Thursday, October 27, 2011

Profits Are for People

This is a great article by Walter Williams. In my younger days as a CPA, I audited a number of "not for profit" programs that were funded by the government and also a few charities. The one common thread was that few of the funds were used for the purpose for which they were intended. Administration was bloated and many of the jobs were no-shows, especially at the government funded programs. Kennedy's pet anti-poverty project on Manhattan's lower Eastside was one of the worst.

Excerpt:
Far more important than simple statistics about the magnitude of profits is the role played by profits, namely that of forcing producers to cater to the wants and desires of the common man.

When's the last time we've heard widespread complaints about our clothing stores, supermarkets, computer stores or appliance stores? We are far likelier to hear people complaining about services they receive from the post office, motor vehicle and police departments, boards of education and other government agencies. The fundamental difference between the areas of general satisfaction and dissatisfaction is the pursuit of profits is present in one and not the other.

The pursuit of profits forces producers to be attentive to the will of their customers, simply because the customer of, say, a supermarket can fire it on the spot by taking his business elsewhere. If a state motor vehicle department or post office provides unsatisfactory services, it's not so easy for dissatisfied customers to take action against it. If a private business had as many dissatisfied customers as our government schools have, it would have long ago been out of business.

Free market capitalism is unforgiving. Producers please customers, in a cost-minimizing fashion, and make a profit, or they face losses or go bankrupt. It's this market discipline that some businesses seek to avoid. That's why they descend upon Washington calling for crony capitalism -- government bailouts, subsidies and special privileges. They wish to reduce the power of consumers and stockholders, who hold little sympathy for blunders and will give them the ax on a moment's notice.

Read full CNS News article here.

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