From Jenny Anderson’s column, “The Insider,” in today’s New York Times:
For limited [hedge fund] partners, there is cause for concern. Take the fund’s investments. Private equity firms theoretically buy undervalued companies, lever them up, cut waste sharply and then sell, ideally at a higher value. As a public company, they will need to focus on quarterly earnings and those results may influence when they buy or sell — taking in fees when they buy and profits when they sell. (Equity firms insist in their prospectuses that they will not manage investments to meet quarterly earnings).
Our civil religion — unbridled and seldom-questioned capitalism — has led us to believe that cutting jobs is a public service. It is not.
The old company’s profit went, in considerable measure, to provide a living wage to, let’s say, a thousand workers. The new company has now been slimmed down, trimmed. modernized, or streamlined. (Notice the vocabulary, incidentally. We would have a very different view of the process if we used words like gutted, looted, squeezed, or plundered.)
The new company now has five hundred workers. To simplify matters some, but not much, the wages of the other five hundred workers are now in the pockets of a handful of lawyers, moneylenders and stock market gamblers with inside knowledge. (Again, words matter; they prefer to call themselves investment bankers, hedge fund managers, investors, and financiers.)
The true worth of the company may have been — in a more moral society would be held to be — the jobs of the employees, and the value of the goods or services created by the company.
The latter may continue, although very possibly the personnel reductions will result in worse service or shoddy goods. But the jobs lost are gone forever, to the detriment not only of the individuals but the community.
You might as well say that a tick creates value, when all it does is suck your blood for its benefit and leave you with Lyme disease.
But what about all those jobs in the health insurance industry and the value those employees add to society? Cutting out some those jobs would be a step in the wrong direction if one follows this argument to its logical conclusion. All those folks looking to streamline our health care industry by adopting an efficient single payer universal health care system are nothing but ticks looking to gut, squeeze and plunder that model of efficiency, the Blue Cross building right up the street from me. The one that employees at least a thousand local men and women who efficiently do the work that our health care system requires.
Could it be possible that sometimes these folks do some good to society by creating efficient systems that replace formerly inefficient models?
Posted by: Buck's Brother on July 20, 2007 3:11 PMBut what about all those jobs in the buggy whip industry and the value those employees add to society? All those folks looking to streamline our transportation industry by adopting that newfangled "horseless carriage" are nothing but ticks looking to gut, squeeze, and plunder that model of efficiency, the Conestoga buggy whip company right up the street from me, the one that employes at least a thousand men and women who efficiently do the work that our transportation system requires.
And if the above looks ludicrous to you, that's because it is. No more ludicrous than the notion that Blue Cross employees should have a "right" to their job even when societal progress renders their jobs obsolete, of course...
- Badtux the Snarky Penguin