The Defining Issue of Our Times

Here’s an axiom. People like the result of change, but they hate change itself – it upsets them. That should be absurdly obvious, but in the late eighties and far into the nineties, that was the big management issue – how to get your employees to embrace change. The topic made thousands of consultants rich and produced endless books on supposed leadership. The most popular of those books, and certainly the most irritating, was from 1998 – Who Moved My Cheese?

Simple parables are always annoying, because they’re so condescending. Making something so simple even a child could understand it is assuming most people are fools who are best treated like little kids, and little kids who aren’t that bright, and never will be. Adding cute mice, in search of a nice bit of cheese, doesn’t help matters. That makes things worse. The middle-management of most major corporations is used to being ignored and dismissed as useless, but they’d rather not be insulted. Meeting the demands of upper management, for bottom-line results, while keeping your crew working together, or even working at all, is hard enough. All the talk of mice and cheese was beyond offensive, if not insulting, but the idea was that one had to understand how one’s subordinates think, and understand why they resist reorganization and automation and outsourcing and all the rest. This meant embracing this paradigm:

Change Happens

They Keep Moving the Cheese

Anticipate Change

Get Ready For the Cheese to Move

Monitor Change

Smell the Cheese Often So You Know When It Is Getting Old

Adapt to Change Quickly

The Quicker You Let Go Of Old Cheese, the Sooner You Can Enjoy New Cheese

Change

Move with the Cheese

Enjoy Change!

Savor The Adventure And Enjoy the Taste of New Cheese!

Be Ready To Change Quickly and Enjoy It Again

They Keep Moving the Cheese.

That was it, or at least those were the chapter headings, but everyone knew this was self-serving. When someone asks you to embrace a new paradigm, as that was how everyone spoke back then, you could be pretty sure you’d be laid off soon. Industries are always changing, with some disappearing entirely while whole new industries sometimes suddenly appear. Many people are going to be hurt by that, badly. Lives will be destroyed. To be told this is a good thing, to be told that soon you’ll be writing best-selling Android apps or running your own boutique winery in Napa, is cool, but that seems unlikely – because it is unlikely. Talk of mice and cheese doesn’t help when three guys in Bangalore will soon be doing your job and no one here will ever hire you again, no matter what new skill-set you painstakingly acquire. Those new skills too will be irrelevant soon enough. Management consulting had become a way to help you break the news to your team that most of them, or all of them, would soon be weeded out, and a way to let you know that you too would soon be gone. There must be a way to tell everyone they should love that, and they found a way. Yeah, they do keep moving the cheese, and you’re not getting any. The trick is to make you feel that’s your fault. The whole thing was a scam.

Some did manage to thrive anyway. The result of change was just fine for them – they found new careers, reinventing themselves as real estate agents or interior decorators or whatever. Then the real estate bubble burst, the economy collapsed, and there was no cheese there. Others, with fine careers in manufacturing, long ago found themselves weeded out of what is now essentially a service economy. Everything is made elsewhere now. Cities centered on a single industry disappeared. That’s what happened to Detroit, although Pittsburgh, the Steel City, reinvented itself as a center of medical services and advanced technology. That, not steel, was their new cheese, and they’re enjoying that cheese, for now, even if the city’s population dropped by more than a third during the transition. Change weeds out the losers, even positive change. Lives were destroyed.

Economists call this creative destruction – which Karl Marx saw as one of the basic inherent evils of capitalism, because it destroys so many lives, and far-right American economists think is a wonderful thing, because all sorts of good come from it, like a dynamic incredibly prosperous economy, getting better all the time, creating whole new industries over and over. People should like the result of change, even if they hate change itself – because this sort of change is for the greater good, the eventual greater good. They, whoever they are – Bill Gates or Jack Welch or whoever – keep moving the cheese, but that’s a good thing. Karl Marx was just a big softie, overly concerned with the losers. Some people are always going to lose. That’s life.

Marx has lost that argument, but we all have to live with the result of many decades of this creative destruction – too many losers among us, and startling income inequality we haven’t seen since the twenties, or ever before. We don’t live in that inevitably good future. No one ever does. We live in a time of massive long-term unemployment and tens of millions of Americans now working for next to nothing, barely getting by. While we wait for that inevitably good future, we have to deal with the losers. They’re not going anywhere, and telling them that their predicament is their fault, perhaps using simpleminded parables about cute mice and cheese, is still a scam.

That’s why President Obama recently called this the defining issue of our times – “a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain that if you work hard, you have a chance to get ahead.”

