Corporations Are Not Humans : Not Even Close ---Episode 45

             SHEDDING JOBS AND CONCENTRATING WEALTH 
                                                 ( continuation )


4. Investment in Headquarters Teamwork and Morale to Maintain Loyalty and Performance 


   The peripheral functions --- farmed out either to subordinate units within the corporation or to outside suppliers dependent on the firm's business --- are performed by low-paid, often temporary or part-time "contingent" employees who receive few or no benefits and to whom the corporation has no commitment. The result is a two-tiered structure that is highly differentiated with regard to competitive pressures. There is considerable, if uneasy, cooperation among the corporations that control the cores of major networks to maintain their collective monopoly control over markets and technology. The peripheral units, even those that remain within the firm, function as independent small contractors pitted in intense competition with one another for the firm's continuing business. They are thus forced to cut their own costs to the bone. This dualistic structure is an important part of the explanation for the growing income gap found in the United States and many other countries. 
   According to experts, "It is the strategic downsizing of the big firms that is responsible for driving down the average size of business organizations in the current era, NOT some spectacular growth of the small firms sector, per se." The largest 1,000 companies in America account for over 60 percent of the gross national product, leaving the balance to 11 million small businesses. The contracting-out process does create new opportunities for smaller firms, but the power remains right where it has been all along ---with the corporate giants. Lacking independent access to the market, the smaller firms that orbit core corporations function more as dependent appendages than as independent businesses. 

    This explains why, when the world's largest corporations unceremoniously shed well educated, loyal, and hardworking employees, they are actually increasing their economic power.  From 1980 to 1993, the Fortunate 500 industrial firms shed nearly 4.4 million jobs, more than one out of four that they previously provided. During that same period, their sales increased by 1. 4 times and assets by 2.3 times. The average annual chief executive officer compensation at the largest corporations increased by 6.1 times to $ 3.8 million. 
   Although some corporations have been forced into downsizing by weak markets and lax management, others have downsized from a position of considerable strength. GTE announced plans on January 1, 194, to lay off more than 17,000 employees in the face of a strong market and a steady growth in operating income. Other companies enjoying growth in markets and profits that announced significant layoffs at the end of 1993 or the beginning of 1994 include : Gillette (2,000 employees), Arco (1,300 employees) , Pacific Telesis ( 10,000 ) , and Xerox ( 10,000 ). Some cut real fat from the payrolls. Other cuts were part of the shift to outsourcing. Many were made possible by new technologies. Major job cuts often accompany mergers and acquisitions, which are usually aimed at strengthening and consolidating market share while reducing employment costs. After Chevron merged with Gulf in 1984, it reduced the combined workforce by nearly half, to about 50,000 people. It cut another 6,500 people in 1992-93. 
   General Electric shed 100,000 employees over eleven years to bring total employment down to 268,000 in 1992. During that same period, its sales went up from $27 billion to $62 billion, and net income increased from $1.5 billion to $ 4.7 billion. GE became smaller only in terms of the number of employees who shared the benefits of its growth in profits and market share.  It mainly shed its commitment to provide productive and well-remunerated employment for 100,000 people and their families. It did not shed its technical, financial, or market power. 

   Some of the more vivid examples of a two-tiered structure are found in the agriculture sector. Large agribusiness corporations commonly reduce their own risks, while increasing their profits, by contracting out production to smaller farms. The owners of the small farms provide the major capital investment and bear the risks of crop failure. Since the corporate giant controls the market, the small farmer has little choice but to accept the terms it dictates --- including production methods, the price of inputs it requires the farmer to buy, and the price it will pay for the crop. The only choice left to the farmers is to accept the terms, go out of business, or find another crop whose market is not yet controlled by core corporations. The restructuring of agriculture has contributed to decreasing the farmers' share of consumers' food dollars from 41 percent in 1910 to 9 percent in 1990. 
   Figures compiled in 1980 by the U.S. Department of Agriculture revealed that production and marketing contracts covered the production of 98 percent of sugar beets, 95 percent of fluid-grade milk, 89 percent of chicken broilers, 85 percent of of processed vegetables, and 80 percent of all seed crops. When a contractor firm controls the market, producers are at its mercy. When Del Monte decided, for example, to transfer the bulk of its peach procurement from northern California to Italy and South Africa, most of its contract farmers saw their market vanish for reasons that had nothing to do with the local appetite for peaches. 
   Such conditions mock Adam Smith's notion of a competitive market comprised of small buyers and sellers. The farmer receives a lower price and the consumer pays a higher price than either would have obtained under conditions of true competition. The world's major agribusiness corporations are rapidly extending this system to the world.