Let’s celebrate profit, not apologise for it
Let’s celebrate profit, not apologise for it
Luke JohnsonSun, June 7, 2026 at 6:00 AM UTC
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The urge to better oneself is a basic and admirable ambition - Toby Melville/Reuters
The Confederation of British Industry (CBI) has accused Labour of "turning profit into a dirty word". But profit isn't a dirty word. In fact it is an absolutely essential element of what makes society function. Without profit, there would be no industry, no investment, no growth, no innovation and no progress.
The alternative to making a profit is a loss. And that state of affairs is unsustainable for any organisation. No company – or indeed charity – can operate at a persistent deficit. Ultimately it runs out of money and is forced to go bankrupt, shut down and lay off all its staff.
Profit is the ultimate source of all investment. Companies cannot attract investors unless they promise them a return on their money – and that can only be provided by actual or projected profits – one way or another. Without investment, it is impossible to start or grow any enterprise. Capital is needed to build, to pay people, to provide services, to trade.
Humans respond to incentives, and the profit motive is a powerful one. It encourages entrepreneurs to risk their time and capital to develop new products and services they think they can sell at a surplus. It is not the only motivation: but it is a fundamental driver. The urge to better oneself, to improve one's standard of living – that is a basic and admirable ambition. It is what has propelled civilisation forward since time began.
The hunger to turn a profit is moderated by free markets. Where they function properly, competition forces firms to offer value to customers to stay solvent. There will always be voracious rivals ready to pounce if any business gets complacent and tries to take advantage of the public. As Jeff Bezos, of Amazon, has reportedly said: "Your margin is my opportunity."
Profits and markets are better methods of allocating capital than governments. Central planning is never as good at directing resources to their most suitable destinations as millions of customers and thousands of entrepreneurs are. Politicians seek short-term applause and if permitted would ferociously subsidise all manner of wasteful activities, pressured and persuaded by special interests, if left completely unfettered. As it is, the state tends to manage badly almost everything it touches, which is partly why public sector productivity is so poor.
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I fear that socialists, many of whom think profit is somehow a wicked concept, view the world through rose-tinted spectacles. Like Commissars in the USSR, they believe they know best about how society's capital should be distributed. We have forgotten just how inefficient, underinvested and demoralised Britain's nationalised industries used to be – from British Rail to British Telecom to British Leyland. Rail usage has more than doubled in Britain since they were privatised in the 1990s; prior to privatisation in 1984, it took months to get a telephone line. State monopolies are almost invariably badly organised and suffer from political interference.
Surveys suggest the public believe companies are much more profitable than they actually are. Certain businesses can enjoy remarkable margins and returns, and occasionally competition authorities are needed to intervene to ensure that markets are operating properly, and customers are not being exploited. But mostly money flows swiftly to wherever profit opportunities lie, which means that many businesses are barely profitable owing to intense competition. While this can mean consumers buy goods or services cheaply, chronically unprofitable industries will tend to suffer from underinvestment over time.
Ultimately, capitalism is a system of creative destruction, whereby underperforming companies go broke, their assets are reallocated, and new operators try to run the undertaking in a more commercial way. Such disruption can lead to new ideas, more job creation and fresh thinking. This is a major reason why the private sector is so good at renewing itself.
By contrast, this almost never happens in the state sector: be it education, the NHS, the military, the police or the Civil Service – the institutions mostly remain unscathed despite restructuring, no matter how poorly they deliver services to the public. The reputations of organisations like the NHS and the police among taxpayers have declined materially in recent times – partly because they struggle to adapt to changing circumstances.
Those who dismiss profit as a dirty word do not understand human behaviour and how civilisation evolved. The instinct to develop enterprises and seek reward for that effort pre-dates the Old Testament. We should celebrate markets and risk takers, and encourage their endeavours. Employees prefer working for a business that is profitable and successful, because they are more likely to get pay rises and bonuses. The more profit a community generates through its businesses, the more money will tend to flow to its workers, pension holders and other citizens. Profit is an undoubted force for good.
Luke Johnson is chairman of Risk Capital Partners
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Source: “AOL Money”
