mormonomics & mormonethics presents an unconventional lds slant on topics related to economics, ethics, organizational values, and politics. its intent is to offer mormons (and anyone else, for that matter) a perspective not generally available in the mainstream media (or in gospel doctrine class).
Monday, March 19, 2018
Economic Insanity: Chapter 6 (part 1)
Nation of Wage Earners (Part 1)
Sure, cried the tenant men, but it’s our land.
We measured it and broke it up.
We were born on it, and we got killed on it.
Even if it’s no good, it’s still ours.
That’s what makes it ours—being born on it, working
it, dying on it.
That makes ownership, not a paper with numbers on
We’re sorry. It’s not us. It’s the monster.
The bank isn’t like a man.
Yes, but the bank is only made of men.
No, you’re wrong there—quite wrong there.
The bank is something else than men.
It happens that every man in a bank hates
what the bank does, and yet the bank does it.
The bank is something more than men, I tell you. It’s the monster. Men made
but they can’t control it.
Ownership. The ground-level
assumption of modern American capitalism is that individual ownership of
capital should be unlimited. This assumption gives shape and direction to our
wayward economic system and opens the door to the other faulty assumptions
we’ve talked about. When we peel away all its window dressing, capitalism isn’t
really about free markets or free enterprise, as the economic elite would have
us believe; it is about ownership of capital. Period. Capitalism, like
communism, is a philosophy about ownership. Over the years capitalism
has come to mean “unrestricted private ownership of capital,” a condition that
is decidedly incongruent with our political precepts and our social ideals.
This, however, was not always the case.
The great misconception about
modern capitalism is that it is a democratic economic system. We’ve always
equated communism with authoritarianism and capitalism with democracy. The
logic goes something like this: since democracy is the opposite of
authoritarianism, since capitalism is the opposite of communism, and since
authoritarianism and communism always seem to go together, then democracy and
capitalism must be one package—you can’t have one without the other. This is
nonsense. It is theoretically possible to have political democracy without
capitalism. It is also possible to have capitalism without political democracy.
Any dictator who allows his subjects to own property and accumulate capital has
created capitalistic authoritarianism.
Most capitalists would be shocked,
however, to learn that modern capitalism is, in practice, as incompatible with
democracy as is the enforced cooperation of communism. Capitalism, technically,
is the unlimited private ownership of property and the means of production.
The italics here are important, because they point to two conditions that
conflict with democracy, create increasing inequality, and spawn a host of
problems in society. The fact that I can own a piece of property, build a house
on it, and reside there is of little consequence. But the unlimited ownership
of capital, the means of production, is exactly what places capitalism at odds
with our political and social ideals.
In an unlimited capitalist system
such as ours, ownership of capital, although it can take any form, tends to be
either concentrated in the hands of one or more active individual owners or
dispersed among a large, shifting, external body of passive owners. These two
types of ownership are very dissimilar, even opposite, in form, but in effect
they are actually quite similar.
Concentrated ownership, the more
traditional form, produces people we generally think of as capitalists:
individuals who have accumulated or inherited such large amounts of capital
that they can hire others (buy their time and energy, a portion of their lives)
to produce products for them. The employees are paid a nominal amount that we
call a “fair wage,” the products are sold, profits are reaped, and the owner
then uses these funds to increase his capital—so that he can purchase the time
of more individuals and further increase his wealth, his capital, and his
distance from those whose lives he more or less owns.
And he does own them in more than
a metaphorical sense, because he owns the produce of their hands and minds, a
literal part of them. And they can’t escape his employ (except to flee to
someone else’s), because they don’t have capital. They’re not paid enough by
the capitalist to become independent, as he is. He doesn’t share his capital
with them. Instead they’re paid just enough to stay one step ahead of the bills
(if they happen to be prudent money managers), and for this they should be
grateful, or so they are indoctrinated.
Now, you may argue that this is a
gloomy, Marxist view of our relatively prosperous economic conditions,
especially considering the perceived outcome of the Cold War, but let’s take a
closer look at democracy. One would have to be hallucinating to suggest that
capitalist businesses of any size are democratic institutions, even those that
seriously are trying to “democratize” the workplace. Do the people hired by an
industrialist or small business owner have an independent voice in the
fundamental decisions or direction of the business? Are they equal with the
owner in either pay or power? Of course not.
“But,” some may protest, “many
employers are benevolent and treat their employees well.” Certainly, and there
have also been many benevolent monarchs throughout history, but their subjects
didn’t enjoy democracy, government by the people. The employees of an
industrialist don’t govern the organization. Even when they are empowered,
they still live in an authoritarian system. There is a world of difference
between employee empowerment and employee ownership. You don’t have to
“empower” owners. The key here is that someone else is able to exercise
arbitrary power in the employees’ lives, even if that person elects not to. It
is the ability, the possibility, that is relevant here. The owner, if he
chooses, can even require them, if they want to keep their jobs, to conform to
trivial or demeaning rules and customs.
