From their previous album, Tourist History, What You know:
Ha-Joon Chang explains, using the case of the failed Novartis patent in India, the horse meat scandal, and the Poundland scandal to the myriad of ways in which profits are social and political, and not reflexions of the magic of the market:
“The pharmaceutical industry most starkly reveals how profits are “social” creations – it makes its profit because it is granted artificial monopolies in the form of patents. But it is not alone in this respect.
Another obvious case is the banking industry. Today, many banks all over the world would not have existed but for the huge public money poured into them in the aftermath of the 2008 crisis. Even in the case of those that have not been bailed out, their profits would have been much lower (or their losses far bigger, in the case of loss-making ones) without the cheap money showered on them – without any condition, unlike in the case of state supports such as unemployment benefit – through cuts in interest rates and the quantitative easing by the Bank of England.
In other instances, the social protection of business is more roundabout. The horsemeat scandal has revealed that British supermarkets and the European meat industry have made higher profits from the relaxation of regulations regarding food standards, introduced by the coalition government in 2010 in the name of cutting government spending and, more important, “red tape”. The Poundland scandal has revealed that British retail stores would make lower profits if they were not allowed to use the claimants of unemployment benefits as unpaid workers.
I can go on, but the point is that all businesses make what profits they make only because the government, and the electorate as the ultimate sovereign (at least in theory), helps them in all sorts of ways – free money (banks), free workers (Poundland), monopoly rights (pharmaceutical companies), implicit permission for substandard products (supermarkets).
Once we accept that the amounts of profit companies make are ultimately determined by these “welfare payments” society decides to confer upon them, we begin to see the problem with the free-market view that has dominated the world for the last few decades.
For far too long we have been told by the business lobby and free-market ideologues that profit is the objective indicator of a company’s contribution to the economy, when it is really socially and politically determined. Poor people receiving government benefits have been told far too often that they are spongers, when the rich get even more government benefits.”
Read the whole thing.