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Saturday, September 7, 2013

Bank Profits Hit Record as Wages Stagnate in the U.S.: A Tale of Two Cities

In the United States, executives have been compensated much more than their own non-supervisory workers. This has been so in not only absolute terms, but also relative to other countries. As a first step to getting to an explanation, the sheer magnitude of the gap in the U.S. must be digested.

          The magnitude of the difference between the U.S. and all the other countries listed here suggests that the ratio of 475 to 1 is artificial rather than natural.  Moreover, the different ratios point to differences in underlying cultural values. Image Source: www.politifact.com

According to the Associated Press, American “banks earned more from April through June [2013] than during any quarter on record, aided by a steep drop in losses from bad loans.”[1] The Federal Deposit Insurance Corp. reported that the banking industry earned $42.2 billion in that quarter, up 23 percent from the second quarter of 2012. Banks' losses on loans decreased 30.7% from a year earlier to $14.2 billion, the lowest in six years, and lending increased 1 percent from the first quarter. Losses on loans fell to the lowest level since the third quarter of 2007. Home equity loans showed the greatest declines in losses.[2]

CNNMoney reported that the nation’s biggest banks were expected to hand out more in compensation (including $23 billion in bonuses) in 2013 than they had done in 2009. The total compensation of CEOs had increased by 876 percent between 1978 and 2012.[3] The FDIC report shows that the largest banks continued to drive the industry's profits while smaller institutions have struggled. Banks with assets exceeding $10 billion, including Bank of AmericaCorp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo, accounted for about 82 percent of the industry's earnings in the second quarter of 2013. Most of them had recovered in part from federal bailout money and record-low borrowing rates—neither one warranting higher compensation. For instance, the Fed’s bond purchases had been keeping long-term interest rates low.

On the very same day the FDIC announced the record profits, fast food workers across the U.S. walked off the job to protest low wages and poor treatment. Roughly “200 protesters including employees from McDonald's and Wal-Mart and members of the Chicago Teachers Union and the Service Employees International Union gathered outside the Rock N' Roll in downtown Chicago. Sixty cities joined in with their own protests. "It's not livable," Tyree Johnson, who said he's been a McDonald's employee for 21 years, charged. "I've been dedicated to McDonald's for the past 21 years. I still make $8 an hour. "I'm tired of choosing between paying rent and eating," said worker Tamara Best-Watkins to the crowd. "I'm tired of choosing between taking my daughter out and paying rent." Speaking at the protest, U.S. House representative Jan Schakowsky (D-Ill.) noted that McDonald’s CEO “makes in two or three hours at work what his employees make in a year.”[4]

With the federal minimum wage of $7.25 per hour having remained unchanged since 2009,  the demonstrators demanded a $15-per-hour minimum wage and protections against retaliation for joining a union.[6]  Hourly wages for nonfarm workers had fallen 3.8 percent in the first quarter of 2013; that drop surpassed any other since the Bureau of Labor Statistics began keeping track of wages in 1947.[7] Hourly worker pay had risen just 1.9 percent in 2012, even as the consumer price index increased 1.8 percent. That was the third-weakest annual increase in hourly pay since 1947, topping only the 1.4 percent gain in 2009 and a 1.8 percent gain in 1994.[8]

Jean-Jacques Rousseau, an eighteenth-century European philosopher, would label such fiscal inequality as artificial, rather than natural. Even though artificial inequalities are not hard-wired into human nature, we may have made them virtually impossible to expunge from the American political economy. Perhaps just viewing the widening gap as artificial could be a first step back from the brink of social instability and maybe even revolution, in spite of the odds established and enforced by the military-industrial complex.

1. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.
2. Ibid.
3. Ibid.
4. Kim Bellware, “Fast Food Workers Protest in Chicago for Living Wages, Better Treatment Amid Nationwide Strikes,” The Huffington Post, August 29, 2013.
5. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.
6. Mark Gongloff, “U.S. Suffers Biggest Pay Drop on Record, as Workers Squeezed Tighter,” The Huffington Post, June 5, 2013.
7. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.
8. Mark Gongloff, “U.S. Suffers Biggest Pay Drop on Record, as Workers Squeezed Tighter,” The Huffington Post, June 5, 2013.

