Aaron Clarey, a.k.a. Captain Capitalism, has written a very useful, easily understandable primer on why it’s necessary for businesses to make a profit. Here’s a brief excerpt.
The simplest way to understand why profits are necessary is to understand it from a perspective of providing goods and services. This is an oft forgotten or ignored aspect of economics because everybody seems to focus on MONEY and not the things that actually matter – GOODS AND SERVICES.
I cannot eat a dollar.
A Yen will not provide you surgery.
A pound will not feed your dog.
And a Euro will not fuel your car.
However, these currencies WILL buy us the goods and services that provide ultimate value and utility in life. A dollar will buy me an apple that I can eat. A Yen will buy me some gas that will fuel my car. A Euro will buy a dentist’s services to repair your teeth. And a pound will buy some dental floss after your dentists lectures you for not flossing. So the whole point and purpose of an economy is to produce the stuff, not the money nor necessarily profits in the process of doing so.
Since it is the stuff that needs producing that ultimately matters you need to ask how stuff gets produced, and the answer is “not charitably.”
In order for things to get produced, somebody has to inevitably forfeit some of their time to produce them. This can be done on an individual level as per subsistence type craphole economies like Africa, or in the awesome 1st world through organizations, namely, corporations and companies. Large and complex systems organizing capital and labor to produce an amazing plethora of things all on the cheap. But regardless of the size of the company, it has to ultimately be started. And since time is ultimately the ONLY resource that matters to humans, any sane and self-respecting human is going to demand he or she be compensated for it.
Thus introducing profit.
This is the problem most people who have a problem with profit face. They look at it backwards. The issue isn’t whether somebody deserves profit or whether profit should exist. NOTHING would exist unless it was for profit. And the insurance industry explains this incredibly well.
There’s more at the link.
This is the sort of thing that socialists can never seem to understand. Without the incentive of profit to motivate them, why should individuals or businesses work for the common good? They won’t, of course, as the history of applied socialism makes dismally clear . . . but somehow a lot of young people are taken in by this false argument and fake philosophy.
If you have such people among your friends and/or acquaintances and/or colleagues, let them have a copy of Aaron Clarey’s article. It might make them think – for once.