The Pursuit of Profits

...But monopoly and the consequent sacrifice of production to profits was exceptional, exercised within narrow limits and, in any case, subject to the attentions of the antitrust laws...

...This, as noted, serves its own bureaucratic purposes, which are by no means coordinate with the public need...

...Being uncommitted to any particular product (or community), such an enterprise has a clear and easy choice when faced with unsatisfactory performance: It can attempt a tedious effort to invest, design, innovate, and improve labor relations, or it can simply shut up shop and shift any residual capital to other employments or to other countries...

...Self-interest, much praised in our time, turns executive thought to the maximization of personal reward...

...Along with this, at the top of the organization, is the agreeable independence that exists in fixing one's own compensation, perquisites, and golden parachutes...

...It is no great secret, or anyhow I have tried to keep it a less than confidential matter, that, with others, I have long resisted this benign formulation...

...With the support of much practical evidence we are seeing a microeconomic movement that in a small but provocative way is the counterpart of the Keynesian revolution...

...465 pp...

...None of these tendencies of bureaucracy and managerial autonomy is remotely consistent with optimal performance...

...Subordinates also relieve their principal of such ungrateful tasks as problem-solving and thought...

...Finally, it is a fair comment on all of these books that they are stronger on diagnosis than on prescription...

...Among other flaws, the underlying theory associates the optimal performance with the entrepreneurial corporation in which ownership and control of the enterprise are closely related, and the exercise of market power is exceptional...

...And down through the corporate bureaucracy there is similar emphasis on the most recent results...

...There is relatively little enthusiasm for public ownership...

...Nor are still other circumstances...

...So, also, much management training...

...We were a tolerant footnote in the text...

...This is especially true of the older mass-production industries, reflecting the strong likelihood that any management will partake of the character of its products—that the steel men, intellectually speaking, will resemble a billet of steel, coal men a deposit of coal, quite a few mineral producers a carload of their own ore...

...The authors of the attack on the optimizing theory of the firm—of the new microeconomics—include Barry Bluestone and Bennett Harrison {The Deindustrial-ization of America...

...The strongest manifestation of this faith was, for long, the assumption of optimal performance both by the business firm and by the market economy in general...

...17.95...

...It ceased to be believed (and taught) that the economic system, left to itself, would find its equilibrium at full employment of plant and working force...

...Further, but by no means finally, there is the matter of managerial staffing and reward...

...Robert Reich {The Next American Frontier...

...Thus it has direct effect on the cost of capital, the resulting improvements in capital plant, and the prospective gains in productivity...

...These have a life and compulsion of their own...

...Monopoly aside, the firm, in pursuit of profits, selected the socially most desirable scale, technology, organization, and investment for future improvement...

...Samuel Bowles, David Gordon, and Thomas E. Weisskopf {Beyond the Waste Land), and most recently, and in many ways the most important of the four, Seymour Melman {Profits Without Production...

...In the next stage of this discussion we must have more explicit consideration of the remedial design and also of the political resistances that will be encountered...

...323 pp...

...by J.K...

...they need to show results in the few years they have left to serve...

...And monetary policy restrains inflation through unemployment and idle plant capacity and their consequent effect on trade union bargaining and corporate prices...

...Nowhere else in our society is there anything quite like it...

...short-run gains can be solidly at the expense of long-term performance...

...The nonoptimizing tendencies are all associated with the mature management-controlled enterprise...

...If the optimizing tendency failed macroeconomically, perhaps it could fail microeconomically as well...

...However, I do not think those of us who asserted this position had much effect on the central economic faith...

...This design draws a sharp line between those who guide the enterprise and are responsible for better performance and those who, as it used to be said, do the heavy lifting...

...Conservatives who come automatically to the support of Pentagon budget claims are major architects of our industrial decline...

...In consequence, the corporation is denied the potential contribution to its success that might otherwise come from the intelligent people on the assembly line and shop floor...

...It is a common theme that, in one manner or another, the present command and control relationship between management and workers—the deeply imbedded caste separations in the modern corporation—must be broken down...

...In essence, it is that military procurement is cost-indifferent...

...When management and corporate bureaucracy take over in a context of general market power, managerial and bureaucratic goals are served...

...There are matters of emphasis or omission in these books to which I would accord at least passing mention...

...A series of highly persuasive books has attacked the optimizing view of the modern and mature corporate enterprise...

...Finally, although other matters are covered in these books, comes the major—I think vital—point made in detail by Melman on the effect of the military culture on industrial productivity and performance...

...When existing plant is idle, there is an inevitably adverse effect on investment in new and better plant...

...There is also the commanding role of short-run performance...

...BEYOND THE WASTE LAND by Samuel Bowles, David M. Gordon, and Thomas E. Weisskopf Anchor Press/Doubleday...

...This is especially so when the faith mirrors the convenience of important or powerful economic and social interests...

