Profit and Growth

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sofistek's picture
sofistek
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Profit and Growth

This topic appears from time to time in various forums that address our predicament. A recent post by Chris prompted me to ask the question again, since that post appears to imply that it's possible for business to exist to make a profit (the second last point of the principles and, possibly, principle 5). The principles were excellent until I hit those points.

It seems to me that a business that makes a profit (i.e. income that exceeds all expenses) will either grow or provide funds for the economy, as a whole, to grow. if the principles outlined in that post allow for profit, don't they also allow for growth?

Since growth is unsustainable (and damages the environment), growth is an undesireable feature of any future society that we might envisage. Does it make any sense to have businesses make profits without fuelling growth?

Tony

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kemosavvy
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Re: Profit and Growth

from what i gather from your question, you really want to know about GROWTH.

i've got to run at the moment but i just interviewed a guy who is making a film based on growth and the interview will shed alot of light on your question.

here is the link.

steve

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Re: Profit and Growth
sofistek wrote:

It seems to me that a business that makes a profit (i.e. income that exceeds all expenses) will either grow or provide funds for the economy, as a whole, to grow. if the principles outlined in that post allow for profit, don't they also allow for growth?

Since growth is unsustainable (and damages the environment), growth is an undesireable feature of any future society that we might envisage. Does it make any sense to have businesses make profits without fuelling growth?

Absolutely.  Prosperity is an alternative to growth.  It'll take growth (aka recovery) on our parts to savor it.

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Re: Profit and Growth
deggleton wrote:
sofistek wrote:

It seems to me that a business that makes a profit (i.e. income that exceeds all expenses) will either grow or provide funds for the economy, as a whole, to grow. if the principles outlined in that post allow for profit, don't they also allow for growth?

Since growth is unsustainable (and damages the environment), growth is an undesireable feature of any future society that we might envisage. Does it make any sense to have businesses make profits without fuelling growth?

Absolutely.  Prosperity is an alternative to growth.  It'll take growth (aka recovery) on our parts to savor it.

BTW, that answer to the second question implied my answer to the first:  according to CM, either growth or prosperity.

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Re: Profit and Growth

I'm not sure I understand. Can you define prosperity and how it relates to profits?

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Re: Profit and Growth

 

We are currently in the profit based money paradigm, when people realize it's not working anymore, sustainability and efficiency will be the new incentive system.  You can only fill a water balloon up so much before pop!

The Technocrats were talking about this decades ago, zeitgeist movement talks about this and something called zero-cost economy.  

Were just playing the money game, eventually all this crap will go back in the box and we will open a new one called civilization, at least I hope.  Until then enjoy the ride, and until people realize it's just a game and we can change it anytime we want to, just keep playing and enjoy the best you can.

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Re: Profit and Growth
kemosavvy wrote:

from what i gather from your question, you really want to know about GROWTH.

i've got to run at the moment but i just interviewed a guy who is making a film based on growth and the interview will shed alot of light on your question.

here is the link.

steve

Looks like an interesting film but I know growth is unsustainable. What I'm asking is whether it's possible to have businesses making profits but no economic growth. without the profits simply being buried or burned.

As for growth itself, New Scientist did a special edition, in October 2008, about growth and how it is killing the planet.

Tony

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Re: Profit and Growth
sofistek wrote:

What I'm asking is whether it's possible to have businesses making profits but no economic growth. without the profits simply being buried or burned.

Tony,

CM made a distinction between growth and prosperity in Chapter 5 of the CC.  What did you get out of that chapter?

From a permaculture perspective, I will say that you're not far off when you mention burying and burning of profits.  Prosperity is marked by community health, arts and celebration* that consume profits.  Prosperity is more like a natural system than is so-called growth because it is in place (each one is different), passively receives infusions from beyond (sunshine and weather, seeds and spores, etc.) and includes these decomposers.  Growth is about more growth, not the renewal that's natural to prosperity.

Natural systems teach that decomposition, not devastation, builds (conditions for) the future!

David

* these are what we must grow to savor

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Re: Profit and Growth
sofistek wrote:

Looks like an interesting film but I know growth is unsustainable. What I'm asking is whether it's possible to have businesses making profits but no economic growth. without the profits simply being buried or burned.

