Profit as Just Recompense

"A stake will be driven between fitted stones — sin will be wedged in between buying and selling." -Sir. 27:16

Last summer I had a conversation with a Protestant friend of mine about the concept of profit and exploitation. The question I posed to him was whether any financial arrangement was just so long as both parties agreed to it, no matter how much it might be weighted in favor of one party. He answered in the affirmative - an agreement was an agreement, and so long as both parties entered into it freely, there was no way it could be morally objectionable, regardless of how the agreement was weighted. We debated about it for some time, and I posed various scenarios testing his position. While I got him to admit that in certain extreme situations agreements could become exploitative - like selling an apple to a starving man for $100 - he basically stuck to his position that any financial agreement was just by virtue of it being freely consented to by both parties. While he acknowledged that exploitation existed, it pretty much had to be a matter of life and death before it could become so.

This opinion changed several months later, however, when my friend became personally enmeshed in a financial dilemma which challenged his position and led him to affirm the moral dimension of economic activity.

My friend, call him David, is a handyman. David had bid a certain home improvement job for a client. The work was tedious and in a particular trade that David was not entirely a master at. He estimated three full work days to complete the job and gave the homeowner an estimate of $3,000, to which the client agreed. At this price, David would have been compensated for time and materials and left with a modest profit of about 15%. The client agreed to the price and time-table.

However, after the bid had been accepted, David ran in with another contractor who had more experience in certain aspects of the work. David saw he could save time by sub-contracting this work out to this gentleman, which he did. In the end, the work that was supposed to take days ended up taking only one day, at a total cost of only $300 for the subcontractor. This meant that this job which was supposed to yield David a 15% profit had now become 90% profit.

This put David in a tight spot. While he had insisted to me that any mutually agreed to financial transaction was just, no matter how one-sided, he now found himself on the "winning" side of an extremely one-sided arrangement - and his Christian sense of honesty was weighing on him. He began to have scruples about whether it was just for him to take 90% profit on a job; he was crippled with feelings of remorse, of dishonesty and of feeling like he'd robbed his client. 

David went to his friends and family - all Protestant - with his concerns. They unanimously told him that he was "thinking too hard" about it, that "business is business", that the client had "agreed" to $3,000, that what he did was not wrong but "savvy" and "clever", and that if God wanted to bless him with 90% profit, it should be received with thanksgiving. Even David's wife told him the same! But still, he was very uncertain and ill at ease, and so finally called me, confessed his trouble, and asked my opinion. 

I of course told him that he was right to be disturbed, because the profit he had taken was way disproportionate to the work that was actually done, regardless of what the client had agreed to. 

My friend was troubled by an apparent injustice in the amount of profit he took from the job. Though being a Protestant he was not equipped with the vocabulary of traditional Catholic social teaching, he was struggling with the appropriate Christian definition of profit. "Profit is a tricky word. Like many other words - "nature", for example - the term "profit" has undergone a redefinition at the advent of modernity.

For modern man - that is, for post-Enlightenment, laissez-faire, neo-liberal capitalist man - profit is the difference between gross revenue and expenses. It is the result of a simple equation; simply subtract expenses from revenue and the difference is your profit. Thus, in order to maximize profit, the difference between revenue and expenses must be made as great as possible, and he is the most savvy, most astute businessman who can figure out how to enlarge that gap. For modern man, Profit = Revenue - Expenses.

But for pre-modern man - that is, for the man living under Christendom and working within the traditional understanding of economic relationships - profit is defined as a just recompense for some particular work. The amount of the recompense is relative to the work done. 

We see in the traditional understanding, labor and profit are linked - the fact of the profit and its amount are related directly to the work performed. This is why my friend had a guilty conscience about taking 90% profit. He knew that, relative to the quick, inexpensive work performed, there is no way 90% profit could be considered "just recompense" for the work performed. There is a moral linkage between the work done and the recompense for that labor.

Notice, however, that in the modern definition, this linkage is not there. If profit is simply revenue minus expense, there is really no moral or logical connection between the work done and the amount of profit gathered. This is why those who subscribe to the modern definition have no moral scruples about pocketing 90% profit, for they see no necessary connection between the profit and the work done. Profit is simply whatever the businessman is able to pocket - though no doubt they would feel quite ripped off had they found someone took 90% profit at their expense. The pre-modern medieval definition, on the other hand, maintains a moral and logical connection between work and recompense, ensuring that financial actions remain situated on a spectrum of justice (another example of the superiority of the harmonious medieval mind over the fractured worldview of the moderns).

In the end, my friend David yielded to his conscience. He called the homeowner and explained that the job had come in way under budget and that, even though $3,000 had been agreed to, he thought a much lesser sum would suffice. The homeowner was understandably grateful and impressed with David's integrity. Do you think he will have any hesitation recommending David to friends and family in the future?

This episode demonstrates that, while one may be unfamiliar with the particulars of Catholic social teaching, the economic moral sense that Catholic social teaching presupposes is innate in anyone with a developed Christian ethic. Those sensitive to justice can easily see that taking 90% profit is not clever or business savvy; it is unjust, because it lacks any proportionality. My friend had begun by arguing vehemently that consent made a financial agreement just, but had totally changed his mind. The fact that someone consents to such an arrangement cannot make it just, merely legal. And in a society without any moral compass, what is legal ultimately becomes the definition of what is just.

"It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed toward “having” rather than “being,” which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself." -St. John Paul II, Centesimus Annus, 36 

For a great article on the Profit Motive and the differences between modern and pre-modern views, see this article at the Distributist Review