The true engine of the economy

I teach humanistic business management for the lay person. This combines practical skills with a specific philosophic approach. The philosophy is important.

Humanism is about taking responsibility for solving the problems we have and doing so in a way that is respectful of other people and of the environment since we are dependent on our environment for life.  This sounds wonderful but it has some very tangible effects on how we go about the business of business.

The first is to understand that people drive the economy.  Economic activity is about people, creating and distributing things. Every single thing that is created is created, presumably, to solve a problem someone has. If someone doesn’t have a problem that needs solving, they don’t need to purchase the goods or services of another person.

Individuals needing problems to be solved DRIVES economic activity!  Business owners building things don’t drive the economy. They are responding to it. They are trying to capitalize on the needs that people have. Which is fine. But the basis of their businesses is the needs of the consumers.  If consumers don’t need what you are selling, you don’t have a business.

This reality should have profound policy implications for how we run our companies and how government either supports or hinders economic activity.  Let’s start by talking about businesses.

Any business who forgets that they exist to serve the needs of their customers will find themselves sidelined.  Taking a humanistic approach to business helps you to recognize the centrality of the humans who are your customers, your employees, and the humans who are effected by your supply chain. All of them matter as individuals because they are the individuals who drive the economy. Every. Single. One. Of. Them.

When we talk about customer rights, understand you are talking about human rights. Fail to respect human rights and you fail as a business because you are failing at the central purpose of business which is to solve human problems, not create them.

As for government, let me put it this way, if a politician isn’t concerned about human rights or civil rights or the needs of all humans, including and especially for the poor and disenfranchised humans, then their policy proposals are as anti-business as they are anti-human.  Individuals drive the economy. Take care of individuals and the economy thrives. Harm and suppress individuals and economies shrink and collapse.  The choice is ours – but it’s pretty clear that Humanism is the only rational way forward.

The Problem of Unearned Income

Humanistic Business Management as it applies to tax policy.

I subscribe to the Evonomics Blog. And if you don’t, you should.  Joseph E. Stiglitz, winner of the Nobel Memorial Prize in economics, has a great essay on how unearned incomes are killing the economy - http://evonomics.com/joseph-stiglitz-inequality-unearned-income/

The gist of it is this. Income inequality is bad for the economy. Capitalism is driven by demand. Demand comes from consumers and consumers are by and large workers otherwise known as people who make things.

The problem is that our tax policy rewards unearned income, meaning income that isn’t derived from making things, but income that is made just by pushing money around or receiving rents on things that other people have made. This rewarding of unearned income distorts the economy and takes money away from projects that actually make things and gives it to people who provide no real value.

Now I realize that people in banking will argue that they do create value. But they really don’t. All they are doing is facilitating the creation of things and sometimes, they aren’t even doing that.

There is an assumption that the people who are the most rewarded contribute the most. But that’s an assumption and it isn’t always true. This is the lie behind trickle down economics. And it is a lie. If you give more money to the people at the top, it does not create more jobs or better paying jobs. What creates more jobs is demand.

If you are interested in this as a policy issue area, read the article. It is dense but totally worth reading.

Inequality causes instability. 

The bottom of this essay contains a lot of policy proposals that are about how to reduce inequality and they range from investments in education, to changing the tax code by redefining what economic performance means.  If you are concerned about the health of the economy – this is an essay worth reading.

Humanism and Economics

What is a Humanist approach to business and why is everyone talking about it?

Humanism is a progressive philosophy of life, that without super-naturalism affirms our ability to lead ethical lives of personal fulfillment that aspire to the greater good of humanity.  It is impossible to separate the philosophy from our economic lives or in how we want to organize our economies.

The problem is that we Humanists don’t agree on much. In fact, famous economists Karl Marx and Friedrich Hayek were both Humanists. Both advocated for economic systems they thought would best maximize the freedom and welfare of their fellow humans. And yet, what they advocated for is pretty much the exact opposite of one another.

