OF PROFIT & MORALITY-1

April 01, 2016

It is as simple as simple is. Also, complex. A consistent profit-forgoing approach in one part of the world cannot be sustained in the presence of a voracious profit-seeking in another. This is because understanding the thought process of citizens of our Global Village is as important as refining and consolidating one’s own opinion.

Viewpoints have been distilled from individuals of different academic, professional and socio-economic backgrounds, and nationalities and encased in this essay appropriately.

This writer concludes that super-normal profit-seeking is a strong engine of socio-economic development and holistic progress, if profit-earners can subsequently exhibit exemplary supererogatory behaviour, while abstaining from indulging in personal materialistic excesses.

The headline can well be attributed to a modern-day Hamlet in the business world — confused, lost in thought, introspecting, and analysing the usefulness of his/her existence to life on earth. At times, engaging in business with a stultified conscience would seem so much easy. This is, however, old hat. Old ideas, like old habits, die hard. But, die they always do. What starts off as weak whiffs of fragrance here and there soon pervade the entire ambience, ushering in a revolution. The business world is poised at the threshold of one such ‘uprising.’

“Pretty tricky question,” says Hans-Petter Fjeldstad, thoughtfully, when asked about the morality, or otherwise, of profit-making. Hans is a Norwegian by birth. He pursues research at the Hydraulic and Environmental Engineering Department of the Norwegian University of Science and Technology in Trondheim. Håvard Bergsdal is also Norwegian researcher in his early 30s who, like Hans-Petter, agrees that the question is thorny. He is actually not quite sure if morality or otherwise of profits can be determined even from the motives. Peter Sevcik, a Slovak researcher based in Bratislava, replies that the term ‘moral’ is fuzzy, and to him, is sans a clear-cut definition. Hans-Petter, Håvard and Peter are three of the respondents to an E-mail sent out by this writer, in an attempt to glean public opinion. Peter’s confusion about what is moral, and what is not, needs to be allayed, while other categories of profit need to be briefly discussed, before one can attempt to explain the tenuousness, or otherwise, of the link between morality and profiting [or, 'profiteering' when the connotation is negative].

MULLING OVER MORALITY

Put simply, ‘morality’ is something which is deemed to be desirable and acceptable by society, and ‘immorality’ is the contrary. The definitions are highly subjective, and vary over time, as they are closely governed by culture, tradition and religious beliefs. For instance, alcohol consumption is immoral in Islamic society, but it is a much-encouraged social more, elsewhere in the world. Beef eating is immoral for Hindus.

There is also what one would term as supererogation — going the extra mile and doing much more than what is asked for [Cowan and Rizzo, 1995]. One could also christen this behaviour as hyper-moral or super-moral, if one may, or alternately refer to it as ‘extraordinary morality.’ On a scale, one may say that morality is neutral [it is a duty and the least expected of a responsible, conscientious, law-abiding citizen], immorality is negative [highly condemnable and, perhaps, punishable by law], and supererogation is positive and highly appreciated [laudatory].

PONDERING OVER PROFITS

One could profit either by cutting production costs [by improving efficiency of use of the material factors of production, or exploiting cheap labour], or by increasing the prices of products one puts on the market. There are some who would do both and rake in super-normal profits. Exploitation of cheap labour in the developing world has been going on for a long time. The willingness to accept low pay [as something which is, at least, better than nothing] is availed of in this case. Profits which are tainted by the exploitation of cheap labour are indisputably immoral, unless, of course, these are ‘siphoned back’ to the augmentation of the welfare of the community in which the enterprise functions. Arts and events consultant Varshita Venkatesh, however, is displeased with the caveat. She believes that the question of ‘siphoning back’ will not arise if labour is not short-changed in the first place.

If the profit margin is greater than the interest payable on loans taken from banks [the so-called super-normal profits], it is the way the surplus is handled to determine whether profiting is moral, or otherwise. Diverting a good portion of the surplus to socio-economic development in rural areas, and reinvesting the remainder in meaningful research and development [Brownfield and Greenfield] expansion would generate more employment; it will also obviate the taint of immortality which would, otherwise, be associated with it. Super-normal profits could either be the outcome of a planned business strategy, or may come about by way of windfall gains — influenced primarily by external factors in this highly-interconnected, globalised world. Cowan and Rizzo [1995] cite the varied gains made by American oil companies, during the oil crisis of the 1970s, as another exemplar.

This is not all. While profits accrue when one provides some concrete value [in the form of a product, or service] for consumers’ money, there are also profits which are mere misappropriations [theft, fraud etc.,]. They most certainly are condemnable as downright immoral.

KNITTING MORALS WITH PROFITS

Having defined morality, immorality, supererogation, normal and super-normal profits, windfall gains and misappropriations, it becomes evident that a business which gains a little ‘super-normally,’ pays its taxes on time, and invests the surplus in expanding the business, cannot be blamed for exhibiting self-sustaining behaviour. There is nothing immoral about this, as long as the head honchos do not siphon-off a considerable portion of profits to augment their personal wealth and indulge in material excesses at the expense of consumers.

Sustaining a business is of paramount importance. Money is needed to run a business, to ensure the well-being of the employees, and to adjust to the rise in prices of the factors of production and interest rates on loans taken from banks. Expansions and acquisitions come much later in its life-cycle. In a perfectly-competitive marketplace, the scope of drawing in super-normal profits, is narrowed down considerably. This may benefit consumers — with the richest having a wonderful time — but, this could possibly result in the exploitation of cheap labour wherever and whenever possible. Retrenchments become commonplace, but the motive for it may not be primarily to enhance profit margins, but to merely survive in the marketplace, and endure the lows before the next boom phase.

Contributing to charitable causes — exactly where the need exists — and, giving a truly supererogatory ‘face’ to the extra greenbacks earned, is secondary to ensuring that cheap labour is not exploited.

Byman Hamududu, a Zambian researcher in the field of hydropower, considers this exploitative nature of businesses to be a strong determinant of the immorality of profits than overcharging consumers for products and services. In fact, he fully supports the right of businesses to seek profits from their customers. Varshita [quoted earlier] wonders why availing of the customers’ willingness to pay, to generate profits, should be considered immoral. Ayon Tarafdar hails from Kolkata [India], and works in Trondheim, Norway, as a researcher. He does not want to associate the word ‘immoral’ with profits. He believes that profits are intended in the first place to be distributed fairly among the ‘components’ which generate them. What ‘components’ mean here is, of course, open to debate.

Many competitors are in business not to become charitable at a later stage, but to entrench themselves in the marketplace, survive, and ensure a constant flow of revenue. Overpricing with a charitable intent at the back of the mind is not easy for a business which believes in a modern-day-Robin-Hood-approach to contribute to the improvement of the standard of living of the poor and the underprivileged. It will, of course, be possible in a monopolistic marketplace [niche and specialised products], where the monopolist is a do-gooder and true benefactor of the lower strata of society. This may also be possible so long as there are no new competitors emerging on the scene.

What is most vital to sustain the supererogatory behaviour is the support of customers. Willingness to shell out a few extra bucks when there is a guarantee that these will be channelled to charity is extremely important. The greater the proportion of such customers in the marketplace, the more difficult it becomes for competitors to undercut prices to augment their market shares. It follows, thus, that corporate entities and businesses may exhibit super-moral behaviour, but they need the support, appreciation and backing of customers [and, the government/s] in order to sustain it.