In a debate on inequality and how workers should be given more, the question was asked, "Why would businesses invest in equipment to increase productivity if it all went to workers and not profit for the owners and investors of the company?"
This is exactly the point that divides people with different ideals/personalities. Some view workers as just tools the business pays for to operate. Others view the employees as having a larger, fair stake in the company because they're the ones actually running it day to day. They wouldn't have a job without the company, company wouldn't exist without people working the jobs.
Just like anything, you can pay for cheap quality and not maintain it, but it can still run and you should save money if it runs well enough, or you can pay top dollar and maintain the parts well. Maybe it'll run better, maybe it'll run the same.
I think this type of managing is why, in America at least, we have growing inequality with a shrinking middle class (source1, source2). Rising inequality can lead to rising crime, social unrest, and political extremism. It makes sense from a capitalism perspective to only reward the owners and investors, but it also seems short-sighted as there are long-term consequences in a society from this where the owners and investors become an increasingly exclusive class of people.
I blame Managerialism as the source for what kick-started the trend to growing inequality problems, then aided by various government policies that rewarded and encouraged this practice. Managerialism is belief in the value of professional management and practicing ruthless economic efficiency with control, accountability, and measurement. Decision making is done based on number reports only, about maximizing returns for owners and investors only. From a business perspective, it makes sense, but it also takes a negative toll on society.
Family-owned businesses grew into giant, impersonal corporations. Managerialism ruined communities and human relationships. The boomer advice of pounding the pavement and getting a job with just a firm handshake and some gumption is almost entirely an artifact of history. Under managerialism, costs are cut everywhere, so money flows directly to the top as much as possible. Jobs are outsourced and processes are automated, including hiring processes done with computer software sorting resumes. We also now deal with annoying automated phone relays when trying to call offices, having to shout, "Speak to a representative" into the phone over and over. The need for human attendants has been and continues to be removed as much as possible. There is less community support from local businesses as they've gone under or been bought out by larger companies. Little league and high school teams have less sponsors because big companies don't care about that stuff. It's just another cost that's easy to cut.
Some argue that this is good practice because it lowers the costs of goods. Combined with the development of technology, I concede that it has - in some cases; but when jobs are cut and wages stagnant from long-term managerial practices, the low prices don't matter when there's no discretionary spending money left. Owners and investors are heavily rewarded for their risks and investment, but in the long-term it's getting harder and harder for more people to become owners and investors themselves. It's becoming an exclusive class in society. Besides, is there really risk when companies are considered too big to fail and get bailed out by government anyway?
Another argument is that boosting the stock market is good for everyone's retirement accounts. Money in the stock market is good if you own a LOT of stock, but the vast majority of people don't. They have some retirement accounts invested so it's good if the accounts grow safely, sure; but improving wages is far more beneficial in the long term than people's 401K savings. They can use that money to spur the economy, save even more, and upgrade their quality of life.
I was surprised by this Fox News piece from 2019. It sounds like a very progressive concept for them as it discusses the negatives of how certain hedge funds and "vulture capitalism" is bad: https://www.youtube.com/watch?v=IdwH066g5lQ
Again, it's this practice of ruthless economic efficiency. Outsource jobs, liquidate valuable assets, operate on a bare minimum of employees needed and pay them as low as possible while maintaining adequate, necessary staffing. Then lobby congress and buy politicians to set policies in your favor.
I blame these managerialism practices and the rise of hedge fund "vulture capitalism" for destroying everything by depressing wages, killing jobs, and creating the terrible hiring practices we have today. The managers hired to cut costs and increase profits for owners and investors is peak capitalism, but destroyed the human and community connection.
Another financial game being played that is important to note is with stock buybacks. Watch this Vox piece, also from 2019, titled, How American CEOs Got So Rich:
CEOs and executives could get a sweet bonus if the stock price goes up to reward investors. The quickest way to increase their stock price is to use corporate profits to buy their own stock. The Securities Exchange Act of 1934 cracked down on stock manipulation and insider trading, which also, in a way, forced corporate profits to be reinvested in growing/upgrading the company, raising wages and bonuses, and/or pay dividend profits to investors directly.
Laws changed in the early 80s, bringing back buybacks. Companies spend majority of profits buying their own stock. It's not being reinvested nearly as much. Money in the stock market is good if you own a LOT of stock, but the vast majority of people don't. They have some retirement accounts invested, sure, but I already covered how improving wages and bonuses are more beneficial to the majority.
GM comparison with Toyota and Volkswagon. GM was doing buybacks heavily, not reinvesting in their company. They declined. They earned record profits, yet cutting operations. Something else is probably going on, but it's easy to see why so many people are upset to see the same headlines over and over of companies making record profits, but then increasing their costs and/or screwing over their employees.
Southwest Airlines had a loot of trouble during the end of the year holidays in 2022. They previously received a $7billion federal bailout, spent $5.6billion on stock buybacks, gave their CEO a raise to $9.1 million, and spent $0 updating their software. Thousands of workers and travelers paid the price.
In January 2023, Bed Bath & Beyond revealed that the company is considering filing for bankruptcy. In the previous year they spent $589 million on stock buybacks while reporting a $559 million loss. Shouldn't that money have been reinvested into improving their competitiveness and marketing?
The Republican party often pushes for corporate tax cuts for companies to lower costs and keep more money to reinvest in their business and workforce. Instead, we got more record buybacks benefitting the same exclusive group.
Multiplier Effect: There is a chain of damage described and a real life example shown in the video. When big plant closes, or a large employer of any kind that serves as an anchor for the community, so do some of the suppliers feeding into that company and businesses that serve the employees working there. When the big one closes down, it kills the whole community as jobs/income dry up. This was especially prevalent in manufacturing plants that all got relocated overseas. All that money went to executives and investors. Sometimes products got cheaper for those of us still with jobs to buy it, but many just boosted profits for the buybacks.
This is harsh capitalism, but I can't blame them when some companies genuinely go belly up. This is what happened to all the ghost towns when gold rush or other mining operations ended.
I blame the rising inequality problems and people's growing acceptance of "socialist" policies on managerialism and the attitude of people like Bob's boss from The Incredibles when he cried out, "We're supposed to help OUR PEOPLE! Starting with our stockholders, Bob. Who's helping them out, huh?"
Look, you can still make money, while also taking care of your own. It's possible. You'll keep less for yourself, but employee morale is good to keep up productivity and everyone will WANT to promote your business.
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