Thursday, September 5, 2013

Business Ethics Through Rose-Colored Glasses

That business ethics scholars are as though children playing in the clouds in claiming that the vast majority of business practitioners are good-intentioned, or ethical, is an empirical statement that is in need of empirical verification. I suspect the scholars' typical utopian perspectives, curiously coincident with prescriptive ideological "Thou shalt nots," suffer from not touching ground from gazes atop ivory towers. That is to say, the scholars are factually incorrect. Let us, therefore, sweep away the fog so at least we have a realistic picture of what is actually going on "on the ground."

Off the top of my head, two industries come to mind that are very likely infected by a sordid, unethical mentality: Wall Street banks and the hospitality industry  (i.e., hotels and motels). I am increasingly astounded at the sheer ease with which managers and employees working at low- and medium-class hotels blatantly lie or go back on their word to customers, or "guests" (a term whose misapplication is enforced by omniscient herd animals and their task-masters working not only in hotels, but also restaurants and retail stores, such as Target).  
Dwarfing particular unethical managers and employees, entire companies have unethical cultures. Enron and Arthur Andersen were two infamous cases. The sheer amount of wealth that vanished with Enron's demise suggests just how costly to us all even just one unethical company can be. Beyond the collateral damage to the Gulf of Mexico and Daiichi, Japan, respectively, the world was astonished to learn that both BP and Tepco added insult to injury as foremost on their respective executives' minds was to hiding from governmental and public eyes the extent of damage in order to minimize legal liability, even though lying about the extent of damage as it was unfolding hampered governmental responses to minimize the damage.

At some point, a severely unethical mentality becomes malignant, even sociopathic, narcissism. In Tepco's case, the company's public responsibility (typically mislabeled as "corporate citizenship," a legal fiction) meant lobbying the Japanese Prime Minister a couple years later to renounce his campaign pledge, which he promptly did just three days into office, to rid Japan of nuclear power. Private gain over public good is a hallmark of unethical business strategy.

At the industry level, entire systems, such the one that relates rating agencies to other institutions, and the way all-you-can-eat buffets are rigged lies are intrinsically unethical in their very design, by design (i.e., kein Zufall). The typical franchise agreement fails so miserably in terms of the corporation being able (or even willing) to hold a local franchisee/manager accountable for having lied to customers that the arrangement itself can be considered unethical (e.g., violating Rawls' justice as fairness--to the customer).  

Particularly problematic are the institutional conflicts of interest that undergird the design of entire industries, such as that of rating agencies and public accounting firms. We have become so accustomed to the legal-fictions behind the ethically-warped incentives that reside in these designs that we regard the institutional role-conflicts that are so easily-exploited by opportunistic, self-aggrandizing worker-bees and primped managers as necessary evils. What we presume to be necessary is often only mislabeled convenience that can be jettisoned if we as a society are willing to take the candy away from the spoiled children who pretend to be adults (e.g., Richard "tantrum" Fuld, who was both CEO and Chair--another conflict of interest--at Lehman Bros).

                                                                      Richard Fuld, formerly CEO and Chairman at Lehman Brothers.

If we are to seriously confront the epidemic of lying (or not keeping one's word) to customers [oops, I mean "guests," who strangely enough must pay for the privilege] and evading formalistic accountability-mechanisms, we only kid ourselves by doing so with rose-colored, idyllic glasses. Lest it be said that a company's corporate social responsibility program makes up for unethical conduct at the store-level, just try to convince an offended customer!  Does Starbucks' "profit-sharing" with coffee growers or support for gay marriage make up for a store manager over-charging customers in spite of a company policy to the contrary? Do Wal-Mart's CSR programs "in the community" make the company's atrocious labor practices, which include terminating employees who try to unionize, somehow acceptable?  
Moreover, to equate CSR with business ethics is to make a category mistake as well as to commit Hume's naturalistic fallacy. That is to say, norms and ethical principles are different things, and the "is" of social norms cannot justify as ethical principles can. To say that an existing social norm justifies a certain corporate culture or policy is not to justify the latter ethically. Alignment with society's norms and values is admittedly in a company's long-term interest (as a going concern), but such congruence does not justify the alignment ethically (i.e., in terms of should).

