Business as Usual

Manufacturing Costs=DM + DL + MOH

The above equation is one of the important formulas learned within Accounting 221, one of the required courses all business majors at Wake Forest University take. Here we learn how to do internal accounting, making sure the business knows what costs make up its operations, thus being able to use that data in order to cut costs in the future. In this formula calculating the manufacturing costs that comprise the production of a good, we see Direct Materials (DM), Direct Labor (DL), and Manufacturing Overhead (MOH).

I outline this formula, not to give a primer on Managerial Accounting, but to argue that “business” is not neutral. The mathematical formulas we draw up to reflect “good” business practice have important implications on the well-being of others. How specific monies are spent or saved whether in business, politics, families, or otherwise have distinct effects on human beings. I want to highlight in particular the Direct Labor portion of this formula because I find it so relevant to today’s cultural and political climate. Hidden within the abbreviation “DL,” lies the income of millions of Americans who depend on the numbers in this formula for their well-being. Many business students each year, including me, go through the motions of performing various calculations—connecting, for example, the value $200,000 to the letters “DL”—without ever considering that these two letters represent the livelihood of first and last names. What I want to suggest is that when “DL” is not connected to a “Jane Doe,” the business manager becomes disconnected from the laborer both socially and monetarily. For when one is constantly fixated on reducing the costs associated with labor, as in Accounting 221, one is also disconnected from the bodies those costs represent.

Two conclusions result from this analysis. First, as philosopher James K.A. Smith argues,”an education-whether acknowledged or not-is a formation of the desires and imagination that creates a certain kind of person that is part of a certain kind of people. The facts and information learned as part of the process are always situated and embedded in something deeper that is being learned all along: a particular vision of the good life.”¹ As Christians we are called to the first commandment of Christ–to love the Lord with all our mind, heart, soul and strength. I think this calls for a critique of an education that forms our imagination to “see” the laborer as invisible, as merely a cost to be reduced. When we recognize that there are counter-educations to the gospel that form our minds and hearts to reject Christ’s second commandment–Loving your neighbor as yourself—we learn to be formed by the true gospel that calls us to love. Second, I want to argue with theologian William Cavanaugh that Christians, both consumers and business leaders, are “called to create concrete alternative practices that open up a different kind of economic space—the space marked by the body of Christ.”² Our practices of business leadership and consumption are to create spaces that recognize all workers as created in the Image of God, not as mere vehicles for profit, easily dispensable as “production needs” change.

What might this mean for the real world? Certainly this requires a large-scale Christian critique of the capitalistic system, a project not fit for this blog post. What I want to minimally argue in this space is that a Christian understanding of business practice must embody, against the supposedly neutral profit maximization gospel of capitalism, an understanding of the wage of the laborer as tied to his/her flourishing. A Christian, it seems to me, armed with the view that all workers are dignified, must be repulsed at a world in which CEOs make 204 times the average worker.³ A Christian business leader should work to create alternative spaces in which this chasm is unthinkable, in which profits don’t float up to the top, but are reinvested into the workers of the company-the ones most vulnerable within the system.

In conclusion then, there is no “business as usual” or “it’s just business,” for there is no neutral “business” in which all actions are to fall under. All business action is normative, guided by a vision of the good life. One of these visions, offered in the formula above, revolves around a telos of profit maximization hindered by the costs of labor. As Christians, I believe we are called to a different vision, a different formula, guided by a different normative vision of the Image of God Christ calls us to recognize in everyone.

[wpex more=”View Sources” less=”Hide Sources”]

1. James K.A. Smith, Desiring the Kingdom: Worship, Worldview, and Cultural Formation (Grand Rapids: Baker, 2009), 29

2. William T. Cavanaugh, Being Consumed: Economics and Christian Desire (Grand Rapids: Eerdmans, 2008), viii

3. Elliot Blair Smith and Phil Kuntz, “CEO Pay 1,795-to-1 Multiple Wages Skirts U.S. Law,” Bloomberg. 30 Apr 2013,

http://www.bloomberg.com/news/2013-04-30/ceo-pay-1-795-to-1-multiple-of-workers-skirts-law-as-sec-delays.html[/wpex]

4 responses to “Business as Usual”

Nicholai Stuckwisch

June 16, 2014

George,

I appreciate the insights you share in this article and especially the connection you draw between Direct Labor and the actual human beings behind it. I just completed my Sophomore year as an Accounting major myself, and I have definitely seen a trend within my businesses related courses to separate the numerical values we are given to work with from the origins of the costs/revenues we see.

