I get this a lot from programmer types who think life will go on forever just like now.

As a programmer type, I can confirm the stereotype. When your livelihood depends on massive networks of information, you can adopt some pretty distorted realities. However, I’ve sort of come full circle now that I’m working for myself at home - I’m finding I often enjoy household chores far more than I ever did before, because it’s a much more visceral, grounding, discrete experience, contrary to sitting in cyberspace all day. So I’m even trying to get into gardening, and Kevin, I’d love it if you could share any resources you’ve found about getting started growing your own food.

PML: I believe it was in part org theory literature on agency costs back in the ’60s and ’70s that led to the dramatic cultural change in senior management in the ’80s. Until around 1980, the typical CEO was a faceless bureaucrat or “organization man.” It was widely believed that stock options and bonuses would created an “entrepreneurial” mindset so that CEOs would maximize shareholder value. In fact, however, senior management are just as much an unaccountable bureaucracy as ever, but now the Cowboy CEOs think of themselves as “entrepreneurs.” They do indeed game stock value, but they do so to maximize their own short-term advantage at the expense of shareholders.

The old bureaucratic management displayed many of the shortcomings of Gosplan, but at least they had the comparatively long-term mindset of a career administrator, and not of an Ottoman tax farmer.

The “across the board systemic effects” you mention are exactly why arguments for a “market in corporate control” (Mises, Manne, etc., on capital flight and hostile takeovers as a way of disciplining underperforming firms) are so overblown. Such a market requires reliable comparative data, which isn’t there when the same corporate culture affects performance across the board. That’s one point I made in that “Economic Calculation in the Corporate Commonwealth” argument referenced above. As I argued in the article, capital is more likely to flee when a corporation treats its workers well and thinks in the long-term, even when the stock performs well. On the other hand, if it performs badly despite asset stripping and treating employees like shit, the conventional investor mindset is likely to be “Well, they followed all the rules, so it must be sunspots or something.”

Anyhow, it also struck me how relevant these issues are to the political framework, where “it doesn’t matter who you vote for, a politician always gets in”.

… Bill Waddell. Sorry, much as I’d like to, I can’t take credit for it. Unfortunately, Bill has gone AWOL from Evolving Excellence, where he used to rant against stupidly managed, “publicly” owned behemoths like GM and GE, much to the amusement of everyone who tuned in to that blog (it’s still there, Kevin Meyer just isn’t the same brand of fire breather). Bill’s book, Rebirth of of American Industry, explains how DuPont, Sloan, and Brown created a system whose definition of profit was perverse. Enron didn’t really invent anything, they just happened to come about in less fortunate times.

Bill and Kevin have this radical idea that manufacturers ought to hire people who both know about and like manufacturing instead of the legions of MBAs who don’t know an orifice from a hole in the ground and who think that manufacturing is a dirty, disgusting, lowly form of employment reserved for people who were not smart enough to make it into a graduate business program.

Thanks for the kind words though.

Thanks for the point about the real extent of consumer sovereignty, quasibill. The transformation of the economy in the early twentieth century, from bulk commodities, to push distribution based on brand name competition and mass advertising, was itself a massive assault on consumer sovereignty. The package goods that prevailed in the ’20s were around four times as expensive, in real terms, as the bulk goods that prevailed around 1900.

Wal-Mart gets up to some pretty good shenanigans when it comes to pricing. Aside from their loss leader in each category, their appliances tend to be prices pretty much the same as those of the other retailers. They advertise the loss leader to get people in there, and then hope when actually get there and scan the shelves, they’ll see the $80 microwave immediately to the left of the $60 loss leader, and say “Oh, what the hell, it’s just another twenty bucks.”

They also engage in what I would consider fraud. For example, I learned from a former Wal-Mart vendor that the appliances they sell in their stores are made with cheaper and lower quality part substitutions, but they require the manufacturer to label them with the same product number as their regular product line to give the false impression it’s the same thing.

Snapper lawnmowers quit selling through Wal-Mart because they were under pressure to do this sort of thing. Wal-Mart kept pressuring them to substitute cheaper and less durable design, and sully their own reputation for quality, in order not to make the other lawnmowers at Wal-Mart look bad. On one end of the pushmower display would be Snapper mowers priced at several hundred $$, designed to last forever and start up on the first try as long as you owned them. The rest of the display would be taken up with mowers, many of them priced well under $100, designed to be used for a year and then thrown away with the engine shot.

I can ask just as easily, what is wrong with ‘producer sovereignty?’ And that’s assuming that the average consumer is actually sovereign. The reality is much more complicated than the catch-phrase thrown around by most libertarians. The reality, right now, is much close to ‘capital sovereignty’ than anything else.

But putting all that aside, I’d refine Keith’s point a little and ask, as a matter of policy, should we prioritize consumption or production? Although I’m against the whole concept of central planning, if I had to pick one, I’d rather prioritize production. And to me, one way to prioritize something is to give me some meaningful standard of control over it. I have almost 0 control over the productive aspect of my life - I’m an employee, so I don’t derive much pleasure from the process, in general. I seek to put in the minimum time necessary to get the job done properly so that I can spend more time doing things I enjoy.

