PROFESSOR BOYER: --American corporation, Navigating the Hazards of a New Economy by Gerald Davis, who's the Gilbert and Ruth Whitaker professor of business administration at the Ross School of Business and professor of sociology at the University of Michigan. Davis argues that corporations in the United States are on the decline, and he argues that, while in the old days we would have thought this was a good thing, in fact, that's a bad thing. And he tells us why he thinks it's a bad thing. And then he gives us predictions on how the future could be either very bad with the uberization of everything or, in his view, good, utopian with a localization of things, which I personally don't find all that utopian. But it will be interesting to hear our speakers.
While he is a professor of management and sociology, today we're going to get a different view of the book by two faculty members in the ILR school, Louis Hyman who's a professor of labor history, and Risa Lieberwitz who's a professor of labor law. And they're each going to speak for 10 or 15 minutes. Louis is going to begin, then Risa, and then we'll have time for questions. So take it away, Louis.
LOUIS HYMAN: All right. Thank you, Professor Boyer. So The Vanishing Corporation, for those of you who haven't read the book-- and I assume in this situation, like in all of my seminars, not everyone has done the reading-- I'm just going to go over the main argument first, that the publicly traded corporation is disappearing. And on balance, that is bad for the American workforce because the corporation acted as an agent to reduce inequality.
Now, on its surface, this seems totally ludicrous. After all, we all know that corporations, mega corps, are evil. They extract value from the working class. How could a corporation reduce inequality? And it's a very provocative argument.
And he points to a few key features in this, one, that pattern bargaining and employment standards for workers, especially in the post-war, for workers and executives, spread norms and practices regardless of sector throughout corporate America, which was the dominant organization of capitalism that he argues, that a strange set of post-war encumbrances, like pensions and health care, American firms took on. And through these practices which were disseminated, the corporation reduced inequality by providing upward mobility through corporate ladders, through its employees.
Now, he gets a lot right. And a lot of interesting facts come out of this document. There has been a reduction in the numbers of publicly traded corporation, which is what drives the title, The Vanishing American Corporation, which I imagine, for a lot of people, this is very surprising. He also gets right that our benefits system is largely dependent on corporations and that corporations are able to be organized by working people in the post-war. And there's also benefits for executives and managers.
But aside from many things like facts, these certain facts, I think he misses a lot about what is crucial for understanding what happened in post-war American capitalism and, of course, after the post-war ended. And these blind spots in his argument about who the corporation benefited, why inequality was reduced in the post-war, what this so-called vanishing really means, and whether the corporations passing will have the dire effects he describes are actually sort of fatal flaws in lots of his arguments.
Now, who does he miss? Now, most obviously and painfully, as you read this book, the person who moves up this so-called career ladder is a race of gender or race or education or class, which is, in fact, not how post-war corporations operated. There were not career ladders for women. There were not career ladders for people of color. This was a world of white men for white men. And that obvious truth, that this corporation was an engine of upward mobility for some, is elided throughout the entire book.
It isn't until we get over 100 pages that race is even mentioned, and gender even less frequently, in any meaningful way. And this isn't something you add onto the argument. This is something that is a structural condition of how capitalism is organized in America. So to simply treat that as a dummy variable in a regression misses a key point about how our firms operate.
He also misses the key way in which college education is assumed to be normal. There's an introductory story where he talks about his father and him and people he knows. Well, he's not normal. College education even today is only about 30% of the American population. This is a small fraction of who we are. And even after the GI bill in the post-war, it was still not the majority. So again, this basic demographic information distorts the kind of narrative he's telling about the rise and fall of a particular institution.
So let's just put that right over there. You can decide for yourself whether that's enough to stop reading the book. So his argument about why this is happening turns on a small number of arguments, and they're very logically tight in the way that sometimes people like to argue, that the corporation is disappearing because of Coasian coordination costs being reduced. And this is a very common argument about economists particularly of the institutional strain, that the reason why we have firms-- and this goes back to the 30s. Why do we even have a firm?
Well, it's because of the coordination costs at the boundary between the market and the firm. And he's arguing, like many people do, that this boundary has reduced in cost because of technology. But the timing of this actually matters. So if he's really looking at this period after 1997, that's one thing. But actually that's not what he's doing. He's not looking at this post-internet world.
He's looking at the period after the 1970s, which, of course, actually, historians have a very different-- not sure the way to put it-- chronology of the rise and fall of conglomerates that he has in his potted history. But the technology there doesn't really change so that phones are available in the 60s, phones are available in the 70s, phones are available in the 80s, phones are available in the 90s. And yet this timing of when he thinks this is occurring has nothing to do with the technology that underlies it.
And the internet, it's easy to imagine back that the internet has existed and was used much longer than it has. We have a hard time imagining the period before the smartphone these days. We talk about the uberfication. Smartphone is 10 years old. And it's hard to remember that because, for most of us, we sleep next to it cuddling it like a teddy bear.
