A commentary on the Failings/Successes of Congress and the Administration, and Other Issues of Interest!
-- Mindless & Spineless is in reference to the majority of House and Senate members!
Monday, September 2, 2013
Corporate Profits Decline: Time For A Celebration?
By Austin Hil
“Corporate Profits Lose Steam.” That was the
headline atop a recent Wall Street Journal article. For those that become
indignant about highly successful and profitable corporations, this should be
reallygreat news – right?
But nobody is celebrating. In fact, the
sagging profits reports of the past several weeks are thought to be such a bad
thing that some believe they have brought about the downward shifts on the
stock market as of late (could it be that the business uncertainty caused by
our U.S. government could be the problem on Wall Street instead?).
Companies as diverse as Krispy Kreme donuts
and the almighty Microsoft have seen profits decline a bit in recent
months.Americans – especially the
community organizers among us who become unhinged when businesses are
successful – should be thrilled about this.
If profits are such a terrible thing, why
aren’t we relieved by their decline?
For the record, I have no idea whether or not
a recession is eminent. And to the extent that economic activity is nearly
impossible to predict with precision, nobody else knows either.
But regardless of whether the economy is
moving up or down, Americans need to grapple with this “love-hate” attitude
towards profitable enterprise. And let’s start with a couple of philosophical
questions: Are profits always a good thing for a company to produce? And is it
okay for one company to be really, really, profitable, even when other
companies are not?
In some spheres of life – collegiate and
professional athletic competitions, for example –Americans have no problem
accepting the fact that with each match-up, some will succeed while others
fail. Yet when it comes to business, success in producing profits is often seen
as merely a necessary evil – and only acceptable if the profits aren’t
Part of the dilemma may well be that far too
many Americans assume economics to be, as the term goes, a ‘zero-sum game.”
Just as it is the case in many sporting events that one team wins and the other
loses, so also it is assumed that if one individual or group is profitable, it
necessarily causes somebody else’s unprofitability.
That, of course, is false. In our competitive
free market economy, success with one enterprise often creates new markets in
which other companies can succeed.
An easily understood example of this is the
coffee house industry. In the 1980’s, Starbucks took the concept of the local
coffee house where people meet and spend time together and drink beverages, and
turned it in to a global business phenomena. And since the earliest beginnings
of Starbucks, several other coffee house chains have been launched - Moxie
Java, Tully’s Coffee, and Caribou Coffee to name a few - as an effort to
capitalize on the burgeoning coffee house market. While today Starbucks remains
the largest chain of its kind, these other newer and smaller companies have
nonetheless benefited from Starbucks’ success, in as much as Starbucks
essentially created the market for the modern-day coffee house in the first
But economic realities are one thing, and
people’s perceptions and “feelings” are something different. And at present
America is surrounded by an ever-present hostility towards profitable
businesses – much of which emanates from the highest levels of our government.
Some of us saw this era of hostility coming.
Back in 2008 while he was campaigning for the presidency, Then-Senator Obama
made it a point to chastise American businesses nearly every time a robust
earnings report was published. In the summer of that year, as an example,
speaking to a stadium full of adoring followers, the President-to-be made it
clear his disdain for the petroleum industry:
“First of all,” candidate Obama stated,
“you’ve got oil companies making record profits…no… no companies in history
have made the kind of profits the oil companies are makin’ right
now…They..they…….one company, Exxon Mobil, made eleven billion dollars…billion,
with a “b” ….last quarter….they made eleven billion dollars the quarter before
that…makin’ money hand-over-fist…makin’ out like bandits…”
Imagine that! “Makin’ out like bandits” –
that’s an amazing assessment of a successful business enterprise, suggesting
that posting profits is tantamount to thievery. Of course at that moment in
time, the early signs of a recession were appearing, and it was politically
viable to send the message that “if we can’t all prosper right now, then none
of us should prosper right now,” and his vitriol over the profitability of the
Exxon Mobil Corporation played well with the crowd.
Yet Mr. Obama’s disdain for business “profits”
has continued throughout his presidency. Fast forward to February 7th of 2011
when the President addressed an audience of the U.S. Chamber of Commerce.
Speaking of the improving balance sheets that were emerging within many
American companies at that time, President Obama stated: “The benefits can’t
just translate into greater bonuses and profits for those at the top. They have
to be shared by American workers, who need to know that expanding trade and
opening markets will lift their standards of living, as well as your bottom
These were the words of our Ivy
League-graduate, Nobel Prize-winning U.S. President. Surely he, of all people,
understands that profits aren’t simply “shared” - they are “earned.” And surely
he realizes that when a company is profitable, it’s not merely the C.E.O. that
benefits (investors, employees, and customers benefit from profitability as
well). Certainly the President of the United States understands these most
basic concepts of free market enterprise – doesn’t he?
But we never hear that from our President. Nor
do we hear much praise at all for successful, profitable enterprise from
anybody in our government. It’s usually anger and disgust when profits are
good, and promises of intervention and “stimulus” when profits are bad.
It’s a very self-serving and destructive game
that our politicians play. And they will keep on playing until Americans demand
differently – and until Americans come to terms with profits.
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