Academic journal article Phi Delta Kappan

Profits without People

Academic journal article Phi Delta Kappan

Profits without People

Article excerpt

Why - when corporations are shedding employees and reducing job opportunities as fast as they can - are business leaders demanding that educators produce a world-class workforce? Could it be, Mr. Boutwell speculates, that one way to keep wages and incomes low is to have a huge supply of highly educated workers but a small demand for their services?

Louis V. Gerstner, Jr., had a busy year in 1993. He was recruited from RJR Nabisco to become the CEO of IBM. He was also the principal author of a book that berated American schools and teachers.(1) In that book, he held educators accountable for not increasing America's supply of world-class workers - those with high-tech skills and problem-solving abilities - that he claimed the corporations sorely needed.

Gerstner's recruitment to IBM turned out to be very propitious for him, though not for IBM's world-class employees. First, Gerstner was paid a bonus of $4,924,596 just to sign as CEO. Then he was given a stock package worth $10,820,880. That, plus some incidental incentives, brought Gerstner's total compensation package to more than $21 million.(2) For that kind of money, one would think that Gerstner would just take care of IBM's business and let educators take care of their own, especially when Gerstner's advice to educators was wrongheaded and disingenuously misleading.

Gerstner's own executive behavior gave the lie to the message of his book. IBM made its reputation and its huge profits by employing the high-tech researchers, engineers, and technical developers who represented the finest products of American schools - indeed, the very kind of graduates that Gerstner claimed the public schools were not supplying to business. Yet, in line with IBM's new "lean and mean" management strategy, Gerstner fired some 90,000 of those highly trained employees, about one-third of IBM's 270,000 workers. That was in addition to the other 183,000 high-quality employees that IBM fired before Gerstner arrived.(3)

Gerstner's actions were driven by the current conventional wisdom of business executives with regard to the new global economy, to wit: systemic restructuring of the world's industrial economies is proceeding rapidly, and corporations have to capitalize on the power of technology and use more sophisticated production processes to become more efficient. They need to build what the executives stylishly call a "new economy." Gerstner and his peers felt that American business had better get on the bandwagon or be left behind. These corporate executives believed that America's businesses had dilly-dallied and managed to lose America's competitive advantage through a series of ill-advised and inept decisions. The effects of those poor decisions were accelerated by a series of unwise government actions, especially certain tax policies and a military expansion.(4)

For at least two decades, the United States did little to protect its manufacturing base against intrusion from foreign competitors. But by 1980, America's core corporations had finally recognized the steady loss of competitive advantage to businesses in other countries, Japan and Germany in particular. In their panicky reaction to the new global economic challenge, these core corporations initiated a number of piecemeal actions.

America's business executives could have responded more effectively to changes occurring in the global economy. They could have cultivated new ideas and approaches to make the American economy competitive again. But they did not. Instead, they adopted simple-minded downsizing.

First, the core corporations and their subsidiaries began to shift factories and routine manufacturing work to low-wage areas within the U.S. When they ran out of places to move to in America, routine manufacturing companies began moving to Mexico, Malaysia, Ireland, and other low-wage foreign countries. Based on what one writer calls a "postindustrial fantasy" many thriving high-skill industries that manufactured such commodities as textiles, electronics, autos and auto parts, and hundreds of home consumer products were allowed either to move overseas or to come under the domain of other advanced industrial countries - Japan, Germany, the Netherlands, France, and others. …

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