From one perspective, what happened during the global financial crisis could be seen as either the failure of free market capitalism, or what invariably happens when it’s replaced with something more corrupt. After all, this is supposedly the system that creates a rising tide that lifts all boats, or at least all boats captained by honest folk who work hard. The fact that so many have found their lives involve increasing pressures coupled with decreasing rewards, regardless of whether or not they did everything like they were lead to believe they should, could be taken as evidence that something went wrong with the free-market ideal.
But others have a different perspective regarding free market capitalism. This perspective denies that the freedom implied in the term ‘free market’ refers to uncoerced, voluntary exchange resulting in appropriate, mutual gain for all participants regardless of where they may be positioned on the economic ladder. Rather, it is argued that the ‘freedom’ is the freedom to use whatever means possible in order to compete against each other, take what we can, and generally dominate, suppress and beat other businesses via whatever methods you can get away with.
In other words, while capitalism has helped improve life in some ways, it remains a fundamentally bigoted and elitist system that favours one group over another. This favouritism has little to do with the belief held by free-market zealots, that rewards always go to the manifestly worthy. Rather, they are directed toward the group who gamed the system for structural advantage. Unlike in previous cases of elitism and bigotry, classes such as gender, race, or religion have little to do with favouritism within the free market system. It is to do, instead, (as the Zeitgeist movement put it) “with a kind of forceful expedience and competitive mentality that pushes itself to the top of the class hierarchy, at the inevitable expense of others”.
An important question is whether the free market went wrong and was allowed to be corrupted by those who betrayed its principles, or whether the corruption is just what you get by following the logic of market competition and the commodification of everything including debt and state power. This could be seen as analogous to the question of whether Stalin was an accident or the inevitable consequence of running the communist experiment. A detailed investigation may be beyond the scope of this essay, but regardless of whether the free market became corrupted or whether it just evolved in predictable ways given its premises, we can see in the beliefs mentioned above why the worsening conditions brought about by the lean-and-mean model were tolerated as much as they were.
Firstly, there is that belief, mentioned earlier, that money always flows toward the manifestly worthy. The implication of such beliefs is that, in order to have gained the most in free-market competition, your contribution to society must have been just as high. In other words, if a few are enjoying skyrocketing wage increases and bonuses, becoming billionaires in the process even as the rest of us experience deteriorating conditions, those few must have done something both important and helpful for society, making their wealth a just reward.
Such beliefs arguably do not coincide with the logic of the capitalist system. Recall that this is an inherently class-based system that divides us up into two groups: Workers who do most of the labour (both physical and mental) and who may remove their labour but have no right to a job; and the Owners, who choose who is employed, gain most from production but are not obliged to participate in production itself.
Under such a system, everything that really makes a positive difference to our lives- all the services, the problem-solving, the creative innovation- happens almost exclusively within the lower echelons of the corporate complex. It is those at the lower and middle runs of the economic ladder- blue- and white-collar workers- who actually produce wealth, only to see the fruits of their labour capitalized upon by those who exploit the mechanisms of the market. That’s why we call this system ‘capitalism’. This is not to deny that those who hold vast wealth worked hard, or are clever; it is just acknowledging that the hard work they engage in really has little to do with generating real wealth by solving society’s problems (such work being undertaken by those lower down on the economic ladder.) Instead, it involves manipulating and restructuring the market so that rewards are directed toward those who rigged the game, not to those who actually do the bulk of the problem-solving, engineering, and creative innovation.
Secondly, those employees who accepted increasingly harsh and unfair working conditions had a mind-set nurtured by three decades of management practices within the paternalistic model (see part four of this series if you want to know more about Paternalism.) They were prepared to do what was necessary to help their employer overcome current challenges, because they still believed there was such a thing as mutual loyalty. By the time it became obvious that the system was now one in which their class was exploited by the executives in the corporate hierarchy, many of those white-collar workers were trapped in economic conditions that restricted their ability to choose alternatives.
This brings us to another way in which jobs are not like work. Where work is concerned, provided you are working well and appropriately, your living conditions will improve. Appropriate work done well is always rewarded. But when it comes to jobs, you can do everything you have been lead to believe is right and yet experience deteriorating conditions because the system favours a class or group other than your own. 
