There'd Be No Thanksgiving Without the Profit Motive

(Note: This commentary was originally published Nov. 22, 2001.)

"The worst crime against working people," so said Samuel Gompers, "is a company which fails to operate at a profit."

Gompers, of course, is known by the history books as the father of the labor union movement in America. He was founder of the American Federation of Labor. It may seem incongruous for such an important labor figure to say such a thing about profit, but Gompers appreciated something back then that perhaps a few of today's labor leaders don't. An economy without profit is an economy in deep, deep depression.

Profit and the self-interest motive behind it were under relentless attack not so long ago. The radicalism of the 1960s was dead set against them, laying most of society's ills at the feet of greedy, profit-hungry and selfish capitalists. Anti-profit sentiment was even more popular in Europe and Africa, where it helped boost the socialist agenda and a wave of nationalizations.

In more recent years, however, a better understanding of profit has taken hold in surprising places. Communist China started implementing it in the late 1970s as an incentive for moribund state industries and previously prohibited private enterprise. And in my files is an English translation of an article that appeared in a most unlikely place. Here's a key excerpt:

"The economic situation of enterprises will have to depend directly on profit, and profit cannot fulfill its function until prices are liberated from subsidies. Over the centuries, humankind has found no more effective measure of work than profit. Only profit can measure the quantity and quality of economic activity and permit us to relate production costs to results effectively and unambiguously . . . .  Our suspicious attitude toward profit is a historical misunderstanding, the result of the economic illiteracy of people . . ."

Those words were written by economist Nikolaay Shmelyov in the June 1987 issue of Novy Mir, the leading political and literary journal of the then-Soviet Union, no less. The Soviets, after years of anti-profit propaganda and policies that produced a world-class basketcase economy, were showing signs of shedding some of that economic illiteracy. There's truth in one of the jokes that was making the rounds in Moscow just before the collapse of the Soviet system in 1991, namely, that to find a genuine believer in Marxism these days, one has to visit universities in the United States.

Thanksgiving Day is a particularly appropriate time to reflect on the meaning and value of profit. The settlers at Plymouth colony who started the holiday tradition nearly wiped themselves out early on when they set up a communal, socialistic economy. Each person was producing for everybody else and received an equal share of the total production. In the absence of a strong profit motive, the settlers starved until Gov. Bradford altered the arrangement. Thereafter, men and women produced for profit and the result was bountiful harvests with full Thanksgiving tables.

The people who don't like profit prefer to extol the virtue of selflessness, the charitable motive. Don't get me wrong here, I'm not opposed to charity. A loving, caring concern for others is a beautiful thing, and Americans have always been the most charitable, giving people on the planet. But the fact remains that profit is responsible for more good things—by a long shot—than all the charity in the world.

Consider this as you feast at the table today. The people who raised the turkey didn't do so because they wanted to help you out. The others who grew the cranberries and the yams didn't go to the trouble and expense out of some altruistic, charitable impulse. If you think those folks and the others who made almost everything else you own performed their tasks as sacrificial rituals, then you probably believe McDonalds when they say, "We do it all for you."

In Marxist North Korea, they have a regime that works night and day to see that nobody makes a profit or owns a private business. There won't be anything like Thanksgiving dinner in North Korea today, and that's no coincidence.

As for me, you can count on me saying a prayerful thanks for more than just good food today. I'm going to say thanks for the profit motive which made it all possible. When God instilled a measure of productive self-interest into the human mind, he knew what he was doing.

Lawrence W. Reed is president of the Foundation for Economic Education — www.fee.org — and president emeritus of the Mackinac Center for Public Policy.