24th May 2024
Profits part 2
Having written about what profits are and whether they are per se good, I have come across some news stories which point to the moral downside of pursuing profits.
Medicines
Is the profit motive a good way of determining which new medicines to develop or for which diseases to seek a cure? Should it be necessary to make a profit – as opposed to covering costs – in order to develop a medicine that will relieve suffering and/ or enable someone to live a more normal life?
And when a medicine has been developed, is it appropriate to sell it at a profit, knowing that this may be put it out of the reach of people whose health might otherwise be improved? Is it appropriate to charge a license fee for would be manufacturers in less affluent parts of the world?
Of course there is a cost in researching and developing new medicines and treatments – but how is that best paid for? Future profits or through taxation, allowing research to be seen as public service for the common good?
Supermarkets
Supermarkets typically promote their business as selling best value foods – either as very cheap foods or as affordable but quality foods. But how benefits most from these low prices or who pays the cost of cheap food?
To ensure low prices, supermarkets utilise the benefits of economies of scale. This can exclude small traders from selling produce to them. It can cause particular complications for farmers if they struggle to grow enough of their crop that is of the right size, at the right time and in the right quantity. Failure may mean loosing the whole supermarket order: no sale, no payment.
Another way of ensuring low prices is to cut costs, especially labour costs which can mean cutting back on hourly rates or hours worked or staffing levels. This is usually to the detriment of the low paid workers rather than higher grade staff.
But where supermarkets are in fact primarily focused on profits, prices will be no lower than needed enough to maintain sales at levels that maximise profit. In this example profits rose by 159% whilst sales rose by just 7.4%.
Oil profits
Shell, like many oil companies has repeatedly made record profits – enhanced in part by the war between Russia and Ukraine. As consumers were forced to pay more and more for their energy bills, the government introduced a 35% windfall tax to recoup some of the unearned profits. The policy however allowed the oil companies to offset this tax to the tune of 91p for every pound they invested in fossil fuel extraction projects in the UK.
In 2023 Shell made profits of £22.3 billion and paid in tax £1.1 billion, including £240 million in relation to the windfall tax. This was the first time Shell had paid any taxes since 2017. As well as offsetting losses, Shell has also offset against tax, costs incurred in decommissioning North Sea platforms – a task that has yet to be completed, leaving many parts of the infrastructure leaking poisonous chemicals into the sea.
The profits that Shell makes does not benefit its consumers, nor UK citizens, nor the environment – only shareholders (which still includes various pension and investment funds) and board members.
https://www.bbc.co.uk/news/business-60295177
The super rich
Whilst most people in the UK have seen their annual income fall in real terms, a select few have seen their income and wealth continue to rise. Typically these were people who inherited or otherwise could access money. People with money can buy property rather than renting, and can then gain from rising property values. At the same time this has the effect of raising property prices out of the re@ch of many people. People with money find that proportionately the things they buy – luxury items – do not rise as fast in price as basic items. The inflation rate for basic foods has been consistently higher than for more upmarket items. It is a true saying that ‘money begets money’.
The unequal spread of money distorts markets – shopping streets in affluent areas continue to thrive whilst in deprived areas, more and more shops have closed.
The Guardian reported “The richest 350 individuals and families together hold a combined wealth of £795bn – a sum larger than the annual GDP of Poland. Priya Sahni-Nicholas, a co-executive director of the Equality Trust, a charity that campaigns for the creation of a fairer society, said the list “demonstrates the obscene extent of inequality” in the UK. “Billionaire wealth is up by more than 1,000% since 1990 at a very real cost to us all,” she said. “This rich list is built off record bill increases, massive price hikes for essentials, an endless shortage of decent homes, and huge investment in fossil fuels.
“To make progress on these crises we must tackle inequality. The super-rich have spent centuries diverting wealth into their hands, making our democracy less responsive to people’s needs and damaging our communities. The result is we are poorer, sicker, less productive, unhappier, more polarised, and less trusting.”
The Green Tau 