Commentary

Years ago, I recall reading about a survey in which Americans believed businesses made on average profits of 36 percent, an estimate supported by years of similar polls by Opinion Research when estimates ranged from 28 to 37 percent.

A recent review of more than 7,000 companies revealed that the average profit margin for all companies was 7.9 percent, and just one industry had a profit margin as high as 36 percent – tobacco at 43.3 percent.

But the facts never get in the way of those on the left who like to paint business as too big, bad and corrupt.  Even “Big Oil,” often the left’s whipping boy, had a below average profit margin of 5.6 percent in the most recent period analyzed.

Sen. Elizabeth “I’m going to get me a beer” Warren, who wanted to be your president in 2020, and actively sought to be President Biden’s treasury secretary, proved she’s not even qualified to be senator.

She recently tweeted @SenWarren, “What happens when a handful of grocery store chains like Kroger dominate an industry.  They can force high food prices onto Americans while raking in record profits.  We need to strengthen our antitrust laws to break up giant corporations and lower prices.”

In December, she sent a letter to Kroger, Albertsons, and Publix, excoriating the grocery giants for “passing costs on to consumers to preserve pandemic gains” and “taking advantage of inflation to add greater burdens,” according to Joe Lancaster, reporting in Reason.

She also noted that “while grocers’ profits had risen during the pandemic, the chains had not reinvested that windfall into “lower prices for consumers” and protecting and compensating their workers.”

The senator could hardly have picked a worse industry to cite as grocery stores consistently have among the lowest profit margins of any sector.  “The entire retail grocery industry currently averages barely more than one percent in net profit, and in Kroger’s most recent quarter, it reported a profit margin of 0.75 percent.

Having learned a great deal about profit and loss from my financial accounting-educated wife and my days working for a Fortune 500 corporation, businesses have costs of goods and fixed costs to deal with before determining its net profits.

While grocery chains have had increased revenues over the past year, their profitability has been hit by those costs, not just products, but transportation, adapting to pandemic shopping issues, and employee compensation.

This wasn’t Warren’s first assault on grocers.  While campaigning for president, she called for using the laws to prevent retailers from selling their own products, like Safeway’s Signature brand.

Such a move would have a severe impact on grocery stores that rely on their own brands to stock cheaper brands for consumers while lowering their costs.

I became a believer in economist Milton Friedman, who viewed profits as the lifeblood of a company, the engine if you please, that invigorates innovation and the success of a firm. Friedman believed that the sole purpose of a business was to generate profits for its shareholders, recognizing that sound profits justify the risk shareholders are taking in investing.

When talk began about the “social responsibility” companies owed for its existence, Friedman believed they were spending stockholder money on various causes they may not necessarily agree with. Why not let stockholders decide which charitable organization or cause to support?

I believe political correctness, and the recent advent of “wokeness” is becoming a problem for companies, forcing them to lose focus on what made them a viable competitor. 

One such company is American Express, which embarked on “racial justice” initiatives including woke employee training programs.

“AmEx employees and executives are being asked to disregard their real-world experiences and virtually everything they’ve been taught about economics,” wrote Christopher Rufo of the Manhattan Institute.  “They’re also being asked to ignore equal opportunity laws, and urged to base their business actions on a warped definition of “justice.”

In the company’s participation in racist oppression, its executives are encouraged to begin “deep redistributive and reparative work” through the reduction of credit standards for black customers, sacrificing profits in the interest of race-based reparation.

With AmEx’s APR ranges from 13.99 to 29.99 percent. Blacks have lower average credit scores resulting in higher interest payments. The charges do not have a racist intent, but AmEx is being encouraged to base the creditworthiness of blacks based on a subjectively assigned level of “privilege” or “oppression” considering factors such as race, sex, and, yes, gender identity.  AmEx will have to carefully weigh the rules under the Equal Credit Opportunity Act, which prohibits certain qualifications

“Presumably, AmEx has sought to provide a service that makes credit available on a colorblind basis while generating revenues to pay its workers and give shareholders a reasonable return on their investment, “wrote Rachel Gresler in Heritage.

AmEx reported a 2.27 percent per share to stockholders in the third quarter of 2021. 

BACK TO SENATOR WARREN – If she’s really interested in the consumer, I suggest she cut government spending, which has caused the hike in inflation. 

Now, more than ever … may God continue to bless the United States of America.