...In company with the large commitment of capital to economically sterile military production and its similar appropriation of engineering and scientific talent, this is a major factor in the poor performance of the modern American corporation...

...It is, however, only the beginning...

...Bowles and his colleagues and Melman are persuasive in the belief that the long-established, seemingly inevitable command and control design of the modern corporate enterprise is obsolete...

...it is on the basis of the last year's or the last quarter's showing that individuals are recognized and promoted...

...In the longer run they are, if not dead, in Arizona or Palm Springs...

...8.61 paperback...

...It remained for the State to take remedial action...

...Executives come to positions of major influence in the corporate bureaucracy late in life...

...Even the mainstream economics is bound, I think, to be a little shaken in the end...

...Although this failure and need came to be accepted, it was a measure of the depth and power of the older optimizing faith that it vigorously resisted this doctrine even in the face of the overwhelming evidence of the Great Depression...

...It can hardly be imagined that those ensconced in, or rewarded and empowered by, the present system will easily surrender their bureaucratic position, however adequately their nonoptimal performance is established...

...Samuel Bowles and his colleagues do have a diverse, interesting, if somewhat optimistic set of proposals...

...This, in turn, disqualifies them, both at home and abroad, in competition with their cost-disciplined foreign rivals...

...It is to such shuffling of assets—not to industrial performance in the particular plant—that management effort is committed...

...I would place more emphasis on the general problem of organizational aging than do most of these authors—on the tendency of all organizations, public and private, to identify excellence in personnel with what most resembles those already there, excellence in policy with what is already being done...

...they are by no means coordinate with optimal social performance...

...This did not happen...

...The most general problem arises with the multiproduct or conglomerate enterprise...

...This was the signal and, in the end, the sweeping victory of Keynes...

...The attitudes toward cost control cultivated here then extend over to their civilian business...

...These laws served wonderfully to channel liberal concerns into innocuous legal proceedings—a vacuum chamber for liberal emotion...

...Within the Keynesian framework the mainstream economics continued to hold that the behavior of the individual firm, if not always perfect, was oriented to optimal social benefit...

...In the 1930s, however, there was a general surrender on the idea of optimal macroeco-nomic performance...

...These last will be awesome...

...If the present retreat from monetarism continues, we will hear somewhat less about poor industrial performance...

...There is also some tendency to overlook the role of macroeconomic policy in modern industrial performance, the monetary aberration of these last years in particular...

...An important measure of executive cum bureaucratic prestige is the number of persons over whom the individual presides...

...In the last two or three years much has changed...

...The principal flaw was monopoly, widened in the 1930s to include small numbers or oligopoly...

...It is, the authors maintain, one of the reasons the Japanese and the Germans (with the Mitbestimmung laws that bring the trade unions into an active directorial role) have left us behind...

...These books do not lend themselves to a wholly easy and just summary, but it is possible to catch the central points as they emerge from the several volumes and, in the case of Melman, from a comprehensive, well-supported statement of almost all the central themes...

...There is, in consequence, a strong barrier against long-term planning and associated investment...

...It is to this that the solemn attention of all financial analysts and all stock market necromancy is addressed...

...that is evidently seen as involving only another variant of the managerial problem...

...Low productivity and bad competitive performance are the direct counterpart of our military fixation and the resources that the military-industrial complex draws into the military budget...

...There could be an underemployment equilibrium or an excess of aggregate demand that would mean inflation...

...Monetary policy works against the endemic inflation of our time by way of high interest rates and restricted borrowing and investment...

...If overall economic behavior was less than optimal, John Kenneth Galbraith, professor of economics at Harvard, has written "Money," "The New Industrial State," and, most recently, "The Anatomy of Power...

...Under pressure of competition its prices (subject only to undue exercise of market power) tended to the socially optimal level...

...Galbraith The most pronounced and least discussed tendency of economics is for its ideas to settle into a faith— a faith which can long survive even aggressively hostile evidence...

...This is a major loss, extending to matters of worker morale and sense of responsibility for quality control and productivity gains in general...

...But there continues to be a minority which does not resist the enjoyments of inconvenient truth and the even greater pleasure that comes from afflicting the comfortable...

...19.18 hardcover...

...THE DEINDUSTRIALIZATION OF AMERICA by Barry Bluestone and Bennett Harrison Basic Books...

...The culture of the economics profession allows and even encourages members to relax in the comfort of the acceptable, which is also, generally speaking, where the promotions and honors accrue...

...It is implicit in Melman's thesis that for industrial as well as more specific survival we must come to terms with the military-industrial power and get military spending under control...

...So there is an inner dynamic of bureaucratic expansion...

...Melman's case here is exceedingly compelling, made more so by the background in engineering and the practical arts that he brings—along with a wealth of economic data—to his argument...

...This is what Robert Reich has called paper entrepre-neurship...

...so might be that of the firms that comprised the system...

...Firms supplying the Pentagon are deeply accommodated to cost-plus contracts and planned and predictable overruns...

...There was, perhaps, a reason...