How Capitalism Works Now

The Disposable American: Layoffs and Their Consequences by Louis Uchitelle (Alfred A. Knopf, 283 pages, $25.95)

All Together Now: Common Sense For a Fair Economy by Jared Bernstein (Berrett-Koehler Publishers, 154 pages, $12.00)

America Back on Track by Senator Edward M. Kennedy (Viking, 210 pages, $24.95)

When it comes to the fundamentals of our new-model economy, even the definitions of common words have changed for the worse. As recently as 1989, the Oxford English Dictionary defined “layoff” as a temporary dismissal. But in the years since then, as the permanent layoff became a pillar of contemporary business practices, it was the OED's definition that proved to be provisional.

That point about changing usage comes from The Disposable American, Louis Uchitelle's important new study of the growing instability of employment in the United States. The literature on the laissez-faire capitalism of the past quarter-century doesn't lack for withering critiques, but Uchitelle's book provides the first in-depth look at what may be the new capitalism's most depressing manifestation: the layoff -- its rise, scope, and consequences. It is a measure of how inured we have become to this life-diminishing practice that Uchitelle's account of the pre-1975 economy reads like an account of some pre-lapsarian world we have all but forgotten.

Yet it was only in 1984 that the Bureau of Labor Statistics (BLS) began to tally what it termed “worker displacements.” Beginning with the railroads in the 1880s, large- and mid-sized American employers had once placed a premium on a stable workforce. Peter Drucker's seminal The Practice of Management, published in 1954, attributed the success of IBM -- the Microsoft and Google of its day -- to the high morale of company employees, resulting in large part from the virtually lifetime security of an IBM job.

By the late 1970s, however, American business began to change. The nation's CEOs began letting their workers go as the economy moved into lower gear, foreign competitors began to underprice American manufacturers, Wall Street began to call the tune on Main Street, and unions grew too small and sclerotic to protect their own. The CEO who led the way, Uchitelle reminds us, was General Electric's Jack Welch, who laid off one out of four GE employees -- 118,000 in all -- between 1981 and 1985. GE wasn't suffering the torments of steel manufacturers, which were being wiped out by cheap imports, but Welch (in those years nicknamed Neutron Jack after the bomb that spared structures but killed people) was on a quest to boost share value by lowering wage costs. In time, Welch became the most highly regarded corporate chief of his generation.

How many Americans have fallen prey to applied Welchism? Extrapolating from BLS figures, Uchitelle calculates that between 1984 and 2004 roughly 30 million Americans were laid off, a total that doesn't include workers who took early retirement or buyouts because their employers were downsizing. If those workers are factored in, Uchitelle estimates, the number of displaced American workers nearly doubles. In a New York Times article that appeared after the publication of his book, Uchitelle reported that 13 percent of American men between the ages of 30 and 55 had dropped out of the job market. In the late 1960s, that figure stood at 5 percent. He noted a comparable evolution in the European Union and Japan as well -- suggesting that the problem extends beyond the distinctively harsh American form of capitalism.

Much of Uchitelle's book traces the post-layoff odysseys of a broad range of employees -- United Airlines machinists, a banker, a Proctor & Gamble executive, the editor in chief of a publishing house. While each has a different story, they all suffered a major loss of self-esteem and decline in income in their subsequent job or consulting gig -- if they landed one at all. He cites a survey showing that roughly two-thirds of workers who lost their jobs were working two years later, and only 40 percent of those employed (that is, 25 percent of the entire laid-off cohort) were making as much as they'd made in their previous jobs. Of the more than 800 laid-off United Airlines mechanics whom Uchitelle studied, only 185 were working one year after their discharge, and most of the 185, who had made $31 an hour at United, were pulling down between $14 and $20 an hour in their new jobs.

In the all-but-forgotten Keynesian past, the federal government had seen its role as providing at least some stimulus for employment as the job market weakened. Indeed, government-guaranteed full employment was on several occasions a key battle cry of modern liberalism -- once, just before the postwar boom took off, with the Full Employment Bill of 1946, and again, as the postwar boom petered out, with the Humphrey-Hawkins Full Employment Bill of 1977. Both bills initially obliged the government to provide jobs until a specified low level of unemployment was reached, but both were ultimately watered down to the point where they obliged the government to generate no jobs whatsoever. Then, in 1982, the government's discrete and smaller employment programs were scrapped in favor of a new program that provided retraining to a fraction of the new legions of laid-off workers. The great higher-skills-can-save-us scam had begun.

Uchitelle chronicles the retraining programs in which the United machinists, and other workers he followed, enrolled. He documents how these programs actually led these workers to lower-skilled, and almost always lower-paying, work. The real point of these programs, he concludes, is to “channel the unemployed into the unfilled jobs that do exist.”

Both Uchitelle and Jared Bernstein, in his new book All Together Now, note that this shift from job creation to job training as the government's response to unemployment places the blame for the structural changes in capitalism on the individual's lack of skills. Bernstein's book -- and he is the sprightliest writer working in the dismal science since the heyday of John Kenneth Galbraith and Robert Lekachman -- is one mid-length salvo at the dominant tendency in economic thinking, which denies any role for a collective response to a collective problem.

As both Uchitelle and Bernstein document, the Clinton administration, no less than the preceding and following Bush administrations, preached the gospel of education and retraining as the answer to the job loss from trade and globalization. Both authors as well as Senator Ted Kennedy in his new book, America Back on Track -- a clear statement of the liberal world view at a moment when such statements are desperately needed -- affirm the value of a more educated work force, but also call for more managed trade policies and public employment programs. Kennedy has long argued -- rightly -- that environmentalism, far from being a job killer, can be a major job creator, and makes a compelling case for the Apollo Alliance, a proposal to create three million new jobs retrofitting America.

Uchitelle and Bernstein have produced important contributions to the liberal economic discourse -- though I'm compelled to point out one Bernstein error: In footnote one to chapter one, the Washington Post columnist cited spells his name “Meyerson,” not “Myerson.” That slip aside, these two very different works are valuable exposés of the cruelty and dysfunctionality of our high-gloss, high-tech, workers-be-damned capitalism.

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