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View Diary: Wall Street is Doing it Again: The Looting of America Continues (128 comments)

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  •  Not necessarily. (3+ / 0-)
    Isn't profit a proxy for "a lot of people want to buy your stuff"? If that's the case, aren't you producing something of value and adding to society that way?
    Profit is not necessarily a proxy for that.  Profit is capital you have extracted from your business, usually in the form of money.

    Proceeds imply demand.

    The excess revenue can then be turned into a variety of things: more employees, better pay, capital investments and maintenance.

    Profit is owners draw, plain and simple.  It is what you take off the table.

    Small profits in a sole proprietorship or small business = modest take home pay for the owner and entrepreneur.

    Large profits mean something else is going on, whether it be customers being overcharged, workers getting shafted, safety and environmental concerns being skirted, patronage-based government subsidies being abused, etc.  All but the are often the result of "externalities," which is contemporary business speak for "stick someone else with the bill for our cost of doing business."

    Profit resulting from those dynamics represent the extraction of wealth from the commons.

    The biggest problem with wealth extraction is this:
    Wealth is the residue of complexity.  It is built up slowly, over a long period of time from the accumulation of increasingly complex interactions.  Complex systems persist because of a multitude subsystems of aforementioned interactions.  When you extract wealth from a system, you begin weakening subsystem patterns and complexity starts collapsing into increasing simplicity.  Profit is extracted and wealth is destroyed.  But it is not at a 1:1 ratio.  The profit that is taken also destroys some of the systems ability to continue accumulating wealth.

    A real world example in the context of the original diary: if California's school system ultimately needs to be reworked due to collapse under the burden of public debt, the cost is much more than the wealth originally extracted as profit by the financiers and the bondholders who were paid some interest.

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