And so this breakup of these conglomerates happened in 1970 or thereabouts, and so it's not about the internet. Full stop. And so the unbundling of the corporation had nothing to do with technological determinism. It had everything to do with a particular set of ideologies and regulations and industrial shifts elsewhere.
At the same time, unions that are center to his arguments were already on the decline in the 1950s. It accelerates in the 70s. And by 1987, this is, again, not the story. He talks a lot about how business startup costs for app development are low and why this is why the corporation no longer matters. But yet he also argues persuasively, and I agree, that app startups don't matter in the economy, that they're not a prime driver of value. They're not a prime driver of employment. And the costs for a new industrial plant, like a chip manufacturer, are in the order of tens of billions of dollars.
So which kinds of startups is he talking about? And like elsewhere in the book-- and this something that drove me particularly crazy-- he is ludicrously non-specific about what kind of corporation, what kind of sector of the corporation, that he is talking about. And corporations reflect their sectorial organization. Organizations are not universal. They vary depending on what they are doing.
I'm not an OB scholar, but I at least know that much. And so when we think about the corporation, he's talking about a very particular set of industrial corporations that are driving this post-war growth. He's talking about aerospace corporations, electronics corporations, and a few other kinds of firms. And he, again, brackets out the fact that we had just a few years earlier blown up the whole planet and had to rebuild it, which of course, created an extraordinary demand for American producer goods of all kinds.
Now, industrial corporations are very dependent on their profitability for their place in the product cycle, 0.1, so that, as we have a maturing sector, like all products, they become less profitable. And this is a problem, because many of the firms that he would like to talk about are no longer in this growth period. And today, we don't actually-- though we live in a period of technology, these technologies are actually refinements of older kinds of science.
New science that produces new kinds of industries hasn't happened for 40 years. And this is the arguments that people like Tyler Cowen and other kinds of economists are making about why we don't actually have profitable industrial growth anymore. And you can put that alongside other kinds of arguments, like globalization and also automation, which we're going to come back to in a second.
But these industrial firms of the post-war were organized very differently. They were about joint production on an assembly line. And so he makes very particular and strange and esoteric arguments about what is called specific human capital or firm specific capital that have really no bearing on the money paid to workers.
It's not about that. That's not why people paid workers. People were paid because they wanted to avoid labor turnover. Because if you missed your work, the entire assembly line had to stop. And this wasn't over-common until toyotism in the 1980s in the United States. So his ideas about his illusion of the specificity of the industry that underplayed these corporations undermines his arguments and his understandings about the firm.
I'm skipping ahead because I feel like I'm running over time. OK. He also, when he talks about the shift away from industrial corporations, elides the importance of retail corporations. And this is not unique to him. Walmart was not listed as a leading firm by Forbes until the mid 1990s, because only industrial firms were considered important.
But when you do that, when you overlook retail, you're overlooking not just stores which seems superfluous, I presume, because they are less real than industry. You overlook a key transition in the last 40 years, which is the shift from firm-based capitalism to supply chain capitalism. Over the last 40 years, all firms have shifted to be software and logistics firms. And if you haven't, you're basically out of business.
And so the growth, the excitement, the opportunities are out of this. And when we talk about globalization, we're really talking about supply chain capitalism and the extension of supply chains around the world. It's not that we're not manufacturing things and where we buy things all the time. And so he's missing this transformation even inside the industrial firms that he wants to talk about, again, by eliding the importance of the transformation of the firm and the underlying economics of the firm.
The same time, he is obsessed with tech, because tech is sexy. But this overlooks the fact that tech is now part of every firm. To focus on Google, to focus on Facebook is a misunderstanding of what software is, what software does. And so that leads me into another point, which is generally automation.
In the 20th century, we underwent an enormous automation phase, that is the elimination of humans from agriculture. We go from a predominantly agricultural economy to predominately non-agricultural economy. And that is the big story of the 20th century. It is not manufacturing. In the late 20th century, we see, again, this same kind of shift as manufacturing jobs are eliminated. And in neither agriculture nor in manufacturing does that mean that the US economy doesn't make stuff or food anymore.
Recently, according to the World Bank, we added $2 trillion a year in value added manufacturing. It is second only to China at 2.8. We wildly outpaced Germany, which had a paltry 690 billion in value added-- I know. Chumps, right-- manufacturing. We are still a manufacturing economy. We just don't employ people to make things.
This is a good thing in the long run. But this division of that productivity is not about the market. It's about politics, which we'll come to at the end. But that story is totally absent here because of his obsession with the organizational form. And the story he wants to tell is about jobs, even though he's writing about corporations.
Now, why inequality compressed? There are numerous arguments about why inequality happened in the post-war corporation that economists and historians and sociologists have been arguing for many decades. He likes to point to one number, which I couldn't believe that I saw sociologists do this. A historian would-- and we're not known to be very numerate, but this is not something that we would do. He pointed to a 0.9 correlation between the decline of inequality-- between inequality and the numbers of corporations.
