An Economy Based on Profit-Maximizing Companies is Unsustainable and Bad for the Common Man
Debate Rounds (4)
Pro (me) will have to prove:
1. This model is unsustainable
2. This is bad for average Joe
Con (you) will have to prove:
1. This model is sustainable
2. This is good for average Joe
Round 1 is for acceptance only.
Round 2 is for opening arguments.
Round 3 is for rebuttals and new arguments
Round 4 is for rebuttals and closing statements, NO NEW ARGUMENTS.
Please have economical knowledge and at least familiarity with economical concepts and terms.
America has a great infrastructure. Even if you remove the highways you still have the railways and the waterways and airports. The railways never would have been built if not for big business building them to maximize profits, that is also true for the water transportation and airports. Many in America are living in poverty, but that is true of most if not all countries in the world of all economic systems. However you must compare what poverty means in various parts of the world. In America those at the poverty line (not extreme poverty or the homeless) still have plenty to eat and home to live in with basic utilities and appliances to store or cook the food. In most other countries those in poverty are starving, malnourished, living in one room shacks with maybe electric lights and very few clothes to wear if any besides what they are wearing.
That huge difference in the poverty level of different in countries show that America has a much higher standard of living than most other countries, that is due to capitalism. Capitalism and the opportunity of making it big in a new young nation is what brought many immigrants to America and started the Industrial Revolution in America. The industrial revolution started in America and although it also benefited the rest of the world it is what made America the wealthiest nation in the world. That never could have happened with an other economic system or with the government controlling all business activities as they do and attempt even more of today.
"ROUND 1 IS FOR ACCEPTANCE ONLY"
If you are accepting my challenge you are also accepting the rules.
"Round 2 is for opening arguments"
This is where you should have posted your statements from round one. Please forfeit round 2 of this debate, and proceed with your rebuttals and arguments in round 3.
A main point that I must prove is that when all firms operate under a profit-maximizing model, average Joe's standard of living is hurt. One sure way to show this is through the income disparity that countries like the USA have. I'm sure you've heard enough of Bernie Sanders yelling about the "one tenth of one percent making as much as the bottom 50%" but here's some stats just to beat a dead horse. http://inequality.org... shows a variety of US statistics that may interest you, or http://inequality.org... for a global perspective. Wow, who knew that the US would house almost 1/2 of the world's millionaires?
I would like to point out that in a profit-maximizing scenario, unions are seen as hindrances to profits. Any Microeconomics course will tell you that the easiest way for a company to improve profit margins by cutting costs is through cutting labor. Unions and labor laws get in the way, so companies operating under this model must resort to political tactics such as the ones we are seeing today with corporate lobbying. It is odd when it is actually a cheaper, profit-maximizing model to spend money on lobbying and cut labor/wages than it is to negotiate with a union. Please refer to the second link above to see the correlation between labor union participation and income inequality.
I would like to now bring up the point of the unsustainable nature of a profit-maximizing economy. Were it not for inflation, there would be no ability for all firms to operate under this model and receive positive revenue. Put simply, if there were 10 million in a market, 5 firms owning 2 million apiece, monetary flow cannot create revenue for all 5 firms. At least one firm has to suffer a loss in order for any firm to gain. Obviously collecting and hoarding profits freezes up monetary flow, contributing to economical stagnation. We have now a system that does not encourage spending and that is a reason for why we see billionaires hoarding, completely discrediting any of this "trickle-down effect". The cups at the top merely get bigger if there is no incentive for them to let anything trickle down. Obviously this is not something positive for aspiring average Joes who would like to rise rank in this economy.
Many of these profit-maximizing firms operate to maximize profits in the short run for they need to "do right" by their investors. They do not particularly see past 5 years, and this is possibly why we see so many new companies outright fail. Many people also believe that to abandon the model of profit-maximizing and to take up sustainability/social good practices is corporate suicide, yet there is evidence to prove otherwise. https://www.brookings.edu... is a Harvard study that compared the portfolios of profit-maximizing firms to sustainability-modeled firms and found a significantly higher gain in sustainability models (46%). This study is mentioned in this well-done Ted Talk measuring the business perspective of "doing good", finding that companies with this philosophy tended to perform better - https://www.ted.com...
