US Corporate Executives to Workers: Drop Dead

The Washington Post has a story that blandly supports the continued strip mining of the American economy. Of course, in Versailles that the nation’s capitol has become, this lobbyist-and-big-ticket-political-donor supporting point of view no doubt seems entirely logical.

The guts of the article:

Three years ago, Harvard Business School asked thousands of its graduates, many of whom are leaders of America’s top companies, where their firms had decided to locate jobs in the previous year. The responses led the researchers to declare a “competitiveness problem” at home: HBS Alumni reported 56 separate instances where they moved 1,000 or more U.S. jobs to foreign countries, zero cases of moving that many jobs in one block to America from abroad, and just four cases of creating that many new jobs in the United States. Three in four respondents said American competitiveness was falling.

Harvard released a similar survey this week, which suggested executives aren’t as glum about American competitiveness as they once were…

Companies don’t appear any more keen on American workers today, though. The Harvard grads are down on American education and on workers’ skill sets, but they admit they’re just not really engaged in improving either area. Three-quarters said their firms would rather invest in new technology than hire new employees. More than two-thirds said they’d rather rely on vendors for work that can be outsourced, as opposed to adding their own staff. A plurality said they expected to be less able to pay high wages and benefits to American workers.

The researchers who conducted the study call that a failure on the part of big American business. They say the market will eventually force companies to correct course and invest in what they call the “commons” of America’s workforce. “We think this mismatch is, at some fundamental sense, unsustainable,” Michael Porter, one of the professors behind the studies, said in an interview this week.

But what if it’s not?

Why, if you were a multinational corporation, would you feel a need to correct that mismatch? Why would you invest in American workers? Why would you create a job here?

At what point does it become a rational business decision for American companies to write off most Americans?

It’s hard to know where to begin with this. First, Harvard Business School is hardly a bastion of socialist thinking. Porter and his colleagues are correct to call out short-sightedness in the incumbents of C-suites. And there’s nary a mention of the role of the long-overvalued dollar, thanks to the lessons that China and the Asian tigers learned in the wake of the 1997 Asian crisis: keep your currency pegged low, run a big trade surplus so you have such a large foreign exchange warchest as to never again be subject to the tender ministrations of the IMF.

But second, and more worrisome, is a vastly larger intellectual failure on the part of the Washington Post and even the Harvard investigators. They’ve completely lost sight of whose interests are at work. The HBS grads are looting the American economy for their own personal profit. Making better products and developing new markets is hard and it takes time for that effort to pay off. Cutting costs is easy. Getting a pop in the price of your stock due to investors’ belief that offshoring and outsourcing will lower costs is even easier.

It’s far from a given, particularly at this juncture, that more outsourcing and offshoring is good for anyone aside from top executives, well-placed middle managers, and the various intermediaries in the outsourcing industry (yes, there is such a thing). We’ve been writing for years that even in the 1990s, we were hearing from executives at companies that sent operations overseas that the business case was weak, but they went ahead regardless to please Wall Street. Chief investment officers have said flatly that outsourcing is overrated as a cost saver.

In the early 2000s, we heard regularly from contacts at McKinsey that their clients had become so short-sighted that it was virtually impossible to get investments of any sort approved, even ones that on paper were no-brainers. Why? Any investment still has an expense component, meaning some costs will be reported as expenses on the income statement, as opposed to capitalized on the balance sheet. Companies were so loath to do anything that might blemish their quarterly earnings that they’d shun even remarkably attractive projects out of an antipathy for even a short-term lowering of quarterly profits.

And even when these projects actually do lower costs (as opposed to transfer income from lower-paid workers to middle managers, who need to do more coordinating, and senior executives), there are hidden costs in terms of extended supply chains, lost flexibility, and ceding the opportunity to develop expertise to vendors. In other words, even when profits improve, it’s typically achieved by making the company more fragile.

This unwillingness to invest represents a failure of capitalists to do their job on a massive scale. US-style short-termism has become all too common around the globe. As yours truly and Rob Parenteau wrote for the New York Times in 2010:

For instance, IMF and World Bank studies found a reduced reinvestment rate of profits in many Asian nations following the 1998 crisis. Similarly, a 2005 JPMorgan report noted with concern that since 2002, US corporations on average ran a net financial surplus of 1.7 percent of GDP, which contrasted with an average deficit of 1.2 percent of GDP for the preceding forty years. Companies as a whole historically ran fiscal surpluses, meaning in aggregate they saved rather than expanded, in economic downturns, not expansion phases.

The big culprit in America is that public companies are obsessed with quarterly earnings. Investing in future growth often reduces profits short term. The enterprise has to spend money, say on additional staff or extra marketing, before any new revenues come in the door. And for bolder initiatives like developing new products, the up front costs can be considerable (marketing research, product design, prototype development, legal expenses associated with patents, lining up contractors). Thus a fall in business investment short circuits a major driver of growth in capitalist economies.

Companies, while claiming they maximize shareholder value, increasingly prefer to pay their executives exorbitant bonuses, or issue special dividends to shareholders, or engage in financial speculation. They turn their backs on the traditional role of a capitalist – to find and exploit profitable opportunities to expand his activities

Some may argue that lower investment rates are the result of poor prospects, but the data does not support that view. Corporate profits have risen as a share of GDP since the early 1980s, reaching unprecedented levels right before the global financial crisis took hold. Even now, US profit margins are nearly two thirds of the way back to their prior cyclical high, despite a subpar recovery.

