Thursday, January 17, 2008

Enough Profit?

Admittedly, I'm probably not the right person to talk about high profits. I'm rather working on the lowest end of business, being temporally employed. But there's one thing I've often wondered about: Is there such a thing as enough profit?

I've been thinking about this more than once in the past. Currently I'm thinking about it, because Nokia has just announced to close yet another plant in Germany. It doesn't really touch my own life - I'm not working there, it's a couple of hundred kilometres from my hometown. It touches the lives of a lot of other people, though. There have been a lot of people working at that plant and they've been doing overtime until quite recently - even though the management already knew they were going to move.

For a long time the company has produced cell phones there. Some of the workers interviewed in a special I saw have been working there for ten years. And, even though admittedly the additional costs for a worker in Germany are quite high, the company has also reaped benefits from the local government. They were a major employer in that area and thus entitled to tax cuts and other niceties. Now they're moving the plant to Romania, because it's supposed to be cheaper.

Now, I'm not really the reincarnation of Karl Marx, but I do believe that companies should not be allowed to completely do as they pleased. They should not only have to watch their profit margin, but also the impact their actions have on, say, the area they produce in.

As I mentioned, Nokia was a major employer in that area (just as Siemens once was a major employer in my hometown, but that's long past). The closing of the plant, therefore, means that a lot of people will loose their jobs. And, as a major employer in that area will be missing, they'll have a hard time to find a new job.

The only reason for the closing of the plant, on the other hand, is the profit margin. They didn't make a loss in Germany, but they could make more money in Romania, because work is much cheaper there. Romania still is one of the poorest countries in eastern Europe (unlike, say, Poland or the Czech Republic which are doing quite well). People there will indeed work for little money. But they won't be able to purchase the products they're making.

To be honest, I've never really understood the principle of moving plants to countries with low wages, just to save some money in the end. If a company produces things people really want to buy, then the sales should be high enough to finance the expenses. (And create a nifty profit, too.) If a company doesn't produce things people want to buy, then maybe it should consider producing something different. As far as I know, this is something of a principle of a free market (as opposed to the planned market of, for example, the former GDR). But then, what do I know? I'm not a manager, just an employee.

Yes, you can make more profit by producing something with less costs (and at some point, the only way to lessen the costs will be to lessen the costs of your workforce). But people are not only producing the goods, they're also buying them. And to buy something, you have to earn money beforehand. So if you put people out of employment, you shouldn't be surprised if less people are able to buy your goods. And if you produce goods for less by moving to a country where people earn less money in wages, you have to realize that those workers will never, ever be able to buy those goods.

This, I think, is something which the managers of various companies (not just Nokia, but they are the current example) do not realize.

Unlike the highest management of various companies all around the world, I think there is such a thing as "enough profit". And we'd live all better, if managers did realize this, too.

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