And I was just shocked. I was shocked this wasn't a regression. And I was also shocked because this-- as more technical people in the room can tell you, you can't do a correlation with a time series in this totally naive way. And this sort of belies a more important fact about it, that he ignores, he brackets, many other factors in the economy.
I'm just going to name a few. For me, I'm going to start with taxes. A much more compelling argument to me about inequality reduction in the post-war is that the top marginal tax rate peaked in the 50s at 92%. The top marginal tax rate was 92% and then extended up into adjusted incomes of up into the millions of dollars. So why are the rich not having as much money? Well, maybe it's because they're being taxed 92%.
I don't know. To me, this strikes me as a pretty straightforward argument. It was still 70% when Reagan came into office. And now, of course, it's 40%.
Unions. He is right that unions mattered. But those unions could only matter because of the way production was organized. And it was already beginning to come undone in the 1950s and 60s. And, of course, for African Americans, the ones that are not talked about in this book at all, government jobs and government unions matter a lot, because government jobs for African Americans were a key path in the 1960s into the middle class.
So this is just a few arguments. There's many others. But even his core argument about this idea of the reduction, his very numbers are faulty, the reduction of the number of corporations. It is true that after 1997 there has been a reduction in the number of firms listed on the New York Stock Exchange and perhaps, by extension, the NASDAQ. Although, globally it's gone up, which is a point he doesn't talk about.
And there's an interesting paper called The Listing Gap, a working paper by [INAUDIBLE], by one of our colleagues. And so from 1997 to-- this is a quote-- 2012, the US had 8,000 delists of which 5,000 were due to mergers. This is about half of all the delistings of the '96 [INAUDIBLE]. So is this a vanishing or is this just a merger movement? Is this a reorganization of the firm?
And so jobs may have disappeared, but corporate assets have grown. Corporate profits have grown. And this is why the stock market, despite its volatility, is still bullish for all these decades. So this basic fact on which his entire argument rests is itself faulty. It seems more likely to me that inequality drove corporate profits, which were then used to buy other firms, which, of course, historically is a very bad use of capital, as Porter has pointed out as early as the early 1980s.
And which maybe this is one of the reasons why there aren't new opportunities for labor, why there isn't new growth, because this money is not being retained, invested in long-term RND. And as well, this speaks to the lack of IPOs. Because why would you exit through an IPO if you were a small startup when you can simply be acquired by these large firms which are awash in useless cash?
OK, so I ranted on about this. So again, the story for me here is not the vanishing corporation but the growth of corporate assets at the expense of corporate jobs. So what does this all mean?
Now, at the end of the book, he makes a lot of different scenarios. But for me, the most important one he makes is the one that's close to his heart, the pitch for the end, pitch for liberal arts plus coding as the way to move forward in the world. Now, I don't think this is a bad idea. I think empowering students with how to automate their own jobs, to manage automation in the workplace is actually a really good idea.
For students like ILR, as we're reviewing our curriculum, I think that should be something we talk about. I personally don't think anybody should graduate college and not know basic computer science. Writing code today is as important as typing was 20 years ago. And I certainly use my one semester of computer science all the time in my own work. I've automated many parts of my job.
But I also don't think this will work for our whole society. And again, there's this illision between who he's imagining. He's imagining a very particular person. Only 30% of people have a college degree. And if the answer is to go to college, then the game is over for American capitalism. If the answer is to go to college and learn how to be a programmer, then it's totally over in American capitalism.
What we need to do is figure out how to include people back in the workforce. Workforce participation is lower than it's been in decades. And the unemployment number, which is bandied about, as Nicholas Eberstadt recently wrote about in commentary, is a relic of another economy. And so to increase participation, we need to increase labor demand, which means new industries which are not born automated. And this is hard to imagine. This is the hard nut to crack.
Historically, the answer has been new science. New basic science produces new technologies which demand lots of workers. And over time they go away and they are replaced. For some people, the answer is a basic income, that people have no value anymore, something I find deeply offensive and I don't think is true.
For others it's upskilling, like Davis. But the real answer, I think, in the long run will be capturing this new science, which is all our young scientists are going to Wall Street and because they can't get grants. And this is fundamentally at the core of this dynamic, I think, as well as this misuse of corporate capital.
So in short, I think this is a provocative book with some surprising information for those who don't study this period. And he makes some good arguments. But ultimately I find them unconvincing as a silver bullet for understanding what has happened in our increasingly desperate economy since 1970. And, of course, for those who are not included in the book, women, people of color, appeared before 1970, it was even worse. It's really about the vanishing corporate job, not the vanishing corporation. But that is not what is argued or even proven.
RISA LIEBERWITZ: OK.
LOUIS HYMAN: Thank you so much
RISA LIEBERWITZ: All right. Thanks, Louis. Those were really interesting comments. And I'm glad you set out the thesis of the book so I don't have to do it, which is great. And the take that I have on the book is there's some overlap with Louis, but I have a different kind of approach to it.
