Jewish World Review Dec. 24, 2003 / 28 Kislev, 5764

Thomas Sowell

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Consumer Reports

Profits Without Honor: Part II

http://www.NewsAndOpinion.com | Those who rail against profits and "greed" seldom stop to think through what they are saying, much less go check the facts. Most of the great American fortunes— Rockefeller, Ford, Carnegie, etc. — came from finding more efficient ways to produce a product or service at a lower cost, so that it could be sold at a lower price and attract more customers. If making a fortune represents greed, then greed is what drives prices down.

None of this matters to people who have been conditioned to respond to the word profit automatically, as Pavlov's dog was conditioned to respond to certain sounds.

"Never speak to me of profit," India's legendary leader Pandit Nehru once said to that country's leading industrialist. "It's a dirty word." Policies based on that attitude cost millions of Indians a better life for decades, by stifling India's businesses.

Indian businesses flourished around the world — except in India. Only after India's severe restrictions on business were lifted in the past dozen years has its economic growth taken off, creating rising incomes, employment and tax revenues. This poverty-stricken country could have had all those things 40 years earlier, except for a prejudice against a word.

Unthinking prejudices and suspicions about profits is often matched by unthinking gullibility about "non-profit" organizations. No matter what money may be called, both individuals and organizations must have it in order to survive.

Businesses get their money from those who buy their goods and services. Non-profit organizations are crucially dependent on money from other people — either voluntary donations, tax money from the government, or money extracted from businesses through lawsuits.

Where there is a product or service of widely recognized value, such as education or medical care, schools and hospitals can attract donations on that basis. But there are other non-profit organizations which can survive only by inspiring fears and anger that bring in donations.

For these kinds of non-profit organizations, the sky is always falling or we are threatened with seeing the last few patches of unspoiled land paved over for shopping malls, virtually everything is "unsafe," we are running out of natural resources, and air and water are becoming dangerously polluted.

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Facts do not make a dent in these claims. No matter how much data show air and water pollution to be far less than in the past, that only a small fraction of the land of this country is paved over, or that there are far more known reserves of natural resources than there were half a century ago, or that life expectancy is increasing despite innumerable "dangers" proclaimed by hysteria-mongers, the media continue to take these people seriously because non-profit is equated with unbiased.

The media treat "consumer advocates," for example, as if they had some expertise, rather than propaganda skills. But there are no qualifications whatever required to become a "consumer advocate." Nor is there any test whatever for whether a "public interest" law firm in fact serves the public interest, rather than filling its own coffers with damage awards or advancing its own ideological agenda.

Unlike profit-seeking businesses, which must keep down costs in order to survive, many of the costs created by non-profit organizations fall entirely on others. Those others include not only their donors but also those who pay in many ways for the government-imposed restrictions created at the urging of non-profit crusaders.

These costs include sky-high housing prices in places where non-profit organizations can get state and local governments to prevent, restrict or harass anyone seeking to build homes or apartments. Frivolous lawsuits by "public-interest" law firms drive up prices with huge damage awards against businesses, doctors, and others.

The biggest costs may be paid by people needing medical care in places where expensive malpractice insurance, brought on by frivolous lawsuits, have driven doctors away.

These are very high prices to pay for a halo around words like "non-profit," "public interest" or "consumer advocate."

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JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author of several books, including his latest, "Applied Economics: Thinking Beyond Stage One." (Click HERE to purchase. Sales help fund JWR.)

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