^ Andy Grove, who made Intel the world’s greatest manufacturer of high-content microprocessor chips
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Two recent articles, one by Robert Kuttner in the Huffington Post, and the other an interview with the late Andy Grove of Intel published in the New York Times, sum up most of what ails the American economy today as well as what to do about it. We all know the obvious : ( 1 ) secure jobs that pay well are hard to find; ( 2 ) a huge amount of enterprise capitals its on the sidelines, uninvested; ( 3 ) firms that can outsource mass work do outsource it ( 4 ) firms resort to all manner of evasions so as not to pay workers well or, in some cases, to accord them employee status. Not so obvious are the paradoxes of our market economy that frustrate so many of us.
Before I tackle these paradoxes — after which I will offer some pathways to a better world of work — I must post links to the two stories mentioned. First, you can find the Kuttner story here : http://prospect.org/article/sanders-socialism-and-shafted-generation ; and second, the Andy Grove “warning to Silicon valley” : http://www.nytimes.com/2016/03/26/opinion/andy-groves-warning-to-silicon-valley.html
Grove’s warning begins my exploration of how we as a nation might recover our economic power and the prosperity that derives from it. Key to Grove’s warning is this rather lengthy quote :
“Without scaling,” he wrote, “we don’t just lose jobs — we lose our hold on new technologies” and “ultimately damage our capacity to innovate.”
“And yet, an all-out commitment to American-based manufacturing has not been on the business agenda of Silicon Valley or the political agenda of the United States. That omission, according to Mr. Grove, is a result of another “unquestioned truism”: “that the free market is the best of all economic systems — the freer the better.” To Mr. Grove, that belief was flawed.
“The triumph of free-market principles over planned economies in the 20th century, he said, did not make those principles infallible or immutable. There was room for improvement, he argued, for what he called “job-centric” economics and politics. In a job-centric system, job creation would be the nation’s No. 1 objective, with the government setting priorities and arraying the forces necessary to achieve the goal, and with businesses operating not only in their immediate profit interest but also in the interests of “employees, and employees yet to be hired.”
Grove’s main point is one that I wrote about several months ago. In that article, I pointed out that our finance economy is speculative, not capitalist. Just as Grove says, in too many cases, firms hoard cash any way they can, and maximize profits so as to keep speculator investors happy on the quick; whereas, in a capitalist economy, profits would come second to value-added assets and a proprietary platform of know-how. As Grove insists, jobs are assets, as are the employees who have them. Unless our nation wants its economy to play merely a brokering role — negotiati8ng foreign-made goods to ultimate customers, a role that requires few employees, we have to start thinking of work and workers in the perspective Grove talks of.
Jobs created by consumer demand. Only demanded products sell. This, we know. it isn’t so obvious that jobs are an asset. Speculator stock markets have come to think of jobs as a cost item merely, to be pared down wherever possible. But as Grove tells us, jobs are know how, and know how is a crucial asset. Without it, a firm, has no competitive advantage. And who possesses this know-how ? The workers who have it and use it.(this is why it is so important to avoid employee turnover. Workers who leave take their know how with them, for other firms to make use of. (The costs of hiring and training replacement workers aren’t small either.)
Some firms seem to understand Grove’s point. Major retailer Costco famously pays its lie employees $ 45,000 a year plus benefits; few of its employees leave or want to.
Of course basic retail service work such as Costco employment cannot be outsourced. Still, not all retailers follow Costco’s lead., Think WalMart. Here again, it’s the stock market’s short term speculation model that dictates how firms regard work and workers.
In a rapidly innovating economy such as ours, many jobs will pursue innovation, and last as briefly as an innovation remains innovative. Yet even here, know how has lasting value. Few workers possess such complex skills as innovation workers. If their current job ends, there should immediately be a next one awaiting them, in perhaps a less vanguard industry. The difficulty is that innovation skill decline in value over time, like a stock option with an expiration date. Innovation workers should be schooled, and t.hen job trained, to update their innovation skills on their own: yet the demands of their current job require them to suppress their own innovation in favor of the firm’s.
If we are to bolster the market value of innovation work and workers — and to secure the asset value of line work and workers — we need to ( 1 ) use tax policy to discourage short term stock market speculation ( 2 ) use margin rules to tamp it down ( 3 ) restructure corporate law so as to make it difficult, if not impossible, for speculators to take control of a firm’s board of directors ( 4 ) penalize firms that outsource skill set jobs ( 5 ) make it an unfair labor practice for firms to take on workers as :”temporary:” and not pay them benefits or give them security ( 6 ) seek a change in GAAP rules so that a firm’s employees are accounted assets and so valued on a firm’s balance sheet, thus offsetting their pay on the debit side.
This last may just be the most momentous of the reforms I suggest. If accepted, it almost guarantees that workers will be paid more, maybe much more. And this, to my thinking, is a far more worthy outcome than the high income taxes that Bernie Sanders suggests, as a way of paying for the greatly increased government services he advocates, including free college tuition, single payer health care, and a huge, Federally funded infrastructure program (twice as expensive as Hillary Clinton’s). Yet neither the GAAP change nor any of the other reforms will be done until and unless our political conversation recognizes work itself an enterprise asset. Only when work is accounted an asset can workers be treated as assets too. Some forms do this. Can our politicians grasp the need to make this the rule ? If so, we have a chance to reconstitute our economic strength. I hope we do it.
—- Mike Freedberg / Here and Sphere