Tampere
19 May, Sunday
10° C

The library of essays of Proakatemia

Human-centered economy Vs. Profit-centered economy



Kirjoittanut: Sille Sinor - tiimistä SYNTRE.

Esseen tyyppi: Akateeminen essee / 3 esseepistettä.
Esseen arvioitu lukuaika on 10 minuuttia.

Written by Katrina Cirule & Sille Sinor


1. INTRODUCTION

Regardless of the industry, most of us are always a part of the business. Whether it is the producers, the distributors, the end users, the company runners, or all of the above. That is one reason why the authors of this essay wished to look more closely into the topic of human-centered and profit-centered economies.

Of course, revenue and profit are crucial elements in every business. Therefore, it is important to note that by saying “profit-centered economy”, the authors of this essay mean an economy in which a business operates that is solely profit-centered with making money being a key indicator of success.

The authors of this essay are curious to see how business activities differ while operating in different economies. The aim of this essay is to dive deeper into the differences of human-centered and profit-centered economies, and business examples, as well as reflect these learnings on authors’ experiences.

2 PROFIT-CENTRED ECONOMY

A profit-centered economy is an economic system in which the primary goal is to maximize profits for businesses and individuals. In such an economy, economic activity is driven by the pursuit of profit, and the accumulation of wealth and capital is seen as the key measure of success. While profit is an important motivator in any economy, this can result in a focus on short-term benefits and neglect of long-term sustainability. (Chand 2014)

3 CONS OF A PROFIT-CENTRED ECONOMY

3.1 Unsustainable practices

As previously mentioned, in a profit-centered economy, businesses prioritize profits over other crucial aspects such as environmental sustainability, social welfare, and ethical concerns. This can lead to a range of negative outcomes, such as environmental degradation, social inequality, and the exploitation of workers and consumers. (Bocken & Short 2021)

A recent example could be named Adidas, a German corporation that designs and manufactures sportswear. Their ads about the next-generation Stan Smith sneakers as “100% iconic” and “50% recycled were found misleading and guilty of greenwashing by the Advertising Ethics Jury (AEJ). Environmental labels about sustainability are one of the ways of greenwashing, and, although it can result in higher revenue, the ethics of this practice are questionable. (Abbara 2022)

3.2 Wealth inequality

In a profit-centered economy, economic policies and institutions are often designed to support the interests of businesses and investors, rather than the needs of the broader society. This can result in policies that prioritize tax breaks for corporations and the wealthy, deregulation of industries, and the reduction of social welfare programs. (Thornton & Hendricks 2019)

An example of wealth inequality can be seen in the US, where the tax code no longer complies with one’s capacity to pay taxes. Furthermore, it enables the wealthiest to pay nearly nothing in taxes compared to their gains. This results in the economic elites using their wealth to influence the US political system in a way that benefits them. For instance, acting as a political donor in hopes to affect the decisions of even more tax cuts. In order to establish a fair tax system and a more inclusive economy, accurately accounting for wealth is crucial. Especially if the revenues are later invested in education and infrastructure. (Thornton & Hendricks 2019)

4 THE TANGIBILITY TRAP OF A PROFIT-CENTRED ECONOMY

Looking at business activities solely from the perspective of minimizing costs and maximizing profit can also result in a tangibility trap. It prevents from solving crucial problems and leading change in today’s volatile world. A solely profit-centered thinking can affect businesses in artificially scoping down projects, focusing on measurements rather than the value created, as well as demanding to scale solutions instead of outcomes. (Debaque 2022)

4.1 Artificially scoping down projects

Most businesses use a people/ hour model meaning that the costs of operations are based on the number of people resourced, their experience, and the hours spent on certain business activities. Although it is a practical way of looking at human resource costs, minimizing the costs most likely means cutting the project length, as well as the number and diversity of professionals involved. (Debaque 2022)

By decreasing the costs and aiming to get the highest return on investment (ROI), businesses pursue a “do it as fast as possible” mindset. The problem, in this case, is that one knows the costs of the project but can only estimate the value it will create (ROI). This can then result in a tangibility bias: “to increase ROI, clients will try to reduce upfront costs, even if it means lower potential returns on investments, to reduce risks”. In the end, this approach demands workers to cut corners to save time which can lead to lower-quality solutions. (Debaque 2022)