I think that's one of the things that Louis did very nicely, is to show how the evidentiary base of the arguments that Davis is making are flawed, right? But even taking his thesis on its own terms, I think that there are-- even assuming there's some more to it, his idea about large public corporations creating greater equality, I think that there are other critiques that can be raised. And fortunately, I have some different ones.
LOUIS HYMAN: Fantastic.
RISA LIEBERWITZ: And hopefully there'll be some overlaps as well. So I wasn't actually much more impressed with the book than Louis was, but as I said, for some different reasons. So let me lay this out and hopefully we'll have time for discussion as well.
One of the things I think that we overlap in in our analysis and critique of the book is a kind of decontextualization of the book, that the arguments and the descriptions that Davis lays out really lack multiple factors, that are relevant to creating, growing, and ultimately decline of certain forms of business organizations, such as economic conditions, social conditions, legal conditions, technological conditions. And a lot of those are missing, as Louis pointed out. And in addition to that, the missing factors, there's also a lack of really recognizing the interactive nature of those factors in a dynamic process of social change.
And one of those includes the very dynamic and serious class conflict that exists in the struggle between capital and labor. I think that was put in there as an afterthought more than anything. And as you pointed out as well, the complete erasure of race and gender as factors. I mean, there's almost no real people involved in his discussion, just results--
LOUIS HYMAN: Yeah.
RISA LIEBERWITZ: --that affect people. And also, the third piece that I think really comes out of this decontextualization is Davis's presentation of businesses, including the public corporation that he's focusing on, as benign institutions that simply respond to political, social, and economic conditions but are not active in shaping those conditions. And I'm going to talk about now the way that those three aspects of my critique work together.
So first, I find that the book lacks an analysis that shows the way that businesses, and including corporations, are embedded in society as actors who shape society and are shaped by society. And as a result, I find that the book presents a deterministic analysis of the history of corporations, that when I read the book, I kept having this sense-- and also then sort of explicit statements that Davis would raise, would make, that things that happened occurred because it was time for them to happen.
So for example, the expansion into large public corporations occurred because it was necessary for economies of scale. So it had to happen. Another example, that the reduction of the size and some diversity of corporations through outsourcing and the use of subcontractors simply had to occur. And so that's why the corporations did it, that they had no choice in the matter.
And I found that you had a similar approach to technology. So the critiques that have been made about technological determinism, I think, fit here as well. Certainly, businesses change as technology changes, but businesses also play a role in developing technology to promote business goals, so that the use of robots certainly promote the goals of businesses. You know, I'd like to talk a bit more about the goals of businesses, because I think that the book really doesn't deal with essential questions about the goals of capital and the goals of businesses in their different form, including the public corporation.
So the goals of capital are consistent over time. We see that businesses have goals to increase and maintain their power and their control over business decisions and business choices. And businesses have goals to increase profits and wealth and to control the way that the profits and wealth are distributed. Those are very consistent goals over time.
But the ways that businesses do this may change over time. And the ways that businesses achieve those goals involve choices. I'm going to go back to that notion of avoiding a deterministic kind of analysis. And I'm thinking about the choices that businesses engage in, including what form of business that they take, such as the public corporation that he discusses. So the choices businesses make are based on existing social, economic, and political conditions as well as choices being made based on the ways that businesses can influence those conditions to promote business goals, to increase their power and increase their wealth.
And at certain historical moments, certainly, this choice may lead to the growth and expansion of large public corporations in the way that Davis describes as the best, if not perhaps the perfect, way for them to achieve their goals. At other historical moments, the conditions may lead to other choices that were not available earlier, such as outsourcing to subcontractors that some of the large public corporations engaged in in the US, perhaps first by going to other corporations and businesses within the US, going to the south and then going globally to find cheaper labor to achieve the goals of maintaining and increasing profits and power without the costs of unions and without the costs of well-paid workers.
But these, again, were choices that were made within that historical moment but in terms of what's available to make those choices. But the goals remain the same. The means change but the goals remain the same.
Now, businesses also, as I think really is connected to some of the points that Louis was making, shape conditions to favor their goals. On the one hand, they're constrained by things like tax laws, but they're very active in helping to shape those tax laws in ways that favor them. They're active in legislative changes that include things like deregulation. Businesses are active in helping to shape judicial decisions that go particular ways, and appointments to things like the NRB, perhaps even appointments to the Supreme Court, right? Who knows?
So in this moment, to talk about businesses as just sort of benign institutions that sit and get acted upon seems particularly absurd. So let me just add some other points here before we open it up to discussion. Another thing that I think is really missing here in the discussion of businesses and the choices that they make is the way in which business choices are shaped in important ways by labor struggle.
Now, as I said just before, I think the book presents businesses as kind of benign or even benefactors of labor, that kind of social compact idea that Davis raises. And this creates kind of a strange combination for me. Because on the one hand, Davis presents labor unions as kind of an afterthought or an appendage to the story of corporate or business forms or actions, so that the kind employer, maybe paternalistic but kind, gives benefits and job securities to employees, and that's in the public interest.
