of commerce, yet trade was done by negotiatores, combination bankers-cum-wholesalers, and mercatores, or local merchants, who traded often naturally harvested commodities through networks and coalitions on a small, sole-proprietor scale, pursuing the bottom line of cash flow. Though individuals, families, and partnerships certainly made fortunes then as now, from shrewd negotiation and risky enterprise, it wasn’t through Ricardian, Sloanite, Fordist, Marshallian “business” as you and I know it.
So picture, if you will, the broader outlines of the world of commerce before business. As brought vividly to life by the works of the great sociologist Karl Polanyi and eminent historian Fernand Braudel, it was a world where households were the economy’s main productive unit; guilds and communities its main organizational form; local marketplaces its loci of exchange; surplus, rather than profit, its flywheel; and reciprocal exchange its nexus. It was, in short, a radically different blueprint for human exchange, one designed for a very different conception of prosperity.
In that era, society’s great achievement was subsistence, instead of perpetual strife, and its great challenge might be said to have been material abundance. Yesterday’s was a commerce that excelled at producing handcrafted luxuries for the rich in tiny numbers, like handcrafted furniture, finely made frescoes, or towering, grand sculptures. But—shades of Marie Antoinette exasperatedly exclaiming “let them eat cake!” at hungry Parisians—it was deficient in offering reasonably priced goods to rising middle classes, poor at creating abundance, and lacking in innovation.
Think, then, of the potency of a paradigm that unlocked the power of producers to supply and of consumers to demand. It could knit together and make the most of novel institutions, like assembly lines, factories, and bureaucracies to produce low-cost goods at unprecedented scale and compete to improve their features and attributes with ever-greater ferocity. It could mobilize the minds and muscles of not just dozens, but hundreds of thousands, distribute and source to and from all corners of the globe, and ubiquitously sell goods in city, town, and village alike. In this context, business was radical—and revolutionary—in the abundance it unleashed. It’s no wonder that to most, a healthy economy still means one that maximizes the volume of output.
Yet I have come to believe this paradigm has reached a state of diminishing returns. Take a look at what business as usual hasn’t been able to create over the last decade:
Value. It’s often thought that, over the long run, equities are a sure bet. In recent history, they’ve delivered steady, sure, positive returns. Until now. The noughties were the first decade in recent history during which, broadly speaking, no shareholder value was created. If you’d put $1,000 in a broad basket of equities, like the S&P 500, you would have been left with only about $800.
Returns. Business is an engine of profit, right? Wrong. As John Hagel III and John Seely Brown, codirectors of Deloitte’s Center for the Edge, have noted with their path-breaking Shift Index, real asset returns have been dwindling—not rising—for decades.
Jobs. The past decade was the first in recent history during which net job creation in America was essentially zero; more jobs were destroyed than were created. Hence, today’s staggering—and unprecedented—unemployment crisis.
Fulfillment. In survey after survey and study after study, engagement, job satisfaction, and numerous other measures of fulfillment are low—and dropping. In 1987, when the Conference Board first surveyed fulfillment, 61 percent of people were satisfied with their jobs. By 2010, that number had dropped to 45 percent (http://www.evolvedemployer.com/2010/01/06/employee-engagement-at-an-all-time-low-what-can-you-do/). According to the consultancy BlessingWhite, only 29 percent of people are engaged with their jobs (http://www.blessingwhite.com/research.asp). The work that business offers just isn’t fulfilling, so instead of being motivated to innovate, reinvent, reimagine, and outperform, most of us are dully uninspired, dispirited, frustrated, suffocated, and downright stymied.
Income. Business is an engine of shared prosperity, right? A rising tide that lifts all boats? Wrong. Median household income in America fell during the noughties, ending the decade lower than it began. As both UC Berkeley’s Robert Reich and I have pointed out, real middle-class incomes have been falling since the mid-1970s. The average American has failed to earn a share of the productivity gains that have flowed from his or her work, and hence, in an economy of rising prices, going deeper and deeper into debt to maintain the same standard of living was the only option: one of the real root causes of America’s ongoing credit crisis. Income inequality is blowing past even extreme Great Depression–era levels. The flipside? As Wharton economist Justin Wolfers has noted, “over four decades of economic growth hasn’t reduced the proportion of Americans below an unchanging poverty line.”
Net worth. Wealth creation is supposed to be what the American economy excels at. Yet, perhaps the most striking feature of the great crash of the noughties wasn’t just in terms of credit, but a deeper root cause: American household net worth has been stagnant for several decades.
Trust. The only people less trusted than divorce lawyers and journalists? CEOs. Trust in corporations is low and has been dropping for decades. Though business spends billions on public relations, what it can’t seem to build is relationships with the public.
Finally, consider the challenge of human suffering. The numbers are numbing. Twenty percent of the world’s population—more than 1.5 billion people—is undernourished. Over 9 million people—5 million of them children—die every year from malnutrition. More than 11 million children die every year from preventable diseases, like malaria and diarrhea. Half the world’s population lives on less than $2 a day. Over a billion people have no access to safe, fresh water. More than 2.4 billion people don’t have access to the toilets you and I take for granted—adequate, hygienic sanitation. Three million people die every year from water-related diseases that could be prevented. There are 27 million slaves in the world.
Taken together, that’s an astonishing set of indictments. They might not conclusively reduce the conventional wisdom about business to rubble, but they’re enough to make me stop, shake my head, and ask myself, “if business as usual can’t solve any of the above, then just what the heck is it good for?”
This is the beginning of a case against business. It suggests that, in the twenty-first century, the paradigm known as business is simply not good enough: not for people, not for society, not for the natural world, and not even for economies, shareholders, or prosperity itself.
So what went wrong with this gleaming, streamlined machine? As the old axiom goes, what gets measured gets managed. And as it turns out, we’ve been measuring the wrong things.
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