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Stop complaining

share the profit

February 03, 2007|by GEORGE MICHAEL

It certainly has made for a great news story recently each time xone of the big oil companies announced its quarterly profits. People get really juiced when a corporation such as Exxon-Mobil announces profits of $10 billion for a given three-month period.

Exxon-Mobil is the biggest company in the world in terms of sales, and so billions of dollars in profits could be thought of as billions of gallons of gasoline sold, millions of homes heated, thousands of jet plane flights and dozens of other benefits to both our nation and the world.

But there is a big problem when these profits are announced. It has to do with public attitudes about profits themselves. Politicians and the media like to play to the public on this issue. It has appropriately been called "the politics of envy." Public officials know how to appeal to the baser motives of the public and how to take advantage of our relative ignorance concerning economic matters.

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Envy is a lot worse than greed. Greed, when kept in appropriate bounds, can serve a useful purpose. Greed can motivate people to better themselves, work harder, take risks and even provide for the needs of others by doing something they enjoy. Does the owner of a restaurant who makes a profit provide something only for himself? Or does he provide a service for others?

Envy, on the other hand, is deadly. It is the resentment of the success of others. It is a resentment that leads to a social policy that rewards the indolent and punishes the successful. Cynical politicians know how to manipulate the emotions of the public to shape public policy.

Profits serve a useful function. They tell us which producers are doing the best job at providing us what we need. Profits are signals letting us know where more capital investment is needed. They let us know who is most efficient at managing scarce resources. Exxon-Mobil is by all accounts a very well-run company. Should we punish it for success?

Keep in mind that the main reason for the big profits of these companies is what Congress has done, or rather, not done, over the past six years. By refusing to allow drilling for new oil, Congress has created an artificial shortage of gas and oil. Since oil companies happen to own large reserves of oil and gas, the value of their capital has greatly increased.

So if Congress is really serious about cutting into oil company profits, it should let them drill for oil in Arctic National Wildlife Refuge and elsewhere. The increased supply is the best way to bring prices back down, along with some of those "obscene profits" politicians like to complain about.

By contrast, Ford Motor Co. announced losses last week of $12.7 billion for 2006. This must have been good news for liberals. Liberals like failures much more than successes, whether in business or on the personal level. Failure provides opportunities for them to feel needed by providing a government handout. Never mind that their idea of a "helping hand" involves someone else's money.

The absolute worst way to deal with the current oil market situation would be to put some kind of new taxes on oil companies - which means, this is what a Democrat-controlled Congress is most likely to do. Oil companies and shareholders of oil stocks already pay a hefty amount of the national tax bill. Public policy should not be to punish the successful and reward those who fail. But of course, liberal social policy has been doing this for years.

The net profit for oil companies on average is about nine cents on a gallon of gas. Meanwhile, depending on what state you live in, the federal and state governments siphon off 40 to 50 cents per gallon in excise taxes and they don't do a thing except to make it harder for the gas companies to earn even their nine cents. Who is profiting the most here?

If you do not wish to support the profits of the oil companies, you can always make choices as many Americans are already doing by reducing your personal dependence on oil, such as driving a smaller car, moving closer to work, heating your home with an alternative fuel, using public transportation or walking and biking more. Those are fine options on the personal level.

Without realizing it, many people with 401(k)s, life insurance or retirement funds already benefit from oil company profits in their personal financial portfolios. You may be reaping the rewards of their success without even realizing it.

Another great thing about the free market is that you can make those same "obscene" profits yourself. Just buy some Exxon-Mobil stock. Or, for a more modest investment, buy shares in an energy mutual fund. You can get into these energy stocks without being filthy rich. That way, you can join the party and make some money too.

Does buying oil company stock seem risky? Are you afraid you might lose some money? Energy stocks did decline about 15 percent in recent weeks. So there is some risk. It is the same risk oil companies have to face every day. If you are not willing to take this risk, then quit complaining about companies that do.

So when you hear the next round of earnings headlines and some media guru is waxing elegant about obscene profits, just remind yourself of the pettiness of the politics of envy and the benefits of living in a free market economy.

George Michael is a Williamsport resident who writes for The Herald-Mail.

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