The reality of the lean-and-mean model is that it allows the executives in the corporate hierarchy to receive a disproportionate share of the wealth while also forcing employees below the executive level to bare most of the costs of economic recovery. Over the period in which the lean-and-mean model rose to dominance, chief executives gained a 490% increase in annual compensation (ie salary, bonuses, stock grants and options.) This, remember, was during a period in which other workers had wage increases that barely kept up with inflation, or even found themselves financially worse off as they spent their retirement savings, accepted lower-paid jobs and other such measures, in order to meet household obligations.
During the 80s and 90s, the feeding frenzy of mergers and acquisitions meant that related ‘downsizing’ happened during periods of prosperity as well as downturns. One in every five white-collar employees spent less than 24 months in their job before getting fired, and their termination did not necessarily have anything to do with the quality of their work ethic. They were, instead, victims of a system that used layoffs as a blunt instrument of first rather than last resort, wielded by an executive class prepared to blame anyone other than themselves for inadequate results. 
Destroying viable businesses and sacking good workers might sound like bad practice, but only if you cling to the belief that the free-market is a rising tide that lifts all competently-piloted boats. But, if you see it in terms of a system of competitive exploitation favouring one class at the expense of another, it actually makes sense. A business world in which there is little job security creates an environment of fear. The less secure your job is, the less bargaining power you have. Therefore, the more you can be pressured into taking on more labour for fewer rewards. By cutting wages, slashing benefits, and imposing longer working hours, a business is effectively saving money that could go toward the sort of things that boost stock prices, like bottom-line results or growth-orientated activities. The lean-and-mean model just doesn’t believe in wasting corporate earnings on employees, not if they can be coerced into working harder for less.
Is there coercion? That depends on what you believe. There are those who believe that there cannot be coercion in free-market economics because everybody is in a position to voluntarily accept or reject whatever terms of employment are offered to them. Of course they are free- it’s the ‘free market’! By this logic, the Dear Leader of North Korea must have been one of the most genuinely beloved rulers ever to have lived. He was, after all, the ‘Dear Leader!’. Maybe I am being unfair and forgetting that the free market ideal became corrupted by meddling governments. But I suspect it is more a case of those who strongly favour libertarianism acknowledging coercion when spoken of in the context of state power while being unable or unwilling to acknowledge the reality of economic coercion. But if the system has corrupted or evolved toward one akin to a game that’s rigged to favour one small group of players at everybody else’s expense, if one’s perception of the market is that of a highly insecure environment in which tenure in a job may be removed at any time, casting you with all the probable financial stresses that are part and parcel of a world of booms and busts back among the unemployed (hardly a group in a strong negotiating position in a world in which jobs are perceived to be scarce) then all these factors are very likely going to influence your decisions and offer an advantage to companies seeking to keep working hours high and employee rewards low. According to this perspective, general relative poverty is not really a tragedy to be overcome, but rather a positive condition for the owner classes, since it ensures economic coercion resulting in cheaper labour. Among those who lost jobs during the years 1995 to 1997, one in every four were paid at least 20% less when re-employed.
Not surprisingly, given that employee earnings were barely keeping up with inflation or actually deteriorating, many found that the only way in which they might share in their company’s rewards was through stock market. This only increased the financial sector’s power to prioritise the bottom line at the expense of everybody below the executive level. As ‘Marty’, an art designer at one of America’s largest publishing companies remarked:
“We’re all devouring ourselves. We all own stocks, and as shareholders, all we care about is profits. So we’re the ones who are encouraging the conditions that make our lives so awful”.
Under the lean-and-mean model, businesses use vestiture as a carrot-and-stick to both tempt and beat employees into working harder. Recall that this model really doesn’t want to reward those below the executive level in the corporate hierarchy if it can possibly get away with it. In the case of becoming invested, the lean-and-mean model provides a strong incentive for companies to set investing requirements high, since that invariably increases the likelihood that employees will be ‘downsized’ before they meet those requirements, enabling those funds to be recaptured. Limited, for example, pegged tenure at seven years. The rate of forfeitures was around 35%.