What I am understanding to be your primary argument, that there is no neutral form of business, is also an excellent point. I honestly think that there are actually very few things that we can claim to be neutral because almost every word we speak, thought we entertain, and action we carry out is likely to impact those around us in some way or another. We are not living inside an empty vacuum but rather social creatures involved in a very interconnected and social world. When we engage in any kind of work or activity that could potentially lead to the harm of other people, shrugging our actions off as “just doing business” is never a legitimate excuse, because as you note in your post, we are called to love and care for our neighbors. In the Lutheran Small Catechism, Dr. Luther’s explanation for the fifth and seventh commandments go beyond simply saying that we should not take the lives of our neighbors or directly apprehend their possessions but (for the fifth) “we should fear and love God so that we do not hurt or harm our neighbor in his body, but help and be of service to him in every physical need” and (for the seventh) “we should fear and love God so that we do not scheme to get our neighbors money or property, or get them in any dishonest way, but help him to improve and protect property and income.”

Not only are the commandments the forbidding of certain acts, but they are a call to perform others that help and support our neighbors. There is no neutral act toward the rest of mankind at all, not just in business, because we are specifically commanded not to hurt them and instead to benefit them.

At the same time however, there are a few talking points I am interested in possibly hearing you extrapolate on further.

First, I am wondering what, from a business standpoint, your suggestion for moving away from the profit maximization/cost minimization model in business might look like in actual practice. Businesses do need to operate a profit on some level or another or they are not likely to stay in business very long and the people they employ would suddenly be without jobs altogether, so I am curious to hear what kinds of suggestions you might have for finding a balance.

Second, I think you could actually carry your argument beyond Direct Labor and into Direct Materials as well. The materials you are purchasing are being produced by another business and its own DL costs. If you seek to minimize the costs of your DM (which is going to become more important if you are trying to avoid cutting DL costs) you are going to be simultaneously working to decrease the income of another company and therefore decrease the amount of funds they have available to pay their own workers. This goes back to the idea that there are neutral actions, whatever cost you are trying to minimize is likely connected to someone else somewhere whose job, family, and well-being may be disrupted if you reduce or eliminate the necessity for their job.

Third, what are the specific reasons that we should cringe at executives making large amounts of money compared to their employees? I’m not going to necessarily say you are wrong in suggesting this, but I’m curious about what your argument is. Are you concerned with the amount of money the execs are making, the amount of money their employees are making, or the difference between the two?

Fourth, and finally, I am wondering if you make any kind of distinction between different industries. Should a company like Ford that has a lot of career jobs/jobs that people plan/hope to hold as long as they remain in the workforce be more concerned about supporting their employees and not unnecessarily reducing DL costs than a company like McDonalds that would typically be reserved for teens, young adults, and students working over the summer or while they go to school? In other words, should there be a difference in approach to DL costs between employers that are likely hiring people for life and those that are hiring people for a few months to a couple of years before they go on to pursue a real career?

Sorry my comment ended up being so absurdly long. The tendency to ramble is a struggle I often deal with, but thank you very much for your post. I look forward to reading more of your thoughts in the future.

George Aldhizer

June 16, 2014

Thanks Nicholai, for your thoughtful and systematic response (not rambling at all).

You’re very right, my argument can be extended to just about anything in life. The problem is that we tend to view the world as if it was neutral, as if that is just the way the world is, full stop. It blinds us to the real contingencies of the institutions, systems, beliefs, and spaces within the world, that could be different than the way they are.

(1) You’re again very right, I don’t want my article to be seen as an apologetic for a no-profit system. I think that what I am arguing for is to view profit, like business, as non-neutral. The resulting profit of a business, like the Manufacturing Costs formula above, depends on allocation of monies that could be allocated differently. I think I’m arguing minimally for a different distribution of income within the firm, that doesn’t have the profits “float up to the top” as I say.