The unions are kind of secondary to that. So he gives businesses credit for acting in the interest of employees because of the business's concern for the public interest as opposed to addressing a reality that businesses were forced to concede to labor union collective demands through conflict and struggle, which, of course, also shaped the legal and regulatory conditions that force businesses to bargain. And he also ignores that there is more than just giving benefits to talking about lowering inequality. He ignores the competing goal that's a democratic one of bringing unions into the workplace with the goal of participating in how the distribution of wealth takes place and creating priorities in the distribution of wealth and power and decision making.
So he sees unions as simply secondary here and gives businesses the primary credit for what they did. And yet, at the same time, the book presents corporations as not being responsible for other choices, such as the outsourcing or rupturing of the employment relationship. Davis doesn't identify the choices that businesses engage in to do outsourcing and getting rid of employees completely, treating them as either part of that global assembly line, this global supply chain, or as independent contractors in order to avoid labor unions, in order to join the race to the bottom of cheap labor, in order to avoid liabilities.
Now, technology enables them to do this now, but they probably would have done it earlier if they could have. But at this historical moment, they do it, and yet he doesn't seem to view that as a choice that's being made. And, in fact, he presents the choices that are being made, or what businesses do, as inevitable responses to global competition and technology changes, and even as very smart decisions, like Nike keeping, as he puts it, the value added of keeping the design here and sending everything else to other countries. And he also presents Nike and other corporations as, well, not really being able to know what's happening in those subcontractors. So we really can't hold them responsible for it.
Now, there's one point that Davis makes that I do agree with, OK, but not for the same reasons. I actually agree that there are advantages to having large public corporations. For example, I didn't sign on to petitions that were going around to keep Walmart out of Ithaca, not because I like Walmart. I don't like Walmart, obviously. There are good reasons not to like Walmart.
But the feasibility or the potential for unionizing in large businesses is far greater than unionizing in mom and pop kind of local businesses. And the large corporation, I think, counters the kind of romanticized vision that exists in the US of small business. So give me the large business any time in terms of the possibilities of actually organizing workers over mom and pop that nobody wants to organize, right? And it's really hard for unions to organize because it just bleeds their treasury.
So now I'm done with where I agree with him. So let me just end with that sort of surprising advice of what he says should be done at the end. I didn't see it coming. Go local, OK? Become a locavore. OK, that's an interesting piece of advice after what he's just said and in a globalized economy.
And also he promotes the idea of greater democracy in these kind of local organizations. I said, well, that's an interesting piece of advice given that he ignored it completely with regard to the goals that labor can have in corporations. So I think he just kind of got tired maybe at the end, was my reading. And he said go local and do good work and be kind.
So perhaps I wasn't as kind as I could have been to the book. But that's my take on it. Let me just-- one word before we open it up. I have to leave a little bit early because I've got to run to be on a conference call, and so it's not leaving in a huff, and it's nothing anybody says. I'm just going to go and Louis can, I'm sure--
LOUIS HYMAN: Oh, we'll see about that. You will leave in a huff.
RISA LIEBERWITZ: Maybe it'll be both.
LOUIS HYMAN: That's right. Could be both.
RISA LIEBERWITZ: Maybe it'll be both. OK. All right, thanks. So, George, do you want to call on people, or should we just do it? OK. Questions, comments, agreement, disagreement?
AUDIENCE: So this is talked about [INAUDIBLE] related to what you said. So my reading of the go local part, it was more not on a completely despairing note. And my view is that I don't think big labor manufacturing is coming back to this country.
RISA LIEBERWITZ: No.
RISA LIEBERWITZ: So then the question is, whether you agree with his analysis of how things got the way they did, what are the implications for current and the future in terms of the corporations or employment? Let's take it down to the job level. [INAUDIBLE]
PROFESSOR BOYER: If I could interject here. Can you repeat some of the questions, because you're the only ones with a mic to be on the recording.
LOUIS HYMAN: Oh, OK.
RISA LIEBERWITZ: Oh, OK
LOUIS HYMAN: Or should I just stand really, really close to Pam, uncomfortably close to Pam?
RISA LIEBERWITZ: I have some thoughts about it, but do you want to start?
LOUIS HYMAN: Sure. So the question was about, what is the meaning of the local and the global economy, which I think is a really important question.
AUDIENCE: And what do we do about it?
LOUIS HYMAN: And what do we do about it? So I actually have an op-ed coming out in the Times in a couple of weeks about this that's going to be about-- well, partially, I think it's about how to-- it's an important question. We've seen the last election that there's this huge swath of people in rural America who are not part of the boom, boom, boom digital economy of the cities, right, or not part of where all the growth is.
So how do we reach out to them? How do we go local so that people can become part of this? And I do think there's opportunities here on some level that now there are digital labor platforms that allow us to allow people even in very remote areas to work anywhere in the world or sell anywhere in the world. So work either through something like Upwork or sell through things like Etsy.
And people might scoff at that. But it could be something where we are able to have that long tail of labor. Just like Amazon did for selling to all of us with a long tail of inventory, there could be a long tail of labor that people in many different areas can participate in. So I think there are opportunities like that that are not just about a race to the bottom but an opportunity for people who have high-value skills who aren't necessarily living in Palo Alto to participate in this kind of economy.
