09 July 2017

Proper Profit Management Grows (& Protects) Economy

2 Thessalonians 3: 10, 1 Timothy 5: 18, 1 Timothy 6: 9

The wrestling match between labor vs capital, union vs ownership, hourly wage vs passive income, is about money; where profits flow.

Where do the profits flow, and to whom?

If a company is publicly traded (listed on a stock market), a portion of the profits flow to those who own stock (invested and purchased shares), called dividends.

This is an example of passive income.

The owners of stock can live anywhere in the world.

Such monies are extracted from where they are made, arguably causing an economic siphoning effect.

This is also an example of money making more money, or money being put to 'work'.

If the company is private, a portion of the profits go to the owner(s) of the company.

This is the incentive for those who take the risks of starting a company, either investing their own savings or that of others.

Without this incentive as a motivation, there would be no reason for a person to take such risks.

For both private and public companies, another portion of the profits usually go to growing the company.

Maybe marketing, advertising, new equipment, regular maintenance, new product development, etc..

For private and public companies, some profit may be funneled to the employees as bonuses, company cars, paid vacations, etc.; these usually reserved for executive management and possibly lower (mid) management.

Labor typically does not see any profit from their labor above their set wage / salary.

Some companies, however, do share the profits with everyone who works, labor included.

This is typically called profit sharing, and is not common.

So what about a company whose employees are the owners?

One example of such a company, redistributing its profits to all employees, is Mondragon (a worker-owned cooperative) started by Catholic priest Jose Arizmendi.

Jose inspired five students to approach business in a way that returned profits into all hands, growing local communities and eventually turning a small business offering a single product (space heater) into several international companies in four industries employing over 70,000 people.

The growth hasn't been perfect, nor great when compared to other companies of that time and still existing today, but the results are evident in the local communities the employees reside.

In order for an economy to survive, grow and flourish, the masses of people need to have enough income, above the cost of living, to buy products and services...or the simple reality this article highlights.

Mondragon and similar business models could be an answer to the phrase profits are unpaid wages, which is one response to the ancient model of labor vs capital / hired hand vs owner.

One outcome of the Mondragon business model that could be argued is the quote a rising tide lifts all boats, attributed to John F. Kennedy.

And when the economic tide recedes (as it always does), it is companies like Mondragon that do not collapse.

Nor do its employees realize devastation, nor their local communities become impoverished.

Such a business model survives when others cave-in to greed, theft, chicanery and the bitter taste many people have felt when being laid off or losing a job not from committing an error.

Read how it survived the last tsunami that swept over the world in 2008, and how it inspires an ideal that some call anti-capitalist...but is that truly the case?

It is very important that wealth is built and redistributed locally...aiming towards autarky, a step closer to full sustenance and sovereignty.

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