With the crude oil leak in the Gulf seemingly under control and Lindsey Lohan out of the slammer, much of the news lately has been focused on the sputtering economic recovery. This sprawling, amorphous issueâ€”and not BP, nor gay marriage, nor the First Lady’s extravagant Spaincationâ€”will most determine the outcome of the upcoming midterm elections, and the fate of the Obama presidency.
Persistent joblessness can’t be plugged with concrete; there’s no easy solution. True understanding of the phenomenon requires an appreciation for free markets and some open, lateral thinking, a willingness to look at the issue from all sides.
If there’s a blanket statement to be hurled into the fray it is this: Companies will hire when it makes sense for them to do so, and not one second sooner.
Alcoa, and corporations in general, were taken to task recently by New York Times columnist Bob Herbert. His thesis: corporations used the recession as an excuse to lean out, putting profits over people.
“â€¦ worker productivity has increased dramatically, but the workers themselves have seen no gains from their increased production. It has all gone to corporate profits. This is unprecedented in the postwar years, and it is wrong.
“Having taken everything for themselves, the corporations are so awash in cash they don’t know what to do with it all. Citing a recent article from Bloomberg BusinessWeek, Professor Sum noted that in July cash at the nation’s nonfinancial corporations stood at $1.84 trillion, a 27 percent increase over early 2007. Moody’s has pointed out that as a percent of total company assets, cash has reached a level not seen in the past half-century.
“Executives are delighted with this ill-gotten bonanza. Charles D. McLane Jr. is the chief financial officer of Alcoa, which recently experienced a turnaround in profits and a 22 percent increase in revenue â€¦ Mr. McLane assured investors that his company was in no hurry to bring back 37,000 workers who were let go since 2008. The plan is to minimize rehires wherever possible, he said, adding, ‘We’re not only holding head-count levels, but are also driving restructuring this quarter that will result in further reductions.’”
As much as this assessment rings valid, and as much as it must burn the asses of anyone laid off by Alcoa, or anyone with any empathy for the plight of the American worker, consider, briefly, the simple retort from an Alcoa V.P. for corporate affairs Nicholas Ashooh, whose letter was published Sunday, a few days after the original column ran.
“I take issue with Bob Herbert’s characterization of Alcoa as putting profits over people. When the global recession hit, aluminum prices crashed 57 percent and demand fell through the floor, forcing Alcoa to curtail some operations and to sell others. Those actions, while difficult, stabilized the company and preserved thousands of jobs, both within Alcoa and in the operations we sold.
“Today Alcoa is carefully adjusting employment levelsâ€”up and downâ€”commensurate with today’s economic realities. Maximizing efficiency under all economic conditions not only promotes profitability, but is also the best way to protect the jobs of our remaining 60,000 employees.
“It is ironic that Mr. Herbert’s accusation came two days after Alcoa announced the recall of 159 laid-off employees at our Davenport, Iowa, facility.”
The phrase that caught my attention was “maximizing efficiency under all economic conditions.” I thought about it, cynically, from the corporation’s perspective, as a hedge fund manager might, as a human being, and I came to no conclusion other than Ashooh has a point, and that is capitalism is brutal.
Put another way, companies, at the mercy of shareholders, will always try to figure out how to do more with less overhead. It’s not part of an evil plot to torment people. It’s business.
Overworked employees, in more favorable job markets, are free to tell the boss to take this job and shove it, but in times like these, employers have the upper hand, until they don’t. I’m not saying we should applaud or relish this reality, but we all have to accept it. I sympathize with Alcoa even though as I write this I still think Herbert made some good points at the aluminum giant’s expense.
Harley-Davidson has been in the news lately because the “hog” manufacturer is threatening to leave Milwaukee where it has a corporate headquarters and sizable manufacturing presence. Here’s a source of livelihoods and a source of civic pride. What a blow to a town that already endured being the setting for Laverne & Shirley and Jeffrey Dahmer.
Harley actually maintains its biggest manufacturing plant in York, Pa. That plant has already been stung by layoffs. But what would we have Harley do? Motorcycle sales are down, and have been for three years as baby boomers put their inner wild child into an economically induced coma.
Yet Harley remains profitable â€“ precisely because they have cut their work force. Harley’s CEO Keith Wandell made cost-cutting his thing when he came on board in spring 2009. What some call heartless others would call a willingness to make difficult choices.
Harley conceivably could cut 1,000 more jobs, or motor to some other cheaper job market and transition more of its remaining work force to seasonal hours, producing motorcycles more efficiently for spring and summer demand trends.
Who wins in this scenario? HOG shareholders doâ€”at the expense of union machinists. Doesn’t that royally suck for those workers? Yeah, it does.
Who are HOG’s shareholders? They are Fidelity, Vanguard, T. Rowe Price, and other large mutual fund managers. These funds, in turn, invest on behalf of millions of retirement savers who presumably would be pissed off if their fund managers bought shares in companies that performed poorly because of bloated, inflexible cost structures. We’ve seen the enemy. He is all of us.
Capitalism is a nasty bitch, and she has us all by the sack.
I suppose that’s why we don’t even think of leaving her.