More than four years later, those sorry trends have continued, with profits now at a record share of GDP. But the top brass has been handsomely rewarded for its shameful behavior. They’ve discovered that the more they squeeze workers, both here and abroad, the more they can keep for themselves.

And in a bit of unintended irony, the Washington Post shows a headline for another way they’ve succeeded in making the greater public subsidize their profits: How the Postal Service subsidizes cheap Chinese goods. As readers know, the sources of corporate welfare are legion. Walmart’s super low wages are subsidized by $6.2 billion a year in public assistance, a significant portion of its $17 billion in reported 2013 profits. And that’s before you factor in the value of state and local tax breaks that Walmart gets by pitting communities against each other when it is planning new store locations. These concessions are particularly dubious given that Walmarts don’t create jobs, but do a combination of destroy them (by putting smaller retailers out of business) and steal them (by syphoning retail sales and hence other jobs) from neighboring communities.

While Walmart is the poster child of subsidized profits, the Bentonville giant has plenty of company, including large financial firms (so heavily subsidized and backstopped as to not be properly considered private companies), Big Pharma (a huge beneficiary of decades of NIH-funded research) and Big Auto (which has played the “pit communities against each other” game as adeptly as Walmart in securing subsidies for moving plants into union-hostile Sunbelt states).

Unfortunately, Porter appears to have characterized the problem accurately when he depicts the attitude of these self-serving executives as a looting of the commons of labor, meaning much of America. And the precursor of the early industrial period show that this can be a sustainable strategy until workers finally rebel. The Bolshevik revolution, which was actually a peasant revolt, was more than a century after the enclosure movement began its successful program to turn independent yeoman farmers into desperate factory wage-slaves. So while history suggests that capitalists will push workers beyond their breaking point, that rupture can be a very long time in coming.

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72 comments

  1. Veri

    The main “competitiveness” that Americans suffer from is that they are not cheap enough. That is being corrected.

      1. Michael Fiorillo

        Actually, it’s a fallacy to claim the US is falling behind in educational achievement, a Big Lie that is being used to privatize public education.

        Compounding the Lie is the vicious irony that so-called education reform is in fact a recipe for an even more passive, uncritical population, since the new standards and curriculums being imposed nationally are less about education than they are about training the proles for submissiveness and tolerance for tedium.

        I’m a public school teacher, and am loath to use easily-manipulated test scores to judge what’s happing in schools, but even according to that degraded metric, when adjusted for the high rates of childhood poverty in the US – the highest in the developed world – the US actually scores highest.

        1. Banger

          I think you’re right to criticize test results as indicators of anything–yet schools are obsessed with tests, tests, and more tests. Children do well or badly in U.S. public schools in spite of schools.

          But here’s my beef with public education in the U.S.–ideas about curriculum and teaching methods still seem stuck in the 19th century. Developmental psychology, cognitive psychology, advances in neuro-science seldom play a role in teaching. You still have the old classroom full of children of the same age who are developmentally, sometimes, in different universes and have different learning styles. They aren’t allowed to move around much and are thus developmentally underdeveloped physically, as recent studies have shown in the early years while they learn to be part of the herd and are drugged if they are healthy, i.e., fidget and move around, spin and ask too many or not enough questions and so on. The way schools are set up is absurdly stupid and strictly political–schools are not set up for learning but for maintaining order and forcing kids into narrow categories that devalues most of them. Any imaginative kid who has high “alternative” intelligence I’ve spoken to hates school–not dislikes, it hates it.

          Having said that, teachers often do heroic work with children even if, often, they aren’t allowed to hug them (developmentally stupid again) or give them the instruction they need (if it doesn’t meet bureaucratic guidelines. Teachers I know are trying to find alternatives because they are very frustrated with the schools system even though the local system is the best in the state. I hope we can do better because from what I’ve seen (four of my own kids and now a step son) school works only for “normals”, i.e., compliant, conformist children which are always good to have–but we need all of us to be educated. This is not, btw, aimed at just the American system but most systems around the world.

          I remember at some point in my career of taking standardized tests realizing that in order to do well I had to stop actually trying to answer the questions and start “channeling” the mind-set of the people who wrote the tests who wanted dull, standard and banal answers–deep thinking is not allowed! I realized that I had to put on a superficial mind-set to do well on these tests. And the result of this regime is to create a superficial-thinking population and, in particular, ruling elite which is easily led, over-respectful of authority, incapable of even elemental critical thinking and is destroying the world. Good job!

          1. lordkoos

            It’s never been about education in public K-12 schools, it’s always been about training people to sit still and do as they are told.

          1. Ulysses

            It’s worse than that! If it was peasant training then kids would actually be learning some valuable skills related to working the land. Public school kids are being trained to be docile, low-wage worker bees. Fancy private schools are training kids in the rationalizations necessary to maintain their privileges, and, as a bonus, giving them a smattering of exposure to arts and literature– to help them engage in more interesting conversation at parties.

            Very poor school districts are sometimes under pressure to push kids, with too much pride or imagination to thrive at a Mcjob, into the school-to-prison pipeline. This way a huge, unemployable felon underclass is developed, to scare the middle classes into forking over more taxes to construct more for-profit prisons.

