The Lesson of Carrier: America Needs a Real Socialist Agenda
by Peter Dorman (from Econospeak)
The Lesson of Carrier: America Needs a Real Socialist Agenda
I just finished listening to the video clip that has been making the rounds, in which a spokesman announces to the assembled workers at the Carrier plant in Indianapolis that their jobs will be moved to Mexico. It’s embedded in a long article in today’s New York Times that uselessly follows the framing of this and similar events in American political discourse: it’s about whether you are for “free trade” or not, how you feel about Mexican workers versus US workers, etc. The whole discussion takes as given the way corporations in the US (and Mexico) are run and the purposes they serve. It invites us down a rabbit hole that leads to nowhere useful—tariffs and other barriers, or whether we need more programs to redirect some of the “gains from trade” to unemployed workers in the form of checks and education subsidies. Not that trade doesn’t matter, of course, but it’s really missing the point to think that the deindustrialization of America is the simple result of engaging in international trade.
You’ll get to the heart of the matter if you linger on a passage that comes near the end:
Over all, United Technologies [Carrier’s parent] earned nearly $7.6 billion last year, and $2.9 billion of that came from the climate, controls and security division that includes Carrier. Those profits aren’t under pressure; in fact, margins in the unit have steadily expanded in recent years.
But that’s not good enough, said Howard Rubel, a senior analyst at Jeffries, who notes that United Technologies has vowed to cut at least a half-billion dollars in costs annually for the next few years. “The stock hasn’t done well,” Mr. Rubel pointed out.
So here’s the problem: Carrier is profitable and there are no apparent threats to its continued profitability. But it could be more profitable if it replaced workers in Indiana with workers in Mexico who can be paid about a tenth as much. Investors, of course, demand these higher profits. If the purpose of the company is to satisfy its investors, that’s what it needs to do.
But what should be the purpose of a company? Businesses have many beneficial purposes: they can produce things people want and are willing to pay for, they can provide employment for workers and an economic base for their communities, they can promote education through training programs and linkages with schools and universities, and they can pitch in to promote social objectives like sustainability and racial and gender equality. Through their R&D they can contribute to society’s fund of useful knowledge, and through their management and governance they can help cultivate democratic values of participation, cooperation and respect. Of course, to do all these good things they need to be profitable, not just now and then, but on an ongoing basis, anticipating future threats to profitability and responding with innovation and toughness when necessary.
But putting the interests of investors above all others, and putting profit maximization above any other benefit they can provide, can turn them into instruments of economic, social and political decline. It’s not just about shipping jobs to Mexico; moving jobs around the US to force workers to make concessions or simply because the costs of dislocation don’t matter to them, can be just as harmful. Or maybe the way to make an extra buck is to cut corners on the environment, or to avoid paying taxes or to invest in politicians who can rig the system for you. The ability of clever executives to devise new ways to boost profits at the expense of society will always exceed the capacity of regulators to keep them in line.
To put it in a nutshell, the actions of Carrier and the rest of corporate America reflect a system in which investors come first, and the primary goal of business is to maximize profits. We need a system in which investors are just one of many constituencies, and the financial goal is to maximize the probability of remaining profitable over an extended time horizon. Profit has to become a means, not an end.
The socialist agenda, as I understand it, is about the many reforms that move us closer to such a world. It includes worker participation in corporate governance, but also representation of other community interests. It can include measures to broaden ownership, including a role for public and social ownership vehicles along with private ones. Financial reform also has a large contribution to make, especially if it expands the role of public and cooperative banking. Consideration should also be given to measures that would alter the incentives to issue preferred rather than common stock or otherwise attenuate the connection between ownership and control—in other words, perform a Reverse Jensen.
And this is just the beginning: once you start thinking about it, you can see the agenda is enormous, especially because it’s been in mothballs for generations. I wish there were a socialist running for president right now.
This came to me from a friend this morning, and it seems to fit the mood or tenor of so much in discussion these days.
Ezra Pound’s Proposition
Beauty is sexual, and sexuality
Is the fertility of the earth and the fertility
Of the earth is economics. Though he is no recommendation
For poets on the subject of finance,
I thought of him in the thick heat
Of the Bangkok night. Not more than fourteen, she saunters up to you
Outside the Shangri-la Hotel
And says, in plausible English,
“How about a party, big guy?”