Tuesday, September 3, 2013

Is Blogging a Marxist Activity?

In writing posts on a blog, is a blogger alienated, or estranged, from his or her own labor and the product (i.e., the posts)? If not, would Karl Marx say that both the blogging activity and any resulting content exemplify his ideal? In short, are bloggers de facto Marxists? Or are we entrepreneurs better suited to Capitalism? In this respect, we can distinguish the free-standing blogger from the blogger who works on a blog owned by a company (i.e., others).
 Just as what we wear reflects ourselves, so too does our writing. How might what this blogger is "advertising" on his shirt not only reflect on himself, but also be related to his blogging as well his blog's content?      Image Source: drinkwithawrench.com                        

In answering these questions, I look first at Marx’s criticism of labor that is alienated from the worker. Marx argues that a worker laboring on another’s product is estranged from both the worker’s own labor and the product. In both respects, clues of the sort of labor that Marx advocates can be found. From these inferences, I turn to Marx’s positive characterization of labor that is natural for the sapiens species, drawing also on Maslow, Locke, and the erasable Nietzsche for additional support.
In terms of the worker being alienated or estranged from the product of his or her own labor, Marx offers the following explanation.
The worker puts his life into the object; but now his life no longer belongs to him but to the object. Hence, the greater this activity, the more the worker lacks objects. Whatever the product of his labor is, he is not. Therefore, the greater this product, the less is he himself.”[1]
That of his life that a worker puts into the product by means of his labor being mixed into the product in process does not give him a property right in the product as Locke would insist; rather, that of the worker’s life that is put into the product is lost to the worker when the product leaves his hands and belongs entirely to another (i.e., the property owner, or capitalist). As the worker works on more products, the worker’s wages per unit decreases because the owner of the means of production and the product receives less revenue per product. In other words, mass production is a volume business depending in part on low labor costs (i.e., the cost leadership strategy). With lower wages per unit, the worker himself can afford to buy fewer commodities, hence he lacks objects. Also, he lacks objects in that he immediately loses contact with the objects of his labor once he has put his labor into them. Of course, the products were never his, even as he worked on them. Accordingly,

“The alienation of the worker in his product means not only that his labor becomes an object, an external existence, but that it exists outside him, independently, as something alien to him, and that it becomes a power on its own confronting him. It means that the life which he has conferred on the object confronts him as something hostile and alien.”[2]

That the product belongs to another (i.e., the property owner) accounts for its external existence. Accordingly, that of the worker’s own life that is mixed into the product belongs to someone else rather than himself. The worker is thus cut off from part of his own life. The power of the object that confronts the worker in a hostile manner stems from the adversarial relationship between a worker and the property-owner that is exploitive. In short, the worker is estranged both from his own life that he puts into the product and the product itself. It follows that he is alienated from the production process too.

(T)he estrangement is manifested not only in the result but in the act of production, within the producing activity, itself. How could the worker come to face the product of his activity as a stranger, were it not that in the very act of production he was estranging himself from himself? The product is after all but the summary of the activity, of production. If then the product of labor is alienation, production itself must be active alienation, the alienation of activity, the activity of alienation.”[3]

In other words, the worker’s labor is not her own, even during the activity of laboring. According to Marx, “the external character of labor for the worker appears in the fact that it is not his own, but someone else’s, that it does not belong to him, that in it he belongs, not to himself, but to another.”[4] It is, one might say, a kind of theft protected by the laws of property and the related sanctity of contract.

From this account, we can begin to construct Marx’s view on how labor and its products ought to be related to the worker. Already, we can infer that the life of the worker that the worker herself puts into the products through her labor should belong to her. She should feel that a part of herself—her life—is in the product as well as the production process. Hence, the worker does not view either one as an object, not to mention alien and hostile. Economically, that the worker’s life materialized is not separated from the worker implies that the worker has some ownership interest in both the labor process and the product. Granted that Marx can be labeled an economic materialist, I find psychology to be salient in his positive account of labor.