If Humanists can’t agree, then why even have this conversation?  Whether we like it or not, we have this conversation all the time. The question is – how are we going to judge whether one system or method is better than other if we have no philosophic basis on which to judge what is good and what isn’t.

And, it’s pretty clear that the assumptions people have been making about how to best run an economy haven’t yielded very good results. In fact even if you ignore the gross income disparities that have arisen in the last few decades, we still have to reckon with the fact that what we have now, is an entirely unstable economic system that needs to be fixed. Greedy self-interest, it turns out, is not a very good organizing principle.

Humanism really can help provide us with a way of viewing human economic activity that is at once supportive of individual development AND supportive of the community in which all this economic activity is embedded. This is WHY everyone is talking about it.

As a starting guide, I want to quote Humanist Manifesto II (written in 1973).

“Humane societies should evaluate economic systems not by rhetoric or ideology, but by whether or not they increase economic well-being for all individuals and groups, minimize poverty and hardship, increase the sum of human satisfaction, and enhance the quality of life. Hence the door is open to alternative economic systems. We need to democratize the economy and judge it by its responsiveness to human needs, testing results in terms of the common good.”

I may be biased, but I do think this statement provides us with a good starting place. What we want is a system that helps increase wellbeing for individuals, minimizes poverty and privation, and enhances the quality of life for everyone.

What a call for Humanistic business management means is that instead of judging good based on profits we judge good based on how business impacts people. Instead of promoting growth for growth’s sake, we should instead be considering how that growth will impact our communities and our customers and our employees.

This isn’t a way to reject the idea of profits as important. It’s not about either or. It’s about doing both. It’s about balancing more than just the bottom line. A Humanistic approach to business is about balancing profits WITH human welfare. One doesn’t come at the expense of the other. But when it doubt, human welfare comes first!

Yes, individual autonomy and freedom is important, but a Humanist understands that ours is a socially embedded autonomy. To understand how a socially embedded autonomy impacts economic activity – view this fabulous video from RSA.

See
-

And if you want to learn more about the history of Humanism and economic ideas – visit Steve Alquists blog post Unmaking the Manifesto - http://www.steveahlquist.com/2014/10/unmaking-manifesto-humanism-and.html

Good Leaders Align Needs

Why the death of homo-economicus requires managers to change their management tactics and adopt a humanistic management model.

How a manager manages people is largely dictated by their concept of what it means to be human. In the world of business, the dominant model for a long time has been homo-economicus.

Homo-economicus, for those of you unfamiliar with the term, is basically the assumption that humans are rational animals and that given good information; we will make rationally optimal decisions. Most people who advocate for the value of unrestrained free markets do so because they believe in the homo-economicus model.

Now, in case you weren’t aware of it from the obviousness that we humans aren’t very rational, the Evolution Institute has put out a journal with studies that provide the evidence that we humans aren’t very rational. See the journal here: http://evolution-institute.org/node/144

The studies they cite show that humans actually make decisions more how the Humanistic Psychologist Abraham Maslow suggested we do based on our hierarchy of needs.

What does this mean for a manager? It means that if you want to successfully encourage people to make decisions that benefit your company, you need to take their real decision making process into account, which means you need to understand that we humans seem to make decisions by weighing our hierarchy of needs against one another.

When you understand this, you understand that your job as a manager is to help people align their various needs so that the “right” choice is the overwhelmingly obvious choice and the easy choice to make because SO MANY of their needs are met when they make that choice.

To do this you need to help align an employee’s individual needs with the needs of their working group and the working group’s needs must be aligned with the needs of the company. A Humanist manager takes that another couple of steps further by aligning the needs of the company with the needs of the society and with the needs of the ecological biosphere that is earth.

And this really is the Humanist approach in a nutshell. Using a realistic and scientifically based view of humans to better help humans achieve not only their needs, but the needs of the society in which we all live. Can I get an AMEN?