How Jobs Destroyed Work: The Complete Edition (part one)

HOW JOBS DESTROYED WORK: The Complete Edition

(Image from Business Insider)
Author’s note: This piece was originally presented in the form of several essays that I uploaded to my blog and Steemit. I always intended it to be read as one complete essay, however, so I thought I would upload a version that presents the essay in that way. Unfortunately, the file is too large to submit to Steemit as one essay, so I have had to split it into two.

CHAPTER ONE: ‘ISN’T THAT TITLE OVER THE TOP?

Anything that bares the title ‘How Jobs Destroy Work’ is bound to be regarded with disbelief by those who love their jobs. Such people do exist: folks who have found employment that is meaningful to them, which nurtures their skills and provides a sense of doing something positive for society. That such people exist could be taken as proof that my essay is wrong, and I confess that the title is, strictly speaking, inaccurate. But I don’t think it is all that inaccurate, and had I called the essay something like ‘Jobs Don’t Always Destroy Work, But Usually They Do’ there would have been nothing wrong with that title.

This is not what we are supposed to believe. We are supposed to believe that jobs create work and that good, meaningful, useful employment is available to all if only we would put in the time and effort to obtain it. And yet, it seems to be the case that most of us are failing to find jobs we love.

When Gallup polled 25 million employees in 189 countries, it found the percentage of workers who feel engaged by their jobs to be 13 percent. To put that another way, close to 90 percent of employees don’t like their jobs, or at least don’t care enough about their mode of employment to see anything engaging about it. Anecdotal evidence might also lead to similar conclusions. I don’t know about you, but most people I know count weekends, bank holidays and vacations as days to look forward to, and Monday on a working week as the worst day of all. At least that Gallup poll can console such people with the knowledge that they are hardly a minority. Most share their frustration of having to trudge off to a job they would rather not do.

So why did so many people fail to achieve that envious goal of securing a dream job? Lack of ambition? Not motivated enough to do what it takes to get a worthwhile career? I am going to argue that they failed because the world of employment actively destroys work much more than it creates it.

DEFINING ‘WORK’

Something needs to be addressed and that is the question, ‘What Is Work?’. To most people, the answer is ‘physical or mental effort that you are paid to do’. But is that really an apt description?

Here is a way in which to achieve full employment. Pay fifty percent of those who are currently unemployed to dig holes and pay the other fifty percent to fill them in. There can be no doubt that full employment could be achieved that way, so why does this solution seem ludicrous? The reason why, I would say, is because such labour is ultimately pointless. Neither percentage achieves anything because the labour of the other percentage undoes all their work. Each is like Sisyphus, pushing that boulder all the way up the hill knowing full well that it must roll all the way back down again.

We can see, then, that paying somebody for their labour does not necessarily make that labour rewarding to the individual or beneficial to society, but I think this point is forgotten all too often. How many times have you heard ‘at least they have a job’ in response to somebody’s soul-deadening labour of questionable social value? This brings us to one of many ways in which jobs destroy work. It is a rather metaphorical point, but nevertheless I think it is important. Jobs have monopolised the word ‘work’ to the extent that nearly everybody thinks that when we talk about work we are talking exclusively about paid employment. In other words, only labour performed for wages is work, and the only reason to work is to receive wages. If you are not in paid employment, that must mean you are not working. So what are you doing? Most people would say you are ‘doing nothing’.

Let’s be clear on what this belief is saying. If you are a person who cares for an elderly relative, preparing their meals, cleaning their home, providing them with company and generally making sure they are well looked after, and you do all this voluntarily for no charge, you are not working. On the other hand, if you are one of those people who cold call homes pretending to be from Microsoft, and you are paid wages or a commission for selling useless security software to gullible consumers, you are working.

When you spell it out like that the attitude ‘only paid jobs are work’ sounds ridiculous but people fall into this way of thinking all the time. I recall a female contestant on a game show who, when asked ‘and what is it that you do?’ replied that she was not working. She had given it up in order to be a mother to her baby son. In what kind of world is a role as important as maternal duty and the raising of the next generation disregarded as work? Answer: one in which jobs have monopolised the word.

