Profit is ok, but human well-being should come first

The Bible is not an economics handbook. But it has a lot to say about profit and loss, entrepreneurs and bankrupts, employers and workers, meanness and generosity. Underlying it all is the fundamental principle that God has no favourites and expects us to treat one another with respect.

So I was greatly heartened to Chair the Living Wage Commission which reported last year.

As President of the Board of Trade, in a speech to the House of Commons on 28 April 1909, Winston Churchill said, “It is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions.”(1)

“Our Commission found that those employers who treat their workforce with respect actually benefit”

Our Commission found that those employers who treat their workforce with respect actually benefit. To give just one example, KPMG, since applying the Living Wage for all its staff in 2006, found extra wage costs were more than met by lowered recruitment churn and absenteeism, greater loyalty, and higher morale leading to better performance.

That contradicts the heresy that the path of righteousness is the road to ruin!

Nevertheless, we’ve some way to go before gross income inequality can be rectified. By any measurement, it cannot be right that 80 of the world’s billionaires own as much as 50% of the world’s population. In the UK, the five richest families are wealthier than the poorest 20% of the population combined.

“It cannot be right that 80 of the world’s billionaires own as much as 50% of the world’s population”

The Nobel prize-winning economist Joseph Stiglitz, in his recent book, The Great Divide, writes “When there is a crisis it is always ordinary citizens who bear the brunt — workers who lose their jobs, homeowners who lose their homes, ordinary citizens who see their retirement accounts vanish … and who cannot live out their dreams.”

Stiglitz is also particularly critical of the banking system: “If they (the banks) are too big to fail and they know it, excessive risk-taking is a one-sided bet: if they win they keep the profits, if they lose, taxpayers pick up the tab.” He summarises this as socialising losses while privatising gains.

Furthermore, there is a growing chorus of opposition to lax executive pay habits. Fidelity Worldwide Investment has urged companies make their long-term incentive plans less short term in nature, or face votes against remuneration at annual meetings. Last year the Church Commissioners opposed executive pay deals in two-thirds of the companies where they have a holding.

“Proper pay and profit are OK. But there are limits. Human flourishing and well-being should come first”

Adam Smith, said to be the father of modern economics, wrote: “Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.”(2)

These are important straws in the wind. Proper pay and profit are OK. But there are limits. Human flourishing and well-being should come first.

(1) Hansard, House of Commons Debates, col. 388, 28 April 1909.

(2) Wealth of Nations, 1776

 


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