Stop Corporate Terrorism
For the past year, concern with terrorism has dominated public discourse in the United States. Our sense of security has been badly shaken, while politicians and the mass media have missed no opportunity to remind us of our vulnerability. This single-minded focus is distracting us from a major threat to our quality of life and our peace of mind. We should turn our attention to the corporate terrorism in our midst, name it, analyze it, and discuss what we can do about it.
In the 1980s and 1990s, business leaders and politicians used the forces of free trade, globalization, deregulation, and privatization to reshape our economy. They expanded the freedom of corporations to engage in mergers, downsizings, and relocations. Although these decisions disrupted the lives of millions of workers and communities all over this country, the stock market rose to unprecedented levels. Some gained and many lost. According to Business Week, while the average CEO made 42 times the average worker's pay in 1980, by 2000 this had risen to 531 times. Over that same span, the income share of the richest 5% increased more than 40% while that of the lowest fifth decreased more than 20%.
The September 6, 2002 New York Times provides graphic illustration of this pattern. In an article entitled "G.E. Expenses for Ex-Chief Cited in Divorce Papers," readers learn that Jack Welch, the infamous slash and burn CEO of GE who retired a year ago, not only collects a pension of $9 million a year and consulting fees of nearly $20,000 a day, but has also retained his use of a Manhattan apartment valued at $80,000 a month (yes, a month!), plus wine, food, and laundry, access to a corporate jet (worth another $3.5 million per year), floor level seats to the New York Knicks, courtside seats at the U.S. Open, a box at the Metropolitan Opera, membership fees at four country clubs, and more.
An article conveniently located nearby (might there be a closet radical working as editor at the nation's premiere newspaper?) introduces readers to Kathy Steever, office manager of an auto repair shop in Sioux Falls, South Dakota, who has just lost her employer-provided medical benefits. Ms. Steever is expecting a baby in December while her father, who also works at the same shop, learned last year that he has cancer. Both will face their medical challenges without insurance, along with about 40 million of their fellow Americans. This is the class reality of the U.S. economy.
When the 1990s bubble burst, corporate executives sought to protect their own gains by shifting the burdens onto others through a campaign that deserves to be called "corporate terrorism." Workers have been the primary victims of this campaign. In sudden closings and workforce reductions, executives have eliminated hundreds of thousands of jobs, from airlines and telecommunications to manufacturing and hotels. Those workers who still have jobs face increased pressure to get more accomplished with less support. Benefits have also been slashed. Corporate employers have shifted more of the burden of rising healthcare costs to workers. A recent national survey of 460 major employers found that 70% plan to make changes to their health benefits in the coming year, reducing benefits and increasing co-payments and deductibles.
Pensions face new risks. Fifteen years ago we were already hearing that many major corporate pension funds were underfunded, that they had been tapped for investment capital. Now, corporate scandals, such as Enron, have revealed that major employers have loaded 401(k) plans with corporate stock, not only inflating the stock's apparent value but also endangering workers' pensions if the stock's price collapses.
Stockholders have also been victims of corporate terrorism. Corporate executives colluded with accountants on the one hand and analysts on the other to prop up stock prices long after operating profits had begun to plunge. When the ugly truth came out, stock prices plummeted and the Dow Jones and NASDAQ averages stagnated, costing stockholders large chunks of their nest eggs. A report recently cited by National Public Radio toted up five trillion dollars in losses and predicted it would take the typical stockholder thirty years to make up for the losses.
While executives have manipulated accounts, pension funds, and stock prices to net hundreds of millions of dollars, millions of Americans have watched their retirement funds dissipate. Consumers (most of whom, of course, are also workers and stockholders) have also been buffeted by these practices. The deregulation of utilities, particularly electricity, has raised the cost of living, even for people on fixed incomes. In California, for instance, costs to consumers have gone up 30% since the Enron fiasco. Corporate plans to privatize water - touted as the key commodity of the new century, to play the role that oil played in the 20th century - threaten our future standard of living.
The last time Americans were confronted with such economic challenges - the crash of 1929 and the ensuing Great Depression - they responded by organizing in their workplaces and neighborhoods and in the political arena. Workers organized new unions adapted to the new structure of employers (national rather than local), the new organization of production (unskilled mass production rather than craft-based), and the new make-up of the workforce (immigrant and African American rather than primarily native-born white men). They developed strategies and tactics, such as sitdown strikes, that were effective despite high levels of unemployment, and they reached out to the wider communities in which factories, mines, and mills were located.
The results were awesome: while only two and a half million had belonged to unions in 1929, eight million joined over the course of the 1930s, and major corporations like U.S. Steel, General Motors, Armour, Firestone, and Westinghouse were signed to national contracts which raised wages 30% or more, guaranteed vacations and pensions, and established seniority protections and grievance procedures.
In the political arena, unions joined with community, farmers, consumer, and civil rights groups to push successfully for changes which benefited all workers, not only union members: a national minimum wage, legal reforms protecting the right to organize, unemployment insurance, and social security. They also pushed the federal government to adopt economic policies which created jobs, built new infrastructure, and stimulated demand which helped to restore economic growth.
It is time for us to reflect on this past history and to consider the lessons it offers for our present predicament. The labor movement needs to adapt to the new structure of employers (multinational), the new organization of production (information technologies and high tech), and the new make-up of the workforce (diverse inside the U.S. and inclusive of workers outside the U.S. employed by the same multinational corporations). And we need to ally with community, environmental, farmers, and civil rights groups to generate the political expression and power that can create new rules and policies that ensure fairness and equity in the global economy. Through such a process we can put a stop to the corporate terrorism that threatens our quality of life and peace of mind.
Peter Rachleff is a professor of history at Macalester College in St. Paul, Minnesota.