Though I think you do bring up a very good point, for your article speaks of this, Capitalism breeds, in many cases necessitates, profit maximization and cost cuts in order for the firm to keep up with competition. It is this “large scale critique of capitalism” that I speak of above that I believe is necessary, because I believe that people at the bottom are most hurt when fierce competition “forces” a company to cut costs to the bone. In sum, a different model other than profit maximization, seems to need a different way of doing/viewing capitalism.

(2) Yeah, great point. All three of the parts of the formula can be critiqued, and your very right, how we cut costs affect not only our firm but the other firms in the supply chain as well (and the consumer).

(3) Yeah, great question. I think I am primarily starting with the low level worker as being worthy of a living wage. If that worker is working within a company that has profit to be spread to various employees, the ones at the top shouldn’t have an income that disallows those at the bottom from having a living wage (i.e. not having to work two minimum wage jobs).

Secondarily, I am critiquing the gap between the income of the top and of the bottom. I am thinking of this in terms of the social segregation (look at our cities, our churches even) that results from such a large income gap within our firms. This, then creates social spaces in which high income people are only allowed access and spaces in which high income people (and low income people) would not want to associate with those at the bottom.

I think this raises the question, Just what does the Kingdom of God, come to fruition in the Resurrection and the doing away of sin and death, just what does that look like? And to what capacity are Christians and the church called/able to be a part of this “Kingdom come on earth as in Heaven”?

(4) Well, I think that brings up a good point. I think that employers should care about their employees, and this will (may) mean that incomes are adjusted according to the family situation of the employed. The teenager working a part time job I think shouldn’t be making the same wage as the single mother working the same job.

Although I would note that your idea of an employer that today hires people for life to be a real rarity. Firms just aren’t looking to do that these days for better or for worse. I think that does raise a question of my essay, namely, how to motivate employees, or how to fire employees under a care for the employee and a care for his/her living wage. I dunno, interesting thoughts.

Hopefully what I’ve said is decently clear.

Nicholai Stuckwisch

June 17, 2014

I think what you’re saying is very reasonable, and I certainly agree with you for the most part. I appreciate getting to see your thought process and lines of reasoning.

I do wonder whether or not the issue with a distribution of social spaces within the church and elsewhere is a problem not just a problem with income distribution. Is it perhaps more of a problem with a human tendency to gravitate toward distinct groups and ideally (in their minds) a group that is more prestigious than any other. It is the same kind of human mindset that lies at the root of sexism, racism, and other forms of elitism that divide people. I see this kind of superiority issue arising everywhere including my school and among the homschooling crowd I grew up. Grades, club involvement, and even the type of degree you are pursuing are all used as means of trying to establish prestigious positions within the university setting, and within the homeschooling sphere of individuals (which is dominated by Christian families as far as I can tell) it is very common to find a sense of superiority that comes with being home educated and not being like “those public schoolers.”

Humanity is just really, really bad at accepting the fact that despite or varying accomplishments and abilities, we’re all created equally and that our Father in heaven cares for us all. Income, wealth, and social status are abused all the time, but is there something inherently wrong with being wealthier than most people or does a very common problem just tend to express itself pretty keenly in the upper class?

The more I read the feedback to our articles, hear from my friends about my own post, and discuss this with you, the more I feel like our two posts actually compliment each other pretty well, and I am already appreciating the good that the Conciliar Post has to offer!

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Reply

George Aldhizer

June 23, 2014

Yeah Nicholai, I think you raise a good point. You’re right, I don’t think we should reduce social differentiation to income distribution, because there is much more going on that just that. I do think it plays a big role, especially in places like Wake Forest where the wealth differentiation is so great.

I don’t think there is something inherently wrong with wealth at all. I think, however, that wealth, in the hands of sinners, can so easily be abused. When abused, it not only hurts the upper class in their sin but also hurts the entirety of society. We see all members of American society longing for social status, and it ends up hurting all of us in the process.

