The War on Profit
Last Monday (Halloween), President Biden lashed out at the “outrageous” profits of the oil industry, vowing to impose a windfall profits tax on the US industry if the companies don’t increase production and lower prices at the pump.
Democrats have a problem with profits. To them, profits seem dirty or immoral. They believe that profits are derived from the exploitation of people, whether workers or consumers, that profits come from low pay or high prices. Their contempt of profits is the same contempt in which Karl Marx held profit. This disdain for profit explains their desire to impose high taxes on US corporations, giving the government the opportunity to redistribute this wealth to more deserving people (at least the people that the Democrats deem more deserving).
This disdain for profit and money making is steeped in many centuries of history. The landed aristocracy of Europe looked down, not only on the peasants that worked their land, but also on the merchants and guilds of craftsmen that supplied them with the luxury goods and imported delicacies they craved.
Feudal society was based on the concept of three divinely ordained groups of people or estates, the aristocrats who owned the land, the clergy who controlled culture and morality and the peasants who worked the land and followed the rules. Each large landholding was essentially self-sufficient and had, not only farm workers, but blacksmiths, millers and other producers of the goods and equipment needed to operate a large estate. But wealthy and powerful aristocrats also wanted silks, jewelry and other precious items that could not be produced on the estate.
For these luxuries, the aristocrats used merchants to import these goods from other lands. But because the merchant did not actually produce the luxury goods, he was considered only a reseller who bought cheaply and sold dearly in order to enrich himself. This pursuit of gain was considered outside the order ordained by God, making the merchant a sinner to be despised. Worst of all was the money lender who charged interest on loans, an act considered to be un-Christian and against the word of God. It was for this reason, money lending in feudal times was relegated to the Jews, who were despised even more than merchants.
So the medieval elites disdained the striving of the lower classes to generate savings and profit because it infringed on their god-given right to property and wealth. The aristocrats wanted a static society where they lorded over illiterate peasants. That left them with oodles of time for palace intrigue and dangerous liaisons. This static society lasted for many centuries with lots of wars and dynasties but with very little change. A carpenter from the sixth century would find the fourteenth century workshop little changed. Aristocratic elites not only disdained profit, they feared profit, because profit is a powerful motivator.
It was the search for profit that sent caravans across the desert to bring back silk from China. It was the search for shorter trade routes (the reduced cost going straight to profit) that caused Christopher Columbus to bump into the Americas. It was the search for profit that drove the mountain men across North America trapping beaver for their valuable pelts. Practically every innovation that has occurred in our history, the steam engine, the internal combustion engine, the laptop computer, was created in the search for profit. And it was profit that drove modern tech companies to provide free social media platforms, smart phones and free overnight delivery of practically anything. Adam Smith understood that the invisible hand that guides the free market economy is made possible by the motivational power of profit. Without profit you would still be tilling the soil behind some great ox.
As I noted in my Building Blocks Essays (July 6-17, 2018) profit was the key ingredient in the development of Western Civilization. So why does the progressive left (along with most of academia) hate profit? Like other people, they hate what they fear. They hate profit because they can’t control it. The Chinese Communist Party realized that they needed the profit motive to create a prosperous modern country. But they fear profit and are now trying to get their people back under control by wringing profit out of their economy.
And President Biden and many in the Democratic party do not want US companies to be too profitable. Because with profits comes power and they are too jealous of their grip on power to share it.
So now that you understand the role profits play in economic growth and human development, you may wonder why the Democratic Party seeks to wring profit out of the American economy.
Firstly, I don’t think Democrats, in general, and especially progressives understand anything that I have just explained. They must think that somehow prosperity just happened. That goodwill and cooperation created great civilizations and provided us with all the inventions that make modern life so pleasant. Or maybe they think that government invented all that stuff.
Of course, governments do have a role to play in innovation. War is also a great motivator. It is the ultimate competition. And while survival, not profit, is the goal of war, many people have gotten very rich from war – those that supply it and finance it and not those that fight it. But in peace, governments want stability, not change. Stability keeps those in power, in power. Look at all the instability caused by the Industrial Revolution. Government can build an atomic bomb but would be hard pressed to invent a washing machine or vacuum cleaner.
Or maybe their beef against profits is their mad desire to make everyone equal (at least in terms of income and wealth), in spite of the clear fact that we are all different. At least, wealth and income are more easily quantifiable. Other quality of life factors such as health, happiness and contentment are more difficult to discern. And also more difficult to redistribute (although the government does seem to have the ability to make a lot of people unhappy).
Because the government cannot create wealth, it is relegated to confiscating wealth and redistributing it to others, which is does prodigiously to the extent that now wealth redistribution forms the larger part of government (even though such a function is not mentioned in our Constitution as a responsibility of government).
All this redistribution of wealth does not seem to have made people any happier. The lack of happiness among those people whose wealth has been confiscated is understandable, but even those receiving the wealth of others don’t seem very happy what with all the protests and rioting recently.
Whatever his motivation, President Biden wants some (or perhaps even most) of all the profits that the oil companies are making (he calls them excess profits but who determines what is excess and what is not?). According to an article in the New York Times, he says, “It’s time for these companies to stop war profiteering, meet their responsibilities to this country, (and) give the American people a break.” Maybe the oil companies lack of civic responsibility is related to President Biden’s campaign promise in 2020 when he said, “We are going to get rid of fossil fuels.” Maybe if the oil companies thought that the government would live up to its responsibilities to the oil industry and not try to run them out of business these companies would reciprocate and do the right thing. But if your future is uncertain you prepare for the worst, and that is what the oil companies are doing.
The oil companies are acting rationally. It is a president that threatens domestic energy producers and then begs foreign despots to produce more oil in order to lower the price at the pump that makes you wonder. Maybe it has something to do with the coming election.