A benevolent business owner can
easily become a tyrant if the company experiences a few setbacks. WordPerfect
Corporation, mentioned in an earlier chapter, was a very good company to work
for, or so many of my neighbors have informed me. Employee salaries were above
industry average, the atmosphere was relaxed, and year-end bonuses were
consistent and generous. Then the atmosphere in the software market, dominated
by Microsoft, grew ominous. WordPerfect owners announced that they would
terminate 21 percent of the workforce. They deemed this necessary, but that is
irrelevant to this discussion. The point here is this: Did these terminated
workers have any recourse, any real power? No. They discovered the hard way
that they didn’t belong to an organizational democracy. They couldn’t maintain
their corporate citizenship by virtue of the fact that it was their
business. They couldn’t vote the owners out of office. All they could do was pack
their things and hit the pavement. One day they were under the illusion that
they were valuable and happy citizens of a wonderful corporate kingdom; the
next day they were gone, with a new understanding of why corporate citizen
is an oxymoron. Republics have citizens; authoritarian systems have subjects.
Employees in most businesses are
trapped. Because they don’t own capital, they can’t just walk away and declare
their independence. They have to make a living in some way, unless they prefer
to either starve or live off government handouts. Independence and equality
have been withheld from them by a system—capitalism—that is overtly
authoritarian in nature. And even when it wears a benevolent mask, it is still structurally
authoritarian and retains its oppressive potential.
The question today’s progressive
business leaders and consultants are asking is: How do we make authoritarianism
palatable? Or worse: How do we disguise authoritarianism to make it seem more
democratic. These questions will never yield a satisfactory answer.
We extol the virtues of the
free-market system, because it is largely (as its name suggests) free; at the
macro level, it is consistent with our democratic ideals. But that system ends
at the front door to most businesses. The free market exists between
businesses, but not within them. Companies in the market are free, but
employees within those businesses are not. Gifford and Elizabeth Pinchot have
coined the term free intraprise to describe a free-market system that
ought to exist within organizations. “The alternative to corporate bureaucracy
is not merely training managers to behave in an empowering way within a
bureaucratic structure; it is developing a system of freedoms and institutions
analogous to free enterprise.”1 It is my contention, however, that free
intraprise cannot truly exist unless ownership patterns change within
organizations. Ownership is the entire question where liberty and
democracy are concerned.
As indicated above, our
authoritarian system of ownership also has another face. Dispersed ownership,
the opposite of concentrated ownership, results in an even more insidious state
of affairs. Here we’re talking about the massive corporations that dominate the
economic (and physical) landscape of twentieth-century America. These
conglomerates are owned (sometimes indirectly through mutual funds and pension
plans) by a mass of faceless names that usually play no role within the
business as employees or managers and may even have no direct contact with the
business as either suppliers or customers. They are strewn from one end of the
country to the other, almost as if a big wind had swept them up like autumn
leaves and scattered them across the countryside. Some have called them
absentee owners. Normally we call them stockholders.
Since these absentee owners are
little concerned with the day-to-day operations of the business—taking specific
interest only in stock prices, dividends, and earnings per share—they hire
professional executives to run the show. And since professional executives
actually have more power than the dispersed body of owners, they represent the
corporate equivalent of the individual capitalist, the industrialist. They
perform the same function, enriching themselves on the labors of others, paying
themselves exorbitant wages, acting as rulers and decision makers for the
masses of employees whose workaday lives they have purchased (albeit with
someone else’s money).
But there are significant
differences between an individual capitalist or industrialist and a
professional executive. The industrialist invariably has a knowledge of both
the product itself and the process by which it is created; he (or sometimes
she) is more community oriented, more aware of the lives of his employees, often
seeing himself as some kind of benevolent, provident feudal lord; and he is the
legal owner of the business.
Most professional managers, on
the other hand, are generalists, often having no specific knowledge of the
products and processes they are hired to manage. Instead, they’ve been trained
in modern business schools; they have white collars and are dressed for
success. They know finance rather than the nuts and bolts of a particular
industry; and their financial training, they firmly believe, qualifies them to
work in any business with any product—because they don’t really deal with
products, only with the numbers that surround them.
So they play with ratios and
financial statements, dream up marketing strategies, and acquire other
companies and products that they don’t begin to understand, secure in the
knowledge that their jobs are safe as long as the bottom line, market share,
and dividends are on the increase. This is why a company like General Electric,
with its relentlessly return-crazy chairman, “Neutron Jack” Welch, now sells
bonds, makes jet engines and locomotives, hawks a direct-broadcast satellite
service, markets industrial diamonds, and runs a TV network.