            Right here in NYC, third graders with “defiance opposition disorder” (aka insufficient abject servility) are already put into the “justice” system that leads inexorably to a lifetime of grinding poverty and social misery.
            http://www.democracynow.org/2013/4/16/headlines/students_officials_condemn_school_to_prison_pipeline_in_nyc

            1. wbgonne

              Neo-peasants for our neo-feudal world. We don’t want the critical thinkers who are essential to a functioning democracy. We want — as you say — “docile, low-wage worker bees” who will work like drones until their economic utility ends and then die meekly in poverty.

              1. Roland

                Proles aren’t peasants, because peasants are much harder to lay off or evict.

                Bourgeois in a mature capitalist society have nowhere near as many obligations towards their inferiors as the old feudal aristocracy.

                On the other hand, proles have freedom of contract. So we all just need to shut up and be happy.

            2. jrs

              Another advantage of the smattering of arts and literature is to use it argument from authority style against the masses. You see the current order of the world is just wonderful, the dumb masses are just to ignorant to get that entirely. If only they had this knew this obscure fact or reference (the actual knowledge of their lives meaning nothing).

              The left may want less ignorant masses just so they could fight better for themselves but trust me everything isn’t the left.

        2. proximity1

          Maybe. But, judging by all that I have to go on, namely, your views and the refined prose in which you express them, I am inclined to ask you if you don’t agree that, as I suspect you to be, you’re simply not typical of many of your teaching-level’s peers–whether they’re your own age, or older (if possible) or younger.

          How many teachers today use the phrase “I am loath to”–never mind use it with correct spelling and syntax? How many don’t combine singular antecedent pronouns with plural referents? e.g. Say, “Anyone can lose his way if he is not careful,” rather than “Anyone can lose their way if they’re not careful.” ? How many don’t mistakenly use “me” where the correct word is” I”? , or “them” where “they” should be used? These are of course just one tiny set of indicators but I believe that, taken together, they help show us that our native-usage of English is just one glaring example of serious decline–in this case in the formerly found common standards of written and spoken English. On that clarity of expression depend our capacities to reason and to communicate effectively. I read and hea rsub-standard English usage from people who’ve been through the best schools and universities and some of these people must go on to teach or to write, edit or publish professionally. In all this we haven’t even mentioned mathematics or natural sciences.

          E.g. :

          “Alex and I both studied English Literature, Cockburn at Oxford, me at American University in DC 15 years later.”

          —- Jeffrey St. Clair, writing recently in “100 best novels in translation since 1900” @ Counterpunch.org

          1. phil

            No true Scotsman.

            My mother was a teacher, many of my friends teach at my kid’s school, my neighbor across the street and another one a few houses down are both teachers. Lapses in grammar and expressiveness are the exception among them, not the rule — and when their grammar deviates from the neoclassical dicta the Victorians inflicted on us, it’s typically done willfully and with good reason. I’ll take the account of actual experiences by a teacher over those which someone has assumed into existence.

            1. jrs

              Well I think just about everyone has encountered teachers in thier life (hard to live in this society otherwise) So it’s not some rare experience. But generalizing is often unwise.

          2. Banger

            Most of us use “common” English to communicate which changes in different regions of the country. Here in the South people often use language to convey somewhat more subtle distinctions not used in the, frankly, cruder North. Language always reflects culture and, while clarity (if intended) should always be the main consideration in language usage, adhering to particular forms of spelling and usage don’t make a lot of sense. The classic reference is always to Shakespeare and his world where language was a plaything. I like a very flexible language–now that I’ve moved to the South I will sometimes say “might-could” which is a cool term–there are many others.

            1. hunkerdown

              Exactly. That’s another reason the bourgeoisie put such emphasis on “proper” usage: ideological survival. Seriously, I wanna slap the stuffing out of the next hyper-literate hipster posturing about the Oxford comma.

          3. hunkerdown

            Anyone can lose their way if they’re not careful.

            That you consider “his” the correct third person singular pronoun for one person of indeterminate sex is closer to the root of the problem than the solution. “Proper” usage isn’t about communication, but about marking those who are too busy making material goods for the upper classes to learn the rules of six different languages and when to use them. The same goes for spelling, as Dmitry Orlov pointed out a couple of years ago.

        3. NoBrick

          Educational achievement, like beauty, is in the eyes of the beer-holder. Quibble endlessly
          about the meaningless tests while assuming the tests preceeding teacher certification
          are somehow sacrosanct. If the Emperor created and mandated Public Education to
          “Turn on the Light”, to establish a consciousness or intellectual maturity, to reveal the
          “Way of the World”, or the “Lay of the Land” for the masses, WOULD marketing or
          propaganda be effective? In other words, does this so called “Educational Achievment”
          counteract marketing or propaganda?
          If Public Education WASN’T created/mandated to serve as the “Recruitment Agent”
          for the “System”, pray tell, what was?

