The Rise of the Cult of Profit & the Loss of Business Purpose (An Opportunity for Localism)

What are the basic requirements for people to flourish as human beings and live good, meaningful lives of purpose and value? The simple answer is a person needs a few basic goods and services such as food and water, shelter and sanitation, along with education and health care. A person also needs the freedom to pursue his or her own unique goals and dreams and the opportunity to be respected as a valued member of their community. When so simply stated, it follows that work in organizations is an effective way to satisfy these basic needs and flourish as human beings. 

            This answer also illuminates why people need meaningful work to thrive. We discover three reasons why we need to work: one, to earn the income to acquire the basic goods and services we need to live a good life; two, to develop the talents and abilities to exercise effectively the freedom to achieve our dreams; and three, to make a lasting contribution to the wellbeing of others and become respected and valued members of our community.

            A business then, whether for profit or nonprofit, is an organization of physical and financial assets, people, and knowledge, brought together in order to satisfy our need for work and to produce the goods and services we need to prosper. So we can state the purpose of business as four-fold:

1.     To produce profitably some good or service that benefits someone who wants them.

2.     To pay employees adequately so they are able to purchase the goods and services needed to live well.

3.      To develop the capacities of people so they can effectively exercise their freedom to make a difference.

4.     To contribute to the larger community, which both supports and is supported by the business in an interdependent relationship of society and economy.       

A successful business must effectively balance these four purposes. A business cannot be imbalanced for long without doing great damage to the people and world around it. It cannot neglect any one purpose for the sake of any other purpose, nor can it privilege one purpose at the expense of any other purpose. To do so harms the business, harms the people in the business, and harms society itself. The art of management is to balance the four-fold purpose of business and create the conditions for people to flourish as human beings. It seems obvious that we are failing.

Why are we failing? Our current “recovery” is pretty much a jobless recovery, as have been the last few economic periods following recessions. The jobs that are created tend to be part-time and/or low paying jobs, so people end up being underemployed and see their earnings and benefits shrinking. Since the 1970’s even though worker productivity has risen, middle class working families have seen their incomes stagnate or decrease, and poverty has risen to a 17-year high. Today the gap between the top 1% of income and wealth holders and the rest of us is greater than at any other time since the Great Depression. Yet, while most working families are barely hanging on to economic survival, CEO pay has risen 725 percent and now the ratio of CEO pay to average worker pay is 354 to 1.* By any objective reflection, this is neither wise nor sustainable.

Two great organizational thinkers, Charles Handy and Peter Drucker, both of whom are very much pro-business and could never be considered anti-capitalist, recognized this dangerous trend back in the 80’s and 90’s. The pursuit of profit and the enrichment of the individual at the expense of everything else was becoming the driving motivation in business practices. The cult of profit had enslaved the economy. As a young man in the 1980’s, I remember speaking with my friends, and all we could talk about was how to make a lot of money quickly and with little effort. Lifestyles of the Rich and Famous was a popular TV show of the time and characterized the ambitions and attitudes of many. In an essay entitled, “The Lure of the Zeros,” Handy said:

Money is not the root of all evil; St Paul was careful to say that it was the love of money which was the problem. But I wonder if you really can see straight with all those zeros in front of you, still disentangle right from wrong, above all still be true to yourself in spite of the numbers.

Drucker said way back in 1974 in his book, Management, Tasks, Responsibilities, Practices:

The profit motive and its offspring maximization of profits are just as irrelevant to the function of a business, the purpose of a business, and the job of managing a business. In fact, the concept is worse than irrelevant: it does harm.

Of course, there is nothing wrong or evil with either profit or wealth. As Drucker pointed out, profit is a necessary measure of the validity of a business, but when it becomes the sole purpose, everyone suffers. Similarly wealth is both desirable and good, but not for its own sake, only in so far as it contributes to a meaningful life of purpose and value, which is possible even without great wealth. 

We could begin in our management councils to measure the performance of our businesses against the four-fold purpose and strive to find a balance. Sadly, it might just be that big business and large corporations are too committed to the cult of profit to adjust their business practices. It just might be that most CEO’s are too attached to the self-enrichment mindset to reign-in their exorbitant salaries. It just might be that our political system is too polarized and inefficient to make a meaningful difference. Yet there still might be a silver lining to the ongoing economic insecurity and hardship faced by the American middle class and workers around the world. As they see the wealth gap only increasing and their opportunities only decreasing, they just might realize the solution to their ongoing plight is to build business and economic security at the local level.