Many white-collar employees put up with unbelievably harsh job demands in order to participate in stock-option plans that permitted employees to buy stocks and shares at discounted rates, but only if they remained employed long enough to gain ‘vested’ ownership of the options. A few people did indeed gain fortunes, becoming ‘Microsoft Millionaires’ or its equivalent in high-tech and financial sectors. But the working conditions were so intense that many more just burned out before that reached that goal. Furthermore, it was a goal that often receded away from them, like a rainbow supposedly locating a pot of gold. “I know it’s ridiculous”, confided one software expert in ‘White-Collar Sweatshop’, “but I haven’t looked for another job because my boss keeps telling me he’s going to give me options sometime soon. It’s very hard to leave because you feel so close…even though stock options themselves are no guarantee that you’ll make money, and the promise of stock options is even less certain than that”.
The dream people like him were sold was that if every employee worked to the utmost of their abilities, every single moment of every single day, they would surely be rewarded enough to compensate for participating under such difficult and demanding conditions. But this was a naive belief because they were devoting time and energy to uphold a system that commodified their labour power and rerouted rewards to executives who, quite simply, were not held to the same inflexibly high standards. The rule that, in times of both recession and prosperity, employees should tighten their belts and accept reduced benefits for the good of the bottom-line does not apply at the executive level, although it’s hard to say why not. At least, it is difficult to justify but not explain if you realise that, in a plutocracy, there is a revolving door between corporate executives and the political/financial systems that determine CEO pay rates and bonuses.
According to Chrystia Freeland, author of ‘Plutocrats: The Rise of The New Global Superrich and the Fall of Everyone Else’:
“You don’t do this in a kind of chortling, smoking your cigar, conspiratorial thinking way. You do it by persuading yourself that what is in your personal interest is in the interest of everybody else….And what I really worry about is, there is so much money and power at the very top, and the gap between those people at the very top and everybody else is so great, that we are going to see social mobility choked off”.
That yawning gap consisted not just of the vast differences in earnings between those at the top of the corporate hierarchy and everybody else, but also in terms of the standards one must meet in order to gain reward in the lean-and-mean model. The familiar spin put on stratospheric executive pay is that it is just reward for those who shoulder the responsibility for steering such mighty corporate ships toward higher profits. But this is a lie, because these people seem to be richly rewarded regardless of how well the company does under their leadership. Sometimes, fiddling the books is undertaken so executives continue to be lavishly rewarded. For example, a fair number of companies simply repriced their stock options to lower levels in the event of declining shareholder value, enabling their executives to earn equity-related profits whether the company was doing well or not.
Warnaco’s Linda J. Wachner received a total of $73. 4 million during a period in which the company lost $32 million after taxes. At&T’s return on equity dropped by nearly 25% from 1995-1997, but CEO Robert E. Allen still took home nearly $21 million in all. That must have pleased workers whose lives worsened under management dictates like ‘there’s no free ride’.
Jack Stack, Chief Executive, Springfield Remanufacturing Corporation, was scathing in his criticism of executive behaviour within the lean-and-mean model:
“I have no patience with CEOs who make excuses for layoffs, who say they’re cutting jobs only to make the company more competitive in the market, to protect the interests of shareholders…When downsizing is the only choice, it’s a sign of how badly management has failed, and the people who get hurt are invariably those who had nothing to do with creating the problems in the first place”.
Those who get hurt are those who had nothing to do with causing the problems. Work is not supposed to be like that. Penalties are supposed to go to those who do bad work; rewards to those who do good. This rule often does not apply in the world of paid employment, a world in which ‘boss bears’ have rigged the system in order to favour their class at the expense of everybody else. For the most part, employees do not go to work at all, at least not to ‘work’ as I have defined it. They are instead forced, by economic coercion and social conditioning, to submit to labour within a post-modern slavery system that’s held in place by a value orientation of ‘competitive freedom’ susceptible to oppression, structural advantage, and abuse.
In the last three parts of this essay, we have seen how the Paternalistic Model nurtured a generation of employees who believed- justifiably so, at the time- that the largest corporations cared about them above and beyond their commodification as labour power; how declining economic conditions in the 80s lead to an attitude that these were dinosaur companies bloated with bureaucracy and complacent workers, and how the lean-and-mean model aggressively upped the pressures imposed on white-collar staff who believed- until it was too late to change- that the business world still operated under conditions of mutual loyalty. This has been a macroscale look at the world of employment can betray the promise of work: That reward comes to those who work well and hard in productive effort. Next, we shall investigate how technology is used to devalue labour within the hierarchically fascist dictatorships that are modern businesses. 

