Swarajya, October 15, 1960
The fashion in politics is to attack profits. The attack is two-fold, one form of attack is nationalization, another is excessive taxation on profits arising out of business.
While everyone is speaking about profits and its sinful nature, nothing is spoken about losses. The payment of losses is one of the many functions of profit. Losses in the business of production or distribution are inevitable at some points, and these must be made up by profits at other points.
The profit system, again, is the only machinery for ensuring economy, and good management in production or in distribution. To make the production and distribution of any commodity as economical as possible, which is a very proper object in the interest of the general well-being, the only way is to put the consumer’s check on the producers or distributors. And this is done only by leaving it to the latter and the competition among them to make profit if they can, and bear the losses if they make losses.
If the profit system is given up and substituted by what is known as the public sector, with it goes the fear of losses, and the restraint that is economy. Expenses go up, vigilance goes down, and we have what we see in government-managed production, transport or trade.
Again, all capital is provided out of profits made by previous business. Capital formation is hit by the attack on profits. Is it good for the nation to let the economy grow stagnant, which is the sure result of making profit impossible or inadequate?
The fashion in politics is to attack profits. The attack is two-fold, one form of attack is nationalization, another is excessive taxation on profits arising out of business.
While everyone is speaking about profits and its sinful nature, nothing is spoken about losses. There are losses as well as profits when one ventures to produce or distribute at one’s own risk. Losses are met out of profits gained. The Government levies taxes and yet more taxes. But what about the losses? If we abolish profits one way or another, by legislation, nationalization or taxation, what we shall have is loss only. And this will be borne by the nation right enough, in spite of the politicians trying to conceal it, because when industry suffers, the nation suffers.
The payment of losses is one of the many functions of profit. We have seen this system in concrete form in the fact that businessmen deliberately buy losing concerns to total up in their favour in income-tax assessment. But apart from motive, losses in the business of production or distribution, are inevitable at some points, and these must be made up by profits at other points. Without such an arrangement, production and business must shrink to the detriment of the general welfare. If, by any means, by legislation or excessive taxation, we abolish profit or reduce it beyond the limits of tolerance, much essential production or distribution will go out of commission and national welfare will suffer.
The profit system, again, is the only machinery for ensuring economy, and good management in production or in distribution. To make the production and distribution of any commodity as economical as possible, which is a very proper object in the interest of the general well-being, the only way is to put the consumer’s check on the producers or distributors. And this is done only by leaving it to the latter and to the competition among them to make profit if they can, and bear the losses if they make losses. If the profit system is given up and substituted by what is known as the public sector, with it goes the fear of losses, and the restraint that is economy. Expenses go up, vigilance goes down, and we have what we see in government-managed production, transport or trade.
Again, all capital is provided out of profits made by previous business. Capital formation is hit by the attack on profits. Is it good for the nation to let the economy grow stagnant, which is the sure result of making profit impossible or inadequate? Any one conversant with affairs knows that if the national income is so distributed that no one gets anywhere above the average - which is the goal of the egalitarian - and the nation happens to be a poor one as we are, there will be no capital formation, either private or public. It would approximate the fate of a peasant population which eats up all the harvest and lays by no seed-grain.
