Wednesday, January 29, 2014


low wage education

Subject to some—and perhaps many—notable exceptions, it seems to me that American business culture has gone badly adrift in ways that are ultimately going to prove to be fundamentally bad for business and U.S. society in general. And, by the way, that degradation is not just an opinion—it is well underway and there is all too much data to prove it.

That practicality apart, there is something unpleasant about much (not all) of Big Business behavior at present.

It’s mean; it’s nasty; and it’s morally wrong. It corrodes integrity. It brings out the worst in people. It stinks. It reeks of greed, ignorance, pettiness, and stupidity—and it is leading to a declining standard of living for most of the population.

Why there isn’t a national outcry over this amazes me. The figures are clear. Politicians know this—and yet the kind of drastic action that is needed is not taking place.

Could it be because Big Business owns our politicians, our media, our financial institutions, many of our jobs, and virtually all the instruments of social control?

I guess it could. So what are the consequences of this?

Corporate profits and the stock market may be at a record high, but the earning power of most of the working population is sinking, we have a near permanent trade deficit, our infrastructure is crumbling, our innovation lead has largely vanished, and we are losing ground in trade sector after trade sector. Ironically, in many cases we are being out-exported by competitors—such as the Germans—whose labor costs are significantly higher than ours. 

How do the Germans do this? They treat their workers better (working with them, not against them), invest more in education, training and innovation—and, in many cases, produce better products than we do. It is also note-worthy, that the German economy is much less financialized than ours. In short, the focus of German efforts is on the real economy, not Wall Street. Such differences add up to a German Business Model that is radically at variance with ours, but which is still capitalist. They just do business better. We need to think about that.

But the Germans are exceptional? No, they are not. It is a sobering fact, but when it comes to the economic wellbeing of most of the population, most developed nation are doing better than the U.S. right now—and many developing nations are hot on their heels..

This corruption of the American Business Model appears to have started in the Seventies when the concept that business’s only obligation was to increase shareholder value became widely accepted—despite the screamingly obvious fact that it is clearly nonsense (not to mention despicable).

The reality is that a business does not exist in glorious isolation and appear fully formed—as if by magic. It is a product of society, is multi-faceted, is inter-dependent—and relies heavily on the educational system, infrastructure and government in general—and particularly on its employees, suppliers, customers, and the local community. In short, a business has wide obligations with shareholders being only one element—and, not infrequently, a fleeting element at that. Where public companies are concerned, its shares are constantly being traded. In contrast, other elements in the mix, such as employees, may be there for years. Treating employees as if there are a disposable commodity is not only morally wrong, but a bad business practice.

Let me list just some of the more egregious manifestations of this corruption of the American Business Model—where much of Big Business is concerned.

  • A deliberate policy of squeezing employee pay to the point where many employees are on Food Stamps and other government assistance. In effect, such businesses are having their payrolls subsidized by the government.
  • A deliberate policy of increasing CEO and senior executive pay to the point where it is hundreds of times that of the typical employee.
  • A deliberate policy of buying back shares to inflate the share price—because that is how most CEOs and senior executives receive most of their pay. In a sane world, given that those who initiate such purchases—the CEOS and senior executives—know more about the company than the market in general, this would be regarded as insider trading, and thus illegal.
  • A deliberate policy of removing the defined pension despite clear evidence that 401Ks are less secure.
  • A deliberate policy of crushing unions in any way possible—both legal and illegal.  
  • A deliberate policy of under-investing in research—and in innovation in general.
  • A deliberate policy of under-investing in training—while then complaining that business cannot find enough employees with the requisite skills.
  • A deliberate policy of exporting jobs—while accepting no responsibility for the wellbeing of their former U.S. employees.
  • An indifference to the exporting of expertise, particularly in the research and manufacturing areas, thus giving our competitors an advantage. This lack of concern for the National Interest extends to defense secrets.
  • An implacable opposition to the extension of worker rights—even in the face of evidence that such worker rights can enhance productivity.

Perhaps the nastiest aspect of the current American Business Model is the drive to reduce pay combined with increasing medical contributions and removing the defined pension. Then, as if that little lot did not constitute a sufficient increase in economic insecurity, many companies—particularly in the retail and food service area deliberately keep hours below a certain threshold—thus further diminishing earnings.

The problem doesn’t lie with capitalism as such. It lies with the American version—otherwise known as the American Business Model (ABM).

If we had the good sense to modify the ABM—we could take off like a rocket.

Will we? As matters stand it is finely balanced. Meanwhile our competitors think we are ridiculous—and are roaring ahead.

In contrast, we are self-destructing. When it comes to examining the corpse of what was once the most powerful nation in the world, the United States of America, I have no doubt at all about the verdict.







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