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  1. Tom says:

    These are great articles. Please keep up the blog. When you mentioned ‘Jack’ in this essay I thought that you meant Six Sigma champion of industry Jack Welch who transformed GE into a financial services entity.

  2. Come on. Businesses sometimes need more workers and sometimes they need less. Sometimes a line of products is successful for a while and then falls off. There is “nothing” mean about not paying people you don’t have work for. It would be mean to squander value/wealth in ways that did not increase it.

    Not the “Lean And Mean” is being overwrought and is a bit of management hype that is here being twisted more to the “Mean” side.

    Reward does come to the productive. But what does “productive” mean? It means that the work is justified by the demand levels for that which is being produced. When this is no longer the case for much of the work done by the old staffing levels then that volume of work in that area of business is no longer “productive”.

    • Hi Samantha. If you look at part five of this essay (the rise and consequences of lean and mean business practices) you will find the following:

      Now, the feeding frenzy of mergers and bustups during the 80s and 90s might sound to some like good old free-market competition that would ultimately result in greater economic prosperity, benefitting us all. If the largest corporations were indeed too weighed down with bureaucracy and their employees too complacent; if regulations were getting in the way of more streamlined competitors, surely it was a good thing if all that was swept away? Even if those mollycoddled employees had to man up and face the real world with all its dog-eat-dog competition, it would all be worth it if shareholder value kept rising and the wealth trickled down to the average man on the street.

      The problem was, most of the corporate mergers that took place during the 80s through to the mid 1990s- between 65 and 75% in fact- were failures. For example, Quaker Oats paid $1.7 billion in 1994 for Snapple, but 3 years later it sold it for $300 million. Wordperfect was purchased by Novell in 1994 for $1.4 billion only to be sold for $200 million two years later. And it was not only poorly-performing companies that were devoured by hostile takeover bids. Perfectly viable businesses were destroyed for no reason other than the short-term gains to be had from busting them up. There were people like Saul Steinberg and Ivan Boesky, making their fortunes by launching hostile takeover bids, not because they thought they could steer the company toward greater prosperity, but rather because they wanted to be paid to go away. Investor-raiders like these terrorised executives into resorting to dubious self-defensive strategies, such as preserving their companies’ independence by buying their own stock at inflated prices, a strategy that put the long-term survival of the corporation in doubt”.

      So you can see that I do not have a problem with under-performing employees or businesses losing out and freeing up resources for more able capital enterprises to make use of, as that would presumably raise prosperity overall even if it does make life hard for those made redundant in the short term. But in the Lean-and-Mean era for those who were not executives your job was at risk no matter how well you worked. For such people, it was an environment of fear, one in which you never knew if and when the downsizing axe would fall on your head. This was very convenient for the executives, who could use the fear to coerce their staff into submitting to more labour (upwards of 80 hours a week) for less reward (reducing pay, slashing benefits). But it was not so nice for those below the executive level. “White Collar Sweatshop” (my main reference source for the essays on Paternalism and Lean And Mean) is full of horror stories of the stress non-execs were put under during this period. And, whereas the executive could expect to leave the company a multibillionaire the non-exec almost certainly left with significant debt anxiety.

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