        4. curlydan

          Yes, we must fight against the “schools are bad” meme. I frequently cite this article:
          http://www.motherjones.com/politics/2012/08/kids-school-test-scores-charts-kevin-drum

          And in terms of the teacher quality, I think teachers are in general very good quality, yet the powers that be would like to layoff half of them and have them replaced with untrained yet ambitious grads with half decent GPAs. Practice makes perfect, and these newbie grads would and do flop. As this recent study in Baltimore makes clear, it’s the home- and neighborhood-environment that’s most important. A bad parent or crappy neighborhood (there are many) generally is worse than a bad teacher (there are, IMO, few):
          http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/29/what-your-1st-grade-life-says-about-the-rest-of-it/

        5. jrs

          Yea it can always get worse, and worse education is probably what our overloads want, well yes I suspect so. So they are not to be trusted. But saying education is fine everywhere is also a vast oversimplification and denial of reality. I realize denying reality is every so popular as propaganda but whatever. Good school districts are usually pretty decent and bad school districts are pretty bad and people that went to bad schools kinda know it (from experience not any Big Lie – but lived experience).

          And EVEN the good school districts. Schools are not the only thing wrong with the world. But shouldn’t 12 years of schooling have been able to produce a better citizenry than this? If not what is schooling even worth? Maybe we should throw the money into food assistane or parenting educaiton or something instead if schooling is indeed so feeble.

  2. MarcoPolo

    Every time I’ve seen you write, ” outsourcing is overrated as a cost saver” I wanted to fire back, “that’s not the point. It’s the increased (not less) flexibility.” Now I see we’re making the same argument. It comes at a cost to stability (fragility). We can find all of the people we want to stand in front of a machine, hold their tongues against their lips, and keep that machine running just like they’re told. But we don’t need that. What we can’t do is retain someone who understands the process. I think the real penalty comes as a loss in R&D.

  3. R Foreman

    > They turn their backs on the traditional role of a capitalist – to find and exploit profitable opportunities to expand his activities

    That’s good. It means more opportunities for the rest of us. However I’d feel much more confident about my future if the US Government hadn’t turned into a for-profit institution.

    1. Art Eclectic

      That’s just the natural outcome of crony capitalism. Politicians (the market) need cash in order to win elections. Business (the supplier) needs to protect their models from competition. By providing The Market (politicians) with campaign cash, business has been able to effectively write legislation geared entirely toward protecting their own business models.

      The government has simply been hijacked by lobbyists and corporate donors for the purposes of profit protection.

  4. scott

    I’m working on an R&D project for a Fortune 50 company as a contractor. The investment is in the tens of millions a year, and it’s all going to consultants. I was actually told that this company will not hire any full-time employees to do this project. I suppose this looks good in the short term, but when the project is over and we all go our separate ways, said company will have a new manufacturing process that they won’t understand.

    1. Banger

      Well, when they find they don’t understand then they’ll hire contractors. Right now it looks good to the execs who don’t care at all about a few years down the line–usually.

  5. cnchal

    Eventually the headlines will read:

    US Corporate Executives to Customers: Drop Dead. We don’t need you.

    US Corporate Executives to slaves in China: Drop Dead from exhaustion

    US Corporate Executive to the World: Drop Dead. Ive’ got mine.

    1. NotTimothyGeithner

      The Pentagon is currently trying to start a new Cold War, and we shouldn’t forget super Al Qaeda, ISIS, which was the JV team a few months ago. The American people won’t tolerate bailouts for failed companies. 2008 was a case where the promise of a new sheriff and a very set in stone election outcome allowed the bailout, but the environment is different.

      The whining from the corporate elite will be shrill, but they will find a pliable congress.

  6. trish

    It is “a rational business decision for American companies to write off most Americans,” to squeeze workers here and abroad, to outsource, to make the public subsidize their profits, to fail to invest, to essentially loot of the commons of labor.

    A failure of capitalists to do their job, yes, but the great big (obvious) failure is that of our (now their) government. An utter failure to use policy to get them to do their job, to work for interests of the commons, because of course our government is not ours, it’s run by and for the looters.
    One big club. And to a great degree the MSM is part of that club and that’s a big part of the problem, too.

    Until our broken government problem is addressed, the looters will continue along their merry way.

  7. just bill

    The Harvard Business School has always been dedicated to hollowing out the American economy for the benefit of corporate suits. Marx explained that the only goal of business is to make money. His famous formula was M-C-M. You convert money to commodities in order to convert commodities to money. You take the money to the bank. Veblen added that you take the money and buy assets. You not only take the money you make, you also take the money the banks create by lending against collateral. You ride asset bubbles to the sky. In the Eighties, corporate management learned how to loot the companies they ran, through stock options, stock buy backs, accounting gymnastics to manufacture earnings, outsourcing and offshoring to cut labor costs to the bone. HBS was in the vanguard of all these managerial hijinks.

    What do Americans have to gain from all this? Material progress. You can find it everywhere at Walmart, Lowes, Home Depot. They have an endless flood of cheap Chinese drek that falls apart within weeks or months after you get it home. There are Potemkin cars that would be simply funny if they didn’t explode routinely upon impact with sixteen wheel trailer trucks driven by men compelled to log inhuman hours behind the wheel. You have $5 cups of coffee and heart attack provoking meals at a variety of plastic fast food palaces. The excuse for all this used to be that it created jobs. But that was so Twentieth Century.

  8. Banger

    We have known and talked about the sins of American business being short-term oriented since the days that Japan reared its head as a major competitor and the financialization of the American economy has been the ultimate result. Quarterly earnings are job 1 of an exec in a major corporation because thinking “long” will only get you fired eventually no matter whether you are right or wrong because there are people always gunning for power within the corporate setting and no one plays nice because no nice people get that far.

