As
discussed in my prior post, free trade commitments produce winners and losers
based on diffused decisions in the marketplace, rather than centralized government
choices. The capacity of government to
redistribute creates a market for influencing those decisions. This likely explains the fact that the
Washington, D.C. metro area has the largest concentration of so-called “super
Zips”, which reflect where high-earning individuals live. Brokering that redistribution apparently pays
very well. (For more on this topic, see
this story and interactive map: http://www.washingtonpost.com/sf/local/2013/11/09/washington-a-world-apart/ . And that compensation likely comes from the
rest of us.
Samuel
Gregg lays the foundation for resisting a regime in which government is
empowered in this way in his recent insightful essay, Crony Capitalism: Inefficient, Unjust, and Corrupting, http://www.crisismagazine.com/2016/crony-capitalism-inefficient-unjust-and-corrupting (March 24, 2016). Gregg points out that crony capitalism is not
merely a problem of authoritarian regimes, but it can also thrive in
democracy. It often results in
redistribution that favors the connected class, rather than benefitting the common
good. Economic liberalization limits
opportunities for politicians to provide these goodies in exchange for
political support. Shrinking
government’s power also shrinks the power of the special interest and the
lobbying class. (That is probably not good
for my people, the lawyers who often populate the lobbying class. But it would be good for the country.)
One
important clarification needs to be made about free trade commitments. The fact that we allow the private sector to
make decisions about where to produce, what to produce, and where to source
their purchases, does not mean that these decisions are free from other moral
considerations. In fact, those other
moral considerations are playing heavily into the reason that a departure like
that announced by Carrier causes so much consternation.
As
Francis Fukuyama explains in Trust, his seminal work on the role of social
capital in economic life, economic life and social capital are inextricable
intertwined: “[O]ne of the most
important lessons we can learn from an examination of economic life is that a
nation’s well-being, as well as its ability to compete, is conditioned by a
single, pervasive social characteristic:
the level of trust inherent in the society.” (page 7).
Economic activities of any scale require human beings to collaborate. Trust makes that collaboration possible.
Moreover,
economic activity is not an end in itself.
It is ultimately directed toward human good, meeting needs and wants
with goods and services. (Why do we call
tangible things “goods”, if they are not designed for our benefit?) Humans possess dignity that is expressed
through meaningful work, producing things that their fellow humans need. As Fukuyama explains, work and the fruits of
labor, including money, are forms of recognition, as well as the source of
satisfaction of material needs. And that
recognition comes from a community.
Solidarity with that community can provide important benefits, which
cannot be ignored.
When a
company like Carrier decides to outsource production, many will justly view
that as a breach of a social contract between the workers and the company. This produces mistrust, which can be magnified
by other behavior, such as executives profiting while their fellow workers lose
their jobs. The result is greater
division between workers and administrators, rather than solidarity. Fukuyama provides several examples in which
companies made decisions to protect their workers, which resulted in long-run
benefits, including greater espirit de
corps, cooperation, innovation, and productivity. The pursuit of self-interest does not equate
to advantage without considering the consequences on these relationships.
Outsourcing
is the product of people making choices, sometimes choices with which we will
disagree. Will government make better
choices than private enterprises? We
cannot go that route without fueling a fire which empowers government to do
these things. Changing the identity of
one’s employer – working for the government instead of the private sector –
does nothing to change the risks of bad decisions. There is a role here for voice in the private
sector, including the voice of board members and those who choose them.
Carrier
will likely pay a price for its decision, which can be seen in the loss of
social capital. It may experience
problems with other workers, who see that the company is willing to throw them
under the bus if it means extra profit.
(Of course, sometimes that may be inevitable – if goods cannot be made
profitably, changes must occur. Even the
best of intentions cannot prevent some disruptions that come from market
forces.) The public may also choose to reject
Carrier products because of its decision.
Ironically, as noted in my previous post, Carrier touts its record of
“sustainability” in environmental matters.
But is “sustainability” also a feature that could describe a commitment
to the community in which one conducts business? Query whether we might benefit from a signaling
mechanism that would more clearly transmit information about policies,
commitments, and practices regarding employment and community development. My colleague Vasant Raval and I have a
working paper in this area, which I will discuss in a future post.
Creighton's Institute for Economic Inquiry is co-sponsoring an symposium, “Growing Trust in
the Marketplace, which will be held on April 22, 2016, in the law school on the
Creighton campus. This symposium will
take up the matter of trust and social capital in economic life. See the IEI website for more information,
under the “events” tab. Preregistration
is required if you would like to attend the lunch. Here is a link: http://www.creighton.edu/instituteforeconomicinquiry/events/ . I will be discussing the symposium tomorrow
morning with Jeff Beals on the Grow Omaha show at 9:25 a.m. on KFAB radio (1110
a.m.)
Ed Morse
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