Labor's Leadership Lost

Remember when the U.S. model of "flexible" labor markets, deregulated
transportation and innovative finance was supposed to be an example to
the world? Freed from the constraints of minimum wages, burdensome
product regulations and troublesome unions, American corporations would
develop qualitatively superior products at competitive prices.

Today our financial architecture is in shambles and the U.S. is
easily surpassed in most measures by such social democratic pariahs as
Sweden and Germany, where unions are strong and wages - and vacation
time - relatively generous.

Meanwhile, what has happened to the core productive capacity in the
U.S.? Why have corporate managements failed to deliver on the promise of
unleashing new waves of product innovation and productivity
enhancements?

Writing in the February issue of Dollars and Sense
magazine, University of California at Chico economist Michael Perelman
points out that the U.S. does lead the world in one category. That
leadership role does a lot to explain our current travails.

U.S. corporations rely on a far higher percentage of supervisory
personnel than any other advanced economy. In 1890, supervisory workers
made up less than 1 percent of the U.S. labor force. Today they
represent nearly 16 percent. "Rather than empower workers to take on
more responsibility, employers restrict workers' auton-omy by relying
instead on guard labor, supervisors," Perelman wrote.

Examples abound, and some may provide possible clues to recent news
items. Perelman cites work on the introduction of computer controls in
the paper industry. When these first were introduced the system was
accessible even by frontline production workers. Workers used this new
information to make profitable modifications of the production process,
but management soon moved to limit access.

Why? Doesn't profit maximization drive management? The real question
is profits for whom. In our current political economy, where ownership
and control of capital assets is concentrated in a few hands (sometimes
even stockholders have little voice), corporate executives worry about
workers who become too knowledgeable. "To admit that workers have
something to contribute - besides blindly carrying out the demands of
management - undermines the ultimate rationale for management's
dominance," Perelman wrote.

Equally, knowledgeable workers are in a better position to demand
higher wages. Broadening worker control of the production process may
increase sales and total revenue, but management and stockholders may
find they receive a smaller share of that increased pie. Thus capital
markets and even many banks are often wary of lending money to such
"unconventional" enterprises. In addition, beyond these narrowly
economic motives, the exercise of power can become intoxicating in
itself, a source of entrenched personal identity.

What are the consequences of workplaces organized around management
prerogatives and distrust of workers? Most of us don't like taking
orders or being treated as naturally devious or stupid. The rise of
guard labor is not an inevitable feature of modern technology. The U.S.
employs about twice the percentage of supervisory personnel as does
Sweden. Not only does the proliferation of supervisors add costs, it
wastes workers' capacities and sometimes even channels them into
destructive ends.

The Los Angeles Times reports on unsuccessful efforts by production
line Toyota workers to call management's attention to persistent quality
problems years in advance of current recalls. In response to persistent
and often demeaning supervision, workers in certain historical
junctures have rebelled.

Perelman cites a late '60s auto plant where workers revolted against
the production of a poorly designed car. When management rejected their
suggestions, they initiated a counterplan by deliberately omitting
parts.

The implications of this management model go beyond the individual
firm. Perelman points out that one consequence of the decline of U.S.
manufacturing has been shrinking incentives to invest in productive
activity here.

When businesses are less innovative in quality and cost, customers
are lost, and workers see their incomes decline. Capital then turns to
finance, where the wealthy devise new schemes to lend money to a
stretched middle and working class. Finance comes to represent a large
share of corporate profits, dominates politics and pushes a strong
dollar, thereby further hurting exports.

The finance bubble, full of deceit and manipulation, has itself been
one leg of a squishy productive model. Important as it is to reform and
rebuilding finance, workers gaining a stronger voice and stake in
productive enterprise is equally vital.