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Profits aren't automatically inflated margins. There are healthy margins, and there are inflated margins. There are even margins that are so thin that it's unhealthy, as in the airline industry. Now, to loop back around to your point about investment; either party having additional capital will allow that party to further invest. That is true in the case of formalized businesses, like the ones your thinking about, who can further invest in capital goods. However, it's also true of more informal businesses that you're ignoring, specifically, the employed individuals themselves. Employees are in the business of services -- they perform some labor, be it mental or physical, and are paid for that labor. Formalized businesses are their customer. Profits that those employees obtain are also capital which can be invested -- whether that investment is in their health, their happiness, their residences, their educations, buying tools, the stock market, creating new businesses, affording time to raise and educate their children, and so on. Theories of economics which ignore that the employed are also themselves informal businesses are disjointed, and fail to explain the totality of economic growth and investment. |