Nicholai Stuckwisch

June 16, 2014

George,

I appreciate the insights you share in this article and especially the connection you draw between Direct Labor and the actual human beings behind it. I just completed my Sophomore year as an Accounting major myself, and I have definitely seen a trend within my businesses related courses to separate the numerical values we are given to work with from the origins of the costs/revenues we see.

What I am understanding to be your primary argument, that there is no neutral form of business, is also an excellent point. I honestly think that there are actually very few things that we can claim to be neutral because almost every word we speak, thought we entertain, and action we carry out is likely to impact those around us in some way or another. We are not living inside an empty vacuum but rather social creatures involved in a very interconnected and social world. When we engage in any kind of work or activity that could potentially lead to the harm of other people, shrugging our actions off as “just doing business” is never a legitimate excuse, because as you note in your post, we are called to love and care for our neighbors. In the Lutheran Small Catechism, Dr. Luther’s explanation for the fifth and seventh commandments go beyond simply saying that we should not take the lives of our neighbors or directly apprehend their possessions but (for the fifth) “we should fear and love God so that we do not hurt or harm our neighbor in his body, but help and be of service to him in every physical need” and (for the seventh) “we should fear and love God so that we do not scheme to get our neighbors money or property, or get them in any dishonest way, but help him to improve and protect property and income.”

Not only are the commandments the forbidding of certain acts, but they are a call to perform others that help and support our neighbors. There is no neutral act toward the rest of mankind at all, not just in business, because we are specifically commanded not to hurt them and instead to benefit them.

At the same time however, there are a few talking points I am interested in possibly hearing you extrapolate on further.

First, I am wondering what, from a business standpoint, your suggestion for moving away from the profit maximization/cost minimization model in business might look like in actual practice. Businesses do need to operate a profit on some level or another or they are not likely to stay in business very long and the people they employ would suddenly be without jobs altogether, so I am curious to hear what kinds of suggestions you might have for finding a balance.

Second, I think you could actually carry your argument beyond Direct Labor and into Direct Materials as well. The materials you are purchasing are being produced by another business and its own DL costs. If you seek to minimize the costs of your DM (which is going to become more important if you are trying to avoid cutting DL costs) you are going to be simultaneously working to decrease the income of another company and therefore decrease the amount of funds they have available to pay their own workers. This goes back to the idea that there are neutral actions, whatever cost you are trying to minimize is likely connected to someone else somewhere whose job, family, and well-being may be disrupted if you reduce or eliminate the necessity for their job.

Third, what are the specific reasons that we should cringe at executives making large amounts of money compared to their employees? I’m not going to necessarily say you are wrong in suggesting this, but I’m curious about what your argument is. Are you concerned with the amount of money the execs are making, the amount of money their employees are making, or the difference between the two?

Fourth, and finally, I am wondering if you make any kind of distinction between different industries. Should a company like Ford that has a lot of career jobs/jobs that people plan/hope to hold as long as they remain in the workforce be more concerned about supporting their employees and not unnecessarily reducing DL costs than a company like McDonalds that would typically be reserved for teens, young adults, and students working over the summer or while they go to school? In other words, should there be a difference in approach to DL costs between employers that are likely hiring people for life and those that are hiring people for a few months to a couple of years before they go on to pursue a real career?

Sorry my comment ended up being so absurdly long. The tendency to ramble is a struggle I often deal with, but thank you very much for your post. I look forward to reading more of your thoughts in the future.

Loading…

George Aldhizer

June 16, 2014

Thanks Nicholai, for your thoughtful and systematic response (not rambling at all).

You’re very right, my argument can be extended to just about anything in life. The problem is that we tend to view the world as if it was neutral, as if that is just the way the world is, full stop. It blinds us to the real contingencies of the institutions, systems, beliefs, and spaces within the world, that could be different than the way they are.

(1) You’re again very right, I don’t want my article to be seen as an apologetic for a no-profit system. I think that what I am arguing for is to view profit, like business, as non-neutral. The resulting profit of a business, like the Manufacturing Costs formula above, depends on allocation of monies that could be allocated differently. I think I’m arguing minimally for a different distribution of income within the firm, that doesn’t have the profits “float up to the top” as I say.