Yes, the excess can be used to nurture the Earth.

If a community (or business) makes no profit then it is living on the edge and barely sustaining itself. If a community makes a profit it can exist in many forms. Excess grain can be stored for lean times or used for trade with an adjacent community. A rich community also allows for some individuals to take up dispensable tasks such as basket weaving, story writing etc.

In the business sense we have been conditioned by current business practices of maximizing the bottom line and investing monetary profit for maximum return. There is no fundamental reason why this profit needs to be used for extraction from the Earth when it can be just as easily use for reparations to the Earth. We only need a shift in our legal system!

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Re: Profit and Growth

i'd like to throw in my $.02 and say that profits and growth are not entirely linked to each other.

our economy is not driven to grow by the desire to be more profitable, although it seems that way, we are actually driven to grow because it is mandated by our debt-based monetary system and the fact that we charge interest on that debt.

the formula p < p + i (have you seen this before?) means that the our economy must grow by some amount each year to cover the interest on our debt.

now, since this debt-based beast only eats money we must feed it money, we can't feed it corn or anything physical, it can only be fed numbers. so we have to accomplish all sorts of tasks that create money, one example of this is pulling gold out of the ground and giving it a value in money. we can then feed a portion of that money into the beast.

ultimately, everything will have a value and will be fed into the beast... this means all physical things (oil, gold, corn) and intangibles (ideas, knowledge, expertise) will be given a dollar amount and fed into the beast. people will and are asked to work harder and harder to produce more and more, the treadmill is picking up speed.

profits play a part in this story but they are just a mere side story.

steve

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sofistek
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Re: Profit and Growth
deggleton wrote:

CM made a distinction between growth and prosperity in Chapter 5 of the CC.  What did you get out of that chapter?

It's been a while since I viewed the crash course and don't recall those details. I think of prosperity in a wider context, not directly connected with the economy (happiness, satisfaction, personal growth, and so on). But my question was specifically about profit and growth. Is it possible for businesses to make profits without driving economic growth?

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sofistek
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Re: Profit and Growth
SteveW wrote:

Yes, the excess can be used to nurture the Earth.

I suppose one could think of profit as excess but I think that's a different issue. Societal complexity depends on energy excess (i.e. positive net energy). For example, it is thought that hunter/gatherer societies generally got 10 calories of food for every calorie they expended, allowing for a lot of leisure time. But I'm thinking explicitly of business profit.

SteveW wrote:

In the business sense we have been conditioned by current business practices of maximizing the bottom line and investing monetary profit for maximum return. There is no fundamental reason why this profit needs to be used for extraction from the Earth when it can be just as easily use for reparations to the Earth. We only need a shift in our legal system!

Isn't a fundamental reason that businesses generally don't operate for the benefit of all? Would businesses strive to make profits in order to provide funds for repairing the earth?

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sofistek
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Re: Profit and Growth
kemosavvy wrote:

profits play a part in this story but they are just a mere side story.

Indeed. But I'm still not much further forward in my quest to discover if it's possible for businesses to make profits without driving growth. You're right that growth is needed for our debt-based economic system, but isn't it profits (provided by people/businesses borrowing to buy stuff they can't, otherwise, afford) that provides a vehicle for growth?

Without a fundamental shift in attitudes, that might realise SteveW's hope of businesses operating for the common good, surely profits end up as economic growth? If so, any future sustainable society can't include a profit motive.

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Re: Profit and Growth
sofistek wrote:

Without a fundamental shift in attitudes, that might realise SteveW's hope of businesses operating for the common good, surely profits end up as economic growth? If so, any future sustainable society can't include a profit motive.

A difficult question for most people to even think about but I believe you just answered your own question. The system has failed and it becomes more interesting and challenging each day that goes by which we cling to it.

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Re: Profit and Growth

Tony,

Is it possible for a business to make profits without driving growth?

If growth means quantity of goods and services produced, then yes.    The type and quantity of goods produced  however,   is determined by consumer demand.     Alter the demand,   and you alter the producers activities , and growth.