Lastly I would like to bring up a possible counterargument to my points that inflation is good for an economy, and a little inflation helps all the companies operate under a profit-maximizing model. I would say to that person, that if average Joe is not keeping up with the income gains of the higher-ups, inflation is not at all a good thing. It merely raises the consumer price index, lowering the value of his work. Though it may help put off the burst of the ever-expanding bubble that is the overvaluation of profit-maximizing firms, it does not stop the eventual, inevitable burst that is to come. Average Joe needs to eat, how does he manage if he makes 12/hr with no raises and the price of his milk, his gas, his clothes, his everything rises 6.32% every five years? https://www.statbureau.org...
I would like to remind you that this debate is about an economic system where firms operate under a profit-maximizing model, not necessarily debating the principles of capitalism as compared to socialism, communism, libertarianism, etc. I will concede that many accomplishments of the industrial revolution occurred because of companies operating under a profit-maximizing model. However, it is clear that this is neither sustainable nor good for the common man. It was unsustainable because of the limitations of the value and production of goods (there is only so much tea the Brits can drink and only so many natural resources to be used), and the improper distribution of such goods that relies on seeking maximum profit instead of a need-based approach.
Though I concede that there are other countries whose poverty line and standards of living are a great deal worse than that of the United States, I do not believe that we can make the supposition that most in the poverty line of other countries are malnourished, living in one room shacks, and the rest of the qualities that you described. Though this may be true in truly impoverished countries located in Africa, South America, and parts of Asia, this is not so in the European countries ad other parts of Asia. I would also like to add that it was the profit-maximizing system that the colonial-times to modern era Western countries had that abused the sustainable socio-economic structures of these now impoverished countries. Without the profit-maximizing system, they may have had the opportunity to naturally progress as you can bet that starvation and poverty were augmented by the abuse of systematic superiority and a lack of human touch that comes with such a system. My question to you, did the USA gain the economic superiority it has now SOLELY based on its economic output in isolation? The answer is no, it did so by extracting natural resources from other disadvantaged countries and leaving the natives scrambling in their wake. The common man of these countries were most certainly hurt.
I would like to talk about key operations of a firm that help it in a long term that are in opposition to the profit-maximizing model.
Reinvestment into the company in such things like research and development, employee relations, charitable work, the general well-being and wages of its workers, can pay off tremendously. This improves product, helps gain more contracts, puts the company in a good light with the public, and ensures that the company is not receiving bare-minimum work by the employees. They hold gains that are so speculative but obvious in their nature, it is hard to place an economic value. But one thing that is true, to maximize profit by cutting fields of R&D and Employee satisfaction would spell doom for the longevity of a company, and is therefore unsustainable.
Mind you, outsourcing and moving money off-shore is a product of a profit-maximizing model, EASILY seen as bad for the common man. How about the infamous young CEO who raised the price of necessary AIDS medication or the CEO who raised the price of the life-saving epi-pen? No doubt, this has maximized profits, but they left poor public opinion and people who need treatment with empty pockets.
Perhaps it is time to stop maximizing profit and instead maximize value.
How is a economic system of profit maximization not capitalist? I know government involvement does play a factor, regulations can hurt capitalism but even with strict regulations the economic system may be almost socialist but still more capitalist than socialist. The two terms are almost interchangeable.
You obviously fail to see understand the models required for maximizing profits. Maximizing profits does not mean charging more for a product as you suggested. In your two examples, the epi-pen and the aids medication that plan will back fire for the epi-pen makers and already did for the aids medication supplier. In the case of the CEO and the AIDS medication another company has already marketed a generic at the same price as the medication was prior to him raising that price. I believe that he has since reset the price to its original amount otherwise he would be going out of business. That is not exactly maximizing profits is it? If you ever studied economics you would know each product has price point of maximum profit, a profit can be made above and below that point but it would be less profit than at that point. That is due to having a maximum number of customers at even the lowest point and having very few at the highest point. So your examples are not valid for profit maximization the free market (capitalism) does not allow that to go unanswered competition will always set a price down to certain level.
Need based approach? The needs of the people helps set the price and price gouging as you seem to be accusing companies of is kept in check by competition. Businesses seeking to maximize profits helps to lower prices as they compete for the business of each consumer.
