Profiteering

Name(s):

Excess profits

Windfall profits

Excessive profits

Nature

Profiteering is the pursuit of gain at public expense. It may be by cheating the government, or it may be by robbing developing countries, or by over-charging consumers for medical, food and other necessities. It is particularly prevalent during times of social upheaval when opportunists in all sectors may take any opportunity to take advantage of the uncontrolled situation.

Incidence

In 1990, as a result of the Gulf crisis, oil companies were accused of profiteering through the manner in which they increased prices in order to maintain profitability. In Iraq in July 1992, 42 merchants were executed for profiteering and in September a further 25 were executed allegedly for the same reason. The price of imported staple foods had risen sharply in the worsening economic context of sanctions. Merchants were therefore reportedly refusing to import needed food and were engaged in black market currency transactions. In consequence other merchants also refused to import needed supplies fearing they would be similarly accused of profiteering or be forced to resell stocks at a loss.

In the 1990's the pharmaceuticals industry in Canada, Germany and Norway took advantage of the classification by Codex of certain foods as drugs. This classification prevented the sale of vitamins, minerals and other dietary supplements as food, and so allowed the drug companies to jack their prices up, gouging consumers.

Claim

The more notorious profiteers are those who benefit financially from wars, black marketeers and armaments manufacturers. In some views, to these can be added the major oil and pharmaceutical companies, medical, legal, and accounting malpractitioners, some private hospitals, funeral directors and undertakers in rich countries, corrupt government officials, some banks, lending or investing institutions (local or international), landlords and capitalists of all kinds, centrally planned economies that exploit their citizenry, and labour unions who force excessively high wages or profit for workers.

Counter-claim

Profiteering is a polemical term that reveals an ignorance of the economics of national and private wealth and the concept of value. The existence, movement, expansion, consumption and replenishment of wealth are essential to profit economies. It is not subject to artificial levellings or controls, as it depends more on nature and human behaviour, the greatest variables of all, than on rational programmes or plans. The excess profits of one period are offset by capital or research investments, or by losses in another period. Only high liquidity provides risk and venture capital and the opportunity for an expanded employment base.

Broader

Excess

Unethical financial practices

Accountability based solely on profit

Narrower