The corporate factor in the death of the middle-class

First, a few words on the origins of many of these blogposts. Often, discussions take place with me CCed in and it goes back and forth, say on climate change, Apple, other tech issues, I take that, add to the original article with other articles and form a view from that which eventually gets posted.

This is one of those, the original article being from Stratfor, which said, among other things:

But there was, I think, the crisis of the modern corporation. Corporations provided long-term employment to the middle class. It was not unusual to spend your entire life working for one. Working for a corporation, you received yearly pay increases, either as a union or non-union worker. The middle class had both job security and rising income, along with retirement and other benefits.

Over the course of time, the culture of the corporation diverged from the realities, as corporate productivity lagged behind costs and the corporations became more and more dysfunctional and ultimately unsupportable. In addition, the corporations ceased focusing on doing one thing well and instead became conglomerates, with a management frequently unable to keep up with the complexity of multiple lines of business.

For these and many other reasons, the corporation became increasingly inefficient, and in the terms of the 1980s, they had to be re-engineered — which meant taken apart, pared down, refined and refocused. And the re-engineering of the corporation, designed to make them agile, meant that there was a permanent revolution in business. Everything was being reinvented. Huge amounts of money, managed by people whose specialty was re-engineering companies, were deployed.

The choice was between total failure and radical change. From the point of view of the individual worker, this frequently meant the same thing: unemployment. From the view of the economy, it meant the creation of value whether through breaking up companies, closing some of them or sending jobs overseas. It was designed to increase the total efficiency, and it worked for the most part.

This is where the disjuncture occurred.

To which Chuckles commented:

I think a good article, but he gets the corporate thing terribly wrong, and starts spewing received wisdom about change and productivity and such.

To which haiku commented:

It is a good article.

The ‘problem’ lies in the fact that business re-engineering was designed to maximise the shareholder’s investment, irrespective of the effect on the overall economy. The impact on others was – still is – totally ignored.

The result is – as he correctly states, and Obama is beginning to understand – “a population that can’t consume what is produced because it can’t afford the products”

I also question his use of the terms “increasingly efficient economy”, “the [efficient] agile corporation”, even “free market”: it is a universal truth that the USA boasts the best government that money can buy, and for amazingly little at that. However, this is largely semantics, so can probably be ignored.

Dr Friedman can, however, relax on one point: “It would seem to me that unless the United States gets lucky again, its global dominance is in jeopardy”.

Guess what: it’s already too late.

BTW, loved the following: “The most significant actions made by governments tend to be unintentional”

I’m not commenting negatively or ignoring what was written above by any of the three but I am pointing out a factor which not enough people are factoring in – the radicalization of corporations by introducing the Narrative and with it, the huge influx of the wrong people, especially women, in top positions, in a political, not a corporate attempt to run quotas and the like, as well as the new hegemony of the gatekeepers, HR as some sort of profession in its own right, tied to the political narrative and employing only those who go along with it.

And the very women making themselves available were precisely the ambitious feminists who should not be allowed anywhere near the reins of power. At the same time, only men who went along with all this were employed and seeped onto boards and so there was this dysfunction at board level, exemplified at HP, where the new young Turks steeped in the narrative mixed in with inefficient old men and the result was Fiorina, then Dunn, then an incompetent man and then Megs and the problem with the women was that they were partly into proving themselves – as women.

Meanwhile, the social forces which do determine markets were being manipulated. So in the UK, it went against manufacturing and towards the service industry, a non-industry at this level in the long term, begun by Thatcher and ruined by Labour, along with the mushrooming of the welfare state producing an even more feckless labour pool.

The crises have been predicted because the factors which bring on crises, taken in totality, were designed in. Gangster corporatism came out of lack of regulation, which came out of appointees of the corporations as regulators, in collusion with the banking section [bailouts, for example] and the military industrial complex which is another issue.

A steady change in markets, the political white-anting of a middle-class which supported corporations, the lack of business acumen at the top …

[Haiku adds here: “and in the expensive consultants employed by the top …”]

… the presence of corporate greed and its tick-boxing as a result of the HR hegemony – and all of us have come up against these gorgons with no business acumen but a lot of charts and … er … tickboxes – and there were the seeds of disaster, mixed in with the factors mentioned by the other three.

