Tuesday, November 18, 2014

Large Corporations Have Gutted Our Economy and Damaged Our Country

Republicans are always touting large corporations as the engine of our economy and argue that we have to have business-friendly policies in order to allow them to grow and create jobs.  And while Democrats might take a more nuanced stance publicly, their actions in Congress certainly show that they, while not in lock step with Republicans on this issue, are also certainly very friendly-disposed to large corporations.

One would be a fool not to agree that the business sector, including large corporations, is critical to the health of our economy.  However, it is one thing to say that we need to have policies that promote the growth of business and another to say that business interests trump all others, such as the public good.

But these statements about the importance of large corporations are just cover.  What it’s really all about is something very base at the core of American politics … the power and influence of money.  

It’s no secret that large corporations and industry groups have, through their largesse in donating money to political campaigns as well as their newer participation in PACS, bought unequaled clout in the halls of Congress.  While there are some clear exceptions, generally, regardless what type of legislation or regulation you look at, whether in the hands of Republicans or Democrats, at the end of the day, big business has either gotten their way or so weakened measures meant to control them and protect the public that the end result is in their favor.

Clearly the growth of big business has benefited those who sit at the top of corporate power and are players on Wall Street ... the new elite, the 1%.  But what about the rest of us?  Has the average American benefited from the growth of big business?  Has our country benefitted?  To answer that question, I will be looking at the impact on jobs, wages, small business, and transportation.

Jobs:  Big business is almost solely to blame  (I say “almost solely” because unions carry a good share of the blame as well), aided and abetted by government tax policies, for the loss of millions of jobs overseas since 1979.  For the transformation of the average American worker from solidly middle class with a good wage, to struggling to hang on at a low wage.  Looking just at manufacturing, employment collapsed from 19.5 million workers in June 1979 to 11.5 million in December 2009.

Corporations have always been greedy.  It’s their nature.  In the first part of the 20th century, workers were typically, not always, viewed almost as an enemy who challenged the corporation’s absolute power and wanted more of the corporate financial pie, rather than as valued workers who were responsible for the quality of the product.  The antagonism between the two forces was very evident.  The passage of Federal labor laws, while not changing this dynamic between management and labor,  helped level the playing field by giving workers real negotiating power.

But at some point, corporations had enough of labor negotiations.  Those in power wanted to retain more of the financial pie for themselves and shareholders.  This provided the motivation to find a way out.

And they found one readily available ... the South and it’s “Right to Work” laws.  Many manufacturing firms moved south to take advantage of these state laws which made it very difficult to unionize, and thus wages were significantly lower.  Job losses thus started occurring long before globalization.  

So, for example, I grew up in Reading, PA.  One of the largest employers was Berkshire Knitting, at the time the largest knitting mill in the world.   But within a few years, the vast mills were all empty.  After being sold to Vanity Fair, the jobs moved south and thousands of workers in Reading were out of work.  The same scenario played out in many cities throughout the northeast as light manufacturing relocated to the South.

But it was the advent of the global economy, “globalization,” that nailed the lid on the coffin of the American blue collar worker.  Again, solely because of corporate greed ... wanting to increase the bottom line regardless at whose expense ... (and often against the background of union intransigence) manufacturing as well as many other types of jobs moved en masse to lower cost locations, mainly Mexico and Asia.  The result was a literal hemorrhaging of jobs and the decimation of America’s middle class.

For example, U.S. Dept. of Commerce data show that “U.S. multinational corporations cut their work force in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”  In the two years following the 2008 Wall Street crisis, large American corporations cut U.S. payrolls by a net of 500,000 jobs.  At the same time, they hired 729,000 workers overseas. Corporations were hiring, just not in the U.S.

Corporate spokesmen and their political apologists say that this move off-shore was necessary in order to keep “American” business competitive.  Nonsense.  It was to keep corporate profits and thus CEO and shareholder pockets flush.  They always had the option to cut prices, but that would have meant lowering profits, which is anathema in corporate America.  Protecting American jobs was obviously nowhere on their list of goals.  (Unfortunately, unions were also often unrealistic and refused to countenance pay or benefit cuts in return for job security.)  

The poster child for this off-shore movement, General Electric’s then-CEO Jack Welsh, argued that public corporations owed their primary allegiance to stockholders, not employees.  Nor, although this was unspoken, to the country that spawned them.  Therefore, Welsh said, companies should seek to lower costs and maximize profits by moving operations wherever is cheapest.

And so they moved their operations and the jobs were lost.  These are no longer “American” companies in any sense other than headquarters. 

Yes, it’s true that many new jobs have been created in the United States, including since the recent recession.  But those jobs have overwhelmingly been lower-paying service industry jobs and often part-time jobs.  So people hired for these new jobs are working for less money and their standard of living is far below what it was previously.

Wages:  It’s no secret that American workers’ wages have stagnated over the past few decades.  The reason is also clear … the loss of middle class living-wage jobs overseas and the creation of low-paying jobs here.  And for those who still have their formerly good jobs, their pay has at best remained stagnant or they have had to take a significant cut in pay in order to keep the corporation from moving the jobs overseas.  

Again, all to protect the corporate bottom line.  And so we see that while CEOs today make astronomical sums, a 937% increase, inflation adjusted, in their total compensation package between 1978 and 2013, a typical workers’ income in inflation-adjusted dollars rose only 10% during that same period.  

If corporate profits have risen approximately 3% per year during this period (or 105% … yes, I was surprised, far less than the rise in CEO pay), why haven’t their workers benefited?  Because workers no longer have any clout.  With so many jobs lost overseas, companies, whether unionized or not, don’t have to worry that their employees will leave if they don’t get raises.   They know that workers have nowhere else to go.  And it is a rare corporation that will raise wages because it is fitting to do so.  Obviously, CEOs do have clout.