    As for investing in U.S. workers I think most of these execs don’t trust U.S. workers, don’t believe they are trustworthy or reliable–I think they like the idea of slave labor as an aesthetic choice. There’s something deeply gratifying about imagining a work force that is desperate for work and will grovel on command who you can fire for any cause and since they are sub-human (or they wouldn’t be slaves) there is no conscience to try trick.

    1. Larry

      I would say a vast majority of American workers are in this position. Labor Union participation is at an all-time low. Days lost to labor unrest are at all time lows (compared the 20th century). Worker protections in terms of paid leave and paid vacation are the lowest in the industrialized world. And it seems that a good deal of our workforce is toiling away in jobs below their training, meaning workers should if anything be over qualified for a good deal of positions. I do not see how American employers can expect things to get much better than they already are.

      To me, the early signs of push back are emerging. Wildcat strikes at fast food employers. Large class action suits against employers. Protests emerging over excessive state control of the population. Class consciousness seems to be at an all time high with discussion of the 1% now commonplace. I do not doubt that a major change in course will take time. But I could see our leaders continually fumbling relations with Russia and China, thus forcing work to return to America due to political blowback. After all, the response to work with labor post-WWII was due to the goodness in the hearts of industrialists, it was due to the very real threat of Marxism.

    2. Vatch

      Banger, there’s a lot of truth in what you say, both about internal corporate competitiveness, and about the attitudes of many executives towards employees. Normal people have difficulty thriving in such pathological environments, which lends credence to the theory that there is a disproportionately high number of sociopaths in the ranks of senior business executives.

    3. RUKidding

      Can’t find link, but there was a Letter to the Editor in the Sunday Sept 14 Sacramento Bee stating that Sick Leave was an outrage and that workers should never ever expect to be paid when they don’t work for whatever reason. Workers should just “save money” to cover them when they need to take time off.

      This is the attitude that’s being spread in the propaganda media. The “lucky ducky” workers are ripping off the MOTU by having the nerve to expect such basics as sick leave and personal time off for pay.

      I fully expect US workers to lose more and more, not just in terms of wages and salaries (which is mostly all a done deal now), but also in terms of any benefits at all (mostly a done deal in terms of so many companies only hiring temps, part-time, consultants, etc. But I see at as being gradually incorporated into full time work, as well. No benefits for you, you slob. Be grateful for crumbs and STFU). Not only will we have to fend for ourselves, but the Big Bosses will continue to berate us for expecting anything akin to reasonable pay and benefits.

      How DARE we wage slaves “hassle” our Overlords for such trifling piffles as sick leave?? Good luck to us all.

      1. Banger

        So we should stop working for those fucks and start our own companies and cooperatives–don’t you think? That should be top priority for all of us in our short-medium-long-term planning. Anything else is to court soul-death.

        1. RUKidding

          Yes and no. I know/have known quite a few truly small business owners (range of businesses and/or small law firms). Truly small businesses get hammered by taxes. I’m all for businesses paying taxes, but I suspect readers here at NC know by now that it’s the MegaCorps who pay no taxes, in fact, often get “incentives” (eg the taxpayers pays them) to open a bus. wherever.

          It’s the mom ‘n pops that get screwed, just like the what’s left of the dwindling middle class tax payer. WE are footing the bills anymore, while the mega-wealthy suck blood from a stone and then get angry at any little complaint coming their way.

          OTOH, my Gen X nieces and nephews are mostly “contract” workers, typically working 3 to 5 “projects” at any given time. They appear to me to be working on an insane schedule, which requires them to be pretty much available 24/7/365. However, they have somewhere drunk some Kool Aid that makes them believe that this is GREAT, the best way to work & so forth. No benefits, no sick pay, no personal time off pay… yeah, they are smarties and went to good schools (just barely back when the loans weren’t so high), so they are probably pulling down some bigger buck$ for their “projects.” But it’s incredibly insecure and, like I said, no real “safety net” in terms of sick leave, etc. But they LOVE being wonky fake “libertarians” who are “standing on their own two feet,” “working hard,” and “pulling their own weight.”

          I gave up trying to figure them out a Loooooong time ago. But that’s the belief system of the generation coming up… spoon-fed by Reaganomics to which they all still subscribe, apparently.

      2. jrs

        They’re asking for diseases to spread, especially so with those whose job involves contact with the public (even more so if the have contact with food). They are so blinded by their hatred of employees taking sick days, they can’t even think that the primary beneficiary might not be the employee, although they also benefit.

  9. SoCal Rhino

    Having read this site, I can’t think of off shoring (aka right shoring, aka location strategy) without immediately thinking of the crapification of everything meme. Sure, it’s often portrayed as being about flexibility – those automatic checkouts will allow us to hire more produce managers, except it never does. And residual staff will have more time to focus on high value add tasks, not do double or triple duty to pick up the slack when decades of experience evaporate in the move. And yet. It really is all about the immediate p and l and how easy it for executive leadership to understand how to cut heads, while innovation is hard and takes time, and they don’t trust the information they get from below since everyone feeds self serving disinformation upwards or gets sacked.

  10. diptherio

    Does anyone else get a little nervous when the American labor force is referred to as a “commons”?

