Downsizing
DOWNSIZING
(Tatoodi)
Prof. Michael Busler’s article in ‘Perspective’ section of Star-Ledger (Sunday, March 31, 1996) is an example of classic oversimplification of theory. In nutshell it says: Consumers benefit from competition, which requires downsizing which must therefore be good. This is another kind of fundamentalism (economic, in this case) in which, despite observed facts to the contrary, an author (Adam Smith, in this case) must be considered infallible regardless of the damage done to the society by the author’s views.
Reality is not as simple as theory. Unanswered have gone questions like:
Do cost savings generated by downsizing always get passed on to the consumers in the form of lower prices? Not so. There are many industries like banking in which despite massive layoffs the fees and prices keep going up.
Which consumers benefit at the cost of which employees? American consumers at the cost of foreign employees or foreign consumers at the cost of American employees? More likely, employees all over are hurt without any consumers getting the benefits all of which go to the traders who buy the goods at the cheapest prices in the world and sell at the highest prices in another part of the world.
If all companies operate in competition with each other, how can they make very high rates of profit as they do as indicated by very rapid rises in stock prices?
Rather than listing all such questions, let us examine the realities of the marketplace.
Very small portions of cost savings, be they due to down sizing, lower taxes, subsidies, liberalized laws etc., are passed on to the consumer. Most of them go to the investors.
Competition exists only for the purpose of reducing the costs of production. Prices are set as high as the markets bear. Competition among sellers only means that the consumers have to pay very high prices instead of exorbitant prices. Through extensive and often misleading advertisements, consumers are made to be willing to pay much higher prices than what the sellers can really afford to charge. This generates very high profits. Since not all profits get immediately distributed as dividends, most of them later show up as capital gains.
Those who live by the market shall also perish by the market. Market is a very irresponsible entity. As long as somebody wants to sell some thing, hse (he or she) will create high demand for the product (or service) to be able to charge very high, if not exorbitant, prices by using sex, violence or any undesirable means. It is therefore prudent not to tout market as the benefactor to be given exclusive importance.
Rev. John Jackman, in his article (Star-Ledger, Perspective Section, Sunday March 31, 1996) has not identified a different type of victims of downsizing, its survivors. For fear of losing their jobs in the next round, they are exploited by having to work much longer hours without adequate compensation. Besides, he does not mention the reasons why Mr. Aaron Feuerstein could and other CEOs cannot do what the former did; treat the employees as human beings. He, as an individual investor, has direct contact with the employees and also the authority to be human. The corporate managers, on the other hand, are controlled by investors, who are only absentee and transient owners eager to sell their stocks at the first sign of trouble, and therefore cannot dare to be human.