in today's Washington Post.
Let me begin with the ending:
Problem is, the Wal-Mart model of employment and service not only reflects but also reinforces the declining economic prospects of the majority of Americans. The nation’s largest private-sector employer has used its market power to impose its low-wage model all along its supply chain, leaving millions of Americans with no shopping option other than the kind of discount, and frustrating, experience that Wal-Mart provides. The U.S. economy that Wal-Mart has built — with plenty of help from Wall Street and the government — is in the shape of a downward spiral, and it will take all our ingenuity, and a mass movement for worker power, to free ourselves from that path.This paragraph caught my attention because it ironically reminded me of Henry Ford, who chose to pay his workers enough that they could afford to buy the cars they manufactured: many did and Ford became very wealthy, partly because of that.
In Taking the ‘service’ out of the service sector Meyerson presents us with a picture of which many may already be aware - taking the approach of slashing the workforce may not be healthy for the long-term viability of the company, and cites as examples J. C. Penney, which just fired a CEO who took precisely that path, and Walmart, which is now becoming known for shelves that appear bare because it lacks sufficient employees to keep them stocked.
Yet minimizing the number of employees would SEEM to be an appropriate path for a CEO to follow, as Meyerson notes in his opening paragraph:
For decades, U.S. corporations have been told to slim down. Not to abandon corporate jets or cut CEO pay, mind you, but to produce more with fewer employees. The conventional wisdom couldn’t have been clearer: The minimum number of required workers yields the maximum level of profits, all else being equal and the creek don’t rise.I would argue that corporate America has still not learned the dangers of that path, and seems far too intent on having that ultimately unsuccessful vision imposed upon the rest of America, in Government as well as business.
The column is important and I suggest you read it.
I want to pivot from it to make two arguments
1. what is ultimately says about the inherent weakness of capitalism practiced without restrictions
2. why it represents a strong argument for the rejuvenation of a union movement in this country.
First, it is not that ALL corporations necessarily take this approach, even in the service sector. Meyerson cites as contrary examples two places I am known to shop, Costco and Trader Joe's, writing
As MIT management professor Zeynep Ton argued in Harvard Business Review last year, Costco and Trader Joe’s pay their workers far more than many of their competitors, offer their employees opportunities for promotion and enjoy markedly lower worker turnover and far higher sales per employee than their low-road counterparts. Sales per employee at Costco are nearly double that at Sam’s Club.And yet, we saw many corporations push back at the notion of raising the minimum wage, most push back at any change to the tax code that might mean they paid anything like the share of general revenues that helped this country among other things build the infrastructure that assisted America in become a middle class country - schools, interstate highway system, etc. - move away from defined benefit pensions while raiding existing pension funds for other purposes on the grounds that they were "overfinanced."
The predatory nature of Walmart, including forcing its model of low-wages and anti-unionism down its supply chain, has meant that many people whose incomes are reduced have little choice but to shop at Walmart, which does maintain a very low price structure, even if the service seems to be on a downward spiral. As Meyerson notes of the company, The idea that unrestrained capitalism contains the seeds of its own destruction is hardly new. After all, Marx (among others) made that argument, and we have at this site recently seen dueling diaries as to the correctness of that Marxian assessment. My contention is that the modern version of capitalism cannot survive absent government intervention on its behalf.
Consider that our model of capitalism presumes government assistance. After all, we have copyright and patent protection assumed in the Constitution among the powers of Congress. A true market economy would have no restrictions upon who could enter any market or make any product, and would quickly descend into the economic equivalent of the Hobbesian vision of a war of every man against every other man.
The emphasis on profits in the short term often blinds corporate management to the long term interests of the corporation, as J. C. Penney found out under its most recent CEO.
Capitalism seems to rest upon a predatory model, where increasing market share as a goal can lead to taking actions designed more to undercut the competition than to sustaining the viability of the corporation. While in theory the representatives of the share holders should be ensuring that management is acting in the best interests of those owners, in practice the short-term vision predominates, in part because so many of the directors are themselves corporatists and the voices of individual shareholders are almost never heard. As close as the interests of individuals are the representatives of public sector pension funds insofar as they still exist - and remember, much of the corporatist model is opposed to the "cost" of pensions and having eliminated defined benefit pensions for their employees now attack defined benefit pensions for public employees.
This has led to a philosophical approach to government that is undermining its ability to serve the people. Unless the government function leads to revenues and thus profits for the corporations, many in the corporate world want to eliminate or at least reduce that function so that they do not in any way have to pay taxes to support it. They will play off one jurisdiction against another for reduction of taxes as a condition of locating a new manufacturing plant or warehouse. They will seek control of the taxes they are still required to collect so that they can benefit from the use of that money. They will seek to change laws to benefit them even at the expense of the communities in which they operate. And, in part thanks to a Court that has empowered their corporations as "persons" in a way never conceived of by the founders of this nation, they seek to control the political process that defines the operation of government by unlimited expenditures on political activities for which they want - and get - a deduction from the taxation that funds that very government.
This results in s downward spiral of government service. In my own field of education it means a reduction of teaching staff, an increase of class size, a decrease in the ability of public schools to serve the needs of the children of those not in the dominant corporate class - who by and large choose to opt out of public education. Some even seek tax credits against what little they pay now on the grounds that they are saving the public the cost of the education of their children, even though public education should be a public good, even though such education should be considered a necessary part of providing them a competent work force. They are satisfied to create a situation of those desperate for work to enable them to maintain downward pressure on wages to fulfill the model of low wages as the primary means of increasing their own wealth, even though that model has failed J. C. Penney, is failing Walmart, and is, according to Meyerson, undercutting McDonald's.
The only way of stopping this is to change the paradigm, and in my opinion that begins with collective bargaining and organizing, which requires a rejuvenation of a meaningful union movement.
This nation saw the increase of the middle class at a time when unions were at their maximum share of the American workforce.
It is also interesting to note that defined benefit pensions and truly effective health plans are now both becoming rare in the private sector even as they remain a major part of working for governments - which is why some in the corporate world are attacking them in government. What is interesting to note is the parallel one finds when one looks at unionization. A higher percentage of unionized workers are in government service than in the private sector.
While acknowledging that correlation is not causation, nevertheless there is little doubt historically that strong unions have meant better compensation and benefits for workers not only in unionized work places but also in non-unionized work places in those places where unions are vibrant. That means greater purchasing power which is better for the overall economy. It also usually means more effective schools, a better educated work force, and all that flows therefrom.
The danger as I see it is that the Walmart vision is driving too much - that includes the false notion that somehow we have to reign in the social safety net, that we cannot "afford" it at a time when corporate profits are at an all-time high, when corporations are sitting on trillions of cash, when the ratio of top management compensation to that of the average worker is exploding. Social Security does NOT contribute to the deficit, and that a Democratic administration would act as if it does threatens the very viability of the American economy those advocating for Social Security cuts claim they are trying to save.
Something has to change.
There has to be a countervailing force.
Meyerson points at it, as I have just written about it.
So let me end as I began, and again remind you of his final words:
The U.S. economy that Wal-Mart has built — with plenty of help from Wall Street and the government — is in the shape of a downward spiral, and it will take all our ingenuity, and a mass movement for worker power, to free ourselves from that path.