By David Grace (www.DavidGraceAuthor.com)
In a free-market economy, for-profit companies are basically big, complicated tools whose function is to supply the economic system with low-cost, high-quality goods and services. Like all tools, efficiency demands that the economy use them to fulfill its own selfish needs without any consideration for the wants or the happiness of the tools themselves.
Many people don’t really understand the difference between tools and pets, but they should.
It’s a difference that’s vitally important.
The Difference Between Tools & Pets
A tool is something we use to perform a task.
We spend only as much money on a tool as is necessary to keep it optimally doing its job, and not a penny more. Why should we?
Our attitude toward tools is totally self-centered and selfish. We care nothing for what the tool likes. We don’t care what the tool wants or if it’s happy or unhappy.
We’re only concerned with how well the tool fulfills our own selfish use for it. The instant a tool ceases to do its job, we heartlessly throw it away and replace it with a new or different tool.
A pet is something we spend money on because we love it and care about its happiness. We have empathy for a pet.
Pets get as many resources as people can afford because people care about their pet’s happiness.
We will keep a pet long beyond the point where it is able to do anything for us in return.
Level 1 Tools — Simple Tools
Bob and Sally own neighboring farms. Each has a mule.
Bob’s mule was there when he bought the farm. Bob’s family has named the mule “Artamus.” They pet it and feed it and love it.
Sally dislikes machinery so she uses her mule to plow her field.
Both Bob and Sally feed their mules, have a barn where their mules spend cold nights, and they both have the same vet who treats their mules with the same medicines to make sure that they stay in good health.
Bob spends extra money on treats for Artamus because his family loves Artamus and wants him to be happy.
Sally doesn’t give a damn if her mule is happy,. Why should she? She only spends just enough money on it to keep it strong enough to continue to plow the field.
Bob’s mule is a pet. Sally’s mule is a tool.
Jerry owns a laundromat. His commercial washing machines are tools. He feeds them electricity, lubricates their motors, and replaces their worn belts solely out of cold, heartless, calculated self-interest. He has no inherent attachment to his washing machines. When one of them breaks and it costs more to fix than to replace, he discards it in an instant.
Sally’s mule and Jerry’s washing machines are Level 1 simple tools.
Level 2 Tools — Large, Complex Tools
Walmart is an artificial thing. It has no emotions, no feelings, no heart, no soul. It is a mechanism that people built to make money for them.
For its shareholders, Walmart is and always has been a tool whose function is to sell stuff in order to make money.
Walmart is a tool, not a pet.
When you think about it, you realize that Walmart is no different to its shareholders than the laundromat’s washing machines are to Jerry.
Walmart is just a bigger, more complicated, more intricate tool than Jerry’s washing machines, but as far as Walmart’s shareholders are concerned it is a tool nonetheless.
Walmart’s shareholders will spend money on it to the extent that more money will enable it to do its job better, but if and when Walmart (Toys-R-Us) is no longer able to do its job and make money by selling stuff, they will put Walmart into bankruptcy and sell off its parts the same way that Jerry would yank out a failed washer and send it to the scrap heap.
Walmart is a Level 2 tool.
Do You See Walmart As A Tool Or A Pet?
As a shopper, what is Walmart to you, a tool or a pet?
Are you willing to give extra money to Walmart to make it happy? If Walmart could no longer deliver merchandise or accept returns would you still keep on giving it money because you love it?
As consumers and citizens, our relationship to Walmart is one of total self-interest. To the extent that Walmart does its job, namely, to the extent that it provides the public with lots of stuff at good prices, replaces broken stuff, takes our credit cards, etc. we will give it as little money as we can get away with out of pure self-interest.
The instant Walmart can no longer do its job of delivering low-priced goods, we’re going to move on to Target or Amazon or whatever without a backward glance.
For consumers and for society in general, Walmart is a Level 2 tool and not a pet. In fact, for consumers and for society in general all businesses are Level 2 tools, not pets.
From consumers’ and society’s selfish, self-interested point of view, we only care about Ford, B of A, Safeway, Allstate, etc. etc. etc. to the extent that they fulfill their role as tools that provide goods and services that are useful to us.
We have absolutely no interest in giving any of them one penny more than we have to. Why should we?
We have no interest whatsoever in their executives being happier or their shareholders being happier. Why should we?
Corporations are unfeeling, heartless, inhuman, artificial constructs whose immediate purpose is to function as tools that sell stuff that makes money for their owners, just like the laundromat’s washing machines’ ultimate purpose as tools is to make money for Jerry.
No sane laundromat customer is going to put extra quarters into one of the machines just to fill up its empty coin box or to make Jerry happy.
As buyers, none of us are interested in giving Walmart a ten dollar tip on top of the grocery bill in order to make Walmart’s executives or its shareholders happier.
OK, so here’s the major point I’ve been leading up to:
We are absolute idiots if we treat corporations like pets instead of tools, if we give corporations more money than they need to receive in order to keep them fulfilling their functions as inventors, developers and suppliers of goods and services.
In the same way that Sally would be crazy to feed her mule imported organic quinoa instead of ordinary oats, that Jerry would be crazy to install gold-plated motors and braided silk belts on his washing machines, we would be crazy to give Walmart or Apple or Mylan or Pfizer any more money than they need to receive in order to keep them doing their jobs and fulfilling their function as inventors and suppliers of goods and services.
We aren’t altruists and Walmart, Wells Fargo, Verizon and Pfizer are not charitable causes. They are tools, not pets.
