When Anton Drexler founded the National Socialist German Workers’ Party in February of 1920, he and Adolf Hitler published a 25-point program that consisted of a wide variety of socialist proposals that would radically transform the German economy. The Nazis proposed nationalizing “very big corporations,” abolishing “all income that does not arise from work,” expropriating land from owners without compensation for the common good, and guaranteeing a job for every citizen.
There was another key concept in the Nazi putsch of the 1920s: “Big industrial companies should share their profits with the workers.” Do any of these sound familiar?
In recent years, populations have become increasingly resentful and envious of corporations, executives, and billionaires, and this resentment has been exploited by big government progressives seeking power. And, thus, profit-sharing has turned into a viable public policy prescription for the antipathy and jealousy of the electorate.
Just take a gander at the last few years.
Hillary Clinton, the woman who will never be president, advocated for a profit-sharing policy in her botched 2016 campaign. She told the American People during the first presidential debate:
“I also want to see more companies do profit-sharing. If you help create the profits, you should be able to share in them, not just the executives at the top.”
Since then, political candidates who are self-declared socialists or who subscribe to the democratic socialist movement have often pontificated on the benefits of profit-sharing. It remains to be seen if any of the rumored field of 2020 Democratic hopefuls are in favor of the idea.
That said, like other leftist policy endeavors, profit-sharing hasn’t exactly been thought out.
What About the Losses?
Forcing businesses to share profits with their employees is just government imposing its will on both capital and labor, acting as chief busybodies. This mandate is meant not only to justify a politician and bureaucrat’s existence, but to deepen the immense division between these two sides.
Let’s say the left gets its way and companies are coerced into allocating 25% of their profits. Of course, it would produce a series of unintended consequences, such as a reduction in hiring, expansion slowdowns, or fewer entrepreneurial risks. But there is an obvious question that needs to be asked for consistency’s sake: Will there be loss-sharing as well?
Since the left often speaks of egalitarianism, then it would only be fair to equalize the losses. In other words, if Vandelay Industries reports a $2.3 billion loss, then workers should be mandated to cover a portion of those corporate losses, too. This can be done through measures like pay cuts, overtime, or an extra day’s work. Again, the unintended consequences of this would be workers not showing up for their shifts or even refraining from entering the labor market.
Profit-sharing would wreak havoc on business, the job market, and the economy. And perhaps this is what the left wants, since it would lead to louder calls for the implementation of socialism.
Why can’t we just leave corporations and workers alone and let them enter into voluntary contracts? Akin to every other intervention in the free market, it will only necessitate additional intervention.
Besides, as economist Hans F. Sennholz wrote in 1964, “the market economy is a sharing system.”
Where Are the Profits?
What is funny is that if the left got its way, the policy’s mission would be a failure almost immediately.
It is estimated that about two-fifths of all U.S. companies, on average, are reporting zero profits. Some of the biggest companies today, like Amazon or Uber, are not posting a cent on a regular basis. In fact, LN recently reported that “83% of U.S. companies going public between January and September have lost money in the 12 months leading up to their [initial public offering].”
Even if a private enterprise is fortunate enough to record a profit, a myriad of other state laws, regulations, and taxes eat away at their earnings. Restaurants and retailers, for instance, maintain thin profit margins, and they get thinner every time the government artificially raises the minimum wage. Walmart’s 2017 profit margin was 2.1%.
So, in addition to profit-sharing, you would still have union-backed labor and politicians crying for something else that they deem to be a human right.
Capital Versus Labor
Since the time of Charles Dickens, there has been an ongoing struggle between capital and labor. The former is often depicted as monocle-wearing fiends, while the latter is typically viewed as benevolent heroes – except in the stupendous and realistic 1960 motion picture The Angry Silence.
But why does it have to be both?
It is capital that is investing its money into their factories, their equipment, and their manpower. It is labor that is selling its skills, education, and services to capital in exchange for compensation. The former aims to earn a profit and the latter seeks to receive a paycheck. They both come together for their own purposes. Should strife occur between these two sides, then they can mutually depart from their arrangement without any violence, demonstration, or anger.
Profit may be a vile word to some, but, like its ugly sister, interest, it makes the world go around. It is because there is an opportunity for a business owner to earn a buck for every dollar he invests that we get to enjoy such high living standards. Businesses are not munificent outfits that act as their brothers’ keepers; they are in operation because they have something to sell that you demand, whether it’s a carton of milk or a cup of coffee.
Every Christmas, we are reminded that we are supposed to despise Ebenezer Scrooge and his supposed greed. But, remember, he was a businessman who employed workers and lent money to folks who needed the funds – Scrooge didn’t force them to borrow from him. He kept the profits to himself, counted his coins every moment of the day, and maintained a terrible combover. That’s his decision, and if he wasn’t using the power of the state to achieve his profit-seeking objectives, then all the power to him and other entrepreneurs.
Do you support or oppose profit-sharing? Let us know in the comments section!