Bob Herbert’s column in The New York Tines is under the headline A Sin and a Shame.
The treatment of workers by American corporations has been worse — far more treacherous — than most of the population realizes. There was no need for so many men and women to be forced out of their jobs in the downturn known as the great recession.
Many of those workers were cashiered for no reason other than outright greed by corporate managers. And that cruel, irresponsible, shortsighted policy has resulted in widespread human suffering and is doing great harm to the economy.
He further goes on to say:
Productivity tells the story. Increases in the productivity of American workers are supposed to go hand in hand with improvements in their standard of living. That’s how capitalism is supposed to work. That’s how the economic pie expands, and we’re all supposed to have a fair share of that expansion.
What a way to misunderstand the world of capitalism. Where is it written that the invisible hand will make capitalist private companies hire workers that they don’t need?
In no description of capitalism have I seen a rule that says it is good for companies to run inefficiently by employing people that they don’t need. The whole point of competition is that it drives companies to become more efficient.
There used to be other factors that made it sensible for companies to pay decent wages to the workers that they needed. See the blog post Are the American people obsolete? Of course we used to have strong labor unions too. Companies that were not unionized felt compelled to treat their workers well, lest they decide to form a union. Now that the pressure of unions has diminished greatly, we see what unfettered capitalism can do.
If you cannot understand how a system works in a way that is consistent with its own internal driving forces, then you won’t ever be able to figure out what external forces to apply to fix it. By trial and error you may be able to find something that seems to have a short term benefit, but why depend on luck? Why not study capitalism and economics without a preconceived notion of “how it ought to work?”
When I was in India and observed the carpenters who were fitting out the offices of the company I worked for, I noticed only one power tool among the carpenters. My thought, better to employ lots of people at very cheap wages than import expensive power tools.
I also noticed highish rise buildings going up with the use of bamboo instead of steel scaffolding. Same idea came to me.
The offices of my company that I was visiting employed lots of software engineers. I remember how hard it was to get permission from the Indian government to send over the latest computer workstations for the engineers to use.
Also, at the company there was an employee whose job it was to bring afternoon tea to all the engineers.
So some of the idea of keeping people employed might have been cultural, but some of it might have been a purposeful policy of the government.
When I worked for Indian management in this country, they were very keen on engineers not wasting any time doing things like writing documentation or planning the software in development in advance. All they wanted was busy fingers typing code. That may have been Silicon Valley culture that they had learned here.
I know it is very difficult to get venture capital for a start up business if your business plan does not show most of the work being done in India or China or some other low cost labor market. I find it very hard to argue with the premise of getting 5 engineers working on development in the low cost country for the price of one engineer here. The nationality of the engineer is not the issue, it is purely a cost consideration. An Indian engineer working in this country has salary expectations (and needs) that match the cost of living in this country. If that same engineer is working in India, the money goes a lot further.
The drive for efficiency and optimization may have a cultural component. In the mid-1990’s, I was staying in a beautiful hotel (The Oberoi, I think) in Colombo, Sri Lanka. I saw out the window about ten beautiful red clay tennis courts. There were about half a dozen men, bent over, and patting the clay courts with what appeared to be short-handled whisk brooms. “How inefficient,” I thought. “One man with a roller and a wide broom could easily handle all of the courts and in far less time.” I then remembered a similar incident in a book/novel that my father gave me in the early ‘Sixties, “The Ugly American” by Burdick & Lederer, and thought, “Aha. The Oberoi’s goal isn’t efficiency. Rather, it is full employment.”