This monopolisation of the word work by jobs is insulting in the way it disregards all the non-paying labour that people do each and every day. It’s insulting to mums or dads who are raising children, motivated by parental duty and not the financial bottom line. It’s insulting to those who engage in creative, artistic projects not for monetary profit but because they find intrinsic meaning in doing so. It’s insulting to all those who contributed anything on the Web like a blog, a wiki, an instructional aid a youtube video, or whatever it may be, that was not a commercial venture and instead owed its existence to the fact that its creator or creators were passionate about it.

CHAPTER TWO: THE TRUE DEFINITION OF ‘WORK’

(Image from wikimedia commons)
If we should not define work as ‘a job for which you get paid’, how should we define it? If I were to have a stab at that, I would say that work is any mental or physical effort that is directly linked to a reward, and which offers a sense of meaning to those who are doing it. In other words, if you feel engaged in what you are doing; if you feel there is a purpose, for you personally, in carrying out such labour and that if this work is done well you will be suitably rewarded, then what you are doing is indeed work. I would also add that your reward should not come at too much cost to anyone else. In other words, I don’t care how rich you become from conning people, nor how cleverly you scheme; your efforts should never be dignified by calling it ‘work’.

MONEY: THE ONLY REASON TO WORK?

Now, what about this idea that labour, if done well, directly leads to reward? Doesn’t the fact that jobs pay prove that they at least meet this criteria? Well, no, because money is pretty much useless in and of itself. It’s great for buying stuff, that’s for sure, but since it is that stuff we really want, and not the money per se, if we instead receive money our labour is one step removed from what we actually need or want. Think of the tale of the Little Red Hen. As you may recall, the hen labours all day long to cut wheat, turn it into flour, make dough, bake it, and at the end of what must have been an exhausting day she had her reward: A nice tasty loaf of bread. But if she had done all that labour, then received money, and then gone and purchased her bread, when she got her pay she was one step removed from her actual reward.

And here we are assuming that money is always spent on personal items we actually need (such as food) but what if it’s spent on things we have been lead to believe we need but which, in reality, don’t add much value to our lives at all, least not enough enough to compensate for so many hours in a job you hate? In that case, your work is several steps removed from any genuine reward. The more labour becomes disconnected from genuine reward, the more pointless it becomes to the person doing it.

It’s worth staying with this false belief that if you get paid you have all the reward you need, because it brings us to other ways in which jobs destroy work.

Most people who play a musical instrument well don’t make much money at all from their ability, but a tiny minority gain extraordinary wealth. The Rolling Stones, for example, have had decades of hit records and become multimillionaires as a result. Even though they have a combined age of over 270 years, they are still touring.

Have you ever heard anyone say of old rockers like the Stones, “why do they still do this? They cannot need the money!”. I have. What does a statement like that tell us? It tells us that whoever said it believes that monetary reward is the one and only reason to do anything. Once you have earned more than enough to keep you and your family very comfortable for generations to come, you should stop. After all, there cannot be any other reason to continue performing in front of an audience, or writing novels, or whatever it was that made you so wealthy.

Most of us are not going to achieve anything like the fame and fortune of the Rolling Stones. But to make matters worse, the belief that monetary compensation is all the reward anyone needs has lead to jobs that really work against labour that is meaningful to those who do it.

In ‘The Wealth Of Nations’, Adam Smith presented a vision of the employee that fits well with this idea that it is money, and money alone, that motivates us. He wrote:

“It is in the inherent interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same whether he does or does not perform some very laborious duty, to perform it in as carelessly and slovenly a manner that authority will admit”.

So, what the father of capitalism is saying here is that people are inclined to be lazy. We really don’t want to work at all and when we do, it will be in a ‘slovenly’ and ‘careless’ manner unless the stern guidance of authority forces us to work competently. Furthermore, we see in his statement a long-accepted tenet of economics, which is that if you want to persuade people to do anything, you only need to provide incentives in the form of money.