The  experience  of the old Soviet Union is a real life example of an economy where  profit is a foreign concept.    Can we classify it as a sustainable society ?

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Re: Profit and Growth

Tony,

It's not a causal relation.  A choice comes between.  A profit delivers to the owner(s) a relatively safe opportunity to choose.  If prosperity is the choice, growth is not and vice versa.

If you will not accept CM's notion that prosperity is an alternative to growth, then you may discover only that you are stuck with your notion.

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Re: Profit and Growth
deggleton wrote:

It's not a causal relation.  A choice comes between.

Emphasis added because the persistance of your question seems to arise from leaving out the human element.  Regardless of illuminating analogies or innovative manipulations, economics is not physics.  Human purposes, some foolish, some wise, generate the aggregate called the economy.

The economy seems to have a life of its own, but the more we come alive the more deadly it appears.

David

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sofistek
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Re: Profit and Growth
Carl Veritas wrote:

If growth means quantity of goods and services produced, then yes.

I'm thinking of profit in business terms. Profit, to a business, is inclime in excess of the costs of producing the goods and services that the business sells. If it just covered its costs, the business could continue indefinitely, producing the exact same quantity, provided the resources for their goods and services lasted. So profit is extra income and extra income gets spent by someone, eventually. So that, to me, is a driver for growth.

Carl Veritas wrote:

The  experience  of the old Soviet Union is a real life example of an economy where  profit is a foreign concept.    Can we classify it as a sustainable society ?

History shows that it wasn't sustainable. I haven't studied the old soviet economy in detail but, clearly, they got something wrong and I'm not sure what it shows, with regard to profits and growth.

Note: profit is not the only factor that determines sustainability or not, and not the only factor in economic growth but I'm interested to know whether businesses can make profits without fuelling economic growth.

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sofistek
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Re: Profit and Growth
deggleton wrote:

It's not a causal relation.  A choice comes between.  A profit delivers to the owner(s) a relatively safe opportunity to choose.  If prosperity is the choice, growth is not and vice versa.

If you will not accept CM's notion that prosperity is an alternative to growth, then you may discover only that you are stuck with your notion.

It's not a matter of accepting CM's notion or not, deggleton. It's that I don't understand what you're getting at. Are you saying that growth will not result from profit, provided that profit is ploughed into non-growth stuff? If so, can you give an example of how that can happen?

Please don't be frustrated by the persistence of my question. Maybe I'm just stupid but, so far, I haven't read any comments that show how growth doesn't derive from profit. The only way I can see that is if there are business losses that are exactly equal to, or greater, than the business profits, in which case, business are all fighting for a bigger share of the same pie, at some other business's expense. That may be sustainable (provided other sustainability criteria are met) but it doesn't seem very satisfactory to me.

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Re: Profit and Growth

Tony,

Rest assured, I do not think you are stupid.  Not even close!  But you're on target in regards to frustration.  You define terms just so and every respondant does, too, making us ships passing in the night.

I'll probably be back with an example.  CM gives some in Chapter 5, with which some people are not satisfied, according to forum posts.

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sofistek
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Re: Profit and Growth
deggleton wrote:

Rest assured, I do not think you are stupid.  Not even close!  But you're on target in regards to frustration.  You define terms just so and every respondant does, too, making us ships passing in the night.

It's not an unusual definition. Profits, as reported by companies, seems fairly reasonable. Growth is an increase in economic activity.

But it seems like I need to revisit Chapter 5 - I'll do so soon.

Tony

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sofistek
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Re: Profit and Growth

I revisted Chapter 5 and, I have to say, that Chris didn't make the case very well. Many of the commenters seemed to agree.

His example seemed to be about growth of the population. At least that was the specifics of the example, though I can see that a growing population will certainly lead to increased economic activity. But so will the alternative he mentioned, spending more on each member of the family. So both choices lead to increased economic activity, which is unsustainable.

But, even so, it's not getting at the heart of what I'm trying to ascertain, in this thread. It is possible to run businesses at a profit, in a sustainable society. I think that's only possible if, overall, profit is zero. If total profit were more than zero, it would lead to a growing economy. At least that's what it seems like to me.

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