PREFACE

American capitalism was on a roll in 1962 when I started my management-consulting career. Our country had overcome a major depression, won and paid for a world war, created outstanding colleges and universities across the nation, financed an advanced  education for millions of GIs, and built a huge number of effective corporations.  

People remembered the wretched excesses of the wealthy and powerful of earlier times and, through enlightened politicians and legislation, created an economic system that was fundamentally fair to both investors and workers. Not only did investors become wealthier and more numerous, but a typical working-class American—working only 40 hours a week—could support a family of four.

The income and wealth disparities that existed in the 1920s had been slightly reversed in the ’40s and ’50s, and were largely stagnant in the ’60s and ’70s. Except for minorities, this was probably the best of times ever for working-class citizens in a large country.

But that’s not all. American capitalism was beginning to have a sense of moral responsibility. Progressive managers believed that loyalty meant something, and that it was earned and owed, by both employee and owner. Large companies all across the country shifted their management strategy away from brute force, threats and intimidation, toward improving the “quality of work life.”

By building a climate of fairness and openness, they tried to create a sense of community. People could identify with, and take pride in, their organizations. They saw a close relationship between their own interests and the interests of their companies.

Many smaller companies succeeded and prospered because workers started with the business and accepted low wages and hard working conditions. The implied promise from the corporate executive or business owner was: “Work hard with me, grow with me, and you will share in my prosperity.”

Since they felt they had a stake in the business, millions of workers put their best efforts into “quality circles,” productivity improvement teams and special task forces to help their organizations become more efficient and profitable. When they expressed concern that their greater efficiency might lead to headcount reduction, they were promised that, no, that wouldn't happen.

Management consultants like me, business owners, and high-level executives explained that as productivity and profits went up, as technology improved and as the economy grew, everyone would benefit. Work would become less stressful. People would have a better quality life at home with their families. Eventually, they would get more vacation time, better medical care and possibly a 35-hour workweek.

At the time, I did not believe that I was lying. After all, that had been the trend during the ’40s, ’50s, and into the ’60s. We had become a modern, enlightened country. We believed that honest work deserved to be fairly compensated—according to this country’s improving standard of living, and this country’s cost of living. 

Then the 1980s arrived with a vengeance. Apologists for the wealthy and powerful sold a new set of values to the voting public that allowed pro-business, anti-worker politicians to get elected. They, in turn, changed our economy from one that benefited both investors and workers, to one that now benefits investors at the expense of workers.

Once the balance of power shifted totally in their own direction, the philosophy of conservative politicians, business owners, investors and high level executives mysteriously changed—back to the way it was pre-1930, when fairness and justice had no place in business decisions.

With their newly acquired set of old robber-baron values, investors can now confiscate the wealth that workers, professionals and low-level managers have produced over the decades and invest it outside our country—purely to benefit themselves, and with no regard for those who originally produced the wealth.

Today, the chief executive officer’s only responsibility is to himself and his stockholders. Workers have the same status as machinery and are steadily losing whatever human rights they once had. It’s a ruthlessly one-sided arrangement. No matter how much time and effort workers spend in improving equipment or work procedures, they don’t share in the benefits. They not only have no vested interest in the organization, their work doesn’t become any easier or less stressful.

It gets worse. As a work group becomes more effective, it increases the likelihood that some of their members will be fired, and those who remain will have to work harder than they did before, with incomes that don't keep pace with inflation. Workers are told that “competition demands it”—despite record corporate profits and skyrocketing incomes for executives and investors. Of course, executives and stockholders exempt themselves from participating in the cost-cutting competition and get fabulously rich in the process.

Although we can’t legislate morality, we can legally require behaviors that voters consider moral. We also can destroy the legislation that protects those moral values, and that is exactly what pro-business politicians, both Republicans and conservative Democrats, have done.

As a result, between 1979 and 2000, the stock market rose over 1100%, but real wages for the bottom half of America didn’t keep up with inflation. As Business Week put it,

What’s happening is that a new class of left-behind workers is being created, encompassing a large portion of the workforce. They have jobs, sometimes with high salaries, but while their New Economy counterparts’ earnings soar, the left-behinds are struggling to post small real gains in income. That’s why, despite the overall prosperity, many households keep taking on more debt….

   But for the foreseeable future, most Americans will be locked into Old Economy jobs without much hope of big income gains.¹

Unfortunately, only about 20% of working Americans are employed in the “New Economy,” and, as will be pointed out later, their high incomes are coming at the expense of the 80% employed in the “Old Economy.” Of course, the investors and high-level corporate executives in the old economy make sure that they are largely immune to the sacrifices forced onto the low-level old economy workers who are stuck in this country’s labor market. By manipulating that market—as well as the technology, world trade and international investment markets—investors and executives actually benefit handsomely from their own industry’s decline in this country.

Despite all this, in 1999 wages for many workers started to rise faster than inflation—by about 3-miserly-percent. Better late than never, but that pitifully small increase is probably an indicator that our country’s one-sided economic boom is near its end.

The recent two-decade increase in the disparity in wealth and income between the ultra rich and the poor-and-middle-class is not, as the apologists claim, because the wealthy work harder or are more successful on a level playing field. It’s because corporations now have all the power, and they have conveniently shifted their values from fairness and reciprocal loyalty to survival of the fittest.

Right now, investors and business owners are the fittest, and fairly-paid workers are on the verge of extinction. Admittedly, there is a benefit to investors for their new found values: their high-level executives don’t have to be hypocrites any more by promising that they will be fair in their future dealings with workers. When employees are powerless, threat and intimidation are quite effective, and artful deception is not required.

So don’t buy the popular delusion that today’s income disparity is the result of natural economic forces that should not be controlled. This delusion leads to a sense of futility and the search for scapegoats, and makes it impossible to attack the origins of the problem. Too many people blame

· The Internal Revenue Service (instead of the Congress that shifted tax burdens from the rich to the middle class),

· “Big Government” (instead of the Congress that passed the free-world-trade and anti-labor laws that sold out working-class Americans), and

· Liberals (who, admittedly, fought for the rights of minorities to compete with white males for jobs—but they are the same people who have always fought for anyone unfairly treated, including workers of all categories).

All that count in today’s economy are power and the laws that control incomes. As we enter the new millennium, voters had better figure out which politicians have the interests of our total society at heart, rather than just the interests of the “educated,” the established and emerging rich, and the powerful. 

                      Charles M. Kelly

                      Tega Cay, South Carolina

                      April, 2000