    Generally, a commons is a resource like a pasture or a forest or a fishery. By referring to workers as a commons, this formulation turns people like me into resources, there to be used (exploited) by the managerial class. I really don’t like that. This way of speaking/thinking divides humanity into two groups: 1) the labor force, which is seen as a common resource and; 2) the owners/managers who are the users of that resource and the only ones with agency. That puts the labor force on a par with a coal seam or a stand of pines–i.e. it is dehumanizing.

    As the sainted Utah Phillips once said while addressing a commencement ceremony in Cheney, Washington:

    “You’re about to be told one more time that you’re America’s most valuable natural resource. Have you seen what they do to valuable natural resources? Have you seen a strip mine? Have you seen a clear-cut in a forest? Have you seen a polluted river? Don’t ever let them call you a valuable natural resource! They’re gonna strip mine your soul! They’re gonna clear-cut your best thoughts for the sake of a greasy buck, unless you learn to resist! ‘Cause the profit system follows the path of least resistance, and following the path of least resistance is what makes the river crooked!”

  11. Ignacio

    Why, if you were a multinational corporation, would you feel a need to correct that mismatch? Why would you invest in American workers? Why would you create a job here? At what point does it become a rational business decision for American companies to write off most Americans?

    For the sake of competitiveness, which is the supreme value, you can loot whatever you want to, and feel that you are doing the correct thing. Besides, you are not only competitive but also rational. So the WP is arguing that executives are morally obliged to loot the workers.

    1. run75441

      “At what point does it become a rational business decision for American companies to write off most Americans?”

      When you can no longer sale your goods in the largest global consumer market.

  12. Alex Tolley

    “Of course, in Versailles that the nation’s capitol…”. That about sums it up. Executive elites have become as blind to their environment as the aristocrats at Versailles. The logic of maximizing shareholder value, which is a very Anglo concept, not shared globally, is quite rational, but damaging in the long run. I suspect that none of them see the long run coming due for them, or the possibility that they may precipitate unexpected change much sooner. Their corporate jets may be warmed up waiting for their own personal “flight to Varennes” in that event.

  13. greg kaiser

    While the rupture may seem as remotely future as the rapture, I believe the tone of such articles as this indicates the former is getting closer every day. An economy that is indifferent to trade and investor profit but provides the things I need to live and want to enjoy life can’t come soon enough for me. I don’t care if there are no private banks or investors. What we need is a strong community ethic to produce and distribute food, housing, clothing and all other goods of, by and for the people. The investors and their corporations are parasites who destroy real economy.

  14. Globus Pallidus XI

    Well said as usual.

    But even as outsourcing is an issue, you should also mention the even greater threat to American workers of “insourcing” foreign workers. Not every job can be sent overseas. But EVERY job CAN be done by a foreign national that is imported to drive wages down. Recall also that, at least in principle, outsourcing can be reversed – but an engineered population explosion cannot. When the United States has its population boosted to a billion and more, the average worker will be crushed into poverty and it will not be reversible by mere changes in financial or trade policy. Also, unlike outsourcing, importing foreign workers does not just lower wages, past a certain point it also increases the cost of food and water and rents – and we are past that point. Look at the ‘shortage’ of water in California, a ‘shortage’ that would not exist if there were 20 million fewer people living there. That’s why the sociopathic CEO of facebook is so keen on open borders. Well, except for his own property, which is guarded night and day and was recently expanded to give him some property from the proles.

    1. Dirk77

      Yes. Insourcing of H1Bs allows them to use the existing infrastructure without hiring any of the community who paid to build it. At least outsourcing allows another country to build up theirs – hopefully. A friend manages a software group that is entirely Chinese H1Bs. Really long hours and crappy pay for them, but they must since its the next slow boat back to the old country if they fall out of favor. This is in an area of LA with lots of tech unemployment due to the pullout of aerospace to the South. California’s special problem is that the tax code is regressive – low property tax due to Prop 13, but high sales tax, so the overlords don’t pay for the costs of low wages and increasing people.

  15. sharonsj

    I still want to know whom the corporate execs think will be buying their over-priced products? Chinese slaves? Chinese laborers earning $3 a day? Bangledeshi workers getting 50 cents an hour? Americans working for minimum wage? Or the handful of other corporate execs? And the answer is: It doesn’t matter because retail is dead thanks to them.

    1. Banger

      They neither care about us nor the long-term strength of their companies—they only care about their compensation and stock options and their allies on the Board. At this point they figure the Fed will just keep pumping money to avoid social dislocation.

  16. Susan the other

    Capitalism, as it turns out, is not as creative as it thinks it is. It is ossified in fact. It can’t respond to the needs of society at all. Except to fill big box stores with lots of toxic and useless crap, and etc. It’s really only a one trick pony: profit at any expense. Oxymoronic at best. But it had a good run. In future the only capitalists will be individuals, selling whatever they can just to eat and if they have any money left over they can invest in improvements to their business, like instead of being peddlers – literally on foot, they can buy a van. We are all gypsies now so why not? The only nice thing is, without a consumer base capitalism dies.

    1. Banger

      Capitalism has, in fact, become anti-creative in every way except squeezing profits. We are living in a system that is incapable of change even when we are facing major challenges–world war, climate change and so on. It so locked into the status-quo it cannot react to anything creatively. The same leaders, the same voices who spout increasingly stupid ideas and permit only a stunningly narrow band of opinion to be heard in the public square. All true debate is squelched and we totter on increasingly in chains–one day we’ll just fall flat on our faces–but to me it looks like it is a decade away from that moment.

