The economy is powered by the work of the workers, coupled with people's willingness to spend money. But if workers are pushed harder and harder for less and less, they eventually collectively reach a breaking point in both dimensions of powering the economy: the energy they put into their work, and the money they have on hand to afford to buy as much.
Some of this is structural. I heard an interview with Steven Greenhouse on public radio (NPR) this morning. He has written a book (The Big Squeeze) about the increasing stress on American workers. Many American workers have had to work harder and harder for less and less. And then many get laid off as companies continue to try to increase profits, and do so by cutting payroll.
It's no wonder that all of this is a very bad idea. When there are layoffs that result in a reduction of positions in a company, those who are left have more work to do, but reach limits in how much more they can do, and so productivity begins to decrease. When those who are still employed keep having to do more and more (sometimes having to take second jobs just to make ends meet), they eat badly and may not get enough exercise, and their health suffers, but health benefits are also cut. And with layoffs, and pay that does not keep pace with the rising cost of living, people have less money to buy anything above and beyond the basic necessities.
What has fueled this squeeze? I think, but I'm not sure, that it's not that companies have been struggling to stay afloat, for the most part (although the problems may quickly evolve to that), nor that they are not making profits -- what I have heard more and more in recent years is that companies have not been making big enough profits.
So maybe this is the problem: it's become socially acceptable to make investment decisions only based on performance. The only thing that matters is whether you are investing in the companies that make the biggest profits. This has become what is regarded as rational. The only goal is to make as much money as possible. And so companies compete against each other in terms of how big their profits are.
An encouraging sign is that the phenomenon of "socially responsible investing" has emerged and has been gaining credibility. At least some investors do care about more than the bottom line. They don't make investment decisions just based on performance, but also in terms of the social value of what companies produce, as well as the way companies treat their employees and handle the environmental impact of their production methods.
I would like to see the day come when people care more about ethical measures of success of the companies they invest in than performance. It is still rational to want to support companies that are fiscally responsible, but what if people saw this only as a minimal requirement? And what if the question here were not "how much of a profit does the company make?" but simply, "does the company have a pretty consistent track record in making profits?" without caring how large? What if people just wanted to make some extra money, not "as much as possible." And what if what was determinative, after this minimal requirement is met, is the ethical track record of the company:
- "Do I believe in the social value of what this company produces?"
- "Does this company treat its employees well?"
- "Does this company operate in ways that are environmentally sustainable?"
And only if a company passes all of those tests, does one decide to invest in it.
Some people do this already, but clearly not everyone. What if this became normal practice? Then would our economy revive and operate in a healthier way?
I think it really could. Care about the environment would help sustain the natural resources that companies need for producing what they produce. Limiting production to what is of social value would help everyone to be healthier and to live in healthier relationships with each other. And taking good care of workers keeps them productive, happy, healthy, and able to spend their extra time, money, and energy contributing to society above and beyond what they do for work: being creative, raising children, and attending to the quality of life in the communities in which they live.
I used to question a profit-driven economy altogether, thinking that we would all be better off if all companies were run on a non-profit basis: just trying to be fiscally responsible, and not trying to make "extra" money for people who are not actually doing the work. Any "extra" money that happens to be made could be channeled back into the company to pay for its growth, or could be given away to charitable causes.
But over time I've come to grudgingly accept that there are ways that investment for hopes of profit can be good. Putting money into something you believe in, in hopes of getting that money back with a little extra, is not in itself necessarily problematic. Most of our retirement plans rely on this feature of our economy. At heart, and at best, it is based on a principle of trust and optimism: that if you let others use your extra money while you do not immediately need it, they can do creative things with it that increase the quality of life for everyone, so that by the time you need that money back, they are able to give it back with a little more besides.
The problem has been that people have more and more cared only about performance. Letting greed rule is not a good idea. We should shift our attention to using our extra money to do social good. It's okay not to want to lose money in the process; even wanting a little extra is not bad. But we shouldn't be so focused on getting a lot extra that we lose sight of the bigger picture. After all, what is money for? It is not an end in itself. It is a form of energy. It is a means for channeling our energies towards what we value. We can and should use it to improve ourselves and the world around us.