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A businessman defends profits

Posted by Richard on August 16, 2008

After Exxon Mobil reported a record 2nd-quarter profit, economic illiterates, Democrats, and leftist demagogues (but I repeat myself) fell all over themselves denouncing earnings that Obama called "outrageous." Republicans and capitalism's half-hearted, timid defenders (but I repeat myself again) mostly ducked for cover and acted as if this profit was something for which to apologize. This is unfortunate, as Investor's Business Daily noted (emphasis added):

When capitalists fail to defend the system that's done more than any other to end human misery, they make a fatal mistake. That's why it's so encouraging to see Exxon Mobil's CEO stand up for his business.

… 

Too often, business leaders choose to duck when the arrows of outrage come flying. But Exxon Mobil CEO and Chairman Rex Tillerson made an unusual and courageous stand Wednesday, appearing on ABC's "World News" with Charles Gibson.

"I saw someone characterize our profits the other day in terms of $1,400 in profit per second," Tillerson told Gibson.

"Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost. We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it."

We can't think of anyone who would be willing to pay $4,000 in taxes for every $5,400 they earn in salary or wages. Yet many in our country believe it's OK, even desirable, for oil companies to do just that.

What's needed here is a bit more perspective, a sense of proportion. Though Exxon Mobil set a record for nominal profit, the oil industry isn't actually making the biggest profits.

In the first quarter of this year, the profit margin for oil companies was 7.4%. That trailed the electronic equipment industry (12.1%) and the pharmaceutical and medical industry (25.9%).

Last year, 63 industrial groups posted bigger profit margins than the oil industry.

Good for Tillerson. We need more business leaders willing to stand up for capitalism, defend profit, and speak out forcefully against their critics.

And clearly, judging by Exxon Mobil's falling share price, the oil giant needs a higher profit margin, not more taxes. 

 

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