  17. MrColdWaterOfRealityMan

    These grads haven’t “lost sight” of anything. They view the USA as a convenient operating environment/market with a limited lifespan. When it becomes inconvenient for them to live or do business in the USA, they’ll move. The rich can live comfortably anywhere. There is no “patriotism.” The loyalty of the wealthy class is only to money, and themselves. Nation states, politicians and “the people” are useful only so long as they can be used to create or sustain wealth for the already wealthy. Since these wealthy are transnational and transgenerational, this is unlikely to change without some other externally produced radical change (e.g. economic activity falling below the threshold necessary to maintain hydrocarbon energy production).

    1. MikeNY

      Well said.

      We have created transnational corporate Frankensteins that have no allegiance to anything but Mammon. They will try to arbitrage fiscal authorities and workers until both are left bloodless corpses. It’s time for governments to cure themselves of the fiscal Stockholm syndrome, and tell corporations that paying taxes and paying living wages is a COST OF DOING BUSINESS in the country. Otherwise, they can lose the sales and close up shop.

      1. Banger

        That’s why our job is to deconstruct the BS they lay on everyone and form alternative structures and not give a moment’s though to reform because it is not even theoretically possible at this point.

  18. barrisj

    Boeing Corp. is a classic example of a huge megacompany receiving huge subsidies in the form of govt. defense contracts, Ex-Im credits, and playing states against each other for enormous tax breaks in order for Boeing to “bring jawbs”; it also is a classic example of a company who simply loathes its own rank-and-file employees, from shop-floor assembly workers to engineers. Boeing’s outsourcing for the 787 Dreamliner has been a disaster, nobody denies it, except C-suite executives. Its relations with a highly-trained and motivated employee base has so badly eroded, yet Boeing has the gall to bring in veteran workers to perform major fixes of assemby issues that contractors and poorly-trained non-union workers couldn’t deal with. “The Street” lauds Boeing management when they lay off or fire unionised staff, and replace with either incompetent outside contractors or non-unionised off-the-street workers who’ve never seen an aircraft fuselage in their lives. But, of course it’s all about “efficiency”, and “rationalisation of labour”, and “right-sizing”, etc, etc, sweet music to investors and stock touts. Boeing took a highly efficient and effective manufacturing process and destroyed it, all for the sake of fucking over their employee base on wages, salaries, and benefits, including pensions. However, top management has done quite nicely, thank you very much, with exorbitant salaries, stock benefits, pension benefits, and a lifetime guarantee of the good life at retirement time. Send in the sappers!

    1. RUKidding

      Classic story played out at dozens of US companies. All these big-time CEOs sit on each others’ Boards, scratch each others’ backs, and make sure they all get these giant sucking “salaries” plus various, perks, lurks and other deal sweeteners. To maintain these overpaid charlatans at the top, while bringing in the bacon for the shareholders, they off-shore, downsize, cut worker salaries/benefits/pensions all to the vast clapping & cheering on Wall St.

      When things go south at these companies, as is nearly always the case, the very worst that happens is that CEO may get the boot, but they walk away with Diamond-encrusted platinum “hand shakes,” then generally they move on to the next corp. tittie that they can suck the life-blood out of.

      The insanely gargantuan salaries/bonuses/benefits are all “justified” under the b.s. rubric of: well we MUST pay this insane amount bc these are the “best” in the business, and we have to remain “competitive” or our business will REALLY FAIL this time, if we don’t.

      How many times have we seen this play out? In my lifetime? It’s gotta be in the 100s. Yet the beat and the worker beat-down goes on.

      Boeing is just one on the giant list of crappy sh*tty work practices, management out of control, downtrodden workers losing out on everything, yet the corporate welfare contracts from the USG continue to roll down the pike so that the CEOs can continue apace sucking at the USG tittie.

  19. Sam Kanu

    “…Investing in future growth often reduces profits short term…More than four years later, those sorry trends have continued, with profits now at a record share of GDP. But the top brass has been handsomely rewarded for its shameful behavior. They’ve discovered that the more they squeeze workers, both here and abroad, the more they can keep for themselves….”

    The more accurate way to put this, is this: slashing long and short term investment artificially boosts short term profits!

    But then to keep this game going, you need to find yet another loophole. So after moving every job from US to China, once those people start demanding honest wages and no pollution, you open up Burma or Vietnam and run that game again. Similarly when you cut investment, you outsource R&D and you start looking to buy politicans to rig the game for you, or looking for subsidies in the name of “investment credits” or busting unions etc.

    Call it what it really is: a ponzi scheme. Completely unsustainable.

    1. RUKidding

      They haven’t fully raped, plundered and pillaged Africa, YET… albeit it’s in process. After that? Hard to say where the Ponzi scheme can go.

      1. Sam Kanu

        Oh Africa is well on the agenda.

        In the past 5-10 years the US has been busy building an “Africa Command”:
        http://en.wikipedia.org/wiki/United_States_Africa_Command
        What this entails is basically joining hands with all the worst dictators and the charlatan’s pretending to be democratically elected. Run down the list – they are all cooperating quietly with joint activity, drone bases and so on. That’s the muscle on the ground to enfore the commercial agenda.

