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.

Humanistic Tendencies in Business

Not everyone has Humanistic Tendencies. But maybe they should.

The problem with living in a capitalistic system is that we have to struggle to work to get money to pay for things like housing and food. In a barter economy people would either build a house themselves and farm for themselves or barter to get what they didn’t have.

Don’t get me wrong, I consider myself to be a capitalist. I think the improvement in human welfare that has come with capitalism has been overall beneficial. It’s just that I recognize the social limitations of the system. For instance we have a homelessness problem that capitalism is incapable of fixing because the people who are homeless are homeless because they don’t have the funds to secure housing. It isn’t just “bums” and “winos” who are homeless anymore. It’s also families who are what we now refer to as the working poor.

Capitalism only works as a system to create and distribute the goods required by society to function when people have the capital or funds to consume the goods created or produced. When people don’t have the means (ie: enough capital) to consume goods and services, they are unable to participate in the system or benefit from it. If enough people are impoverished enough that they can’t consume anything the system produces, then the system either collapses and/or distributes good in an incredibly unequal way.  And that’s where we’ve been as a society in the past 10 years.

One of the things that Marx figured out in Das Capital was the importance of worker’s wages to the maintenance of the system. A lot of people in the west haven’t read the book – it’s a huge work. Volume 1 has over 1,000 pages and it’s filled with math and philosophy. But it’s also one of the most accurate models of how a capitalist system works that’s ever been written.  He accurately predicted the booms and busts the system would generate and he accurately predicted how labor would respond to these booms and busts.

What causes the booms and busts? Labor’s wages. When labor is not paid enough to consume the goods they create, the system collapses. The engine of capitalism isn’t the capitalists (or owners). It’s the consumer. No customer, no business. Who are the customers? The laborers. Failure to understand this causes a huge number of problems for a business and for the economy.

This isn’t to say that if you are making jumbo jets you should pay your employees the amount they need to purchase one. Only that you need to pay them enough that they can participate in society and afford food, housing and the basics plus a little more to consume a few modest extras.

The problem is that capitalist forces tend to drive labor wages down because it’s a benefit to the capitalist to pay as little wage as possible. If you can get away with that, you gain an advantage over a competitor who is paying their employees more. If enough businesses pay too little, the system collapses.

This brings us back to the topic of humanistic tendencies in business.  Being concerned about the humans who work for you and the humans who consume your goods and services is good business. There is no division between the people who work for you and the people who buy your products. They are the same people.

It is very easy to see your business as an independent entity. You are competing. What you do doesn’t necessarily impact the societal whole. Except that it does. And a humanistic understanding of business acknowledges that are businesses are embedded in society. We serve society and are dependent on society. It’s a two way street.

Paying a living wage to your employees benefits your company (in terms of lower employee turnover), it benefits your customers, which for most of us not building jumbo jets, is our employees, and it benefits society because it helps make your company a positive force in society instead of a societal drain that is leaching tax payer benefits to supplement your less then living wage to ensure your laborers can continue to live.

Humanistic tendencies in business are pro-people, pro-business and pro-society. It’s not one or the other. It’s all three. In collaboration.