What is the Role of Profit in Society?
What does it mean to make too much money? Who gets to decide what’s too much and what’s not enough? And so, if two companies are identical, and one makes 10 million dollars and the other makes 5 million, is the 10 million company obscene or is it just a better operator – more efficient, more productive? So who gets to decide that? So how does it happen that profits are obscene?
What does profit mean?
Well, realistically let’s look a deeper look at what profit means. Peter Drucker the management theorist described profit as essential for a business. The primary task of each valuable business in a community is to remain in business to provide needed goods and services. A business can not remain open unless it brings in more money than it spends.
Profits aren’t hoarded by greedy owners but provide the fuel for the business to grow and provide service. Without that service the community and the economy would suffer. Let’s look at a typical drugstore Profit and Loss Statement.
A Drugstore Profit Profile
A typical drugstore P&L that has 2-4% net profit and pays 16% – 17% in payroll. So how does this company benefit society? They provide a good jobs and valuable services and they make 4% profit. Are they making an obscene profit? They have provided jobs and income and employment for all of their employees and those employees pay taxes and support other businesses with their spending. So when knuckleheads start attacking profits, obscene profits, or making profit are they attacking jobs or Capitalism in general?
Profit is a Good Thing
I believe profit is good. Profit means I deliver a service and charge more than what it costs me to deliver the service. Profit means people are willingly coming up and giving money to a business for what it provides. They are voting with their dollars. And if people like the product and they like the service, the company makes a profit and people have good jobs. Good companies stay in business over time and bad companies don’t.
The Government’s Role
The government’s role is to enforce the laws that require people to behave honestly and ethically not to provide preferential treatment for one business over another because otherwise the goods and services will not be efficiently distributed.
The government has a rightful role in preventing companies from wielding too much market power that could be exercised in an unfair manner. Monopolies provide no incentive for efficiency or the best use of profit. There’s really no incentive to provide better products at a lower cost. A monopoly suppresses the development of more efficient businesses.
The Monopoly on Federal Power
But here is the key issue that most people miss.
There is no more powerful monopoly than the federal government. Only the Federal Government has a legal monopoly on all its services, puts people in jail if they don’t do what they say, and has the full power to confiscate assets to enforce its decisions.
So do you believe in the economic reality of the marketplace or do you not? If you believe that monopolies are bad should you not also be vigilant to make sure that the Federal Government does not misuse its monopoly power?
The Federal Government Making Health Care Decisions is a Risky Play
Now is the time in the political discussion for all healthcare stakeholders to not allow any Federal Legislation to preclude any health care provider from offering new and valuable services to the changing world. I am confident that pharmacists will find a way to compete and offer valuable service but in order to do so we have to have access to the customers.
When HMOs first came in to vogue in California in the late 1980’s, customers were prevented from using their long time pharmacy because HMOs were allowed to create restrictive networks. It wasn’t until “any willing provider” regulations were written that customers were allowed to return to their neighborhood pharmacy.
Don’t Repeat the Same Stupid Mistakes
Let’s make sure we don’t repeat this mistake this time around. Anything less than full access for all to their own choice of provider is unacceptable. On a level playing field we will win our share of market, so let’s all work to keep this important right in place, so that our communities can profit from our service.