"The answer is no, it did so by extracting natural resources from other disadvantaged countries and leaving the natives scrambling in their wake. The common man of these countries were most certainly hurt"
How do you think American businesses had the money to set up in others nations to begin with? If they were not economically superior prior that point then how did they get to that point? It takes a lot of money to set up a business in a foreign country. Even in those European countries who do not fit the model of the situation I described the standard of living is still lower that what it is in America.
I would like to talk about key operations of a firm that help it in a long term that are in opposition to the profit-maximizing model.
Reinvestment into the company in such things like research and development, employee relations, charitable work, the general well-being and wages of its workers, can pay off tremendously. This improves product, helps gain more contracts, puts the company in a good light with the public, and ensures that the company is not receiving bare-minimum work by the employees. They hold gains that are so speculative but obvious in their nature, it is hard to place an economic value. But one thing that is true, to maximize profit by cutting fields of R&D and Employee satisfaction would spell doom for the longevity of a company, and is therefore unsustainable. "
You profit maximization model is not the model any successful business uses. Long term planning is part of the profit maximization model!!! Companies know that long term strategies are better than a big burst of one time profit potential. Henry Ford spent a lot of money building the first assembly line, he invented the internal combustion engine, he paid his workers a much higher than average wage and cut the working hours. His model does not fit your description of profit maximization, he however soon became the biggest automaker in his day. Businesses understand that to maximize profits you must look at the long term and not the short term as profit can not be made while out of business. All of those things you mentioned as being contrary to profit maximization is actually part of profit maximization. They use that to increase workplace productivity, get an edge on competition, create new product lines, and gain a good reputation amongst the general public. Those things all help the business to maximize its long term profit potential.
So in essence your argument is actually proving your original statement to be incorrect.
A capitalist system is defined by private rather than state ownership. Obviously this does not enforce a profit-maximizing model to be had on all companies, as non-profits are also under this capitalist system. Regulations DO NOT make a system socialist in any way as socialism is defined as industries owned and operated by the state, regulations can be a way affect the free market and change the industry to adapt to external factors, like pollution.
The epipen technique was to profit maximize using a monopoly. The cost of the liquid inside the pen is about 1 dollar, and a 600 dollar price provides a HUGE profit margin. Why else could the CEO rack in 25.82 million in 2014? They claim that the company's profit was a mere 50 dollars on each pen, but this is largely due to the company not counting salaries, like that of the CEO, inside their profit statistic. The AIDS medication guy, Martin Shkreli- "Very good," he wrote to the chairman of the company's board. "Nice work as usual. $1bn here we come." This is the decision of a man who sought and found profit through a sort of monopoly. You tell me, is this good for average Joe? Is this needs-based or profit-maximization?
A quick last point on this, yes there may be generic medications being released that cut the costs significantly. However, the deals worked out with insurance and health care companies often prevent this medication from becoming the one that is offered/your insurance pay for. Eventually, generics will level the price. But there is still the time that they are not able to do so that prevents people from receiving the medication they need at a fair cost. There is also the issue of a monopoly being a huge contributing factor to the unfairness of the cost of a good as well as the best way to maximize profits. Though we may have anti-trust and anti-monopoly laws, these are lax in this country, and we basically grant temporary monopolies to pharma companies with each prescription development. This encourages a system where the companies are looking for more drugs to prescribe/pump into each person and this affects the health care provided. We made a system where for each symptom there's a pill to take rather than a system where we encourage treatments and health regimens, why? Because there's more profit to be found.
In perfect competition we find companies lower prices to compete with the others, helping the consumer, but we both know there is not perfect competition in too many industries.
"How do you think American businesses had the money to set up in others nations to begin with? If they were not economically superior prior that point then how did they get to that point? It takes a lot of money to set up a business in a foreign country."
Economic superiority is but another superiority complex in the minds of the US industrialists, politicians, and many of its people. Money is useless, don't you see? The real value is the resource, that is what is extracted from these nations! It takes a lot of money, perhaps, but it doesn't take much to travel to Africa on a slave ship and sell slaves in the Caribbean, for a profit of course.