CAKE-MAKING IS FUN!

If you believe that paying a wage blesses labour with all the incentive necessary, you probably also believe that so long as people are getting paid it really doesn’t matter what their job entails. With that in mind, let’s look at an activity that you might have found enjoyable as a child, namely cake making. Perhaps when you were young your mother helped pass an afternoon by letting you do some cookery. Maybe you found it fun and educational, following the recipe, measuring out ingredients, executing tasks like stirring, sifting, beating and whisking, keeping an eye on the mixture as it baked in the oven so as to determine when it was neither under or over-baked but just right. And if you did everything correctly, you were rewarded with a tasty treat for yourself, your family and your friends.

Cake-making does not just appeal to children. Some people take it up as a profession, developing such skill at crafting sponge, marzipan and icing into fancy and intricate shapes that their work can be considered an artform. Sometimes the end result looks so impressive it is almost a shame to attack it with a knife and consume it.

CAKE-MAKING MADE LESS FUN

How might you take a job like that, an enjoyable activity that helped pass an afternoon as a kid, or that provides a way for some to demonstrate their artistic and culinary talents, and make it dull? You do it by taking what can be complex and challenging work and dividing it up into a sequence of micro tasks, each one simple enough to require minimal skill. Then, you set one person to do one of those micro tasks, repeatedly, for hours on end (crack egg into bowl, crack egg into bowl) another person to repeatedly perform the next microtask (beat the egg, beat the egg) and so on. What you have created is the assembly line model of work.

Labour of this kind owes its its existence in part to the belief that so long as people get paid for what they do, any job is suitably rewarding. If that really were the case, there would be no harm in organizing work by dividing the overall task into many simple, easily repeated, more or less meaningless units. It was such a belief that lead the likes of Frederick Winslow Taylor, the father of what came to be known as the ‘scientific management’ movement, to use meticulous time and motion studies in order to turn workers into automatons, executing some simple, monotonous micro task like picking up A and putting it on top of B, over and over again. Behavioural studies had shown how rats and pigeons could be engaged in simple, repetitive tasks for rewards of food and water, which seemed further proof that the only reason to do any kind of work was for the payoffs it produces. Management was organised around certain assumptions regarding human nature, namely that without a combination of extrinsic rewards and punishment to keep us motivated, people would naturally tend toward laziness or their minds would wander instead of remaining focused on goals.

And this was the result, as told by Bob Black in his essay ‘The Abolition of Work’:

“One person does one productive task all the time on an or-else basis. Even if the task has a quantum of intrinsic interest...the monotony of its obligatory exclusivity drains it of its ludic potential. A ‘job’ that might engage the energies of some people, for a reasonably limited time, for the fun of it, is just a burden on those who have to do it for forty hours a week with no say in how it should be done, for the profit of owners who contribute nothing to the project, and with no opportunity for sharing the tasks or spreading the work among those who actually have to do it”.

In Black’s statement we see many of the ways in which jobs differ from work as I would define it. He talks about people doing overwork, spending needlessly long hours doing meaningless tasks, mostly for the benefit of people other than themselves.

We’ll get into all of that soon, but right now I think we should take a break from so negativity and say that the production line model of work is not all bad. If you were to ask people to name one good thing that resulted from organizing labour in this way, I would expect most to opt for the increase in material wealth it made possible. Some people have a fondness for self-sufficiency and wish we could have less dependency on others. But the fact is that the more self-sufficient you are, the poorer you are, materially speaking. When it comes to raising prosperity levels, nothing beats specialisation and exchange.

Adam Smith recognised this when he described the output of a pin factory:

“One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head...They could make among them upwards of 48,000 pins a day...But, if they had all wrought separately and independently...they certainly could not, each of them, make twenty”.