But again, I don't think that's the only answer. I think they need to have multiple answers, ways to have new kinds of industries that employ masses of millions of people all at once who are relatively unskilled. Historically, at least, that's how we've been able to transition from one industrial phase to the next. I'm curious what Risa thinks.
RISA LIEBERWITZ: I have the answer.
LOUIS HYMAN: Yeah, please.
RISA LIEBERWITZ: I'm going to make America great again.
LOUIS HYMAN: Yeah, yeah.
RISA LIEBERWITZ: Somebody had to say it, right? Anyway, I don't think there is a magic bullet, obviously. You know, we're in serious trouble, and the we being really globally. Workers and the working class is in serious trouble in terms of being exploited, and certainly in the US, the diminishing power of labor unions being a serious problem. So I don't think that there's an easy answer to this.
I think that Louis is certainly right, that there will be, ultimately, the ability to find new industries, you know? And our Worker Institute at Cornell does a lot of really good work on green jobs and thinking about ways to reconsider the jobs that can be done. But I think the only way to think about these issues is internationally, right? I mean, internationalism is a very progressive idea.
Unfortunately, globalization has taken on simply the goals of capital, to have complete global mobility for capital, in order to actually serve only the goals of capital and leaving workers very much in simply a situation of being exploited. However, we do see organization and organizing taking place in different countries, and even in the US, some very interesting ways of organizing. So I think that this doesn't really address your question about jobs.
But I think the only answer for labor, for the working class, is to think about organizing internationally and thinking about ways to counter the kinds of really venomous attacks on immigrant workers and the division of races against each other that have been the tools for capitalists for many years. And I don't think that either as a country or as a world that we're going to move forward until the working class, through organizing, actually addresses what is in their own interests. And that can include international organizing for a different system, really fundamentally reconsidering what capitalism is. And that may seem even less realistic than localism, if you think about it.
But I'm in it for the long game. And I think that we all need to be. And I think that reconsidering the way in which we distribute wealth and power within capitalism is inevitable in a certain way, because this isn't working.
LOUIS HYMAN: But that's also not something that's new, right? We've struggled over the fruits of productivity since the beginning of the Industrial Revolution, right? So this is something that we've done before--
RISA LIEBERWITZ: Same issues.
LOUIS HYMAN: --that we've struggled over fallen labor demand. Labor demand is always-- which make possible organizing. So these things are interconnected.
RISA LIEBERWITZ: Absolutely.
LOUIS HYMAN: Just hopefully we won't have to have the 100-year bloody struggle like we had with the first Industrial Revolution.
RISA LIEBERWITZ: Yeah.
LOUIS HYMAN: George Boyer.
PROFESSOR BOYER: Hi. I may talk loud enough that you can pick it up on Louis' mic. One of the things that I was very interested in in his discussion in the book which neither of you spoke about much, which is fine, is the collapse of social benefits as a result of these jobs going. When I think about my mother, my mother was a secretary but with a large corporation. And she didn't especially love her job, but she loved that she wasn't looking for a career ladder.
But she did get good health care. She got a good retirement, and whatever. And they managed. One of the things that Davis points out, which I think is true, it isn't that the corporations did good things-- I'm agreeing with Risa on this-- but that the United States is so different than the rest of the industrialized world. In the 40s, after the war, when everyone blew up everyone else, the rest of the world created welfare states, government-run welfare states.
LOUIS HYMAN: Came together.
PROFESSOR BOYER: And we didn't, even though Franklin Roosevelt in his second Bill of Rights speech in 1944 laid out what looked like a welfare state to me. And we never got it. And I just wonder, with the collapse of jobs that give these benefits, since Walmart is never going to be different, what can we do? What can we as the American people do to get the benefits back?
LOUIS HYMAN: Well, do you want to go?
RISA LIEBERWITZ: Go ahead. Go ahead.
LOUIS HYMAN: OK. Well, I think the first thing to realize is that Walmart's existence is predicated on Medicaid--
PROFESSOR BOYER: Yeah.
LOUIS HYMAN: --that we are already subsidizing Walmart, that Walmart makes use of the benefits that we already offer to some portions of our population. It would not be-- if you work at Walmart, they help you enroll in food stamps, right? So there are entire ways in which we already subsidize these corporations, but for certain populations, by providing these kinds of benefits.
Now, personally, I think that's great. I mean, I feel like we should actually have that for everybody, that there's a very right wing, very conservative argument that's made in every other country in the world that says, let firms compete with other firms and provide basics for the whole population. Make sure-- because capitalism, it's good to have competition over the price of socks and tables and food. But you want to make sure-- maybe not food. But you want to be sure that people have the sort of basic safety net so they can be active in the world, so they can be entrepreneurial, that they don't have to worry about things.
