Like, Company A posts 5 Billion in profits. But if they post 4.9 billion in profits next year it’s a serious failing on the company’s part, so they layoff 20% of their employees to ensure profits. Am I reading this wrong?
In: Economics
1. inflation makes all numbers go up over time, which accounts for *some* of this
2. Increasing profits is what the owners want. More specifically, increasing stock value is what the owners want, because the owners own the company through stocks, for the purpose of selling those stocks later. That company that made $4.9 billion in profit represented a loss on the investment made by the owners, or even just less of a return-on-investment than they expected. *Some* businesses truly don’t expect growth, and their stock owners expect a steady cut of the yearly profits (a dividend) instead, but most investors buy shares because they expect the share price to go up.
3. No, you’re not the first to say that this is inherently unsustainable. It’s not crazy to think that the economy as a whole could grow forever, since new technologies and new information is always being developed, but it’s an ownership structure that is ripe for prioritizing short-term gains over long-term health. For further reading you’d have to go beyond ELI5 though.
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