Capitalism's Dirty Secret: Corporations Don't Create Jobs, They Destroy Them
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Corporations are not working for the 99 percent. But this wasn’t always the case. In a special five-part series, William Lazonick, professor at UMass, president of the Academic-Industry Research Network, and a leading expert on the business corporation, along with journalist Ken Jacobson and AlterNet’s Lynn Parramore, will examine the foundations, history and purpose of the corporation to answer this vital question: How can the public take control of the business corporation and make it work for the real economy?
For the last four decades, U.S. corporations have been sinking our economy through the off-shoring of jobs, the squeezing of wages, and a magician’s hat full of bluffs and tricks designed to extort subsidies and sweetheart deals from local and state governments that often result in mass layoffs and empty treasuries.
We keep hearing that corporations would put Americans back to work if they could just get rid of all those pesky encumbrances – things like taxes, safety regulations, and unions. But what happens when we buy that line? The more we let the corporations run wild, the worse things get for the 99 percent, and the scarcer the solid jobs seem to be.
Yet the U.S. Chamber of Commerce wants us to think that corporations – preferably unregulated! – are the patriotic job creators in our economy. They want us to think it so much that in 2009, after the financial crash, they launched a $100 million campaign, which, among other things, draped their Washington, DC building with an enormous banner proclaiming “Jobs: Brought to you by the free market system.”
But the truth is that unfettered corporations are just about the worst thing for creating decent jobs. Here’s a look at why, and where the good jobs really come from.
Taming the Wild Horses
Corporations are kind of like wild horses. They can run you down. Or sweep you around in circles till you’re exhausted. And in today’s world, they’ll surely run off and take your jobs to China or someplace else if you don’t learn how to tame them.
Bad things happen when corporations are unconstrained by strong national policies that force players to think long term, behave decently, and refrain from dumping their short-term costs on the rest of us. They tend to focus single-mindedly on maximizing profits for shareholders at the expense of all else – including jobs. Executives set their sights on a path to short-term boosts in share prices paved with layoffs, wage cuts, and jobs moved overseas, while slashing research and development and investing in the skills of their employees.
The U.S. Department of Commerce found that from 2000 to 2009, U.S. transnational corporations, which employ about 20 percent of all American workers, cut their domestic employment by 2.9 million even as they boosted their overseas workforce by 2.4 million. The result was an enormous loss of jobs nationally, as well as a net loss globally.
In the 1990s, these companies added more jobs at home than abroad. What changed? 1) The rise of India and China, with 37 percent of the world’s population, as hotspots for off-shoring; and 2) the availability of tens of millions of workers in these places, many with college degrees, to do the jobs previously done by American workers.
In India, indigenous companies like TCS, Infosys and Wipro along with transnationals like IBM, HP and Accenture, employ hundreds of thousands of college-educated workers to perform IT services, in large part for American firms. In China, the electronics contract manufacturer Foxconn (headquartered in Taiwan) barely existed a decade ago, but now employs about 1.2 million workers, with Apple its single biggest customer.
And yet Big Business still trumpets itself as the American Job Creator Fairy. Apple has released a report claiming to have created half a million domestic jobs – a highly dubious number which takes credit for everything from the app industry to FedEx delivery jobs (never mind that drivers would be hauling someone else’s gadgets if Apple went out of business). It’s true that in the U.S. managers, engineers and other professionals have found good jobs at Apple. But the non-professional employees are just barely scraping by. A study of the iPod value chain in 2006 calculated that among Apple’s domestic employees, professionals earned around $85,000, not counting stock options, but the retail workers in Apple’s stores earned only $26,000. This is troubling because as Apple has grown in size, most of the employees it has hired in the U.S. work in retail. Are these jobs paths to long-term, stable careers? Quite likely they are not.
While a company like Apple whistles "God Bless America", executives are not going to talk about the job losses induced by off-shoring, nor the horrifically abused foreign workforce that moving jobs to China has produced. And they’re not going to tell us about Apple’s preference for hiring part-time employees who can’t afford to buy health insurance. When such uninsured people have health emergencies, someone has to pay, and the burden falls on the taxpayers.