Personally, I feel like that's OK. I just would like to see it extended to every firm and every corporation so that our young people-- I think about our graduates who may not want to go work for a large corporation. You know, how much better-- so they can go and do something else with their lives. I think the way in which these post-war firms paid workers in this way also was a way of compensating them to avoid present compensation, especially for the pensions that are honestly an intergenerational transfer of wealth, right?
When all those pension funds go bankrupt in a few years, I'm really glad that the boomers all had that and their parents. But then people who are Xers and millennials are going to be paying the taxes on PBGC and other kinds of ways. So it's actually another way in which there's been a massive intergenerational wealth transfer.
So I would like to see that we move towards a more European model so that capitalism can actually be capitalism. And maybe that means rolling back some kinds of benefits in to fit-- and this probably-- recently I talked about what we would probably disagree on. I suspect this is a space in which we disagree. But I would be very comfortable seeing the rollback of certain kinds of labor regulations if it meant the increase of that baseline welfare state for most Americans.
RISA LIEBERWITZ: Although I don't see why we have to give up labor regulations in order to get the social welfare--
LOUIS HYMAN: Maybe we don't. Maybe we don't.
RISA LIEBERWITZ: --sector. I don't--
AUDIENCE: It's higher taxes.
RISA LIEBERWITZ: Well, I don't think it's an exchange. I mean, I think you started out with a really important point, which is that the US subsidizes businesses in many, many ways--
LOUIS HYMAN: Yeah.
RISA LIEBERWITZ: --right? Some are direct and some are indirect, right? Some are very visible and some are invisible. But just the corporate forum itself is a subsidization of businesses in terms of limited liability.
LOUIS HYMAN: It's the socialization of risk without socialization of return.
RISA LIEBERWITZ: That's right. I always like that phrase.
LOUIS HYMAN: Me too.
RISA LIEBERWITZ: That thing of socializing the-- what is it? Socializing the risk and privatizing the benefit.
LOUIS HYMAN: That's right. That's right.
RISA LIEBERWITZ: That's right. Exactly. So that's an old story. And that's important to shift so that we actually socialize the benefits. So, yeah, I mean, the critique of having the firm as the locus of whether you get so-called social benefits is a flaw, right? And it's one that was a flawed system that could exist for quite a long time post-war because of the prosperity that existed, because of women being the caregivers, who were taking care of all of the social matters and been made invisible in terms of doing that, right?
So it didn't cost anybody, right, to have women at home during that work. No, they were just doing it for unpaid labor and subsidizing businesses in that way. So not only do you get government subsidize businesses, but women have subsidized businesses, racism subsidizes businesses, enabling people to be pit against each other. So moving towards more of a social welfare state is certainly the move to make.
But I think that the resistance in the US tells us just how strong ideology is in terms of the commitment to some fiction of the unregulated market working well and ignoring the way in which the government subsidizes and affects the market all the time. But I think it's ideology. I mean, look at the latest election that we just went through. I mean, it's kind of extraordinary to see how many people vote against their self-interest.
And why did they do that? I think because they are convinced by a very deep-seated ideology of individualism and a fiction about the way that the market works and the ability to have democratic and capitalist systems work in harmony.
AUDIENCE: [INAUDIBLE] I didn't read the complete-- maybe the first third. But in terms of Davis' argument of new model, he raised the prospect of a benefit corporation which would oftentimes [INAUDIBLE] talked about. And then as you also look at like Indian corporations, [INAUDIBLE] corporation really, I think, is a successful model of a socially engaged corporation. And I wondered what you two think of those two models.
RISA LIEBERWITZ: I have to-- I have to go, so I'm going to leave it to-- good timing, huh? I'm not leaving in a huff.
LOUIS HYMAN: Not fair.
RISA LIEBERWITZ: I'm just leaving at the right time to let loose.
LOUIS HYMAN: Are you in a huff or not?
RISA LIEBERWITZ: Not yet. I have so many things to be in a huff about that I have to--
LOUIS HYMAN: OK. Be measured in your huff [INAUDIBLE].
RISA LIEBERWITZ: --be measured, yeah, yeah.
LOUIS HYMAN: Yeah, he does talk about the benefit corporation. And I guess this is a space in which I disagree a bit with Risa, that I don't think the-- when you look at corporate leaders, it's not always about profits, especially in the post-war. If you actually see what they do, they really have a-- yeah, David, you can sit down. They have a multi-stakeholder point of view. And this idea that shareholders are the only ones that matter really arises in the ideology in the early 1970s.
If you read people like John Kenneth Galbraith, right, in the late 1960s, he's writing about how corporations work. He kind of laughs at shareholders as chumps who have no real control over the corporations, that managers have totally taken over. And if you want to read more about that, Mario Sullivan has written the best work on this. So I don't agree that it's so clear that capital is this mechanistic process of greater wealth accumulation.
I think it's a constraint. Profit is a constraint on how firms work. In the long run, firms are only sustainable if they're profitable, which is an important point. But I do think that there are alternatives. So like Etsy is organized as a B corporation, and they are committed to, in theory, multi-stakeholder values. I think those are important because they give a signal to investors saying, look, we're not going to maximize your return. That's not what we're about.