In response to your Henry Ford argument, he also had groves in Brazil to extract rubber from trees. The temperatures and humidity would be intolerable, natives were used to working partly in the morning and partly in the evening. Mister Ford thought these natives were lazy slobs, so disputes, violence, riots, and a lot of secrecy occurred there. I wonder what exactly happened to those average native Joes?
Profit maximization cuts corners and seeks to bring the value of their portfolio to the highest it can be. Don't tell me that sustainable investment and benevolent business practices are a part of them main corporations and businesses of the US, because plain and simply they are not. If they were, we would see higher standards of living than what we have now, higher LIVABLE wages, higher youth employment, less ecological impact of businesses, more attention to the needs of the people and natives of other countries, and on and on and non. NO. It is the value of the executives' portfolios that matter to the companies, and they can survive not paying a worker an extra dollar if they feel they personally do not have to.
By all means, companies need to make a profit. But the idea of profit-maximization, that we can find the highest point and just keep everything there, raking in money out of the nipples of society, is not sustainable. They run dry. Money is not particularly unlimited without rising inflation, another thing that average Joe is hurt by when he tries to save his money. Where does the new money go? It ends up collecting at the "top" of society in this unequal distribution of wealth where it stays. Joe makes his 10/hr and it stays there for 10+ years until the minimum wage goes up.
Food, medicine, water, shelter, mental health, liberty, pursuit of happiness, social programs. These all are important to the individual lives of society, and hell, they're not to a portfolio of a company. The highest and most important pursuit is the capital gain, and this is found in providing the lowest wages that people will work, providing the minimal food they can live off, the smallest and shabbiest housing they can sleep in, damned be your mental health, liberty and social programs. Profit maximization takes the humanity out of a business and replaces it with numbers.
"Regulations DO NOT make a system socialist"
Regulations are stepping stones to socialism as they often change how a company does business and many decisions are made to remain compliant. I am referring to regulations that have nothing to do with health, safety, or wages. They are
regulations concerning accounting and business practices. Banks specifically are often forced to give bad loans, but then are bailed out by Fannie and Freddie by selling them the bad loans. That is the biggest cause of the housing crisis and bank bailouts in 2000.
The epipen has become the standard in its market. However even without any government interference competitors will force it to lower its prices. However the Government itself is making it very hard for generics to hit the market. The FDA (a government agency) has not yet allowed the generics in the American market despite them being used for years in Europe with no side effects. Yet in America the FDA won't allow them, again the government hampering the free market and giving a company an unfair advantage. By shutting down the competition the FDA is creating a monopoly. The true profit maximization model goes out the when a government sponsored monopoly exists.
Insurance companies consorting with big pharma as you suggest??
No, insurance companies hate monopolies as they prefer to pay as little as possible, just like anyone else. They prefer generic's as they cost them less money.
" In perfect competition we find companies lower prices to compete with the others, helping the consumer, but we both know there is not perfect competition in too many industries. "
Yeah that is sort of the whole idea of capitalism. In a free market competition keeps prices lower as remaining competitive increases sales which increases profits. (thus profit maximization) It also encourages the products to improved upon to increase sales. Yet in the examples you cited the competition is not always a factor due to government regulations creating a monopoly.
Your own link about Henry Ford defeats your argument.
""Interest throughout Brazil in Ford"s new plantation was high. Natives hoped that Ford could bring the rubber industry back to Brazil. Ford"s commitment to hire Brazilians for the majority of the work further enticed the country. Wages for the employees were good compared to what they were accustomed to and also compared to what contemporaries were receiving in the Far East. Compared to the typical pay of 20 cents per day in the Far East, Ford started out by offering workers 35 cents a day and providing them with free food, shelter, and medical care. Along with free housing, the workers were provided with a community pool, a hospital, tailors, shops, restaurants, and shoemakers. ""
They actually welcomed Ford and he provided a much better living for them than they were accustomed to. Ford created the 40 hour work week and expected the natives to work 40 hours but did not understand that they were not used to that many hours, that was just a cultural difference that Ford soon adjusted to and allowed the native workers to work by their schedule.
You claim that profit maximization hurts the average citizen and the standard of living. Yet you never addressed how America the most Capitalist of all nations also has the highest standard of living as I referred to previously. You still fail to understand what profit maximization is and how it actually lowers prices in the free market.
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