Though I think you do bring up a very good point, for your article speaks of this, Capitalism breeds, in many cases necessitates, profit maximization and cost cuts in order for the firm to keep up with competition. It is this “large scale critique of capitalism” that I speak of above that I believe is necessary, because I believe that people at the bottom are most hurt when fierce competition “forces” a company to cut costs to the bone. In sum, a different model other than profit maximization, seems to need a different way of doing/viewing capitalism.

(2) Yeah, great point. All three of the parts of the formula can be critiqued, and your very right, how we cut costs affect not only our firm but the other firms in the supply chain as well (and the consumer).

(3) Yeah, great question. I think I am primarily starting with the low level worker as being worthy of a living wage. If that worker is working within a company that has profit to be spread to various employees, the ones at the top shouldn’t have an income that disallows those at the bottom from having a living wage (i.e. not having to work two minimum wage jobs).

Secondarily, I am critiquing the gap between the income of the top and of the bottom. I am thinking of this in terms of the social segregation (look at our cities, our churches even) that results from such a large income gap within our firms. This, then creates social spaces in which high income people are only allowed access and spaces in which high income people (and low income people) would not want to associate with those at the bottom.

I think this raises the question, Just what does the Kingdom of God, come to fruition in the Resurrection and the doing away of sin and death, just what does that look like? And to what capacity are Christians and the church called/able to be a part of this “Kingdom come on earth as in Heaven”?

(4) Well, I think that brings up a good point. I think that employers should care about their employees, and this will (may) mean that incomes are adjusted according to the family situation of the employed. The teenager working a part time job I think shouldn’t be making the same wage as the single mother working the same job.

Although I would note that your idea of an employer that today hires people for life to be a real rarity. Firms just aren’t looking to do that these days for better or for worse. I think that does raise a question of my essay, namely, how to motivate employees, or how to fire employees under a care for the employee and a care for his/her living wage. I dunno, interesting thoughts.

Hopefully what I’ve said is decently clear.

Loading…

1. Nicholai Stuckwisch
  
  June 17, 2014
  
  I think what you’re saying is very reasonable, and I certainly agree with you for the most part. I appreciate getting to see your thought process and lines of reasoning.
  
  I do wonder whether or not the issue with a distribution of social spaces within the church and elsewhere is a problem not just a problem with income distribution. Is it perhaps more of a problem with a human tendency to gravitate toward distinct groups and ideally (in their minds) a group that is more prestigious than any other. It is the same kind of human mindset that lies at the root of sexism, racism, and other forms of elitism that divide people. I see this kind of superiority issue arising everywhere including my school and among the homschooling crowd I grew up. Grades, club involvement, and even the type of degree you are pursuing are all used as means of trying to establish prestigious positions within the university setting, and within the homeschooling sphere of individuals (which is dominated by Christian families as far as I can tell) it is very common to find a sense of superiority that comes with being home educated and not being like “those public schoolers.”
  
  Humanity is just really, really bad at accepting the fact that despite or varying accomplishments and abilities, we’re all created equally and that our Father in heaven cares for us all. Income, wealth, and social status are abused all the time, but is there something inherently wrong with being wealthier than most people or does a very common problem just tend to express itself pretty keenly in the upper class?
  
  The more I read the feedback to our articles, hear from my friends about my own post, and discuss this with you, the more I feel like our two posts actually compliment each other pretty well, and I am already appreciating the good that the Conciliar Post has to offer!
  
  Loading…
  
George Aldhizer

June 23, 2014

Yeah Nicholai, I think you raise a good point. You’re right, I don’t think we should reduce social differentiation to income distribution, because there is much more going on that just that. I do think it plays a big role, especially in places like Wake Forest where the wealth differentiation is so great.

I don’t think there is something inherently wrong with wealth at all. I think, however, that wealth, in the hands of sinners, can so easily be abused. When abused, it not only hurts the upper class in their sin but also hurts the entirety of society. We see all members of American society longing for social status, and it ends up hurting all of us in the process.

Loading…

Conciliar Post