And in some ways, that's not going against the corporation. It's returning to an older model of a multi-stakeholder model of the corporation. And we'll see how it goes. It's important, though, there's new corporate models that are pretty-- and I know less about the Tata Group, though I know that he does very little with comparative varieties of capitalism. Although, he signals towards varieties of capitalism and certainly economies of different kinds of modes, like monopolies.
So Americans have long held that monopolies are bad. But monopolies in the post-war gave us all-- Bell Labs gave us all our technology. Monopolies today, like Google, give us all our technology. So, I mean, there's something to be said for letting monopolies just form through all those mergers. Are we at an end? Now I feel very isolated.
PROFESSOR BOYER: There's time for one more question.
LOUIS HYMAN: OK.
LIZ: Who do you think this book was written for? When I read it, I was really perplexed. I felt like I was running all over the place.
LOUIS HYMAN: Who was this book written for, asked Liz? Liz, who do you think it was written for?
LIZ: Policymakers would be the goal, but it seems fairly uneducated. I said this wrong. People who don't have very sophisticated quantitative concepts or the other issues you pointed out. What do you think?
LOUIS HYMAN: I mean, it was written in a very flip tone, very flip asides, which I like as a flip person who likes to be flipped. But I did wonder if it was meant to be engaging to the undergrad or something like that. But I also feel like most undergrads would have a more sophisticated knowledge of either history or statistics or economics. So I'm not exactly sure, which is probably why it's with a small press. I imagine his proposal didn't land at a big house like he'd intended.
AUDIENCE: [INAUDIBLE] that he was thinking it through because he's got kids and doesn't know where they're going to get a job.
AUDIENCE: I think that's right.
LOUIS HYMAN: Yeah.
AUDIENCE: He seemed very self-reflective.
LOUIS HYMAN: He was very self-involved. Sorry. I mean, yeah. So you thought it was for the child of a college professor as the market?
AUDIENCE: Yeah. It was like, oh, my god, it sounded like [INAUDIBLE]. I just think that's where his head was, right? It was through his own lens, and it didn't seem to have academic body. It didn't seem to have a positive message. It came to really be a self-reflection of he sat down on his porch and--
LOUIS HYMAN: Yeah, and it wasn't--
AUDIENCE: And he started out in his own head.
LOUIS HYMAN: And it wasn't a popular [INAUDIBLE], because with popular [INAUDIBLE] you have stories of people.
LOUIS HYMAN: You have to have people and there were no people. So, I mean, what do you think?
AUDIENCE: Well, I was going to say-- I mean, the book is based on a whole bunch of articles, and there's whole articles looking at this kind of phenomenon, right? [AUDIO OUT]. --and various outcomes. I mean, my kind of take is, in one sense, there's a core of a more so narrow argument in there that I think correct but fairly standard in the literature, right, that the decline of the internal labor market, right, the decline of benefits, the breakdown of the multi-divisional corporation, right, I mean, some of the stuff you were talking about from the 70s and stuff, right?
So that's in there, and the sort of breakdown of the internal labor market, the externalization of human resources within corporations, right, this sort of-- Cappelli made that argument of the new deal at work in '99, right? So I think that's not wrong. I mean, that's correct, but it's not new in a sense, right?
The bigger kind of argument, right, which he sort of plays around with the idea that the breakdown of the most divisional corporation of the 1950s and 60s actually means the sort of general weakening of business and corporations, right? He sort of plays around with that but never kind of fully goes there. And I don't think he's got the goods to say that, right? I mean, his heart is with the cooperatives and the localization at the end, right, because he also writes about that, right?
He's got articles where he's writing about a society where we have cooperatives that are local and stuff. And that's what he really believes, I think, right? So that's what he believes at the end, right? But I don't think necessarily he's got the evidence that we're going there, right? That's why it's a little bit of an afterthought, right?
And that part-- also you have benefit corporations, cooperatives, worker-owned corporations, right? I still think back to back in the 1990s when I was trying to think of a PHD topic. And Harry Katz, who is a little more cynical than I-- I was discussing with him the idea of maybe I should study the sort of worker-owned things, right? And he's like, yeah, but that seems to come around every 10 or 20 years. And everybody thinks it's really cool and nothing ever happens of it, right? It always goes away again, right?
And there was a wave in the 90s and Harry was right. They kind of went away again, right? And there's a wave of cooperatives right now. And I have this kind of cynical feeling that maybe in 20 years we'll have a bunch of big corporations that are configured differently but are still dominating the world again. So that's sort of a negative cynicism out of it.
LOUIS HYMAN: Well, thank you guys all for coming out. Thank you professor Boyer for organizing this and the rest of the IRL-- [AUDIO OUT]
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Louis Hyman and Risa Lieberwitz share their perspectives on the book, "The Vanishing American Corporation: Navigating the Hazards of a New Economy" by Gerald F. Davis. Part of the ILR Book Project.