Should Corporate Profits Be Limited?
I heard an otherwise intelligent young college graduate say that corporate profits should be limited to a given figure each year, with any amounts in excess of that being automatically diverted to charity. The sad thing is that there are many U.S. citizens who would have no problem whatsoever with his statement.
Sometimes I wonder if they teach anything at all about economics and capitalism in our institutions of higher learning anymore. In regard to Exxon's recently reported record profits, I heard an otherwise intelligent young college graduate say one of the stupidest things I've ever heard. He stated (completely seriously I presume) that corporate profits should be limited to a given figure each year, with any amounts in excess of that being automatically diverted to charity. I'm serious -- that's what the kid said!
The sad thing is that there are many U.S. citizens who would have no problem whatsoever with his statement. I'm talking about people who either advocate some form of socialism or are just clueless as to how capitalism works. Since there is a very low percentage of socialists in the U.S., most of these people would fall into the latter category. Here are some questions those people should consider:
Wouldn't this kind of artificial profit limit tempt corporate executives more than ever to hide their companies' profits?
If a company reached its annual profit limit, let's say, in August, what should it do for the remaining four months of the year? Continue to churn out profits for charity? Shut down? Start losing money?
If too many large companies started shutting down during the last several months of each year, wouldn't that have a disastrous effect on our economy? Who would provide the goods and services that they suddenly stop providing? Wouldn't that reduce competition and cause inflation to skyrocket?
If a company started losing money before the end of a year, but after it had started sending its excess profits to charity, would it be able get some of its money back?
How would we keep a company's stockholders from selling their investments after it reaches its annual corporate profit limit? If we didn't prevent this from happening, wouldn't it cause the company's stock to crash each year? Assuming this practice became widespread, how would that affect everyone's 401(k) and IRA accounts?
If corporate profits should be limited, shouldn't corporate losses be limited as well? If so, how would that be accomplished?
The sad thing is that there are many U.S. citizens who would have no problem whatsoever with his statement. I'm talking about people who either advocate some form of socialism or are just clueless as to how capitalism works. Since there is a very low percentage of socialists in the U.S., most of these people would fall into the latter category. Here are some questions those people should consider:
Wouldn't this kind of artificial profit limit tempt corporate executives more than ever to hide their companies' profits?
If a company reached its annual profit limit, let's say, in August, what should it do for the remaining four months of the year? Continue to churn out profits for charity? Shut down? Start losing money?
If too many large companies started shutting down during the last several months of each year, wouldn't that have a disastrous effect on our economy? Who would provide the goods and services that they suddenly stop providing? Wouldn't that reduce competition and cause inflation to skyrocket?
If a company started losing money before the end of a year, but after it had started sending its excess profits to charity, would it be able get some of its money back?
How would we keep a company's stockholders from selling their investments after it reaches its annual corporate profit limit? If we didn't prevent this from happening, wouldn't it cause the company's stock to crash each year? Assuming this practice became widespread, how would that affect everyone's 401(k) and IRA accounts?
If corporate profits should be limited, shouldn't corporate losses be limited as well? If so, how would that be accomplished?
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