4.2 Measuring the wrong things

Another aspect to point out is scaling the wrong things. One does not know how much time it takes to enable, for example, an ROI of 40%. However, one knows how much it approximately takes to deliver a new website, hold a training session, or publish a post. Since one works under time pressure, one becomes delivery oriented. Thus, switching the focus from the impact one wishes to create to the unconnected deliverables. (Debaque 2022)

A great practical example that the article suggests is washing dishes, where one needs a sponge, soap, and water. Dishwashing is a 3-step process: mechanical (using the sponge), physical (the hot water softens), as well chemical (the soap dissolves). Using only water to wash the dishes will use extensive water and energy resources. Whereas, using only soap creates too much pollution in the wastewater and the soap doesn’t activate well. Whereas, using only a sponge rubs the surface of the pan, leading to shorter usage in the future. “The issue is that companies are not organized around getting the pan clean, they’re organized around selling water, selling soaps, selling sponges.” One is often measuring the solution, rather than the outcome overall. (Debaque 2022)

5 ARE THERE ANY PROS OF A PROFIT-CENTRED ECONOMY?

Although it might seem that a profit-centered economy only brings benefits in monetary ways, it also enables innovation, international trade, as well as economic growth for others.

5.1 Innovation practices

To maximize profit, a company must stay ahead of its competitors. Innovation is often the key element of leading the market, and it induces creativity and efficiency with it. Innovation helps organizations differentiate themselves and bring novelty. Since it is a great practice to lead through uncertain and complex times, innovation aids organizations to stay relevant, while giving a competitive advantage. (Emeritus 2022)

5.2 Economic growth

Profit-driven businesses are often focused on more investment and expansion, which opens doors for job opportunities for others. Therefore, the income of an individual rises, while providing audiences abroad with goods that cannot be found locally. (Heakal 2022)

These benefits can, of course, be noticed in businesses operating not only in a profit-driven economy. One must also be careful with the side effects that rapid globalization can bring, such as the exploitation of a cheaper workforce or exhaustion of resources for mass production. However, if the aspect of responsibility is kept in mind, profit-driven businesses can open doors for these and many more benefits. (Heakal 2022)

6 HUMAN-CENTRED ECONOMY

A human-centered economy is an economic theory that many social scientists are saying to be the new era of economics for the future. Its purpose is to reconnect the economy and society. In a way that humans are more important than money and the markets exist to serve common values and goals. In the system, human needs and well-being are prioritized over profit to create a sustainable and fair environment. (Jacobs 2018, Yang 2020)

7 PROS OF A HUMAN-CENTRED ECONOMY

7.1 serves society’s needs

The laws of the economy are human-made and subject to choice. In the current system we often still work with values of growth, money, markets, systems, and rules. But in a human-centered economy, economics is based on values of freedom, dignity, security, welfare, well-being, sustainability, and evolution, which provide humans a better chance of surviving in the long term and puts human needs at the center of economics.

With human-centered values, the systems focus more on human needs and to give fair opportunities to all. It doesn’t focus on what serves the markets best or what makes the most money, but rather we think about what impact our actions have on the society and environment and how we can use and benefit from them for all. We can think that the system is like a functioning human body.

The human body has many parts that need to be taken care of and it needs continuous caretaking. If we do not use all parts of the body or focus too much on viewing other parts, it is shown in our health. The human body concept is not only seen as the body part but as a whole with the emotional-mental consciousness and environment, influencing health. A human-centered system aims to keep the whole body in good health to be able to function in the long run. (Jacobs 2018, Zucconi 2018)

7.2 Maximizes the resources 

At the moment, we are not maximizing the utilization of our human opportunities and potential students. We have resources not used and needs not met. In a human-centered economy, one of the central ideas is utilizing the resources to maximize the usage and benefits from them, without harming the environment or health. Especially when talking about human resources in a sense of giving them an opportunity to maximize their potential and create value and equal opportunities. (Jacobs 2018)