Here’s a quick summary of the core ideas from Greg Sargent:

Obama described the decline in economic mobility as a direct consequence of inequality – as opposed to arguing that lack of mobility is itself the problem – and as the product of trends that are decades in the making. He cast the need to ensure that “opportunity is real” for our children…

Obama also argued that current levels of inequality and lack of opportunity as out of sync with the country’s founding values, noting that “the premise that we’re all created equal is the opening line in the American story,” and that the way to preserve that promise is to ensure that “success doesn’t depend on being born into wealth or privilege, it depends on effort and merit.”

And, crucially, Obama described the overall problem as the result of the rich pulling away from the rest. He noted that the share of the country’s wealth is increasingly going to the top while tax cuts for the wealthiest have cut into investments that benefit the rest, emphasizing that this has made it harder for poor children to escape poverty. Meanwhile middle class incomes have stagnated thanks to technological advances and declining unions. Result: The “basic bargain at the heart of our economy has frayed.”

There has been the usual push-back on this – it really is more important to worry about economic growth, not some idealistic notion about how income should be distributed – and the Washington Post’s Ezra Klein sees the difficulties here:

Imagine you were given a choice between reducing income inequality by 50 percent and reducing unemployment by 50 percent. Which would you choose?

Some argue that that’s a false choice: Joblessness is a consequence of inequality, and vice versa. The popular mechanism here is that inequality puts money in the hands of people who don’t spend it, and so the economy is suffering from a persistent demand shortfall. Cure inequality, and you’d solve many of the economy’s other problems, too.

Economist Jared Bernstein has been worrying about inequality since way before worrying about inequality was cool. But in a careful paper released on the same day as Obama’s speech, Bernstein found that there wasn’t strong evidence for the idea that inequality is weakening demand – or for any of the other theories tying inequality to a weaker economy. There “is not enough concrete proof to lead objective observers to unequivocally conclude that inequality has held back growth,” Bernstein wrote.

That doesn’t mean inequality isn’t hurting growth. It just means it’s difficult to find firm proof of it. But if inequality really was the central challenge to growth, would proof really be so hard to come by?

One can get caught in a pointless chicken-or-egg argument with all this, where there’s no way to talk about which came first and which causes which, but the rather traditional economist Paul Krugman sees a way out:

Isn’t it more important to restore economic growth than to worry about how the gains from growth are distributed?

Well, no. First of all, even if you look only at the direct impact of rising inequality on middle-class Americans, it is indeed a very big deal. Beyond that, inequality probably played an important role in creating our economic mess, and has played a crucial role in our failure to clean it up.

Unlike Jared Bernstein, Krugman sees numbers:

On average, Americans remain a lot poorer today than they were before the economic crisis. For the bottom 90 percent of families, this impoverishment reflects both a shrinking economic pie and a declining share of that pie. Which mattered more? The answer, amazingly, is that they’re more or less comparable – that is, inequality is rising so fast that over the past six years it has been as big a drag on ordinary American incomes as poor economic performance, even though those years include the worst economic slump since the 1930s.

And if you take a longer perspective, rising inequality becomes by far the most important single factor behind lagging middle-class incomes.

Beyond that, when you try to understand both the Great Recession and the not-so-great recovery that followed, the economic and above all political impacts of inequality loom large.

It’s now widely accepted that rising household debt helped set the stage for our economic crisis; this debt surge coincided with rising inequality, and the two are probably related (although the case isn’t ironclad). After the crisis struck, the continuing shift of income away from the middle class toward a small “elite” was a drag on consumer demand, so that inequality is linked to both the economic crisis and the weakness of the recovery that followed.

And political decisions only made matters worse:

In the years before the crisis, there was a remarkable bipartisan consensus in Washington in favor of financial deregulation – a consensus justified by neither theory nor history. When crisis struck, there was a rush to rescue the banks. But as soon as that was done, a new consensus emerged, one that involved turning away from job creation and focusing on the alleged threat from budget deficits.

What do the pre- and post- crisis consensuses have in common? Both were economically destructive: Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both consensuses, however, corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth.

This is especially clear if we try to understand why Washington, in the midst of a continuing jobs crisis, somehow became obsessed with the supposed need for cuts in Social Security and Medicare. This obsession never made economic sense: In a depressed economy with record low interest rates, the government should be spending more, not less, and an era of mass unemployment is no time to be focusing on potential fiscal problems decades in the future. Nor did the attack on these programs reflect public demands.

