by James S. Albus
Corporate Downsizing has become the American Way of doing business.
IBM recently reduced their payroll by 63,000 workers. Sears laid off 50,000. AT&T just announced it was letting go 40,000 workers. Boeing reduced its payroll by 28,000. In 1995, American corporations laid off a total of 400,000 workers.
These layoffs are not because U.S. businesses are going broke. These corporations are making record profits.
What is happening is that the impact of modern computer automation on productivity has begun to be felt by the middle class. Because of the productivity enhancement of the new technology, corporations no longer need as many people to conduct business. They can lay off workers, cut payroll costs, and continue to run their businesses successfully.
Economists call these layoffs, corporate downsizing. They say it makes corporations lean and mean. They say this is necessary for business to be competitive in the international marketplace.
The benefits are enormous for stockholders. On the day AT&T announced its layoffs, its stock rose by $2.50 per share, producing a profit of $4 billion for the stockholders.
But the effects are devastating for workers. Thousands of workers with good skills and many years of loyal service are facing an uncertain future. The job market is terrible, especially for older workers with high salaries. Most of them will never find a job as good as the one they lost. Is this inevitable? The answer is NO.
There are two problems:
First, the economy is growing too slowly to create a strong demand for labor. In an era of slow growth, downsizing may be the only way for big corporations to remain competitive.
Second, most people are overly dependent on wages or salaries for income. Few workers receive any significant fraction of their income from ownership of capital.
There is a solution to both these problems. It is called -- Peoples' Capitalism.
The solution to slow growth is to increase the investment rate. The solution to over dependence on salaries is to give everyone ownership of stock to supplement their income. Peoples' Capitalism would do both of these things.
Under Peoples' Capitalism, investment would be increased by 12% of GDP. This would cause the economy to grow at a rate of 6%, or three times faster than it is growing today. If this were to occur, jobs would be plentiful because there would be a strong demand for labor.
If the economy were growing at 6% per year, consumer spending power would grow as well. There would be increased demand for products. Instead of downsizing to become lean and mean in a shrinking marketplace, companies would be in the mode of hiring to meet growing market demand.
Even more important, Peoples' Capitalism woudl pay dividends from profits on investments to supplement income for everyone. Average people would be much less dependent on wages and salaries for income. As a result, many would voluntarily drop out of the labor force. Many families with two incomes would opt for one or the other to stay at home. Many workers would go back to school, or retire early.
In the world today, there is no physical reason for unemployment. Look around! There is no shortage of work to be done. The world is full of need. There are people everywhere that need better food and housing, more education and medical care.
What is lacking is:
- sufficient investment to generate the wealth needed to pay for what needs to be done
- a mechanism for distributing the wealth that could be created by modern technology to those who are most in need
Peoples' Capitalism would solve all this. Check it out. It really is an answer!