Modern Economies Must Learn to Value Human Beings

The Time Has Come to Apply Some Gandhian Economics by Infusing Capitalism With Human Values

- ARUN MAIRA

Accounting conventions require that capital is accounted for in the balance sheet of the enterprise, and expenditures and incomes in the profit-and-loss account. This is universal for all corporate enterprises, be they business ventures, government agencies or "non-profit" organizations. Businesses account for their assets of land, machinery and money in the bank on their balance sheets. Human beings appear only in profit-and-loss accounts. Wages and other costs associated with their employment are shown as expenditures.

Financial investors in a business (who are its owners under the law) expect its managers to produce profits for them. They reward a CEO who generates financial value for them; they have less concern for the lives of its employees. When human effort (whether blue-collar, white-collar or managerial) is no longer required—in a business downturn, for example—for the enterprise to produce what it is expected to, or when humans are substitutable by less costly machines, good business management suggests that human beings should be laid off to reduce costs.

Adam Smith explained, with his example of the pin factory, that division of labor is required to improve the productivity and output of an enterprise. Frederick Winslow Taylor applied this principle systematically to develop a model of "scientific management." He broke down complex work processes into simple repetitive tasks assembled in long production chains. This improved the productivity of workers and efficiency of large factories. This approach enabled more financial capital to be produced from human effort.