As industrialisation spread and the amount and range of material goods that could be produced increased, one might be forgiven for thinking that hours spent in wage labour would go into dramatic decline, freeing up people to do work of other kinds. And, for a while, it seemed like that would happen. In the 1930s, John Maynard Keynes predicted that our ability to mass manufacture material goods would become so efficient, the average working week would be 15 hours by the end of the century. In The Overworked American, Schor quoted one postwar expert who predicted to a Senate subcommittee that by the 1990s:

“We could have either a 22-hour week, a 6 month workyear, or a standard retirement age of 38”.

We are now well into the 21st century and the 40 hour work week shows no sign of stepping aside and letting an era of abundant leisure take over. In fact, from the 90s to the start of the new century over 25 million Americans in white-collar jobs were working 49-59 hours per week while another 11 million put in over 60 hours per week. This overwork did not seem to bother the corporations. The car manufacturer, Lexus, ran adverts with slogans such as “sure, we take vacations. They’re called lunch breaks” and “We don’t have a company softball team. It would lower productivity by .56%”.

In part three we shall investigate the phenomenon of ‘overwork’ and argue its existence demonstrates another contrast between ‘jobs’ and ‘work’.

CHAPTER THREE: OVERWORK

(Image from Reddit)
Overwork is something that does not exist in nature. When wage labour is described as a form of slavery people sometimes object by pointing out that working is simply an unavoidable fact of life. Even if nobody had a boss telling them what to do, nature herself would demand that we labour to secure the necessities of life. A glance at all the activity going on with wildlife- herbivores foraging, carnivores hunting, birds building nests, bees making honey and so on and so forth- lends weight to the argument that a living has to be earned.

But nature differs from something like capitalism or socialism in that it demands only that you do the bare minimum required to sustain your lifestyle. To illustrate what I mean, imagine that there are these bears that need to catch five salmon per day. Now, depending on how bountiful salmon are in their habitat, the bears may have to work hard to obtain their daily quota. Let’s face it, some environments are harsh and it is a challenge to make a living in such places. But let’s imagine that these lucky bears live by a river teeming with salmon, and that it takes ten or so minutes for each bear to catch its daily quota. Just ten or so minutes of work a day (perhaps less if they are really proficient at catching fish) and the bears are done. No need to ‘look busy’, nature is not concerned about about you maintaining an illusion of working once your actual work is done. The bears are free to spend the rest of their time on other pursuits.

In case this all sounds like a fairytale, I would point out a remark made by Hans Moravec:

“In a good climate and location, the hunter-gatherers’ lot can be pleasant indeed. An afternoon’s outing picking berries or catching fish- what we civilized types would recognize as a recreational weekend- provides life’s needs for several days. The rest of the time can be spent with children, socialising, or simply resting”.

Again, I am not saying that life in a state of nature is always this easy, but the point is that whether securing the bare necessities of life is easy or hard, nature requires only that you do the bare minimum needed to sustain your lifestyle. No more.

HERE COMES THE BOSS...

Now let’s return to those bears. Imagine that a couple of more bears arrive, announcing that the river and everything in it is no longer the common heritage of all bears but is instead the private property of just these two. Furthermore, no other bear will receive so much as a mouthful of food unless they each bring those- let’s call them ‘boss bears’- a thousand fish per day. Remember, that each bear previously needed to catch only five fish each per day in order to maintain their lifestyle. Now, thanks to the demands of these boss bears, they all have to do a hell of a lot more labouring just to survive and the vast bulk of the profit earned from this work goes not to them, but to the boss bears.

What I have just described is what can happen under hierarchical class-based systems, of which ‘capitalism’ and ‘socialism’ are prime examples. Under such systems, people are generally divided up into two classes: Owners on one hand and workers on the other. The owner-classes (private owners under capitalism, State bureaucrats under socialism) are so called because they own the means of mass-production: The factories, banks, shopping malls and so on. They own the means of production, get most of the rewards of production, but are under no obligation to contribute to the production itself.

