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A Further Perspective
Did Corporate Downsizing Kill the Economy?
The editors of Newsweek thought so.
(Page 2 of 2)
That was the story line in the then popular movie Up in the Air, starring George Clooney — one of the president’s biggest supporters in Hollywood — as the “downsizing expert” who racks up more than 10 million frequent flier miles going from city to city to terminate an endless parade of desperate employees. As it happened, I had just seen the movie.
I felt sure that Newsweek’s treatment of “Lay Off the Layoffs” idea would offer more of the same screwy logic in seeing a bottomless gold mine of opportunity for unscrupulous businessmen to make money by shuttering plants and laying people off.
Of course, there are firms (and Bain Capital was one of them) that specialize in restructuring distressed companies and returning them to profitability. What they do used to go by the respectable name of “re-engineering.” But that was in another age, before large government bailouts of distressed companies gained general acceptance.
The Newsweek article did not disappoint. That is to say, it was even worse than I thought. And it was the perfect companion piece to Clooney’s Up in the Air. So I wrote a story for the Weekly Standard aimed at correcting some of the nonsense spread by Clooney and Newsweek.
The Newsweek article opened by singling out Southwest Airlines for special praise in hiring new workers and expanding its operations in the midst of the first big slowdown in commercial aviation history — the great slump that occurred after al Qaeda succeeded in simultaneously hijacking and crashing four U.S. jetliners on 9/11/2001 — two into the Twin Towers, a third into Pentagon, and fourth that crashed into an open field after passengers revolted and tried to regain control of the airplane and from the armed and already prepared-to-die hijackers.
As someone who has written about the airline industry for several decades (both as a reporter for leading publications and, at other times, as a speechwriter for CEOs in the airline and aircraft industries), it wasn’t hard for me to highlight the absurdity of Newsweek’s premise — which would have the reader believe that if all of the nation’s airlines had followed Southwest’s example, the industry would have rebounded quickly from the disaster that happened on 9/11.
But nothing could be further from the truth. Among the large airlines, Southwest, by reason of being the one big low-cost carrier, was the only the one that was strategically positioned to expand and pick up market share from the others during a period of falling demand for the industry as whole. As a group, U.S. airlines were losing more than ten cents on every dollar of sales during the post 9/11 slump. With the exception of Southwest and a couple of low-cost, low-fare upstarts — JetBlue and AirTran — they had no choice but to retrench. If anything, the big carriers were slow to downsize in the aftermath of this great national tragedy (employment at U.S. airlines declined only half as fast as revenues in two years after 9/11).
Now here is one last irony which I omitted from my piece in the Weekly Standard as a result of being limited to 1,000 words: Newsweek out-sourced its own story on outsourcing (or downsizing and then farming out the work, which comes to the same thing). Even as it was laying off staff members, it relied upon on an outside source (Jeffrey Pfeffer, professor of organizational behavior at Stanford University’s Graduate School of Business) to write its cover story.
I ended my story with the words: “The big threat to today’s economy is not corporate downsizing, but government upsizing.”
With Obama’s reelection, we are sure to get more of both in the year ahead — more government upsizing and, with that, a demoralized and diminished private sector, leading to more corporate downsizing.
No doubt about it: Team Obama licked its chops at the thought of applying the whole sad fantasy of unfairness and victimization (from Up in the Air / Lay Off the Layoffs / and Occupy Wall Street) to the 2012 election. In Mitt Romney — from Bain Capital — they even had someone they could portray as an honest-to-God “downsizing expert.” Mitt might have been George Clooney’s boss-of-bosses in Up in the Air. What luck!
Unfairness was the winning hand in this election. It trumped the free market and the argument that failed economic policies were a more than sufficient cause for dismissal.
That makes Nov. 6 a dark day for America — and the world.
As for Newsweek, there is no need to mourn its passing. It is going to its just reward in the boneyard of print journalism.
About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator, writes from St. Louis.
