Nation of Islam Minister Louis Farrakhan says one of the demands of the Million Man March on Washington was for the government to create an environment where "people are put before profits." Since profit demagoguery is a deceptive tool used by scoundrels all over the world, irrespective of ethnicity, let's demystify the concept of profits.
Let's get its definition out of the way first. Profits represent the residual claim earned by producers. It's what's left over after all other costs - wages, rent, interest - have been paid. Roughly six cents of each dollar companies take in represent after-tax profits. By far, wages paid are the largest part of that dollar, representing about 60 cents. Far more important than simple statistics is the social role played by profits: Profits guide resources to their most highly valued uses as determined by people's wants and desires.Remember when Coca-Cola introduced the "new" Coke? People were outraged. Who do you think made them bring back the old Coke? Was it Health and Human Services Secretary Donna Shalala? Sorry. It was the specter of negative profits (losses). Profits make sure producers correct mistakes and find out what most consumers want.
After Hurricane Andrew's destruction, people in the Miami area wanted more plywood. What made lumber mills increase production and lumber yards get the trucks out and head south? Again, the specter of profits - this time, the windfall variety. All that plywood heading south meant plywood prices rose in other locations, perhaps discouraging less valued uses of plywood, such as home improvement projects. That's wonderful. After all, rebuilding and repairing homes after a hurricane is a more highly valued use of plywood.
Profits also force producers to behave themselves. If producers waste input, their production costs will be higher, and they'll charge prices higher than what consumers are willing to pay. Therefore, the company will make losses (negative profits) and go out of business. As a result, the company's resources become available to someone who'll put them to a better use. That's if there's no government bailout, as in the case of Chrysler Corp., enabling the company to continue squandering resources.
If we care about people's wants, rather than beating up on profit, we should beat up on nonprofit makers. Government schools fit the latter category. They squander resources and produce a shoddy product while administrators, teachers and staff earn higher pay and perks with customers (taxpayers) picking up the tab. Unlike other producers, educationists don't face the rigors of the profit discipline, and hence, they're on easy street.
How about the U.S. Postal Service? It provides shoddy and surly services, but the management and workers receive increasingly higher wages while customers pay higher and higher prices. Again, wishes of customers can be safely ignored because there's no bottom-line discipline of profits.
Without any question, the major problem of people in general, and blacks in particular, is the nonprofit-making sector of our economy. In any poor neighborhood, you'll see some nice cars, some nice clothing and some nice food but no nice schools.
Here's Williams' law: Whenever the profit incentive is missing, the probability that people's wants can be safely ignored is the greatest. It's not just the post office and schools but delivery of police services and garbage collection as well. More than anybody, poor blacks should know this well.