This is where the working classes come in. Traditionally, they were so-named because they owned next to nothing except their own labour power. Today, thanks to the incredible advances in productivity I mentioned earlier, people who are considered poor have achieved a level of material prosperity that would count them among the well-off of previous generations. This might lead some to conclude that the working classes are much freer now than they once were, but as we shall see ‘consumerism’ can be used to entrap people, leaving them with little choice but to keep labouring, mostly for the benefit of the owner classes.

WHAT EMPLOYEES ARE REALLY ENTITLED TO

It is also commonly assumed that the working classes are free precisely because they own their labour power. But we need to understand precisely what that means under a capitalist system. It does not mean that the working classes have a right to a job; it means that they have the right to remove their labour from a job. There is no obligation on the part of any particular employer to hire any particular member of the working classes, or to keep them on the books once hired.

‘The right to remove their labour’ is what is supposed to make the world of difference between employment and slavery. Under slavery, a person can be the private property of another person, who has the power to make them work any amount of hours, and may even kill them if they feel like it. The right to own your own labour power, and to terminate your employment, surely means the working classes are now free, right?

Well, no. Not if you factor in economic coercion, which was illustrated in a comedy routine by Steve Hughes.

Hughes (roleplaying two former slave owners): “I mean, look, we’ve got to look after these fuckers. We’ve got to clothe them, we’ve got to feed them, they get sick we’ve got to fix them, got to give them somewhere to live. I’ve worked it out: We can just give them two-fifty an hour and tell them to fuck off.

“That’s brilliant. Right! You lot are free to go. We’ll see you back here at 7:30 tomorrow morning!”.

What Hughes is getting at is that if most of the world’s resources are the private property of a relative few, they can deny others from accessing those resources unless they ‘agree’ to whatever terms and conditions they make up. The working classes are in a situation where they must perpetually hire their labour, and under certain conditions the competitive nature of the jobs market can result in a race to the bottom as the working classes outbid one another with longer hours and fewer rewards. That is not to say that such an outcome is inevitable but it is a very probable outcome in a world that sees the purpose of business as being concerned only with making profit for the owners, with the workers reduced to commodities from whom maximum productivity must be squeezed. Furthermore, in America we increasingly see businesses refusing to employ the unemployed, a tactic which coerces workers into submitting to employment even if they have saved sufficient funds to pay for an extended vacation. After all, if, when the money begins to run out you are cut off from any means to replenish your funds, you are screwed. Better keep punching in that clock card!

CHAPTER FOUR: PATERNALISM

(Image from accelawork)
Some businesses operate what might be called a paternalistic model. Under this model, a company’s ‘stakeholders’- its owners, employees and customers- are all well taken care of. The pay is good, the hours are reasonable, many benefits are included (in 60s America, 40% of those workers who had major medical insurance were covered ‘free’, meaning that policy costs were fully paid by the company.) The thinking behind paternalism is that if all the stakeholders are well looked after, they will feel valued and will have a personal interest in ensuring the company remains viable.

Under paternalism, a job can achieve most if not all of the definitions of true work. An employee working for such a company may feel secure in their job, feel they are rewarded for what they do and that the work has real value. Midway through the last century, the expectation was that paternalism would only grow in strength. As Jeremy Rifkin explained:

“An informal accommodation of sorts was reached which was to last, more or less intact, until the mid-1970s. Labour was to share, at least in part, in the gains in productivity- enjoying better wages and benefits- in return for the promise of labour peace and cooperation”.

LEAN AND MEAN

But, paternalism is not the only model a business can adopt. There is also what might be called the ‘Lean and Mean’ model. According to this way of running a business, the financial bottom line is of utmost importance, and anything that eats into it must be minimised or, ideally, eliminated. As far as the lean and mean model is concerned, the company’s employees are not people to be looked after and rewarded for their loyalty. Rather, they are commodities to be exploited as ruthlessly as can be gotten away with. For example, General Electric’s chief executive, Jack Welch, compared a company’s employees to lemons, claiming there was ‘unlimited juice’ to be squeezed from them, so long as companies pursued a relentless campaign to achieve greater operating efficiencies.

