How American Corporations Transformed from Producers to Predators

Yves Smith reposts a post about How American Corporations Transformed from Producers to Predators:

Corporations are not working for the 99 percent. But this wasn’t always the case.

William Lazonick retells the pretty story of how the corporations were once concerned with their employees and the broader society:

A generation or two ago, corporate leaders considered the interests of their companies to be aligned with those of the broader society.

He blames the ‘financialization’ of the firms starting in the 1960's through mergers, then acquistions for the purpose of asset stripping. Fincialization means that:

…executives began to base all their decisions on increasing corporate earnings for the sake of jacking up corporate stock prices.

He sees the problem as:

When a corporation becomes financialized, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards for all. They become focused instead on generating financial profits that can justify higher stock prices – in large part because, through their stock-based compensation, high stock prices translate into megabucks for these corporate executives themselves. The ideology becomes: Corporations for the 0.1 percent — and the 99 percent be damned.

One solution he proposes is to:

Recognize that taxpayers and workers bear a significant proportion of the risk of corporate investment, and put their representatives on corporate boards where they can have input into the relation between risks and rewards.

Sounds like the start of Socialism to me.

My problems with this analysis are that:

• The characterisation of corporations as changing over time;
• The absence of the influence of the fall of Communism in 1989;
• The decay of unions in the 1970's and later

Corporations have always been about the maximization of profit. That is the reason for their existence. They reproduce capital in the shortest time possible.

In earlier epochs, this was achieved through technical innovations such as mechanisation, electrification, automation, and computerisation. This required investment of large amounts of capital, and the replacement of manual workers with intellectual (or knowledge) workers to support these innovations.

Unfortunately, these innovations lowered the percentage of labour power that could be exploited for profits. Thereby lowering the long term rate of profits. So, we have the classical Marxist description of the decline in the rate of profits due to the replacement of labour with machines.

Once this rate of profit falls below the minimum requirement of Capitalists for the reproduction of capital, the amount of investment falls. To restore the rate of profits, the Capitalists relied on the neo-Liberals such as Thatcher and Reagan to crush the unions thereby allowing for greater exploitation of workers. Once the exploitation could not be increased in the First World countries, the factories moved off-shore so that profits could be increased further.

Other firms faked profits through financial means. This is what Lazonick is mainly concerned about. But profits are still profits, no matter where they come from.

This exploitation was further expanded with the collapse of Communism in 1989. Countries that were outside of the Capitalist system were suddenly available for exploitation. There was an added benefit of the the discrediting of Communism as an alternate system. Capitalism was put forward as the winner of the historical struggle. The ideological impediment to greater exploitation was removed.

For the means of production that is currently owned by the corporations to serve the interests of the society at large, we must place the ownership of these assets in public hands. We must overturn the power of the Capitalist class by stripping them of their private property. Public benefit requires public ownership.