Here is more or less how it works:
The World Bank arranges the credit and the dam
Floods three hundred villages, and the villagers find their way
To the city where their daughters melt into the teeming streets,
And the dam’s great turbines, beautifully tooled
In Lund or Dresden or Detroit, financed
By Lazeres Freres in Paris or the Morgan Bank in New York,
Enabled by judicious gifts from Bechtel of San Francisco
Or Halliburton of Houston to the local political elite,
Spun by the force of rushing water,
Have become hives of shimmering silver
And, down river, they throw that bluish throb of light
Across her cheekbones and her lovely skin.
by Robert Haas
from Time and Materials
Ecco Press, 2007 – See more at: http://www.3quarksdaily.com/3quarksdaily/2016/04/wednesday-poem.html#sthash.4LbRW3be.dpuf
Outsourcing isn’t just about wages. It’s also, as run has detailed, about safety, work practices, and the regulations relating to them.
Socialism, strictly speaking, is the public ownership of the means of production, as opposed to the regulation of those means.
Domestic law has contributed to the problems in this country by focusing corporate duties to the short term interests of stockholders and prohibiting “interference” with foreign means of production by WTO rules and trade agreement provisions such as those in NAFTA.
I second your comment, Jack. And I add this: Germany does just fine simply by making manufacturing workers a key part of management.
Funny how it was blue-collar factory workers who made the Reagan Revolution federal and state policy for more than three decades.
But … whatever.
PS: Scott Walker for VP!!
THAT’ll take care of blue-collar workers’ problems!
The employees are free to buy their employer’s stock just like everyone else. In fact, many companies encourage it with discounts and stock purchase plans. Then they employees will have as much say in the governance of the business as the other owners do.
“Then they employees will have as much say in the governance of the business as the other owners do”
that’s pretty funny
Eduardo Porter, NYTimes, today on why American manufacturing isn’t coming back, said this:
In America’s factories, jobs are inevitably disappearing, too. But despite the political rhetoric, the problem is not mainly globalization. Manufacturing jobs are on the decline in factories around the world.
“The observation is uncontroversial,” said Joseph Stiglitz, the Nobel-winning economist at Columbia University. “Global employment in manufacturing is going down because productivity increases are exceeding increases in demand for manufactured products by a significant amount.”
We are hearing from many voices that lack of demand is the critical factor, and it seems right to me. But I never hear anyone mention that as automation continues to replace humans, ‘robots don’t buy washing machines, cars, toasters, etc.” Why is that?
I’m not advocating we return to the Henry Ford assembly line model, but something is going to have to give. We can’t keep turning out products, especially robotically, and have fewer real live people able to afford to buy them, can we????
As agricultural productivity increased, people moved off the farms and into the factories. Now, as manufacturing productivity increases, people are moving into the service industries. However, they tend to be lower-paying jobs. Although, like most factory jobs, they are unskilled labor, they usually do not have labor unions boosting their wages above that of typical unskilled labor. Increases in machinery even take those jobs, with self-service gasoline, self-checkout, and self-ordering kiosks.
I wish I could say where it will end. The way things are going, it will be many people without work, or working in an underground economy so they can avoid the Minimum Wage which prices them out of the labor market. They will otherwise be wholly dependent on the government, without hope of anything better.
What I would like to add to this conversation is the idea that the biggest bang for the buck in moving society in the socialist direction will be to end private finance.
I would also argue that doing so would precipitate a cascading evolution of social intent for all organizations.
In case you haven’t noticed, some parts of our world are arguably moving in that direction…..i.e. China/AIIB
All well said, fine and dandy but the reality is that the greater need for a more socialist economic system is not going to go away no matter who wins the election. Sanders chances of winning did not have the pre established network that the crooked machine had nor the big bucks that the trumpster has. But as we continue to get more of the same inequality, job disparity and wage stagnation over the next 4.5 years a new democratic- socialist will re emerge as the people will demand it. The republicans and democrats must figure a new innovative way to make sure their votes don’t count…Corruption, fraud , waste and abuse will always be a big part of the oligarchs controlling society…