Because professional executives
see themselves as exactly that—professionals, hired specifically to make tough
and perhaps unpopular decisions—they add up the numbers, and if the numbers
tell them to lay off thousands of workers, that’s exactly what they do. Neutron
Jack, for instance, has at this writing erased 170,000 jobs at GE, sometimes going
so far as to send lower-level managers packing on the spot and then shipping
their personal effects home by UPS.2 This from the man who once
said, “Any company that’s going to make it in the 1990s and beyond has got to
find a way to engage the mind of every single employee. . . . What’s the
alternative? Wasted minds? Uninvolved people? A labor force that’s angry or
bored? That doesn’t make sense!”3 Neither does amputating 170,000
people from the body of those supposedly valuable employees.
For fundamental reasons,
professional executives have little personal interest in the impact
their decisions and policies—from plant closings to pollution—have on
communities. They generally don’t live in the communities affected by their
decisions. And because they don’t actually own the business, they’re free to
look out for themselves, preferring loyalty to career over loyalty to employees
or even the organization, usually leaving themselves an open door and a golden
parachute, just in case the organizational plane takes a nose dive or the
pilot’s seat in a larger aircraft becomes available.
So which masters do you prefer,
industrialists or CEOs? As for me, I prefer freedom, for either form of
capitalism is at odds with democracy and human dignity. Should this statement
surprise us? Of course it should. We’ve always been taught that capitalism is
morally superior to communism. In reality, these competing systems are more
similar than they are different. They are two sides of the same rusty coin—both
outdated, both authoritarian in practice, although, ironically, it is
communism, not capitalism, that claims to be democratic in theory.
Times Have Changed
The rise of capitalism actually
brought favorable changes in its early years—greater freedom, equality, and
democracy—but with no inherent restriction on ownership, capitalism was doomed
to its present course. In hindsight, it is perfectly logical that communism
should have arisen in reaction to the injustices and abuses that resulted from
unlimited capital ownership. It’s interesting to note in this context that Karl
Marx’s monumental work, which laid the theoretical foundation for the communist
revolution, was titled Das Kapital. Capital ownership was always the
central issue. The communist mistake, however, was to swing the pendulum too
far—from unrestricted private ownership of capital to no private ownership at
all—and then to enforce this arrangement with authoritarian government.
Capitalism, originally, was a liberal
economic doctrine, a rebellion against the monarchic and aristocratic systems
of Europe. In those days, capitalism was seen as a great tool in dispersing
property, wealth, and power among a much broader group of citizens. But
capitalism soon developed its own authoritarian and aristocratic classes, and
power, wealth, and property soon became restricted and concentrated, just as
they had been under the old monarchies.
“Right-wing economics,” according
to Christopher Lasch, “conceives of the capitalist economy as it was in the
time of Adam Smith, when property was still distributed fairly widely,
businesses were individually owned, and commodities still retained something of
the character of useful objects.”4 But much has changed since then.
The rise of large, impersonal economic bureaucracies, the increasing
inconsequence of owning private property, and the shift from a production ethic
to a consumption ethic have transformed capitalism into something far different
from what it might have become.
The most notable manifestation of
this transformation appears perhaps in the life of the common man or woman. As
the captains of industry consolidated their power, and as their organizations
increasingly became employers of the masses, people felt great pressure to
change, to trade independence for supposed security and marginal prosperity, to
fit the functional corporate mold, and, consequently, they became
systematically dehumanized. “The division of labor, John Ruskin argued, was
misnamed. It was not the labor that was divided but the men, who were ‘divided
into mere segments of men—broken into small fragments and crumbs of life.’ . .
. Men were now condemned to forms of labor that made them ‘less than men’ in
their own eyes. ‘It is not that men are ill fed, but that they have no pleasure
in the work by which they make their bread, and therefore look to wealth as the
only means of pleasure.’”5 This happens when people do not own the
produce of their hands and minds. They become something less than human, and
the market mechanism is crippled.
Adam Smith’s “invisible hand”
cannot function properly in either the unbalanced power structure of corporate
America or our undisciplined “shop till you drop” marketplace; it works best in
an ambience of widespread and limited (relatively equal) property ownership.
Well into the next century after Smith’s death, it was generally agreed that
freedom could not thrive in a nation of hirelings.
Gifford and Elizabeth Pinchot, The End of Bureaucracy and the Rise of the
Intelligent Organization (San Francisco: Berrett-Koehler, 1993), 114.
Paul Hawken, The Ecology of Commerce: A Declaration of Sustainability (New
York: HarperCollins, 1993), 124.
Noel M. Tichy and Stratford Sherman, Control Your Destiny or Someone Else
Will: How Jack Welch Is Making General Electric the World’s Most Competitive
Organization (New York: Doubleday, 1993), 251.
Christopher Lasch, The True and Only Heaven (New York: Norton, 1991),