Small Business:  Politicians of both parties love to talk about the importance of small business to the American economy and cite government efforts to help small business.  Yet these same politicians curry the favor of the very forces … large corporations … that have brought doom to small (and often not so small) local businesses across the country.

We have become a nation that, certainly from a retailing perspective, lacks virtually any individual character from place to place.  Everywhere you go, you will find shopping malls with exactly the same stores.  You will find roads lined with exactly the same collection of fast-food outlets.  You will find a proliferation of Starbucks coffee shops.  And of course, you will find a Walmart, a Lowes or Home Depot, and a Staples or Office Depot.  As a consequence, local stores offering the same services have been put out of business whether because they couldn’t compete with volume pricing or corporate marketing or couldn’t offer the same selection.

These large corporations have thrived, not just because of the business acumen and ambition of their management … which of course is critically important … but because of government policies and actions, including the enabling if not encouraging of the suburbanization of America.

Let me again look at Reading, PA as an example.  In the 50s, downtown Reading was a thriving place with a vibrant local retail scene and cultural life.  But as highways were built that encouraged the creation of suburban development, a new type of business entered the mix … national and regional retail corporations … that found their home not downtown but in new suburban malls.  As this development increased, people living in the suburbs, which now overshadowed the city-dweller in both numbers and economic purchasing power, no longer needed to go downtown to shop, or eat, or go to the movies.  And so despite all sorts of measures by Reading officials, downtown Reading died and is nothing more than a memory, replaced now by an office culture.

Transportation:  Why is America a nation which, more than any other, is so dependent on the automobile?  Why do we have such a weak national or regional passenger railroad system?  Why, with a few large city exceptions, do we have such weak local public transportation networks?

The answer is unambiguous … for almost a century, the automobile industry was the most powerful industrial force in the country.  The saying, “What’s good for GM is good for the country,” was said in all seriousness.  And its influence was not surprisingly felt in Congress as well as in state and local government.

Prior to WWII,  although cars had become an essential element in American transportation, the railroad and mass transit were equally essential.  But after WWII, the federal government, under President Eisenhower, began a massive investment in creating the interstate highway system and expressways that bypass and go through major urban areas … all to make it easier for automobile and truck traffic to get from place to place.  

The official reasoning for this huge expenditure was improving our defense and response to nuclear attack.  But what really lay behind this decision was the power and influence of the automobile industry, together with a desire to increase economic growth through new highway and housing construction.

Just as the coming of the railroad brought about the creation of new towns and cities in its day, so too did the new highway systems (together with the new availability of low down-payment long-term mortgages) bring about the proliferation of suburban development, not just outside major cities but virtually all cities. Over the next few decades, what began as an experiment in changing the basic nature of American everyday life turned into the default mode, urged on by a confluence of powerful business interests and people’s desire to own a home and some property (what became “the American dream”) as well as the white flight from cities.

This government action amounted to a huge subsidy of the automobile industry which had no counterpart in the railroad industry and only a faint counterpart for local mass transit.  Since automobiles were deemed by government to be the transportation of choice, virtually no new mass transit or light rail systems were built in the United States for several decades after WWII. 

But the automobile industry wasn’t satisfied with the benefits flowing from this government action.  They also brought about the actual dismantling of existing light rail systems, most well-known is the Los Angeles system, and the obstruction of new mass transit lines.

The result of this influence (together with the other factors noted) was an increasingly car-dependent society, the deterioration of railroads, and the stagnation of mass transit systems.  Only in the last few decades, since the mid-70s, have new and expanded mass transit systems been built in various cities to accommodate an inescapable need.  

For example, in the San Francisco area, “after dismantling the existing electric streetcar and suburban train system in the 1950s in favor of highway travel using automobiles and buses, given the explosive growth of expressway construction,” the modern BART system began limited operation in 1972 and was expanded over the following decade.

Now, one could certainly argue that the American public revels in and treasures its ability to go where and when it wants to based on the automobile.  After decades of mass marketing campaigns, this has indeed become a major feature of our culture.  And so the average American would not say that they have been short-changed by this development; quite the contrary.

But looked at objectively, would the average American and the country as a whole have been better off with the post-WWII development of a more balanced transportation network … one that included a viable, modern national and regional railroad system, more comprehensive mass transit systems in major cities, and light rail systems in other cities, together with an improved network of roads.  The answer is certainly yes.   And it would have left us better prepared to adjust to an era where the use of fossil fuels must be reduced. 

By looking at these major areas … jobs, wages, small business, and transportation … we see that the power of big business has had a major negative impact on the average American worker as well as on various aspects of our society.  

Not to be forgotten is the broader economic impact of the decimation of the American middle class … the middle class was the backbone of our consumer-driven economy with consumer spending accounting for 70% of GDP (some argue 52%).  Only the emergence of the ubiquitous credit card has saved the economy, but at the cost of massive household debt … an average of $15,593, a total of $880 billion.   Not a good thing.  Many things that have happened because of the power of big business cannot be reversed; however, many can.

Large corporations have consistently shown themselves to be amoral.   As defined by the dictionary, that means that they have no moral standards, restraints, or principles; are unaware of or indifferent to questions of right or wrong.  They have only one guiding principle … improving their bottom line. 

For the good of our country, this cannot be allowed to continue free of restraint.  The public and government must break from this stranglehold of big business and fight for a more egalitarian society.   

In every society, there will always be those who are better off, even rich, and those who are not as well off.  But there is no excuse in a society as rich as ours for the egregious disparity in incomes, for the decimation of a strong middle class, for children to go to bed hungry, for people to be homeless, and for the pollution of the air we breathe and the water that sustains us, which pollution threatens not just our health but our very way of life and possibly the viability of planet Earth.