7.3 Prevents chaos

The traditional economic system can be seen as fragile. Money was created to serve humans, but over time the money grew to control economics and from there humans. When money loses value or comes into crisis, the economy goes down and humans are affected negatively, oftentimes even for a longer period of time. (Jacobs 2018)

Money is only a tool in economics, but it has taken more and more control of it and has a massive impact on it. A human-center economy aims to change the value of money and emphasize other important resources such as human impact and the environment. When economics is not only run by money but has more areas that affect it. The risk of it crashing lowers, as it is affected early on by society’s actions and keeps reacting from different areas on the impacts that might be happening. (Jacobs 2018)

During COVID-19 it was seen how fragile the system is. Many employees were fired and many companies lost their business. In a system that is money driven there is no net to fall on and recovering from it takes a long time. In human-centered economics people and businesses are more supported in the face of a crisis. Also, the economy focuses more effectively on fixing the problems in all areas in a sustainable way, which helps for a longer time. (Kozuszek 2021)

7.4 Life-long learning

A human-centered economy is known to serve human needs and maximize their potential and well-being. One of the ways to do it is to promote lifelong learning. Where people are encouraged to learn throughout their lives and offered education in the workplace, for example. The more educated humans are the more knowledgeable they are about their impact and surrounding. But with this it is important to focus on the right way of education, making it accessible for all and focusing on seeing things as wholesome or a part of a bigger thing. While humans are able to reach their potential by learning, companies are able to use their knowledge and maximize their potential in them. (Yong-Seung Park 2018)

 

8 POSSIBLE CONS OF A HUMAN-CENTERED ECONOMY

Overall the system should be built to serve the need of society and the environment but it might have some inconveniences when compared.

8.1 Time-consuming

Decisions are not only made based on what is most profitable to the company but based on other different factors. Many times in a human-centered approach, decisions are made to reach short-term goals. They focus on what helps humans most in the shortest time and, after reaching that, new goals can be made. This shows the problem where things are not focused on the long term but more to reach the short-term goals. (Mani-Kandt 2021)

8.2 Human recourses get stuck

In a profit-centered economy, business is easier to fire employees based on their performance. Even though they are fired and it is unfortunate, there is a possibility for them to find something more motivating to work on. In a human-centered economy, the poorly performing employee would just be supported and kept in the company and their environment or work would try to make it more suitable for their needs. But if they are a person who is just scared to leave the company, it might circle to the event that the employee will stay in the company as a burden. (Backes-Gellner 2004)

9 MEASURING

The current economic system drives to measure and reward the ends and not the means. For example GDP measures “the value of the outputs of a given economy”, placing wealthy countries higher in the ranking, but not focusing on how and through what practices were the outputs gained. It is not ideal and it can be seen as misleading, having money as one of the main indicators.

Because there are more things to measure and take into consideration when we want to create an economic system that focuses on humans, there could be used alternatives like HCA2E (Human-Centered Approach to Economics) to measure economic growth more human-centered.

In HCA2E there are two pillars that will be measured and indicate the actual health of the economies and how well they center humans and their needs. First, pilar would measure “the physical component, also known as “the likelihood of getting sick” or developing a serious illness such as cancer, diabetes or heart disease in country X vs country Y due to a number of factors such as environmental cleanliness, tolerated stress levels, and quality of food controlling for genetic predisposition of the population as a whole to any of these conditions”. This indicator would change countries to think more about the health of their citizens and the indicators that influence it.

The second pillar to measure in HCA2E is “the mental/creative component, also known as “the faith that one has in the ability to succeed in the economic environment that he/she lives in” or in simple terms “the belief that if you work hard enough, you will make it”. This would show how trusting people are towards their government and building system. The more they believe they can trust the public sector, the better possibilities there are for everyone despite their background to succeed fairly and innovate new ideas for the world.