THREE KINDS OF LABOUR

Under the lean and mean model, the owner classes do everything they can to reduce the bargaining power of the working classes, thereby putting them in the worst possible position when it comes to negotiating employment contracts. What this means is that everything you were lead to believe about employment as a child is threatened by such a model. As children, we are asked “what do you want to be when you are older?”. Becoming ‘what you want to be’ implies that you are going to find work that is a ‘calling’, Amy Wrzesniewski’s term for the most satisfying work experience. Like me, she believes we need more categories for employment than just ‘work’. She divides paid work into three kinds: Jobs, careers, and callings. A ‘job’ is employment in which people enjoy little discretion and find minimal engagement or meaning in what they do. People who have careers feel more engaged in their work, enjoy more discretion, and expect to advance, following a trajectory toward promotion, higher salary, and better work. They don’t dislike their current job but equally they are neither content to remain there, nor expect to.

Finally, we have ‘callings’. People who have found employment of this kind get the most satisfaction out of the work they are doing. They consider their occupation to be very important. They love doing it, so much so, in fact, that it becomes a vital part of their identity.

As a basic rule of thumb, I think it’s fair to say that if we find work very satisfying it’s because we are gifted at it. We all have certain special abilities, and if we can find employment that utilises those skills and helps them to flourish, then there is every opportunity to find great satisfaction in one’s working life.

SKILLS COST MONEY, SO REDUCE SKILLS AND SAVE

The problem is that the last thing a lean and mean business wants is skilled employees. The reason why has to do with bargaining power. If you possess valuable skills and a company needs to employ somebody with those abilities, you are in a pretty strong negotiating position. You are going to drive a bargain that is very favourable for you. A lean and mean company wouldn’t like that, because ‘more favourable for you’ means less favourable for the bottom line. Lean-and-meaners really don’t want to be in a position where they have to employ highly-skilled workers who are hard to replace, and can therefore enter negotiations from a strong position. No, they want employees who are less skilled, easier to replace at as short a notice as possible, and therefore in no good position when it comes to negotiating terms of employment.

Now, a question may have arisen in your mind at this point: Given that they sound like such unpleasant places to work, why would anybody seek employment in a lean-and-mean corporation? One reason may be because, however unpleasant they may sound to those of us who are used to the security and benefits that come from working for paternalistic companies, they provide an escape from even worse situations for others. Around the world there are places ravaged by war, affected by disastrous economic policies, ruined by corrupt leaders, and since in such places there will be people who are effectively waving signs that read ‘employ us! We will accept long hours and low wages!’, lean and mean companies are only too pleased to oblige by setting up sweatshop labour in such places.

But what about places that do have paternalistic businesses? Surely, in a free market in which every worker may choose who they will and won’t work for, labour would flow toward businesses that care about their employees, offering job security and multiple benefits. Nobody would want to work for a company that thinks its employees are lemons to be squeezed until all their juice runs dry. So how do lean-and-mean businesses survive in a free market?

IT ALL LOOKS GOOD FROM THE TOP

Well, firstly, lean-and-mean businesses only look bad from the perspective of employees below the executive level. But as far as major stockholders are concerned, they are far superior to paternalistic companies. After all, in places like those, company earnings that could be raising shareholder value are being wasted on high wages for the non-executives, on generous pensions, too many paid vacations, health insurance and other benefits that lean-and-meaners have reduced if not eliminated altogether. The stronger Wall Street and its financial equivalents in other countries becomes, and the more emphasis there is placed on improving the bottom line, the more paternalistic companies will feel pressurised into adopting the lean-and-mean model lest they be taken over by their more aggressive rivals.

So, intimidation from the financial sector are part of the explanation for why employees find themselves in lean-and-mean businesses. But the owner classes don’t just rely on their financial muscle to force the change; they also use technology and propaganda to redefine work in ways that suits them at everybody else’s expense.

