What are called "free markets" by the various defenders of State Capitalism are parts of a system whereby the wealth of individual subjects is confiscated and redistributed upward to state-subsidized, -favored, and -protected corporations. These corporations in turn complain publicly that onerous regulation and taxation prevent them from succeeding as they otherwise might, although to any objective observer the state regulatory and tax structures are plainly designed to subsidize business, reduce the threat of lawsuit, gut the power of labor, etc.--privilege corporations over real individuals. These poor, overburdened corporate citizens must therefore lay everyone off, or pay them lousy wages, or cut their benefits, or overcharge their customers. When the corporate economy falters and the credit afforded their indentured servants, i.e. employees, dries up, individuals may begin to chafe slightly under the burden of having no actual, tangible personal wealth with which to purchase life's necessities, less yet the small luxuries that make life decent and worth living. They may rumble with inchoate demands that something be done to at least provide them with the bare necessities of contemporary life, and as they see their own wages stagnate and their own jobs become ever more precarious and temporary, they may look askance at certain insanely high levels of profitability in certain corporate circles.
Fortunately, there are shills!
This attitude was wrong in 2006. It is wrong now. High profits are excellent news. When corporate earnings reach record levels, we should be celebrating. The only way a firm can make money is to sell people what they want at a price they are willing to pay. If a firm makes lots of money, lots of people are getting what they want.In the case of health insurers, of course, many people are not getting what they need, and those who do purchase insurance are buying what is necessary at a price they are obligated to pay.
To the country, profit is a benefit. Record profit means record taxes paid. But put that aside. When profits are high, firms are able to reinvest, expand and hire. And profits accrue to the benefit of those who own stocks: overwhelmingly, pension funds and mutual funds. In other words, high corporate profits today signal better retirements tomorrow.
Another reason to celebrate profit is the incentive it creates. When profits can be made, entrepreneurs provide more of needed goods and services. Consider an example common to the first-year contracts course in every law school: Suppose that the state of Quinnipiac suffers a devastating hurricane. Power is out over thousands of square miles. An entrepreneur from another state, seeing the problem, buys a few dozen portable generators at $500 each, rents a truck and drives them to Quinnipiac, where he posts them for sale at $2,000 each -- a 300 percent markup.
Based on recent experience, it is likely the media will respond with fury and the attorney general of Quinnipiac will open an investigation into price-gouging. The result? When the next hurricane arrives, the entrepreneur will stay put, and three dozen homeowners who were willing to pay for power will not have it. There will be fewer portable generators in Quinnipiac than there would have been if the seller were left alone.
But let's not get ahead of the example. The catechism of state capital, reiterated above by Stevie Carter, holds that when businesses do well, they hire and expand. This is plainly not the case, as in the post-industrial economy real wages have declined, personal indebtedness has spiked, and low unemployment has been maintained by shifting a formerly middle-class workforce into low-wage "service industry" jobs. In order to prop up consumption, the system of state capital expanded credit instead of raising wages--in essence, reinventing the company store for the age of electronic commerce. Record profits at financial service industry firms, or energy conglomerates, or technology companies do not spark national trends of hiring and upward mobility. They are ultimately job-neutral or job-negative. Consider that now, as firms announce profits and the major stock exchanges see gains in their measuring indexes, unemployment continues to expand unabated, despite the extravagant claims of the Obama administration.
Carter's disaster-relief case is a fine example of this extortionist's game; there is no reason, of course, that a functioning public entity, a civic organization, a disaster-relief collective, a local government, hell, an insurer, what have you, can't buy its own generators at the wholesale cost of $500 and provide them free to community shareholders in times of catastrophe. The manufacturer and wholesaler are still making profits in this scenario. The only person cut out is the price-gouging middleman distributor who is taking advantage of a natural disaster to make a 300% profit (we should all be in such a business, with such margins!) and blackmailing those poor people by threatening to withhold future service if they don't pay up now. In other words, running a protection scheme.
There are, by the way, models of free exchange and property that address such iniquities.