Letter to the Editor View all comments (26) | Leave a comment
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Appleby| 11.26.12 @ 7:36AM
When I started working for a living, I worked in a typing pool of 12 young women who handled most of the heavy lifting for a branch of a major insurance company. When someone invented and began to market affordable, reasonably easy to use computers, three women could do the work of those 12. The others were laid off. The saying was at that time "Anyone who can be replaced by a machine, should be." About 4 years ago I was laid off from my secretarial job at a major law firm for the same reason -- no longer do attorneys at that firm get their own secretaries; now it's 2 secretaries per 3 lawyers. Oh, and they're firing older and more experienced "girls" to hire shoals of Juniors who are in their prime breeding years and who are rewarded here in Kanukistan with a year off with pay for their pregnancies ... and the law requires that not only must their jobs be held for them, but the employer must hire a contract worker to do the actual work AND pay the regular girl to stay home and play house. It'll be fun to see how that plays out. Meanwhile, the only jobs that are available on a full time basis are the contract jobs. This is probably going to lead right over a cliff, but fortunately I am nearly old enough to retire, so I can watch it happen.
Jack in Wi| 11.26.12 @ 7:44AM
Romney deserved to lose. He ran as a warmongering plutocrat who was pro-abortion and pro-homosexual. There wasn't a dimes worth of difference between Obama and Romney. The people who picked these 2 stooges could care less who won. Because they are still in control with either. This country needs a real opposition.
GobBluthe| 11.26.12 @ 8:06AM
Do you set your alarm clock to get up bright and early so you can make idiotic statements.
GobBluthe| 11.26.12 @ 8:07AM
Hasn't Newsweek done more than their fair share of downsizing?
Kwan| 11.26.12 @ 8:12AM
"Our overreliance on downsizing is killing workers, the economy -- and even the bottom line....."Yes in the non-logical universe of leftist business operating theory, should your business revenues decline by 70% you should still continue employing the same number of employees and run the company at a loss. But when the leftist scam green energy company Solyndra realized that the company was operating at a loss, they immediately laid off 1100 workers, locked the doors, and filed for bankruptcy. The left's anti-business, anti-profit rhetoric is all about trying to convince us that free enterprise/capitalism is Darwinian, -survival of the fittest- and that a Soviet-style command and control of the economy by the central government is what will ultimately lead the country to achieving the sacred goal of fairness and social justice.
TLP| 11.26.12 @ 10:53AM
How much do you wanna bet that all of the Mr. Outraged Newsweekers have an APPLE everything?
Made in China, in a Factory that houses 300,000 Sweatshop Workers, working for Slave Wages?
It's like how The New York Times and The Boston Globe love all of the Unions in the world, except the one's that THEY EMPLOY.
Those Unions are Scumbags, and they make Too Much Money, already.
Or, like Nancy Pelosi, who Loooooooves Unions. Just not at HER VINEYARDS, or in HER RESTAURANTS.
The Clintons love Blacks so much, that they live in The Whitest Town in America.
Obama is Isreal's BFF, if you ignore his many Visits to every Mulim Hellhole within Rocket Distance of Israel, while never setting foot in his Christian Religion's Birthplace.
TLP| 11.26.12 @ 10:59AM
You can throw in that Puerto Rican Mayor of Los Angeles as well, while you're at it.
He Abhores building a Fence to keep Illegals out of this Country, even as he uses $250,000 of City Funds, to put up a WALL around HIS HOUSE.
Scumbag Hipocrytes, all of these Liberal MFers.
Freedomfighter_99| 12.4.12 @ 3:39AM
There ought to be a law that says if you support Open Borders you can NOT have any locks on any doors or gates on your property, and you must have a sign prominently displayed advertising the fact. 90% of ALL Open Borders Nit-Wits are HYPOCRITES!!!
OP4| 11.26.12 @ 8:19AM
I work in a corporate headquarters. We are obsessed with efficiency - because there is no growth! If there was money to be made growing and investing, we would be doing it.
Regulations are out of control and about to get a lot worse as Dodd-Frank becomes fully weaponized in the war on business. Nobody can tell me what capital gains tax will be next year. It is clear that the U.S. will still have the highest job-killing corporate tax rate in the world. I bet the Newsweek article didn't mention any of it.