Surveys of the very wealthy have, however, shown that they – unlike the general public – consider budget deficits a crucial issue and favor big cuts in safety-net programs. And sure enough, those elite priorities took over our policy discourse.

No one is thinking about the losers in all this, because that they are losers is because they weren’t good little mice, so it’s their fault they can’t find the cheese, so to speak, but Salon’s Joan Walsh, finds such thinking a bit counterfactual:

Americans notoriously hate welfare, unless it’s called something else and/or benefits us personally. We think it’s for slackers and moochers and people who won’t pull their weight.

So we’re not sure how to handle the fact that a quarter of people who have jobs today make so little money that they also receive some form of public assistance, or welfare – a proportion that’s much higher in some of the fastest growing sectors of the workforce. Or that 60 percent of able-bodied adult food-stamp recipients are employed.

Fully 52 percent of fast-food workers’ families receive public assistance – most of it coming from Medicaid, food stamps and the Earned Income Tax Credit – to the tune of $7 billion annually, according to new research from the University of California-Berkeley’s Labor Center and the University of Illinois.

McDonald’s workers alone receive $1.2 billion in public aid, the study found. This is an industry, by the way, that last year earned $7.44 billion in profits, paid their top execs $52.7 million and distributed $7.7 billion in dividends and stock buyback. Still, “public benefits receipt is the rule, rather than the exception, for this workforce,” the study concluded.

Then there’s Wal-Mart, which as Salon’s Josh Eidelson recently reported, boasted to a Goldman Sachs conference that “over 475K” of its 1.3 million workers make more than $25,000 a year – which lets us infer that almost 60 percent make less.

Democrats on the House Committee on Education and the Workforce estimated that the giant low-cost retail chain benefits from many billions in public-assistance funding; one Wisconsin “superstore” costs taxpayers at least $1 million a year in public assistance to workers’ families. Remember, too, that six members of the Walton family own as much wealth as 48 million Americans combined.

Walsh thinks America has somehow created what she calls a low-wage work-swamp, which actually itself is a scam:

It’s not just fast food and Wal-Mart: One in three bank tellers receives public assistance, the Committee for Better Banks revealed last week, at a cost of almost a billion dollars annually in federal, state and local assistance. That’s right: One of the nation’s most profitable, privileged and high-prestige industries, banking, pays a sector of its workers shockingly low wages and relies on taxpayers to lift them out of poverty. In New York alone, 40 percent of bank tellers and their family members receive public assistance, costing $112 million in state and federal benefits.

Bank CEOs get multi-million dollar bonuses as profits soar, while millions of tellers are so poor they get welfare. Something’s wrong with that.

Yep, this is a scam, and some now see that:

Revulsion at subsidizing profitable corporations that pay poverty-level wages is helping fuel a wave of long-overdue organizing and protest on behalf of low-wage workers, from the fast-food strikes that have swept the country to Wal-Mart protests this holiday season. Taxpayers recoil at the notion, but so do many workers themselves. “I thought I could make it on my own. That didn’t happen,” Wal-Mart worker Aubretia Edick, who makes $11.70 an hour and still gets public assistance, told the Huffington Post. That’s why she joined a one-day strike. “Wal-Mart doesn’t pay my salary,” she said. “You pay my salary.”

The U.S. now has the highest proportion of low-wage workers in the developed world, according to the Organization for Economic Cooperation and Development. One in four makes less than two-thirds of the median wage, which is the same proportion that relies on public aid.

The odd thing is that Walsh, having heard Obama’s speech, thinks he and the Democrats are in on the scam:

The fact that so many Americans “work their tails off and are still living at or barely above poverty,” receiving public assistance, is not just an unhappy accident. It’s the result of public policy supported by many Democrats – and he hasn’t done much to change or challenge it. In fact, the chair of Obama’s Council of Economic Advisors has made the most spirited defense of it.

The truth is a bipartisan consensus emerged in the 1990s, that a job, practically any job, was better than long-term public assistance for so-called “able-bodied” adults, including mothers with young children. It led to controversial 1996 welfare reform legislation that had ramifications way beyond the realm of welfare.

Republicans demanded work from welfare recipients; (most) Democrats went along, but demanded new support for low-wage workers: an expanded Earned Income Tax Credit, wider Medicaid and food stamp eligibility, new (though not nearly sufficient) child care subsidies. (As an Illinois state senator, Obama was critical, but later endorsed the deal.) The new support programs also helped millions of low-wage workers who never relied on welfare; as wages continued to stagnate and even decline, more people became eligible.