At this point it might be worth going into a little more detail regarding the rise of paternalistic companies in the early 50s through to the seventies, and the emergence of lean-and-mean business practices in the 80s and 90s.

THE RISE OF PATERNALISM

If any one thing can be said to have caused the rise of paternalism, it would be the 2nd World War. During the war, the USA achieved full employment for the first time since the 1920s. When the war was over, there was a lot of concern about the possibility of a postwar recession, which the government sought to avoid through various acts and initiatives. The acts included the ‘Employment Act’ of 1946, which “committed the federal government to maintain maximum employment and with it a high level of aggregate demand”. The initiatives included the GI bill, an education initiative that helped upgrade the workforce, thereby providing a large pool of white-collar workers for the administrative and management-type roles that corporations increasingly depended upon.

As well as anxieties about recession prompting the State to push for high employment, conditions enabled by the war played a part in other ways. For one thing, industry in America was still largely intact, unlike that of Europe’s. The government invested heavily in the business sector, particularly through highway construction and defence-related expenditures. Also, wartime research had helped launch an era of technological innovation, such as IBM’s development of the first general-purpose computer. Finally, wage freezes had been put in place during the war, and this had required employers to use fringe benefits with which to attract employees. This favoured the largest corporations, who could afford to offer greater benefits than their smaller rivals.

But those corporate benefit packages were still costly, even forty or fifty years ago. This might have discouraged their mass adoption, had it not been for militant unions during the postwar period. It made sense to the larger corporations that if they treated their employees well, that would improve emotional attachment to the company, and the threat of socialism would be avoided.

And so it came to pass that the early postwar decades enjoyed economic growth and price stability. The large corporations delivered on their promise of long-term employment prospects, meaning that anyone fortunate enough to land a job there felt secure, and expected that their own prosperity would rise along with the company’s fortunes.

But all that was to change in the 80s and 90s.

CHAPTER FIVE: THE RISE AND CONSEQUENCES OF ‘LEAN-AND-MEAN’ BUSINESS PRACTICES

(Image from free digital images)
During the 80s, attitudes toward the paternalistic model changed. The 1970s ended in recession, and during this period two of America’s largest companies- Chrysler and Lockheed-survived only because of government bailouts. The new decade began with inflation approaching 15%, and unemployment over 8.5%. Gold prices were soaring, a trend that is often associated with investor pessimism. Indeed, there was a general mood of unease regarding the the US’s economic prospects, as the stock market went into the worst slump since the 1930s.

Amidst all this financial trouble, people began looking at those large corporations with their many benefits packages and saw not businesses to be inspired by but rather dinosaurs to be blamed for worsening conditions. Increasingly, people saw the large corporations as bloated and inefficient, handicapped by too much bureaucracy and a workforce with an over-inflated sense of entitlement. It seemed as though America was increasingly unable to compete against more nimble competitors, most notably from Japan and West Germany. The nation was importing 25% of its steel and 53% of its numerically controlled machine tools by 1981.

What really helped the rise of the lean-and-mean model in the 80s and 90s was certain federal and state regulatory changes, coupled with innovations from Wall Street. The federal and state regulatory changes brought about an environment in which corporate mergers and takeovers could flourish. For example, there had been laws protecting local companies from out-of-state suitors, but these were declared unconstitutional by the Supreme Court. Also, President Reagan appointed an attorney who had previously defended large corporations against antitrust suits to be head of the Department of Justice’s antitrust division. This all but guaranteed there would no interference from the federal government with the growing acquisitions and mergers movement.

Meanwhile, Michael Milken, of investment house Drexel Burnham, created high-yield debt instruments known as ‘junk bonds’, which allowed for much riskier and aggressive corporate raids. These, along with the state and federal regulatory changes mentioned earlier, triggered an era of hostile takeovers, leveraged buyouts and corporate bustups.

