7. Value and place of profit in economy

So, is the profit as such wrong?

Based on previous analysis the reader might come to conclusion that the theory is saying that profit is something immoral, highly harmful and so it should be banned. It is not so. However, it is already established that profit as such is causing the contraction of economy. If already achieved profit is not coming back into economy as recurring consumption of its owners, it is causing the diminishing of free circulating money in the system and that is going to collapse sooner or later.

If businessmen making profit are not able to spend it and are accumulating it in the banks (or socks) they are lowering the money in circulation and this is causing recession.

But the profit represents an important motivational factor. Conducting business is highly risky activity and requires huge personal involvement, time, money and risk taking. This risk is indeed much bigger than the entrepreneurs are aware, because it is not only market, currency, technology, political and others, as are commonly thought at the universities.

Our theory is saying that real risk is in the fact that by achieving the very profit as such the economy´s sustainability as a whole is being undermined. The more profit you make, the higher profit there is achieved at the global scale, sooner the economy will collapse.

 To understand this paradox is beyond the power of most of business managers and owners and so we are getting to the situation where the more successful are the companies in your country, the sooner the society as a whole will go bust.

However it does not apply if the already achieved profit is coming back into circulation as consumption. This is the real substance of entrepreneurial reward. To be able to consume more than common mortal can consume through his salary. If you build a palace from your profit, it is OK. The building of expensive mansion represents work and salaries for builders, architects… And its maintenance will require gardeners, servants, security… You can buy Ferrari, Lotus or in case of serious collectors passion the whole lot of them. By doing that you will be giving work to thousands of workers in automotive industry.   Do you want the plane or yacht?  No problem. This all is your just reward for risk taken and success achieved. During such using of profit there is automatic balance setting in as money taken away from economy are coming back and system can work indefinitely.

 So capitalism is a sustainable system, but we need to understand its limits.

If all profits are coming back into economy and used for consumption, the system can work forever.

The problem is that it is not happening.