There’s a broken record in the media right now. It’s playing “Obscene Profits…Obscene Profits…Obscene…” So I got to thinking, how do you define “Obscene Profits?”
In my last post, I pointed out that many people, including many politicians and reporters who babble about the “Obscene Profits” the oil companies are making right now, don’t understand the difference between profit and profit margin. The dollar amount of profit can be huge for companies like Exxon or BP, but their profit margin (profit as a percentage of revenue) might still be alarmingly small. After all, there are times that any business will experience a loss, so the times of profit help balance that out.
Also, I pointed out that Government often makes more money on gasoline than oil companies, because government collects taxes without any of the risk the oil companies take. Thus the title “Can you say H-Y-P-O-C-R-I-S-Y”.
So, what are “Obscene Profits”? Undoubtedly, the people who use that term are statists who love government or non-profits and think any profit at all is dirty. However, when a hard-working couple fills their 401k’s with the stocks of public companies, they are counting on those companies making a profit so they won’t starve to death during their declining years. They would prefer that the profits be as “obscene” as possible.
Also, when a young person get her first job right out of college in a company that has a “last-hired-first-fired” policy, she certainly hopes that the company makes a profit, the more “obscene” the better, or she may be moving back with Mom and Dad.
And when an entrepreneur works 18-hour-days 6 or 7 days a week for 10 years, investing his lifeblood and borrowing every dollar he can, until he finally sees black figures on the bottom line, he needs to start making a profit consistently, or why would he do it?
Why would anyone take the risk of working and investing unless there was the promise of a good return, and why would we begrudge anyone generous rewards of their labors? If we deny business the rewards of capitalism, the flow of goods and services we count on would cease. And then where would we be?
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