EMPLOYEES AS COMMODITIES

It would be hard to exaggerate just how different this new business-world order was compared to the paternalistic model. Whereas before, employees were treated very well, the new breed of executive didn’t think they mattered at all, other than as commodities to be manipulated in order to improve one’s shares. For example, a former savings-and-loans banker remarked:

“When I put my hat on as an investor, all I care about is, ‘am I worth more today than I was yesterday?’. I don’t care about Coca-Cola’s employees, I care about its stock price”.

Echoing this attitude, ‘chainsaw’ Al Dunlap, former CEO of Scott Paper, commented:

“If you see an annual report with the term ‘stakeholders’, put it down and run, don’t walk away from the company. It means the company has its priorities upside down”.

As far as lean-and-mean was concerned, companies that had their priorities right side up were those where managers were preoccupied with equity rather than business. Real-world gains were deemed to be of far less importance compared to paper profits. For those at the executive level, this was an era in which their pay levels and bonuses went stratospheric, but for everybody else the only thing that significantly increased was the awfulness of conditions. Job security vanished, benefits were slashed, and working hours went from 40 or so hours per week to as high as 80 hours.

DIDN’T IT PAY, ULTIMATELY?

Now, the feeding frenzy of mergers and bustups during the 80s and 90s might sound to some like good old free-market competition that would ultimately result in greater economic prosperity, benefitting us all. If the largest corporations were indeed too weighed down with bureaucracy and their employees too complacent; if regulations were getting in the way of more streamlined competitors, surely it was a good thing if all that was swept away? Even if those mollycoddled employees had to man up and face the real world with all its dog-eat-dog competition, it would all be worth it if shareholder value kept rising and the wealth trickled down to the average man on the street.

The problem was, most of the corporate mergers that took place during the 80s through to the mid 1990s- between 65 and 75% in fact- were failures. For example, Quaker Oats paid $1.7 billion in 1994 for Snapple, but 3 years later it sold it for $300 million. Wordperfect was purchased by Novell in 1994 for $1.4 billion only to be sold for $200 million two years later. And it was not only poorly-performing companies that were devoured by hostile takeover bids. Perfectly viable businesses were destroyed for no reason other than the short-term gains to be had from busting them up. There were people like Saul Steinberg and Ivan Boesky, making their fortunes by launching hostile takeover bids, not because they thought they could steer the company toward greater prosperity, but rather because they wanted to be paid to go away. Investor-raiders like these terrorised executives into resorting to dubious self-defensive strategies, such as preserving their companies’ independence by buying their own stock at inflated prices, a strategy that put the long-term survival of the corporation in doubt.

All in all, the cost of failed corporate mergers during this period topped $100 billion. Jill Andresky Frazer, in her book ‘White Collar Sweatshop’ (published 2001) included the following, rather prophetic, quote from Jeffrey Garten, a former investment banker who served as under secretary of commerce for international trade in the Clinton administration:

“For all the talk of free markets, companies such as Citigroup may be too big to fail. Recall how Washington bailed out Lockeed and Chrysler. Megacompanies are almost beyond the law, too, because their deeper pockets allow them to stymie prosecutors in ways their smaller defendants cannot. Or, if they lose in court, they can pay large fines without too much damage to their operations”.

Citigroup was one of the companies that suffered massive losses during the global financial crisis of 2008, and had to be rescued with a massive stimulus package, courtesy of the taxpayer.

REFERENCES

Rethinking Money by Bernard Lietaer and Jacqui Dunne
Why We Work by Barry Schwartz
Modernising Money by Andrew Jackson Ben Dyson
The Zeitgeist Movement Defined
Debt: The First 5,000 Years by David Graeber
On The Phenomenon of Bullshit Jobs by David Graeber
Race Against the Machine by Erik Brynjolfsson and Andrew McAfee
Drive: The Surprising Truth About What Motivates Us by Daniel H Pink
Greedy bastards by Dylan Ratigan
Total Engagement by Byron Reeves and A. Leighton Read
The Rational Optimist by Matt Ridley
Happiness is A Serious Problem by Dennis Prager
White Collar Sweatshop by Jill Andresky Frazer
The Abolition Of Work by Bob Black