“It’s all about profits!”

Here’s an interesting story from the Philadelphia Inquirer (h/t www.smalldeadanimals.com):

http://www.philly.com/inquirer/business/20101212_Critical_U_S__drug_shortage_worsening.html#ixzz18Vrz3bxL

The nub of it is that we now (already) face increasing shortages of drugs all across the spectrum….from common anesthetics to key cancer-fighting drugs. Most of the shortages have appeared among generic brands, which have gone out of business because the already-thin profit margins were unsustainable as healthcare costs are squeezed.

What is particularly interesting to me are the letters to the editor. Some readers make the immediate connection to Obamacare. Many others, however, predictably jump to the conclusion, however illogical, that it is “Big Pharma” that is manipulating these shortages in order to (drum roll) boost profits. You see, it’s all about profits!

In arguing with such people, one’s arguments must be distilled to utter simplicity, so here goes: profits are good! Profits are great, actually. We need more profit.

Profit is a measure of added-value. If I build a house and can only sell it for the sum of the material costs, I have not created new value. There is no incentive for me to build any house other than my own. However, if I can sell it in an open marketplace at a huge profit, that means that I have created commensurate value. Products that do not earn profit reflect no added value. Take away “profit”, you take away new value.

By contrast, if we look around us…to our country and everything that we enjoy about it, it was all brought to us by the incentive of profit…the foods we eat, the fabrics we wear, the vehicles we drive, the warmth in our homes, the activities we enjoy. All this is the product of “profit”.

Take away “profit” from the history of Mankind and we would be still be scratching out our livings through the use of pointed sticks and oxen, most likely as serfs to others.

If you want more of something, make it profitable. If you want less, take away the profit. The solution to the generic drug shortages should be obvious: make them profitable again.

Obviously, there are many people on the Stateopian Left who deeply resent the idea of “profit”. The only way that I can rationalize this position is if they somehow feel entitled to the goods and services provided by others at cost, if not for free. How can that be? How do they get to this perspective?

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  • http://photoncourier.blogspot.com David Foster

    I understand that Soviet enterprises, especially factories, were expected to make a “profit”, at least during the Stalin era. The calculations on which this “profit” was based were certainly dubious, given the lack of a meaningful market to establish prices, but even the Soviets understood that an enterprise must deliver more value than it uses.

  • Mike Devx

    Danny asks,
    > Obviously, there are many people on the Stateopian Left who deeply resent the idea of “profit”. The only way that I can rationalize this position is if they somehow feel entitled to the goods and services provided by others at cost, if not for free. How can that be? How do they get to this perspective?

    I believe they get there by taking a moral position on issues, and then refusing to examine exactly how it could be implemented – which is often flat-out impossible;  and also refusing to examine the effects of the position – which are often calamitous in reality.

    If you wish to, simply sing along with John Lennon:
    Imagine no possessions 
    I wonder if you can 
    No need for greed or hunger 
    A brotherhood of man 
    Imagine all the people 
    Sharing all the world 



    You may say that I’m a dreamer 
    But I’m not the only one 
    I hope someday you’ll join us 
    And the world will be as one 

    The only difference between these lyrics and Pelosi’s preferred world is that he was a songwriter, and she was a politician who couldn’t quite implement every pure socialist desire in her scheming heart.

    But there’s nothing new going on today that hasn’t been going on for decades.  In “Capitalism: The Unknown Ideal”, Ayn Rand highlights an editorial, unsigned, from the editors of the Camden Star Herald, dated August 16, 1963, concerning railroads’ desire to lay off workers because the jobs are no longer productive.  The editorial states:

    The money-makers, the powerful business leaders of America, have failed to realize that prosperity can be inhuman. They have failed to understand that people take precedence over profits…


    Ambition and the drive for profit is a good thing.  It spurs man to higher achievements.  But it must be tempered by concern for society and its members.  It must be slowed down in the light of human needs…


    These are the thoughts that trouble us when we ponder the railroad stalemate.  Crying “featherbed!” like a war whoop, the managers of the railroads have insisted on eliminating tens of thousands of jobs… jobs that are the mainstays of homes… jobs that mean the difference between a man’s feeling dignified or futile…  Before you vote yes for such painful progress, imagine your husband or brother or father as one of those destined to be sacrificed on the altar of progress.  Far better, in our view, to have the government nationalize the railroads and prevent another human disaster on their one-way track of making profit  at human expense.

    As far as I can see, *nothing* has changed in the far-left in fifty years.  Except they have their first president, and they had their first ever two years of total government control, via Obama-Pelosi-Reid.

  • Kirk Strong

    Some time ago I saw a bumper sticker which read, “People not Profit.”
     
    This sentiment reveals a profound misunderstanding of how free-market capitalism works.  Those who do understand free-market capitalism would say, “People and Profit.”
     
    Milton Friedman said it best:

  • http://furtheradventuresofindigored.blogspot.com/ Indigo Red

    We’ve known the cause of this problem for a long time now. When US drug makers are forced to sell drugs to countries with socialized medical programs at very deep discount, upwards of 80-85% in some cases, the American citizen must pay the difference in higher drug costs. As the US population grows older, poorer, and having to choose to buy medicine, food, or heating, fewer people are willing to pay the higher cost of meds. This objectionable situation leads to fewer sales of needed drugs as people stretch a one month supply to two months.

    US drug makers sell product to Canada and Mexico, Britain and all of Europe none of whom pay full price. US drug makers are required to furnish AIDS drugs to African nations at even steeper discounts and often the drugs are free by law. This cuts into the profits drug companies need to continue US manufacturing. When they can’t make a drug here because of high labor costs, the mfg is moved out of country. I used the anti-anxiety drug Paxil that was being made in Puerto Rico after it became too expensive to make on the mainland. For nearly 6 months, my pills were twice the required dosage and I had to cut them in half because the PR factory production was so slip-shod that the pills were of uneven strength and patients health were threatened that DEA had to shut down the plant leaving the world with an anti-anxiety pill.

    Profits are good. Greed, to a reasonable extent, is good. Self interest is good. These are the things that have impelled world progress, extended knowledge, health, and lives. But, modern Liberals cannot understand any of it. Altruism is the ideal that must at all costs become reality.