You know it is an election year when a presidential candidate decries the very system that transformed the United States into the wealthiest nation in history. Former Vice President Joe Biden unveiled his latest “Buy American” strategy that requires hundreds of billions of dollars in new government spending for whatever reason. But while he seemingly plagiarized President Donald Trump’s America First initiative, it was Biden’s lamentation on capitalism that might have raised a few eyebrows in the investment and economics community. Is Biden attempting to strike a populist and progressive tone moving forward? Or was it another blunder, blooper, or gaffe?
Doing the Left’s Biden
Speaking at a manufacturing plant in Pennsylvania, Biden promised to crack down on Wall Street and corporations because they have ostensibly enriched themselves at the expense of the worker. One way to achieve this objective, he says, is to put an end to the era of “shareholder capitalism” and make the rich pay their fair share. As part of his overall “Buy American” initiative, he would enhance the power of unions and encourage small businesses and entrepreneurs. Biden stated in his speech:
“It’s time that corporate America pays their fair share of taxes. The days of Amazon paying nothing in federal income tax are over. Let’s make sure workers have power and a voice. It’s way past time to put an end to the era of shareholder capitalism – the idea that the only responsibility a corporation has is to its shareholders. That’s simply not true, and it’s an absolute farce. They have a responsibility to their workers, to their country. That isn’t a new or radical notion.”
Liberty Nation has debunked the myth that Amazon does not pay taxes, as well as the notion that the rich do not pay their fair share. But Biden’s mention of shareholder capitalism is worth a bit more exploration.
It is no secret that capitalism is not the most popular concept among Democrats. The only person who defended the system during the 2020 primaries was – surprisingly – former New York City Mayor Michael Bloomberg, who also took the opportunity to slam socialism and its sister ideology, democratic socialism. And, even if Democrats say they do not want to abolish capitalism, they typically present a laundry list of reforms that essentially bastardize the system that pays for all their treasure trove of goodies and rewards their cronies.
When Biden talks about eliminating shareholder capitalism, he maintains the same stance as other socialists, the woke crowd, or the economic illiterate. It is said that shareholder capitalism puts profits before people, leading critics to contend that it should be the opposite. As Biden would say, here’s the deal: producing profit for shareholders is producing for the benefit of the people.
A company can only succeed if it creates a product or sells a service that improves customers’ living standards. Consumers patronize a store because they believe it will benefit them in some way. A customer will pay a 100% premium for a cup of Starbucks coffee, mainly out of convenience and brand preference. A shopper goes to Walmart to save money on groceries, clothing, and a new toaster. Oil and gas firms will produce energy commodities to power the world’s homes. Corporations need to find ways of pleasing the public. If not, they fall.
Biden avers that corporations are not socially responsible because they concentrate on the profit motive. However, profits are socially responsible because they prove that entrepreneurs have satisfied the needs of the population. They allow businesses to grow, innovate a product or a service, and hire new employees. Biden keeps alluding to juggernauts like Amazon, but Jeff Bezos made the company into one of the wealthiest businesses in the world by concentrating on the needs and wants of the customer. He was not a one-man band or a Robinson Crusoe – he depended on the talent and human capital of others.
Private enterprises will sell stock and dilute ownership to raise money. (Dear reader, this would be a good time to plug a previous article about corporate buybacks). Investors need to be convinced that buying shares in Acme International is worth their hard-earned capital, forcing these publicly traded firms to maximize their profits. If we were to believe people like Biden and his left-leaning allies, wealth magically appears out of nowhere.
Why We Need Profits
An economics graduate student or an MBA student can write a thesis on the importance of profits from a business standpoint. But profit-making is a critical component in the broader society. Profits can tell us what is working and what is not. They can inform entrepreneurs that they are benefiting the people. Being in the green allows companies to invest in a diverse array of goods, services, and even other businesses to contribute to the greater good. Jeff Bezos is not just stuffing his tens of billions of dollars under his mattress. He is putting that money to work by pumping his dollars and cents into dozens of ventures. Profit is not a dirty word. It is a virtue. For the sake of prosperity, perhaps we can hope Biden simply made another gaffe.
Read more from Andrew Moran.