What kind of man strives not to become wealthy, but instead to prevent others from becoming wealthy? Eurocrats.
Via the Brussels Journal (all the news unfit to print), Johnny Munkhammar sees the spirit of Karl Marx influencing the European Union (what’s new?) through a potential attack on capital ownership. Then Johnny proceeds to get all Ghostbusters on his ass:
As the EU Finance Ministers met on the 27th of February, they expressed worries about profits rising faster than wages in Europe. The conclusion was that the current global economic boom mostly benefits owners rather than workers. ……This resurrects an old ghost. Will Karl Marx, the man who has so far been wrong about most everything, finally have a point about usurpation, in today’s global economy? And will politicians attempt to meet this alleged development with the same measures as they have done in the past? Will they increase taxes – on profits, for example – to make government grow and redistribute money to wage earners? Or might there be another way?
…We all benefit from this development as consumers, since prices of many goods fall. Lower prices are just as important as higher wages, especially for people with low incomes.
You’re right, Johnny. Wages are also a price: the price for labor. So if you say you really, really want high wages, what you’re really striving for is high prices. And nobody wants high prices. No, what most people actually desire, is to be able to afford the finer things in life. As long as the things they want cost generally less than they earn, people are happy. Johnny goes on to echo a point that I’ve made before – that we’re really all “owners,” when you consider pension funds and other institutional ownership, and concludes with a list of recommendations for European bureaucrats, that are sure to drive up employment rates even in the Parisian banlieues.
A little review is in order: profit is what’s left after all the bills are paid. High profits, economic profits indicate that a company is successfully satisfying the needs of consumers, and perhaps more importantly, that there is money yet to be made. Economic profits are a signal to entrepreneurs – it’s as if they’re saying “Come get yours while the getting is still good!” In an even moderately free economy, abnormal profits are a catalyst for competition: other entrepreneurs want a slice of those profits, too. Capitalists invest more money into that particular field, they employ more people, and to the extent that that is not possible, they pay higher wages as a result of competition. Eventually profits return to a normal level though, as the competition between firms erodes them away through the combination higher wages and lower prices.
But it’s necessary for profits to rise, first. Henry Ford could never have offered his famous $5 a day wages if the company hadn’t earned substantial profits through the lean production methods he developed in the years prior. The EU finance ministers would do well to recognize the important role that the profit motive plays in the creation of general prosperity, and that high profits are generally a harbinger of higher wages and productivity to follow.
I think Kip, Esquire has a saying that goes something like: “No nation ever taxed itself into prosperity.” That little gem should be patently clear to everyone. Accordingly, the appropriate response is not to penalize profits – but rather to make it easier to own property or capital goods, to start a business – in short – to make it easier for the common man to realize profits.
