Just at hearing the word profit, some go bunkers.   They see in the ‘profit motive”  a dark cloud that diminishes the value of whatever is performed. It is as if, when one works for profit, a peccadillo is committed and it must be atoned by “giving back.”  I must confess my bias here as that phrase is one that I so detest.  After all, we only “give back” what is not ours, and what is acquired through profit is ours!  The vision of collective ownership is behind the phrase, even when most people use it innocently.

Anyhow, the indignation is not warranted as there is a very important function profits serve in the economy.  Yet, the hostility some exhibit toward the one who profits is deep and the admiration or pity toward those who lose money is widespread. The latter are often seen as victims in a game that is rigged. They are in need of “redistribution” and their passion is for “equality.” As Eric Hoffer said, “Where freedom is real, equality is the passion of the masses.” But do not be confused here, as I said, the redistributists believe there is no freedom in the market.

But I digress. Profit is the recompense for those who risk. They exercise their freedom to invest and produce and, sometimes, they gain. Yes, we hear again the cry of the losers in the economic game: “Your profits are obscene!” You only hear this from those who profit less or work for a wage as long as their gains are small. Let them get a piece of that obscenity and they immediately lose their puritanism.  The fact remains that when one hears of an extravagant profit made by a firm, the more people invest in it. Why?  Because they see there, efficiency and positive results. Profit is that gauge allowing us to assess where to place our assets as to use them more wisely. It gives us needed information to allocate valuable, and finite, resources.

On this issue, the 1986 Catholic Bishop’s Conference pastoral letter was wrong but Pope John Paul II was right. The bishops recommended redistribution and socialism to heal our economy but the pope dismissed this while praising the essential nature of economic profit:

The Church acknowledges the legitimate role of profit as an indication that a business is functioning well. When a firm makes a profit, this means that productive factors have been properly employed and corresponding human needs have been duly satisfied. But profitability is not the only indicator of a firm’s condition.[i]

The pope understands that profit serves to apportion the factors of production in a systemic fashion. As these factors are innumerable, there is neither singular mind nor enlightened vanguard with the human capacity to direct it. Every attempt to do so ends up imposing an arbitrary will over the freedom of others. The arbitrary limiting of profits in the name of “justice” is not only a violation of freedom but also an ineffective way of allocating resources, energizing production, and creating employment.

Finally, profits functions as a catalyst for creativity and efficiencies in the economy. Most producers do not maximize profit by racing prices but by introducing change and economizing. This needs close attention to real needs of clients and the processes of production. Every economic system attempts to maximize production, minimize cost, and create employment but everyone fails by  seen in profit an enemy.

[i] Pope John Paul II, Centessimus annus #35