Victims of the system Essay

Smash and Grab is the label applied to the act of gangs of big cityterrorists who smash the windows of a car stopped at a traffic light andgrab whatever they can before running in hasty retreat. A recent victimin our area was a minister who subsequently died of a heart attackattributed to the trauma of such violence. While this may be an extreme in senseless violation of the rightsof others, there is growing awareness that our great legal minds haveproperly arranged to protect the rights of suspects and criminals fromoverzealous cops, yet haven’t done much to help victims who aresmashed, grabbed, battered, and abused. Victims are less sensational, but every bit as real in themanufacturing industries. People who lost their jobs through noparticular fault of their own tend to be bitter than the System wasrigged against them. In recessions many companies have so littlebusiness that they are forced to lay off people with long service andgood records of performance.

Machine-tool builders lose skilled workersevery time the nation’s economy takes a nose dive. During the recovery phase, lack of skilled workers limits theability of companies to make timely deliveries and gives their foreigncompetitors more advantage. The man in the shop isn’t to blame forthat sad state of affairs, but it makes him all the more vulnerable inthe next down cycle. Much of the machine-tool industry’s trouble is attributed tothe twin woes of high interest rates and a strong dollar. They make ithard to sell machine tools both at home and abroad. Yet no individualI’ve met feels personally responsible for the growth of those twinwoes.

Most of us feel like victims. Then there is merger mania. What do you say to the job applicantwho says she worked well for her former employer, but he sold thecompany and she lost her job.

She learned what is meant by redundant.Can you promise that the job you offer is with a firm that is not goingto be sold out? Professor Michael C Jensen writing “Takeovers: folklore andscience” in the Harvard Business Review would have us believe thatpublic criticism of the takeover market is largely unfounded andunproductive. Realizing the controversial nature of this stance, theHBR editor’s introductory paragraphs include the statement:”If you accept the assumption that shareholders are the mostimportant constituency of the modern corporation, then these mergers andacquisitions make sense because they increase the value of the sharesheld in the target company.” Certainly if the shareholders sell their stock to a takeover artistfor more than they paid they are better off. But what about the peopleon the payroll who don’t own a piece of the action? The professorbrushes aside as folklore the statement that consolidating facilitiesafter a takeover leads to plant closings, layoffs, and employeedismissals–all at great social cost.

He would even have us believethat to slow down mergers would be to slow innovation. As a long-time student of the machine-tool industry, I wouldchallenge the professor to do an academic study of machine-toolinnovation that has followed in the path of takeovers and mergers. Whatwe have seen is quite the opposite.

New product announcements usuallycome to a halt. Often the founding family’s talents simply fadeaway to Florida’s finest resorts, and the new owners suffer from ashortage of people with the specialized smarts it takes to design andbuild a better mousetrap. Just because an outfit has money enough to buy a companydoesn’t mean they have the know-how to keep it competitive in afuture filled with higher technology. In his book, Lee Iacocca grieves for those good people at Chryslerwho lost their jobs in the process of making the company lean enough tosurvive in a depressed market that was not of their making. Theunfairnesses he cites are in systems bigger than individualcorporations.

His straight talk on buyouts suggests “… we pass alaw that says when you borrow money to buy somebody else and cannibalize him, the interest payments on those loans are not deductible. Thatwould get the excesses out of the system pretty fast.” Investment bankers that arranged such mergers have seen an upsurgeof divestiture business. This seems to support the view that takeovermanagement isn’t necessarily more efficient than those who built abusiness.

The Wall Street Journal reports that 700 people lost theirjobs in the last big investment-bank merger. There appear to be victimsof the System all around us.


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