But as labor advocates began to realize and protest the extent to which employers were relying on taxpayers to support their workforce a decade ago, some liberals told them not to worry about it. Responding to an earlier wave of organizing against Wal-Mart’s labor practices, President Obama’s Council of Economic Advisors chair, Jason Furman, wrote a hugely influential 2005 paper, “Wal-Mart: A Progressive Success Story.” (Eight years later, it sounds like he was trolling us.) The former Clinton economic advisor argued that the big box chain’s low prices helped poor people, and that its employees’ reliance on public assistance wasn’t a bug but a feature of progressive social policy.

Yeah, helping people is a good thing, that’s progressive social policy, and if you can help giant corporations at the same time, everyone wins.

Walsh disagrees:

As a social democrat, I don’t think Furman is wrong to defend the role of social programs in making life better for low-wage workers. Lots of progressives believe we should detach health insurance from employment entirely, for instance, and make it a universal benefit supported by higher corporate and top-rate taxes plus sliding-scale individual contributions. Throughout the developed world, workers at almost every level can rely on government-funded health care, childcare, job training and retraining, and even (at lower wage levels) wage supplements.

But it’s not punitive Calvinism or welfare-shaming to question the extent to which it’s now a given that low-wage workers are going to have to rely on food stamps and other public assistance, often for a long time, perhaps permanently. By not also demanding regular minimum wage hikes or putting muscle behind union organizing, Democrats have helped create a vast low-wage labor pool that hovers just above the poverty line, and sometimes still below it, thanks to public assistance, and lacks the economic and political muscle to improve their wages and working conditions. This can’t be good for anyone.

All she asks for is a bit of logic here:

Every dollar taxpayers spend subsidizing corporations paying poverty wages is a dollar not spent on early childhood programs, building universities or funding college education. Yes we need safety nets, but we also need ladders of opportunity. The government spending that built the post WWII middle class invested in education and research, and it was backed by the New Deal’s most effective anti-poverty initiative: the Wagner Act, which eased labor union organizing. …

But Republicans aren’t pushing to raise the minimum wage or make it easier for low-wage workers to organize unions. Their answer is to pull the safety net out from under these workers without building ladders that let them climb. And with sequestration and food stamp cuts, they’re getting their way.

They’re getting their way for the same reason all those management consultants were making a ton of money back in the nineties, and why that infinitely stupid parable about the two cute mice and the missing cheese sold millions of copies – it’s always the losers’ fault, if you think about it the right way. Obama said it wasn’t the losers’ fault, but if Walsh is right, Obama wants it both ways – some sort of system where the few winners still get to exploit the losers, at the taxpayers’ expense, so nothing cuts into their profits all that much. We need them too.

It’s all a bit depressing. Those of us who were there back in the nineties, at one of those off-site sessions all about how to get your team to accept change, remember the talk of mice and cheese, and remember feeling something quite nasty was going on. Someone was going to get hurt, badly. And after all these years it’s still depressing, and it’s still the defining issue of our times. Someone’s always moving that damned cheese.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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One Response to The Defining Issue of Our Times

  1. Rick says:

    Whoa! An epiphany! (At least for me.) My God, where have we been?

    According to Wal-Mart worker Aubretia Edick, we have all been missing the point:

    “Wal-Mart doesn’t pay my salary,” she said. “You pay my salary.”

    Just a reminder to those private businesses who don’t think the rest of us have the right to be telling them what they ought to be paying their employees: Yes, we do have a dog in that fight, because if you don’t pay them enough to live on, then we, the people, have to pick up the slack, through public assistance.

    But while I am slightly confused by certain well-respected economists saying they can’t establish an actual cause-and-effect relationship between inequality and the economic mess we’re in, it seems pretty obvious to me that a link is there. If bank tellers make such a small percentage of what their own bank’s VPs make that we have to make up the difference in Medicaid or food stamps, how can that not supply so little demand to the economy that is needed to keep it healthy?

    I’m pretty sure most Americans think that anyone “on public assistance” needs to just “get off their ass and get a job!”, not realizing that many, if not most, of these people already have jobs. We laugh when we see all those “kids” who work for McDonalds, demanding higher pay, as if we are living in 1962 and all those McDonalds workers are kids, working after school or in entry-level jobs!

    This new reality surely doesn’t even occur to most of us, that business has found this great new business model that allows them to not only survive but to thrive: A large part of the workers’ pay can be picked up by government!

    If so, maybe the rest of us have this decision to make:

    Either we force the companies to pay more, or else we’ll need to rebill them for whatever we pay their employees.

    Rick

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