(As an MBA grad, I see that OB Professors are still completely useless - and probably still laughed at by their students)
Von Mises Jr| 11.26.12 @ 9:33AM
As a fellow MBA and a student of Mises and Hayek, I can tell you that the fascist control of Wall Street manipulating their willing crony capitalist such as Blankfein, Immelt and Buffet (to name a few) along with the "Green Energy" and other scams are the reason for the horrible economy and layoffs.
GM is making electric cars at a $50K loss each. The Obama bundlers like those at Solyndra got over $21K back for every dollar they funneled to the regime.
This is not rocket science, except for the stupid liberals who cannot and will not think. They react only to clichés and emotion.
Seek| 11.26.12 @ 11:56AM
I'm curious: Were you actually a student of Mises and Hayek? They died, respectively, in 1973 and 1992. If you were among their pupils, please shed light on the experience of sitting in their seminars.
TeaPartyNow| 11.26.12 @ 12:24PM
I'm a student of James Madison who passed away in 1836. A person does not have to be living to be worthy of learning from.
Von Mises Jr| 11.26.12 @ 2:17PM
No my friend. I just read several of their books. You can get a very nice library of these great men at www.mises.org.
I read a lot of Sowell over the years, and now that I have the time and under the circumstances, I just self-educated on this subject. Rothbard is also good and Milton Friedman if you don’t get a brain freeze.
Al Adab| 11.26.12 @ 5:41PM
It occurs to me that even if downsizing caused the downturn, there might be found a cause for downsizing in the massive regulatory strictures and its imposed costs. How many companies will downsize in anticipation of the Obamacare costs?
RJ| 11.26.12 @ 10:20PM
All great economists. I find myself favoring Von Mises, I suppose because he was Hayek's Professor. The works of Frederick Bastiat are also a gift to humanity.
TeaPartyNow| 11.26.12 @ 12:20PM
Wall Street is Republican majority. I agree with the fact that they are screwing over America. But it is actually run by what I call RINOs. They call themselves Republicans.
Don't call Wall Street liberal. It's inaccurate. Larry Kudlow & Steve Forbes are still frothing over Romney. & still telling Americans to "invest".
Cats1cowboy| 11.26.12 @ 1:15PM
Wall Sreet makes IRA's and 401K's grow for the middle class. You're killing me!
John786| 11.26.12 @ 10:27AM
Its clever the way the author combines the unemployment rate with Islamophobia. Very creative.
Al Adab| 11.26.12 @ 5:37PM
I trust Ashura was fulfilling. After Thanksgiving, we need a day of fast. Nice how we can combine these traditions.
John786| 11.26.12 @ 7:54PM
Br Al Adab,
I hope you are well. Yes Ashoora has come and gone. It's important to all Muslims particularly the Shia.
Who Knows?| 11.26.12 @ 11:41AM
You actually PAID $5 for a Newsweek?
Boy, are you stupid.
TeaPartyNow| 11.26.12 @ 12:15PM
The economy today is still breathing. It is what they are about to do that will kill it & the American Peoples' wealth. & Republicans are doing everything that they can to accommodate Democrats. Which is what the vast majority of people on the right fail to grasp.
European nations are getting closer to default. America will default too. But before we do, we will cause hyper inflation by printing instead of borrowing, which we are in the process of.
The American People no longer hold the American Spirit of liberty in us. We lay here & pay everything that is asked of us invariably. When things get rough, the right whines, also invariably.
America will never die. But what it prints today will make the people wish for an end. Too bad we no longer believe in freedom in America. Today there'd be no Tea Party. We'll pay everything D.C. wants, oblivious to what we are doing.
America will never die, but the American Peoples' ignorance today most certainly beat her bloody.
Cats1cowboy| 11.26.12 @ 1:14PM
A movie role in which he memorizes lines written by someone else makes clooney an expert?
JD| 11.26.12 @ 2:50PM
Democrats have an incredible ability to conflate causes and symptoms.
Layoffs are a symptom. Government practices are the cause.
Freedomfighter_99| 12.4.12 @ 3:43AM
Actually, Democrat Policies are more usually the CAUSE....
xavier2012 | 11.27.12 @ 2:45AM
Economic downturn, sad day
Get better soon up