Monday, December 5, 2016

The Dumbest Defense Yet By a Beltarian Economist That I Have Seen of Trump's Carrier "Deal"

Steven Pearlstein , the Robinson Professor of Public Affairs at George Mason University, writes in The Washington Post as part of his defense of Trump's Banana Republic deal:
 There was a time in America when there was an unwritten pact in the business world — workers were loyal to their companies and successful companies returned that loyalty by sharing some of their profits with their workers in the form of higher wages, job security and support for the local community. In some cases, this social contract was reinforced by a union contract, but it was also embraced even in non-union situations because there was a broad public consensus that it was the right thing to do. Business leaders conformed to the norm not only because it helped them attract good workers and customers and have clout in dealing with governmental leaders, but also because it made them feel good about themselves.
Where the hell does he get the idea that America was once based on an "unwritten pact in the business world" that companies shared profits with workers?

America was built on the idea of free enterprise where businesses competed for workers on the free market and that it was the free market that therefore determined wages. Profits were a payout to entrepreneurs and risk-taking capitalists.

Pearlstein then gets more idiotic indicating that he doesn't understand the Law of Comparative Advantage:
Then came the 1980s, and all that began to change as American industry began to falter because of foreign competition. Consumers decide they cared more about cheaper products than socially conscious corporate behavior. And just as significantly, investors, after years of lousy returns, decided they cared more about maximizing shareholder value than they did about maximizing the social value of the enterprise they owned.
Sadly, the only thing Pearlstein gets right  is that we are in store for more bizarre protectionism under Trump:
Now comes Donald Trump — in the public mind, a successful businessman — who as the new president, suddenly declares that the new norm is no longer acceptable, and he intends to do whatever he can to shame and punish companies that abandon their workers. It’s one thing for a company to sustain a few days of bad headlines in the local newspaper when it decides to close a facility. It’s quite another when the president of the United States is not only willing, but from a political point eager, to make a federal case out of it. Suddenly, maximizing shareholder value no longer provides the political and social inoculation that it used to....

He knows that he and his new commerce secretary will have to engage in a few more bouts of well-publicized arm twisting before the message finally sinks in in the C-Suite. He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract. It won’t matter that, two years later, these highly publicized retaliations are thrown out by a federal judge somewhere. Most companies won’t want to risk such threats to their “brands.” They will find a way to conform to the new norm, somewhat comforted by the fact that their American competitors have been forced to do the same.

Just as much as changes in the law, this is how norms of business behavior are changed.

Prepare yourself,  Banana Republic Capitalism is coming to America.



  1. "Profit sharing" is an idea concocted by Marxians, on the theory that profits exist because workers get paid less than what their production is worth. Somehow it slipped into the mainstream and even included in some political constitutions. For instance, in Mexico, profit-sharing is mandated by law, performed at least once a year. You can imagine what a thung like that does to start-ups, companies and hiring. I don't understand where Pearlstein gets this idea that companies in the US used to share profits with their workers. I think he's simply making stuff up or he's talking about some sort of appeasement by managent to unions which cannot be construed as voluntary.

  2. --- [...]but also because it [profit sharing] made them [businessmen] feel good about themselves. ---

    The above sounds like the first paragraphs of a fairy tale. Predictably, Pearlstein tries to paint this romantic picture where everyone lived in a state of idyllic bliss and even businessmen felt bad enough about exploiting their workers that they woukd agree to share in the bounty. Blargh!

    Where's my bucket? I wanna hurl.