THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, May 19, 1996 TAG: 9605170643
SECTION: COMMENTARY PAGE: J1 EDITION: FINAL
TYPE: Roundtable discussion
LENGTH: Long : 106 lines
Questions are being asked about corporate responsibility that for the past 40 years seemed as settled as the Civil War. What do business corporations owe the society at large? Should the financial markets adopt a code of Christian ethics? Is it possible to negotiate a merger between the dream of unbridled profit and the hope of a just society?
To pursue these questions, Harper's Magazine invited some interested parties to discuss the new rules of the new capitalism. What follows is an excerpt:
Ronald Blackwell, trade union economist: I can tell you there's a lot of pain in America today. There's a lot of fear out there. It is palpable, and it is alive in the land.
Overall the economy is booming, I agree. We've got a $6 trillion-a-year economy, the stock market's at an all-time high, corporate profitability is at a 30-year high.
But this is the first recovery in the postwar period in which wages are still falling in the fifth year of the recovery. What's going on here is a redistribution of income from employees to employers, from people who work for a living to people who own. And that makes for social divisions that are going to breed political movements that compromise the environment within which businesses exist. That's what we're fighting now.
Robert Reich, U.S. Secretary of Labor: I think we ought to give ourselves and all other Americans a great round of applause for what has been accomplished over the past 20 or 30 years. But I don't think that's the point.
As secretary of labor, I carry on a kind of free-floating focus group. Every week I'm out there talking to people. I'm in plants and factories, I'm in retail establishments, I'm in restaurants, I'm in hospitals. And what I hear, over and over again, is: Yes, jobs are back. Yes, there are a lot of technological marvels out there. Yes, there's a lot that's good about the economy. But over my kitchen table we worry. It's getting harder to pay the bills. The coping mechanisms that we have been using are beginning to run out.
As the median male wage began to decline in the late '70s, American workers developed a number of coping mechanisms. The first one was for women to go into the work force in great numbers. The second coping mechanism, which emerged in the '80s, was for people to have smaller families. Not because they loved children less but because they couldn't afford larger families. And then that coping mechanism was exhausted.
In the late '80s, the third coping mechanism was to work longer. We saw the workweek become longer, and we saw a lot of people take on second, even third jobs. There are 11 million people in this country right now who are working for under $5.15 an hour, near the minimum wage. These are not kids. Forty percent are the sole breadwinners of their families, and they're making $8,600 a year.
George Gilder, author, economist: The fact is that layoffs are a good thing. I remember back in the early '70s in Seattle, Boeing laid off about half of its workforce. It was widely prophesied that this was the end of the line for Seattle, that Seattle was going to be a basket case in the future. Since then, Seattle has become the richest and most prosperous city in the country.
The fact is, layoffs are crucial to growth. The more layoffs in a particular area, the more business starts and the more long-term economic growth. An economy with layoffs is an economy that can create jobs and opportunities. So whatever changes you may propose, Bob, the last one you should do is to make it more difficult to lay people off. Because if you can't lay people off, then you can't hire people so readily. It takes courage, guts, to lay people off, but it unleashes new powers.
Blackwell: When you say that layoffs are good, George, all you're telling me is that you've never had a plant gate slammed in your face. You've never gotten a pink slip. You've never experienced anything like that or you couldn't say things like that.
The point of restructuring a company is not to put people out of work - or at least, it shouldn't be. It's to gain some flexibility to respond to the environment in which the company exists. When you take over a company, it's usually in bad shape. You've got to gain some flexibility in order to turn it around.
Now, you seem to think that the only way to gain that flexibility is through layoffs. I don't think that's true. My union has direct experience with the Xerox Corporation, a company that invented xerography, lost half its market share in the late '70s, and then regained much of that market share in the '80s with a competitive strategy that defined what ``high road'' means.
People's jobs weren't slashed. Management didn't think they had to start out by cleaning house to realize hidden shareholder value. What they came to understand was that they had an enormous untapped competitive resource in their business, and that was the knowledge workers have about what they do, which management not only does not have but cannot get except from those workers. People won't contribute to the success of your organization unless they're secure in their livelihood.
Edward Luttwak, consultant, economist: The corporation is not a moral entity and should not be treated as one.
But it is an entity that's guided by rules. And as a society we ought to fix those rules so that corporations only interested in making money nevertheless do the right thing. At the beginning of the last recession, the chairman of Toyota wrote a letter to all of his employees saying, ``Under no circumstances will we fire anybody.'' Now, why did he act like that? Because he's operating within a framework. The considerable support he gets from the Japanese government, from the financial community, from Japanese society, from his workers, from his social circle, depends on him doing that.
In an American company, the only rational thing for a CEO to do is to grab as much as possible. He's operating under different rules. But there's no reason we can't change the rules.
KEYWORDS: ROUNDTABLE DISCUSSION BIG BUSINESS by CNB