In contrast, I have quite a bit of control (nothing close to sovereignty, but still, significant control) over my consumptive processes. Guess what? I enjoy being in control! This is at least one aspect of compulsive shopping - it’s a joyful experience to have some control. I’m not a compulsive shopper, but I can see where the phenomenon comes from. (especially the old stereotype of the compulsive housewife - who had less control over any aspect of their life than the 50’s housewife?)

Given this current dynamic, is it any wonder why our culture is overriden by consumption and self-motivated productivity is a virtue in short supply (there are other reasons for this, too).

I was once asked to sign a paper agreeing to reimburse my employer for some training they sent me on, if I left within two years (I think it was). I pointed out that the training was non-portable and only served their needs, and that that would allow them to fine me if they fired me, in fact prioritise me for retrenching if that ever came up (I put it more tactfully than that). I told them I wasn’t the one asking for the training, it was their idea, and that anything like that would need a shorter date interval and safegurads against retrenching etc.

Thanks for the info. It struck me that the “contract” was in the accrual of PTO hours stated on the paycheck stub. Stating that they would cease to accrue in the future would be one thing; but this was reneging on them after they had been earned.

Thanks for the backstory on Hewlett-Packard. The article on Fiorina suggests her successor came in initially trying to appease employees by appealing to memories the “HP way,” but quickly turned to the orthodox model of downsizing and “reshuffling the bureaucracy.” PTOs are paid time off. It’s a version of the time bank concept, where sick days and vacation days come out of the same pot. PTO hours are accumulated on each paycheck according to the number of hours worked. So I don’t see how they could have gotten away with it legally, short of bankruptcy; it’s as much a breach of contract as refusing to issue paychecks.

Keith,

That economic insecurity is one reason why paying off debt and growing as much of my own food as possible are such high priorities for me. I see a lot of libertarians stressing the beauties of “division of labor” as if they invented it, and rhetorically challenging “If someone else can do something more cheaply, why not hire them to do it instead of doing it yourself.” I get this a lot from programmer types who think life will go on forever just like now. The answer, of course, is you have to have money when you buy instead of make, and you can’t depend on always being able to sell your labor.

The standard of living has increased in recent decades in some ways, mostly due to technological expansion. I remember the days when VCRs were considered luxury items for the rich. I remember the first person I ever knew who had a cell phone, a friend of mine’s dad who was a neurosurgeon. I remember when my brother first got a PC, I thought, “Why the hell would someone want one of those things?”

I don’t know that this has translated into more real freedom or security for the average person. Most genuine economic statistics I’ve seen indicate real wages have actually gone down considerably since the 60s and 70s. The manufacturing jobs Kevin mentions that offered near cradle to grave security have disappeared and been replaced by service industry jobs at places like Wal-Mart. Also, the number of people who have to work two jobs and the number of families that need two incomes seems to have increased as well. The amount of time we spend at work seems to be going up.

Some have attributed this to the fact that so many people seem to live beyond their means or that the list of “necessities” continues to include more items of a dubious nature. I’m not so sure I buy this rationale. Most working class people spend the bulk of their income on rent, bills, food, transportation, day care, etc. Also, there are things conisdered to be luxuries that one is actually expected to have to survive in a modern economy. For instance, a car was once very much a luxury item. Nowadays, some employers won’t hire people without a car. Same with a telephone. And it’s even getting harder to get by without internet access. Also, college education once carried a good deal of status. Now an undergraduate degree is just a glorified high school diploma. To have any real educational credentials you need a graduate if not a post graduate degree.

The lack of job security Kevin mentions is no small matter. I come across people all the time in the business I’m in who were making $75,000 one year and unemployed and broke the next.

Almost the last thing before her day, HP was turned around by bringing back one of the two garage entrepreneurs who founded it, even at his advanced age (I forget whether it was H or P).

Then time meant that a new generation had to be brought in - it was Fiorina. A liitle while in, one of the HP scions led a boardroom battle against her, her kind and her ways, and for a while looked like winning. Only, despite all the natural persons against her, she got practically all the proxies and the clout of the funds, with their own distancing of ownership and control.

So, everybody who looked saw it coming and objected - to no effect. It’s a worked example of the neutralising of the theory of owning shares.

By the way, what is this US jargon “PTO”?

The worst of it is, the threat of capital flight only works selectively. It works to deter social responsibility, because that isn’t part of the standard corporate culture. As a result, social responsibility is only practiced by corporations catering to a niche market. On the other hand, management self-dealing IS part of the standard corporate culture, so the threat of capital flight doesn’t touch that.

Mona: If I lived anywhere but NW Arkansas, I’d probably shop at Wal-Mart, because they’re really no different in kind from other big box stores I do patronize. But given the role of Wal-Mart in local politics, and especially their role in railroading through a regional airport against the wishes of the local population, I’d like to spit in the Waltons’ faces if I could. I haven’t set foot in a Wal-Mart in ten years, I hate them so badly. I do tend to buy used appliances, though, and to buy almost exclusively store-brand or generic food.