These two pillars would directly be related to humans and their well-being and show how well countries are treating and supporting the people and their needs and how many fair opportunities there are for them. With physical components driving countries to take care of the basic needs of people and with mental/creative components encouraging new developments, this measuring index would directly promote human-center economics. (Botchoukova-Farkova 2016)

10 CONCLUSION

Profit-centered and human-centered economies are two different working systems that mainly value different things. While a profit-centered economy is focused on profit-generating, a human-centered economy focuses on humans and wellbeing. The systems are macro perspective and focus on how the economy works and what effect it has on humans. Writers of this essay hope to bring out the differences between these two systems and help readers understand them and to compare the differences, as well as similarities between these two economies.

 


References:

 

Abbara, E. 2022. Jury Finds Adidas Guilty of Greenwashing. Read on 01.03.2023. https://careerinlaw.net/uk/jury-finds-adidas-guilty-of-greenwashing

 

Backes-Gellne, U. 2004. An economic approach to human resource management. Read 15.03.2023. https://www.econstor.eu/bitstream/10419/78952/1/75240704X.pdf

 

Bocken, N. M. P. & Short, S. W. 2021. Unsustainable business models – Recognising and resolving institutionalised social and environmental harm. Read on 03.03.2023. https://www.sciencedirect.com/science/article/pii/S0959652621020461

 

Botchoukova-Farkova, G. 2016. Human Centered Approach to Economics. Read on 16.03.2023. https://medium.com/@gbf2104/human-centered-approach-to-economics-1c103e3d722f

 

Chand, S. 2014. Difference between a Customer-oriented Company and a Profit-oriented Company. Read on 03.03.2023. https://www.yourarticlelibrary.com/difference/difference-between-a-customer-oriented-company-and-a-profit-oriented-company/7596

 

Debaque, S. 2022. Design should be human-centred, but it is business centred. Read on 28.02.2023. https://uxdesign.cc/design-isnt-always-human-centred-it-s-business-centred-77b8e8ab904f

 

Emeritus. 2022. 5 Important Benefits of Innovation in Business. Read on 03.03.2023. https://emeritus.org/in/learn/important-benefits-of-innovation-in-business/

 

Heakal. 2022. International (Global) Trade: Definition, Benefits, Criticisms. Read on

03.03.2023. https://www.investopedia.com/insights/what-is-international-trade/

 

Jacobs, G. 2018. Overview of WAAS Research on NET / Course on Human-centered Economics.

Watched on 03.03.2023. https://www.youtube.com/watch?v=hbH80jIab7s&list=PLs1k1_9qaDMyNPX9yRPQWWOsu62EQiUyR&index=2

 

Jacobs, G. 2016. Human-centered Economics. Read 04.03.2023. http://www.neweconomictheory.org/content/human-centered-economics-0

 

Kozuszek, L. 2021. A Human-Centric Approach to Economic Forecasting. Read 04.03.2023. https://globalresilience.northeastern.edu/a-human-centric-approach-to-economic-forecasting/

 

Mani-Kandt, R. 2021. Why Human-centered design (HCD) doesn’t always work for international development. Read on 15.03.2023. https://www.itad.com/article/human-centered-design-international-development/

 

Thornton, A. & Hendricks, G. 2019. Ending Special Tax Treatment for the Very Wealthy. Read on 01.03.2023. https://www.americanprogress.org/article/ending-special-tax-treatment-wealthy/

 

Yang, A. 2020. Human-Centered Capitilsm. Read on 03.03.2023. https://2020.yang2020.com/policies/human-capitalism/

 

Yong-Seung Park, S. 2018. Integration of Economy and Management in Theory & Practice. Watched 05.03.2023. https://www.youtube.com/watch?v=X2uTQ0Fr5h4&list=PLs1k1_9qaDMyNPX9yRPQWWOsu62EQiUyR&index=31

 

Zucconi, A. 2018. Overview of WAAS REsearch on NET / Course on Human-centered Economics.  Watched on 03.03.2023. https://www.youtube.com/watch?v=SZgv-W3BsbA&list=PLs1k1_9qaDMyNPX9yRPQWWOsu62EQiUyR&index=4

 

NB! There was Chat GPT used as an inspiration of the topic, but never as the main text.

Post a Comment