October 2, 1974

Profit Or Die!

There is nothing wrong with business that a massive dose of profit won't cure.

Oh, I know this is hearsay in these times of rampant populist sentiment.

But it is high time we stopped worrying about the windfall big business and the super-rich might make in a burst of old fashion capitalism.

Let's worry about you and me, and more jobs, and more take home pay.

Let those with capital to invest, and know-how to manage it, get richer - so long as we get a piece of the action.

We've been on a 40-year binge of soaking the rich, and now it is the economic morning after.

As my old granny used to say, "We've cut off our nose to spite our face."

It has been politically popular for four decades to tax the big corporations, and strike them, for a "bigger slice of the pie."  Well, the government got a bigger slice, and the unions got a bigger slice.  But the investor got diddled, and the consumer cheated.  Now the latter are ready for revolution.

While we were turning the screws on big business, who gave it back to us in spades, we chained ourselves to the rack.  Circumstances have proven our bones brittle.

We are breaking under the strain of too much cost and too much price, or - conversely - too little production and too little profit.

We have taught a whole generation that prosperity would come from redistribution of wealth - from the capitalist to the worker.

Instead we have reaped a harvest of inflation and stagnation - a combination that has given rise to that horrid cognomen "stagflation."

Here we have a new phenomenon in economic history - "growth recession."  We are growing (about 2 percent currently) but not at the booming rate necessary to postpone the reckoning of borrowing against the future.

It has been like a giant chain letter which requires an ever growing number of suckers at the bottom to pay off the top dogs.

Today we have run out of unorganized middle-class suckers and the mutilated system is near collapse.

The big labor leaders still talk about the "unconscionable profits" of big business.  But the propaganda rings hollow.

If the profits are so big, why aren't investors rushing into the stock market to share in the bonanza?

The truth is that profits are dangerously low - and have been for at least 20 years.  The fuel that makes the U.S. economic engine go is just about down to zero.

The muddle-headed politicians are still attempting to make the economy run on Congressional resolutions.  But words lack go-power.

It is astonishing to many that in a period of recession we should have inflationary shortages simultaneously."'

Yet this is the best proof that our troubles stem from wishful thinking rather than economic reality.

The only shortage we have in the world today is that of capital - money to invest in productive machinery.

And capital comes from only one source - profit!

You can hold a thousand economic summits, but growth can come only from production fueled by profit.

All else is baloney.

What this country needs, first, is a reduction in the corporate income tax to the point that business could make a 25 percent profit for about ten years - instead of the measly 8 percent average currently.

With this kind of attraction, a hundred thousand entrepreneurs would rush to cash in.  Inasmuch as they couldn't do it alone, they would have to hire a million people to manufacture needed goods and services.  

Next, the country needs to eliminate the capital-gains tax and greatly increase the capital-loss allowance.  Certainly Nelson Rockefeller, Henry Ford, and J. Paul Getty would greet such changes with glee.  Maybe their already immense fortunes would double.

So be it.  In the end the government will get most of it through estate taxes.

The average investor - the guy with less than a thousand dollars to risk - who makes::; up the largest source of capital would take his savings from under his mattress and put the cash to work helping America while it helps him.

The only other country in the world with a:: capital gains tax similar to that of the U.S. is Great Britain.  And who wants to follow in its economic footsteps?

These realistic measures would require that the government cut its spending substantially.  Our politicians would have to forego the pleasures of buying votes with the voter's own money.  The government would have to cut its cloth to fit the measure, but that's the only way it can survive.

Americans like to boast of their productive capacity.  Yet this has been nothing but a myth for several decades.

We return about 10 percent of our gross national product into capital equipment.  The Japanese plow back 22 percent of their GNP into growth.

On top of this dismal showing, the output of American workers is the lowest of any industrial society in the world.

Result: stagflation.

The crunch is surely coming unless common sense comes first.  The capital-profit system is sick from selfish tinkering.  Socialism - the polite word for communistic control of prices and wages - waits in the wings impatiently to take over.  It's profit or die.

Author: Lindsey Williams