At the local level we can form businesses that will respect the human need for work and realize an authentic balance between business’s four-fold purpose. At the local level we can begin to produce the basic goods and services we all need to live well. At the local level we can create meaningful opportunities for people to develop their talents and abilities and contribute to the wellbeing of their neighbors. At the local level each person can be recognized as an esteemed and important member of the community. So we can continue to stagger on hoping without reason that big business and big government will save us in our current economic troubles, or we can seize the opportunity to recreate economic prosperity for all beginning at the local level.

*  Sources – U.S. Department of Labor, Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey.” Money.cnn.com/2011/02/16. Stateofworkingamerica.org. huffingtonpost.com.

The Promise of Localism and Peter Drucker’s Post-Capitalist Society

Peter Drucker, who passed away in 2005 at the age of 96, was one of the wise persons of the twentieth century and certainly its most influential organizational consultant. In a book published in 1993, called Post-Capitalist Society, he argued that every few hundred years societies go through difficult transitional periods resulting in a new society with new values, new beliefs, and new political and economic practices. He believed the world was going through just such a sharp transformation that would end about 2020 with a rearranged global society. The driving force of this transformation was the knowledge worker, and the new society that would emerge around 2020, he called the Post-Capitalist Society.

            Drucker was quick to point out that Post-Capitalist Society would not be anti-capitalist or non-capitalist. Free enterprise would still be the key to integrating economic markets, but the old Capitalist means of production of land, labor, and capital would be replaced by knowledge as the crucial resource. Knowledge does not function the same way and so cannot be managed the same way as land, labor, and capital, hence this new society would be Post-Capitalism but not post-free enterprise. He did not specify exactly what the new society would look like, but he did persuasively argue that something new was in the process of being born, which would be characterized by new values, new beliefs, and new political and economic practices.

            Capitalism in the twentieth century led to the emergence of big business and big government, both of which are now failing to meet the needs of the vast majority of people, whether workers or citizens. They are neither nimble enough nor wise enough to manage knowledge workers, but in fact treat knowledge as if it were just another version of the old means of production. The challenges we face today around the world, whether climate change, conflict, poverty, health care, or full employment can be successfully met, but not by either big business or big government, and we will waste valuable time if we continue to look there. Just how might Post-Capitalist Society look and how might it successfully solve these problems? As Drucker realized whatever emerges will be a function of what the conditions in the environment allow and of the choices we humans make.

            The conditions we face today are both positive, which will make certain choices possible, and negative, which will constrain certain other choices. For instance, knowledge workers have brought us 3-D printers and vertical farming, which are examples of positive conditions that, along with other new and innovative technologies, will soon make possible self-sufficiency at the local level. In the near future, the food a community needs and the tools to farm it can be produced at the local level.

Examples of negative conditions, which constrain our choices, are climate change and the growing disparity of income and wealth between the one-percenters and the rest of us. So relying on distant resources will become less and less sustainable and meeting our basic needs will better be found in solidarity with one another at the local level, not by waiting for assistance from those “above” us and far away. Given the possibilities and limits of these conditions, we must be very thoughtful about the choices we make – the choices that will give shape to Post-Capitalist Society.

I believe our best hope to create a prosperous and joyful future depends on guiding our choices by the five principles of Localism as already set forth in this blog – the principles of responsibility, reduction, replacement, regeneration, and reconnection. (See post dated Monday, August 6, 2012) Following these principles the center of gravity for the new values, beliefs, and political and economic practices of Post-Capitalist Society will be our local communities. Given the knowledge worker and the new technologies of Post-Capitalist Society, a new social contract is possible, where we care for both the environment and our fellow human beings at the level of our local communities. Given the failures and impotence of both big government and big business, we must engage knowledge and the knowledge worker at the local level if we want to flourish in the twenty-first century. The promise of localism is that we can best care for others, our community, the world, and ourselves and experience deep connection, kindness, hospitality, and a greater sense of the joy of being human with one another at the local level.