        Purpose of the above is to basically secure access to resources and be able to only choke the Chinese when the time comes, but also to provide muscle against leaders who dont toe the line with neoliberal “reform”. So they are already having them privatise national infrastructure, energy networks and so on. Pushing GM seeds that basically leave the african farmer a slave to companies like Monsanto. All laying the ground for exploitation while talking the “growth” story.

        One example of how the propaganda around this rush to exploit Africa works can be seen in a recent McKinsey white paper called called “Nigeria’s Renewal: Delivering Inclusive Growth in Africa’s Largest Economy”. Nigeria is Africa’s most populous country.

        Mind you remember that this is McKinsey: the brains has led the dismantling of the US economic base for profit of a small handful of American corporate execs – and that resulting on falling real wages for the average Joe in the US. So this same McKinsey is setting the table while talking about how this disastrous recipe will deliver “inclusive growth” in Africa.

        Oh and let’s not forget that our national security “geniuses” are probably behind the mysteriously well funded soap opera nutcase militant groups that are steadily destabilizing this region.

  20. impermanence

    People need to get beyond the fairy tale that human society will ever be anything other than a de-evolution to the master/slave paradigm. It’s the game of Monopoly over and over and over…

  21. Jon Husband

    The term “managerial capitalism” comes to mind (managing corporate activities to maximize the value of stock holdings by senior management) … coined by Shoshana Zuboff, a Harvard BS professor

  22. Phil

    This was written in 2003: Prescient?

    WE’RE hearing a lot these days about economic distress. What we’re not hearing enough about are global economic and business changes that hit our manufacturing, technology and financial sectors — and lead to job displacement. These changes will not abate; if anything, they will accelerate.

    It’s more complex than just “globalization.” It’s a series of technology and capital transfers that have fundamentally changed our industrial and technological playing field. The rest of the world is close to fielding robust post-industrial infrastructure, and learning to outplay the best of us.

    The National Science Foundation reports that China graduated nearly 200,000 engineers in 1999 from good universities that get better by the year. By comparison, American Universities graduate a mere 60,000 undergraduate engineers annually.

    Combined, India and China produced nearly 26 percent of the world’s newly minted engineers in 1999. Excluding Japan (where engineering wages are higher), Asian economies graduated 320,000 engineers in 1999 alone.

    Wages for Chinese engineers range from roughly $4 to $8 per hour. Engineers from many other Asian nations (excepting Japan) command little more than that. These well-trained engineers are all perfectly capable of working “on the wire” for engineering firms all over the world — and they are doing just that.

    China has some 18 million people migrating from the interior to the coastal manufacturing provinces every year. This represents a virtually limitless source of low-cost labor for the next 10 or 20 years. It will feed China’s surging consumer demand. Don’t believe for a minute that China’s (or the Pacific Rim’s) economic development will be mostly fueled by American-made products and technology. It won’t.

    China is already the largest manufacturer of consumer electronics products in the world, and within three years will be the world’s largest automotive manufacturer.

    Manufacturing is migrating from Pacific Rim economies (Malaysia, Japan, Korea, Taiwan, India) to China, leaving large workforces and technology infrastructures behind. Those displaced workers are migrating to the technology service sector, and already posing a competitive threat to high-tech service sectors in the developed West.

    India already has Six Sigma (a universal measure of quality that strives for near perfection) technology and consulting firms equal to our very best, offering superb technology solutions at cut-rate prices.

    Roughly 47 percent of Americans are directly or indirectly dependent on technology for their livelihood; keep this number in mind when considering how the “Law of Lowest Wages and Costs” has already — and will increasingly — impact our economy and lifestyle.

    Bottom line: We in Silicon Valley — and America — are in for a long, somewhat painful ride. We will be challenged like never before. Americans will, after a time of readjustment and pain, finally have to ask what “enough” is . . . and that’s a good thing.

    It’s a good thing because the seemingly never-ending upward spiral of promised prosperity that Americans have recently taken as their birthright has come at real cost: disintegration of families, environmental degradation, unhealthy xenophobia borne of the fear of “losing advantages” that we so dearly enjoy.

    After the looming crisis fully takes hold, after the scapegoating of politicians, foreign nations and immigrants has run its course, Americans will search inward for values and ways of life that don’t depend on maintaining material hegemony that is in excess of “enough.”

    We can be prosperous without obsessing about prosperity, that is, sacrificing our very lives and identities to some abstract definition of “success.” I predict a resurgence of interest in things spiritual, a more relaxed definition of what “success” means, more cooperation among neighbors, more social entrepreneurship that leverages community-based assets for the good of all, and an America that has learned to cooperate with the world in a way that optimizes its inherent strengths.

    Herein lies the opportunity: America has one thing that it is more “about” than any other nation — we are diverse. We’re not stuck in a traditional “way of being” that will let us stagnate for long. We adapt.

    With immense diversity as raw working material, America will have an opportunity to redefine itself as an innovative, participating member of a global economic, environmental and political dynamic where limits apply, where competition is fierce, and (ironically) where cooperation is absolutely necessary for survival, economic and otherwise. Prepare yourself.

    1. KnotRP

      300M Americans to 1B Chinese….3.3 factor…..60K American engineers x 3.3 = 198K….pretty dang close to 200K….sounds like a wash.

      Hopefully the NSF had an intern write “The National Science Foundation reports that China graduated nearly 200,000 engineers in 1999 from good universities that get better by the year. By comparison, American Universities graduate a mere 60,000 undergraduate engineers annually.”

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