For example, Marx claims that for labor to be external to the worker means that “it does not belong to his intrinsic nature.”[v] Therefore, work activity should reflect one’s intrinsic nature. Furthermore, through such activity and the products thereof, the worker should be able to affirm or validate herself, hence feel content and free enough to develop her physical and mental energy to strengthen her body and mind. All this is implied in the following:

 In work external to the worker, “he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home.”[6]

Put in Maslow’s terms, applying one’s labor to a product that reflects one’s life naturally facilitates self-actualization. Marx claims that the productive life of a human being is naturally “life-engendering”[7] It is in the nature of our species that we come to learn more about ourselves through our work—both in the activity and from the results. Put another way, seeing one’s life expressed tangibly tells one something new about one’s life and one’s very self. We are naturally at one with our life activity, which “appears only as a means of life.”[8] Moreover, “Man makes his life activity itself the object of his will and of his consciousness. . . .  (H)e duplicates himself not only, as in consciousness, intellectually, but also actively, in reality, and therefore he sees himself in a world that he has created.”[9] How could the worker not learn more about himself from seeing himself in a world materialized in a product that he himself has created?

In writing an essay on a blog, whether involving one’s political, economic, social, moral or religious values and beliefs, a blogger is there, putting his life—and indeed himself—into not only the process of writing (and designing the blog itself), but also the contents of the posts, whether intentionally or not.

The blogger who dutifully writes a daily online-diary of her personal life, for instance, is pours her life and her passion quite intentionally into her writing (both as her writing process and the content of her writing). Her productive activity is essentially an imprint of her memory and her processing of it cognitively. Her very being is engaged and displayed. She might even have a picture of herself on her blog’s home-page. Such a blogger is certainly not alienated from her own blog, the writing process, or the written content. The blog is an extension of her life-experience and her creative spirit whose shadow she has made concrete without being forced to regard the imprint as an object external to, or even cut off from her, as if she were a mother forced to part with her infant whom a property-owner views as a commodity.

Even regarding scholars, such as me, who write and post essays applying theory to unpack current events for the general educated reader, we ourselves are in our respective approaches to writing as well as in the content. Friedrich Nietzsche, a German classicist and moral philosopher writing in the last quarter of the nineteenth century, argues in his writing that when a philosopher reasons and is in the process of writing, the contending reasons are actually urges, or instincts, vying for dominance over each other. The written page is a snapshot of whichever instincts were on top when the philosopher wrote down the words. It follows that a scholar puts his or her life—indeed, very being—into his or her rational, “objective” academic writing. The instincts that manifest as values and beliefs are not absent from the fight for dominance inside the philosopher’s psyche. Hence, differing appreciably from Flaubert, Nietzsche urges us to write with passion—with ourselves personally engaged—rather than to write from a distance from ourselves by striving to perfect our writing-form. “Of all that is written, I love only what a person has written with his blood. Write with blood, and you will find that blood is spirit.”[10]

Also in line with Marx’s ideal, a blogger typically does not lose the product once it has been mixed with one’s labor. Even in syndication, a blogger holds the copyright. A blogger can go back to “revise and extend” any of his published posts. Both the way in which a particular blogger revises and the content itself that the blogger deems so important (or unimportant) to add (or remove) says something more about the blogger, as does comparing the revised “edition” to the original. Perhaps different instincts had overcome the hegemony of those imprinted in the original.

In short, a blogger infuses her thought-process, values, beliefs, and ideologies—indeed, even her intrinsic nature—in both the process and product, the latter remaining with rather than estranged from the laborer. Marx would be pleased—more so, I might add, than had he lived to witness the U.S.S.R. Next to writing a book or screenplay, blogging may even be the epitome of Marx’s ideal work-activity on account of the salience of both self-expression and freedom-of-expression in the writing as a process and enduring rather than alienated product. In multiplying the freedom realizable in the species’ productive activity, the internet may just be the world of self-realization through labor that Marx himself could never have imagined.

 [1] Marx, Karl, “Estranged Labour,” Economic and Philosophical Manuscripts of 1844. (Marxists.org). Accessed August 18, 2013.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Friedrich Nietzsche, Thus Spoke Zarathustra, ch. 7.