Why should society care about the success of business corporations? You might say because society’s wellbeing is dependent upon its’ corporations’ success. Logically then the question is, success in doing what? Well given the importance Wall Street places on quarterly profit, maximizing profit obviously defines success in society. For many it is clearly the means and measure of life. Seemingly the pursuit of one’s material self-interest is what business and American society is all about.
How is it that one’s private gain is believed to benefit peoples’ collective wellbeing? How does your neighbor striking it rich advance the wellbeing of the rest of the neighborhood? What’s in it for ‘me’ can‘t possibly benefit the collective ‘we’, which is society, unless of course there is a general sense of benevolence. But benevolence is the antithesis of self-interest maximization! Moreover, the notion of trickledown economics has never been proven to exist and the most recent experience is just another illustration that it is mere fantasy.
Assume for the moment that the business of business is profit and society’s wellbeing depends upon businesses maximizing profit. Then while corporations are realizing success on this measure, how is it that large numbers of society’s citizens are struggling in the face of record corporate profits? How is it that for more than a quarter century the income inequality has widened between the top 1% and the remaining 99% of households? Millions of people struggle unsuccessfully to find employment and far more are significantly under-employed barely hanging on living hand to mouth. How could such a situation be indicative of (improved) societal wellbeing? Perhaps corporate profit maximization isn’t as centrally important to society as people are led to believe!
The argument for job creation provided by many politicians, as recently explained by economist Paul Krugman, rests on the assumption that lower wages leads to job creation, which has no sound footing in economic theory or sustainable business practice. What this really is is the logical extension of the misguided belief that the business of business is profit and in the trickledown superstition.
Moreover it is likely that this belief is a major cause of U.S. corporations placing laser-like focus on making money rather than on producing quality. The subtext goes something like this, if we can get people to work for nothing we can make a lot of money. No wonder we see the outsourcing of virtually everything—throwing people overboard—in an effort to maximize corporate profit. Though it makes perfect sense to those holding this belief, it is a belief grounded in misunderstanding.
Connected to this is the erroneous assumption that the unit of survival is the separate individual entity—‘Me’, my source of gain, my organization—and thus others and everything are expendable and exploitable to this (self-serving) end. This way of thinking is caused by an absence of systems thinking, a lack of an awareness of our ‘I-We’ responsibility.
A Different Responsibility, A Different Pursuit
Recognizing our ‘I-We’ nature puts us in touch with the individual and collective aspects of being human and with the simultaneous responsibilities we have to our individual and collective development as people. Consequently, we understand that life in society is not simply a collection of independent individuals bumping into each other as each strives to have it all for ‘Me’.
While our economic system would have us believe this for the sake of maximizing our desire to consume the fact is that we need each other for more than the satisfaction of our material desires; we are not merely instrumental to each others’ self-interests. We are human beings and thus have a very deep interpenetrating responsibility to each other’s unfolding. Hence success can’t be limited to ‘Me’ and my gain.
What if economic success is defined as creating and sustaining a livable income for every able person in society? This does not require corporations pursuing maximal profit, rather it requires them maintaining their viability as a business enterprise. The pursuit of maximum profit, quarter-to-quarter, will not ensure viability of the enterprise—ask G.M. how it worked for them.
To this end, W. Edwards Deming spoke of a chain reaction that begins with quality and its improvement as the aim, and ends in more jobs provided. More specifically this chain reaction is: “improve quality; costs decrease because of less fewer mistakes, fewer delays, snags, better use of machine time and materials; productivity improves; capture the market with better quality and lower price; stay in business; provide jobs and more jobs.” Nowhere in this chain reaction is the objective to maximize profit. Profit is not expunged from the conduct of business it is simply realized as a by-product of a commitment to quality in everything that is done and is reflected in the improved viability (i.e. ability to stay in business) of the enterprise. Costs are reduced, not by blaming the worker and lowering wages, but by actually learning how to improve the functioning of the system of work and management—yes improving quality. This demands far more than management by the numbers.
What this chain reaction speaks to is a fundamental change in the business of business. This change requires a new economics, one that aligns with and supports our human nature and not play upon our animal nature. Correspondingly this change requires the conduct of business to reflect a different mindset, one based on the pursuit of ever improving levels of quality not the unfettered maximization of profit.
Economy Should Serve Society
A healthy society does require a viable economic system; one that serves society as a whole, not one that benefits only a small segment of society or one that is served by society. A viable economy affords humanly beneficial commerce, which is the making and selling of quality goods and services for the benefit of people, not mere profit making. Through such commerce money continually flows throughout society bringing benefit to all in society, just as the continual flow of blood throughout the body benefits one’s health.
Thus organizations that capture or hoard money are detrimental to the wellbeing of society as a whole—no matter how much profit is realized. A recent article by economist Joseph Stiglitz provides a wonderful explanation of the state of American society as a result of it morphing into a capitalistic democracy.
The value of money to society is in its exchange, not its accumulation! If the economic system exploits some people in society then it will adversely impact the wellbeing of all people. Thus as income inequality widens the wellbeing of society worsens. As Richard Wilkinson and Kate Pickett clearly present in their analysis, as income inequality increases in industrialized societies so too do health and social problems.
Our ill-conceived economic system, grounded in the assumption that people are pleasure-seeking/pain-avoiding intelligent animals—not human beings inherently seeking further human development—and bent on maximizing profit, not making quality goods and services, is actually detrimental to the wellbeing of society. It should be evident to most that our current situation is simply the effects of such a shortsighted system. The root of our problem is deeper than the actions of investment banks and politicians—it is systemic. We mustn’t attend to the symptoms and ignore the cause. It is not the way of the wise to depend on regulation to curb the inevitable greed fostered by an egoistic economic system. Clearly we need an economy that serves all in society, one where quality is the aim and jobs bring joy.
The concern for growth in profit cannot lead to progress. Progress is not adequately served if the probability of profitable gain is the only or dominant decision-making criterion in business. Is it time to accept the challenge and take responsibility for changing our experiences by changing the business of business and thus our economics, or is it best to wait for someone to save us from us?