Outsourcing and globalization add to the mix, EU regulation, the rule of the CBs, IMF and World Bank and the rise of predatory greed as a business principle, lent to and building on nothing, plus the withdrawal of credit and the weakening of confidence in bonds and so on and so on.

Chuckles’s “never ascribe to malice what can be explained by incompetence” is right in many ways but in other ways, it is just an extension of the fundamental division in mindset by those who steadfastly refuse to see any hand in changes and those who very much see a political narrative behind things, manifesting itself in various organizations in the same way that an underwater mountain range shows various peaks above the waterline but in fact, it’s part of the same mountain range.

Yes, the reason HP is failing is incompetence, so he is right. Don’t ascribe that to malice. But do ascribe those people in charge, at this time, in this business climate and there are trails back to the roots of something far more than incompetence. It employs incompetence but is part of a Narrative all the same.

Analogously, the roots of the trouble in education comes down to certain research over 100 years being funded, therefore encouraged and other principles of learning and research suppressed [many post passim at N.O.], which has implications for teacher training institutions and teacher recruitment itself. If you go back even further, you come to the Rockefeller backed Wundt and his false ideas on learning, on which they built the Lincoln School and others and which came to a head post 60s radicalization – the years of the mid-70s to the mid-80s were where the major damage was done. Boomers starting to enter positions of power and the destruction eventually continued by Gen X simply sealed the deal.

A similar path has happened in business.  The worst aspect of the Narrative is that it has killed off the principle of sound business based on trust and ethics, as well as the nose for a business opportunity.   Today it is far more flashy ideas, incompetents at the top and lack of integrity.

4 comments for “The corporate factor in the death of the middle-class

  1. January 10, 2013 at 8:00 am

    Good post, but an “even” more feckless labour pool? Perhaps if the middle class managers had done their jobs properly, as on the continent, then we might have had more successful industries paying decent wages – hence fewer strikes and people on benefits. The continent got it right – even their nationalised companies thrived.

    But the lure of cheap foreign labour has put paid to that, driving down wages across the EU. Now, even housewives have to go out to work to help make ends meet. Some would argue that the labouring classes really ought to work for peanuts, in order to compete with China. There is, however, an alternative – put an end to globalism.

    Because at the end of the day the free movement of capital, goods and labour only benefits the rich, and at the expense of everyone else. Since it is the rich who own the policy-makers, in Brussels as in national capitals, “localist” revolution will be necessary.

    (Feminists are part of the problem. They make the traditional breadwinner feel inadequate and increase the number of jobseekers – as immigrants do – thus driving wages even lower. The new “socialism” is all about these victim groups, the all-important labour question – decent pay – now being old hat. The socialists have sold out to the globalists.)

  2. Greg Tingey
    January 10, 2013 at 8:38 am

    Ian Hills 90% correct
    You’re wrong about the feminists, though.

    However, the greed & shortsightedness are epitomised in (their definition of) “Efficiency” …
    meaning no spare capacity, everything just-in-time, perfectly “tuned”, etc … until something goes WORNG.
    & then it all breaks.

    Naseem Micholas Taleb [ “The Balck Swan”] has made a name for himself, quite correctly, by showing up these fallacies – & what’s more did so BEFORE the great crash of 2007-8 …..
    However, even he hasn’t spotted a predecessor who always operated under those assumptions: Arthur Wellesly Duke of Wellington.
    He spoke of the opposing French armies & command-structures as being like “a magnificent piece of horse-harness, it looked very well, & served very well, until something broke – & then you were done for. Now I always made my campaigns of knotted rope. When something broke, I just tied a knot & carried on.”

    As someone with an engineering training, you can be assured that I appreciate that point of view, but a lot of supposedly educated idiots can’t or won’t see it – not even now.

    • January 10, 2013 at 9:09 am

      Naturally I’m “wrong”, Greg but as long as you can agree with Ian. 🙂

      And Greg – this is a very good point on your part:

      He spoke of the opposing French armies & command-structures as being like “a magnificent piece of horse-harness, it looked very well, & served very well, until something broke.

  3. Paul Williamson
    January 10, 2013 at 10:55 am

    If you push out trust and ethics as a sound business principle, then that is malicious in my opinion, not incompetence. It is malicious to outsource loads of jobs abroad to sweat factories knowing you are doing 3 things : increasing shareholders and directors wealth, putting loads of indigenous people out of work, and paying others a pittance who have virtually no rights to make your products. That is not incompetence.

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