I’d like to see the bargaining power of both workers AND consumers strengthened against big business. But I agree with Keith that, in a pinch, it’s better to have leverage as a worker. We spend a major part of our waking hours in a position of near-total subjection to someone else’s will, and completely vulnerable to dismissal on their whim. Whether as worker or consumer, increasing our bargaining power translates in material terms into reducing the number hours’ labor it takes to buy a good, and reducing the ratio of effort to consumption. But in addition, increased bargaining power for labor involves economic security and the knowledge that we’re not a paycheck away from being unable to buy the goods at Wal-Mart or anywhere else. As much as the standard of living has increased over the past fifty years in so many ways, a large percentage of Americans back then were at least enviable for the near-lifetime job security they enjoyed in a unionized labor force.

Henry Ford used to talk about paying his workers enough that they could afford to buy his cars. With Wal-Mart, it’s just the opposite: pricing their goods low enough that even their workers can afford to buy them.

Keith:But what is wrong with “consumer sovereignty?” And who stays at Wal-Mart or 7-11 in a low-level position unless they are older folks supplementing income, teens working for fun $$, or what have you? Those positions are entry level, or for the retired.

Kevin: Yes, I’ve read about the logrolling phenomenon, but nevertheless, destroying the company is bad for everyone. Surely the BoD at HD does not wish to see that company plummet?

In my view, much of the ire directed at Wal-Mart and other reviled corporations pertains to benefits. It is unfortunate that via historical fluke health insurance became tied to that. But poor people cannot buy the stuff they need at anything but Wal-Mart, Goodwill, Salvation Army stores & etc.

And none of this is theoretical for me. I don’t know how I would have raised kids without K-Mart, when it was the Wal-Mart of its time. (And no small amount of time perusing what was just in at Goodwill.)

On the question of corporate ownership, I think what’s being discussed here is what James Burnham called the “managerial revolution”, which I also think is a key theoretical component to understanding how a modern society actually works.

I was only speaking of what is legally asserted as normative - shareholders are the nominal owners of corporations. My point is similar to yours - these shareholders have no real power. That is what I meant when I wrote “The system is broken, even when evaluated on its own terms.” On its own terms, the current (legal) setup suggests that shareholders are the owners of corporations. And yet, that is not true in any meaningful way (save for the exceptions you mention - where the original family or a single shareholder holds a large plurality of stock).

A major portion of corporate boards are made up of inside directors, often the senior management themselves wearing a different hat. And boards of directors commonly engage in mutual logrolling games with senior management, rubber stamping each other’s salaries.

But this is what I do not get. If CEO’s are destroying businesses whilst generating huge compensation packages for themselves — with HD as an example — then WTF is the matter with the Boards of Directors who hire these people? Surely they (the BoDs do not want the HDs of the world to decline?

Finally, I strongly disapprove of corporate welfare for such as baseball stadiums. But in the grand scheme of things, I don’t care of the higher-ups at Acme have skybox seats.

What you say is probably true of corporations where a controlling block of stock is still held by one family (like the Waltons), and comparatively small close corporations.

But on the whole, I tend to agree with those who say shareholder ownership is a myth. The shareholder is just another class of creditor entitled to even less consideration than the bondholder, and with almost no real control. As I argued in an earlier post (”‘Public’ vs. ‘Private’ Sector”), corporations are really just masses of unowned capital run by a self-perpetuating managerial oligarchy.

This may sound silly, and I hesitate to write it for fear I’ll make a fool of myself, but it is worth remembering that CEO’s are hired hands of capital, just like janitors and sales clerks are. In America, this fact has been somwhat obscured by the 1947 Taft-Hartley Act, which established managers as a unique class that is not allowed to unionize.

When people hear the phrase “class conflict” the usual picture that comes into their heads is one of coal miners facing off with security guards who are working for the Boss. And yet, I think the phrase “class conflict” can be used in another way. I think it might be worth considering that a CEO who guts a company and gets 90 million in pay is, in fact, in class conflict with the Boss. The CEO is not Boss, no matter how much they enjoy play-acting the role.

I’ll confine my remarks to the US. Investors who own shares in companies are, legally, the owners of the company. They are, therefore, the Boss. They hire the CEO, who is a worker.

Let’s remember, for a moment, the harm that CEOs have done to companies in recent years. There is the case of Enron, of course, still the largest bankruptcy in the history of the world. There is the slow suicide that managment has inflicted on GM, Ford, and Chrysler, a sort of inbred cultural thing that keeps them from competing with foreign car makers. There is the above mentioned Hewlett-Packard.

Clearly, the interests of CEOs diverge shaply from the interests of capital. Even if we assumed, for a moment, that limited liability corporations are a great idea, and stock markets that facilitate the aggregation of capital into limited liability corporations are also great ideas, couldn’t we find a better model of corporate governance than the one that America currently has? The system is broken, even when evaluated on its own terms.

In the past, the obvious class conflict in the US was that between capital and the non-management workers. But in the current era, it seems to me the most damaging class conflict (damaging to the interests of capital) is that between the owners of corporations and the CEOs they hire. Capital no longer has to worry about strikes that cost $200 million and threaten the life of the company. But they now have to worry about CEOs who do exactly the same thing.