Now, let’s move to the next level, up to Level 3 tools.
Level 3 Tools — System-Wide Economic Tools
We need to apply this same basic principle of not spending more on a tool than is necessary to keep the tool doing its job, beyond simple machines as tools (Level 1), beyond individual companies as tools (Level 2) and up to the entire class of business entities as an overall economic-system tool (Level 3).
In a market economy, for-profit companies as a group are a Level 3 tool whose purpose is to invent, develop, build and sell products and services in support of the market as a functioning economic system.
We Need To Consider How Much Profit Businesses Need To Earn To Keep Them Inventing & Supplying Goods & Services To The Economy
From an economic-system point of view, we need to ask the question:
As a structural component in a market economy, how much profit do corporations need to earn in order for them to continue to perform their function of creating, developing, building and selling products and services?
Sally knows how much she has to spend on her mule to keep it working, and she’s not going to spend a penny more than that because she doesn’t need to, because the mule is a tool, not a pet.
Jerry knows how much he has to spend on his washing machines to keep them working and he’s not going to spend a penny more than that because he doesn’t need to, because the washing machines are tools, not a pets.
From the point of view of the economy as a system, business entities are tools that create and distribute products and services, and it’s a waste for consumers and for society in general to spend any more money on them than is necessary to keep them fulfilling those functions because, from the economy’s point of view, businesses are tools, not pets.
How Do We Calculate That “Right” Profit Amount?
So, the question we need to answer is:
How much profit do business entities need to earn in order to keep entrepreneurs starting companies, investors investing in companies, and manufacturers building, improving, and marketing products?
How much profit is enough to do that? At what point does a company’s profit exceed that functionally-useful level?
Since highly profitable, inventive and cutting edge companies like Google and Apple earn profits equal to or less than 25% of deductible costs, it would seem that a profit level of about 25% of costs is more than enough of an incentive to keep the capitalist, market system humming along at full throttle.
For more details on how a 25% cap on profits would work, see my column: We Can Have Better Products At Lower Prices Without More Gov’t Regulation. How we can make the market system work for consumers and employees instead of against them.
Who Benefits From This Limitation On Profits?
The profit motive is like fire. When controlled it is a great source of useful energy. When allowed to run wild it is as damaging as a forest fire. It’s in buyers’ and society’s selfish best interests to prevent the profit motive from running wild.
If a profit greater than 25% of costs isn’t needed to keep entrepreneurs developing and investors investing and companies selling, then from the consumer’s and society’s selfish, self-interested point of view, there is no reason for companies to be allowed to keep a profit greater than 25% of costs and there are good reasons (lower prices, higher wages, less bad behavior) not to allow them to keep a profit greater than 25% of costs.
As simply put as possible, to the corporate mule, profits are the carrot out in front of it on the end of the stick. Once the carrot is big enough to get the mule to carry the load on down the highway, there is absolutely no reason at all to make that carrot any bigger or more appetizing.
Of course, businesses won’t like this. The mule doesn’t like plowing the field for a bag of oats. It would like more, but we don’t care.
Buyers don’t need to care, nor should they care what businesses like or don’t like. They’re just a tools.
Walmart is just a tool. If it doesn’t need more than a 25% profit to keep it doing its thing then we as consumers and citizens are crazy to pay it a profit of more than 25%, in the same way that it would be crazy for Sally to give her mule imported, organic quinoa instead of a bag of old-fashioned oats.
Now, saying this drives libertarians into a rage because for them corporations are pets, not tools. They view corporations as “people” whose happiness is important in and of itself.
They don’t see corporations as merely tools whose purpose is to create, design, and sell goods and services as a component of a functioning market economy, but rather as entities whose happiness is of equal value to that of human beings, and who deserve to keep as much power and wealth as they can acquire, in other words, as pets not tools.
If you want to worship at the altar of Bank of America, and make Pfizer as rich as possible (and correspondingly make its customers poorer than they would otherwise need to be), you should ask yourself how enriching a machine, a tool, more than is necessary for it to continue to perform its function makes humans better, makes the economy better, or makes society better.
Yes, it may make some humans richer, but the value to consumers and society of someone who’s stock is worth $10 million going up to $11 million is far less than the benefits of lower prices, better wages, and less corporate bad behavior that flow from capping profits.
It’s not my job as a consumer or a citizen to act against my own self-interest so that rich people can get richer. It’s only in my self-interest to have a system that makes them rich enough to give them the incentive to keep investing in new businesses. Beyond that, why would I want a system that makes them richer and everyone else poorer?
I’m not an altruist with rich people as the object of my charity.
Libertarians only want to protect corporations’ wealth because “taxes are stealing” is one of the libertarians’ basic rules, and because they think that it’s morally wrong for the government to take any money from a corporation except in exchange for actual services rendered.
That moral principle is just another one of their made-up rules as an assumed first principle, not a real-world pragmatic principle that does the majority of human beings more good than harm.
You can support the idea of letting the profit motive run wild if you believe that:
- Increasing the massive wealth and power of soul-less, artificial entities is more important than increasing the wealth and freedom of as many human beings as possible,
- It’s smart and useful for humans to make their own wealth and freedom subordinate to the wealth and power of artificial, inhuman constructs like Pfizer, Allstate and McDonalds,
- It’s in the long-term best interests of the majority of human beings to treat massive, powerful and wealthy corporations as pets rather than tools.
By David Grace (www.DavidGraceAuthor.com)