Wednesday, August 7, 2013

Cantlon: Resisting the new normal

My friend Tom operates his own independent small business, as I do, so for me there's a certain disconnect in his column today, in which he highlights the challenges for workers presented with our general economic shift away from long-term employment.

With his reference to "our grandparents" Tom recognizes that the employment regime that Americans came to take for granted as our birthright (the "American Dream") was an ephemeral phenomenon. It evolved from the guild-like practices of the 19th century, in which workers chose or inherited a skill and basically stuck with it to the end, with the infusion of roaring profits here based on Europe's unfortunate self-immolation in the 20th. Corporations went big and then bigger, chewing through what looked like endless resources for endless profits. Workers demanded a piece of that pie, and employers could afford it, bringing in health and till-you're-dead retirement benefits. We had a generation or so of this following WW2. It began to break up in the '70s, and wages have stagnated in real terms ever since. Employment security and benefit standards have been in steady decline for half a century. So the halcyon days that Tom references were clearly an economic anomaly not likely to return anytime soon.

As in the rapidly changing 19th century, today's situation isn't good for people with low or outdated skills. But also like then, today's yet more rapid roil of change favors adaptability and embracing the new.

As the unimaginably fast climate change we're experiencing makes it impossible for many species to adapt, rapid economic change leaves many people less able to cope. This is a problem of education and training, obviously, but I see it more as a problem of expectations of the sort Tom leans into today.

The desperate straits of cities like Detroit and even large corporations like GM are rooted in those expectations too. How could anyone expect enough continuing profit to support open-ended pensions and benefits for an open-ended number of workers? Human dignity demands that the company reward the worker who took care of it, but it's clear now that the system we chose failed to account for important variables, like shifting industrial structure and worker longevity.

This doesn't mean that we have to return to squalid exploitation of workers, or what I call the Republican utopia. I think rather that we need to abandon the child-parent model of our relationship with our earning lives, grow up and accept more individual responsibility as entrepreneurs.

Every small retailer or service provider knows intimately that their businesses depend on their own work ethic, ability to ride out adverse times, and the broad uncertainties of the marketplace. My own business could dry up in any given five minutes, and I've accepted that risk from the beginning, placing more value on the freedom that this uncertain life affords me and faith in my own ability to adapt to whatever comes. But there's another less obvious angle.

My business has been generally reliable for over 25 years because of the mutual respect I share with my clients for our relationships. This is how things are done in Japan, and why I have no interest in selling my services to American companies.

Beyond training Americans for greater workplace flexibility and adaptability, which I think is vitally important to our industrial future, we have to bring the values of community to bear in a world where you're no longer a worker, you're a supplier, whether of goods, skills, labor or time, and the only job security is in the loyalty that you build with your customers. Remember loyalty?

For employers, or rather labor customers, the incipient shortage left by boomers leaving the labor force (and remaining active as consumers) means maintaining workplace cultures and conditions that respect the people involved and build those relationships. The concerns that go further in sharing the benefits and profits will do better and be more sustainable through the inevitable ups and downs of a more steady-state economy. I can't see us putting up with the currently ridiculous labor/owner income differential, it will eventually collapse as it did in the late 19th century and again in the 1930s. We have another opportunity ahead to learn from our mistakes and take measures to do better, by recognizing that the business does better long-term where everyone involved does better from it.

But if we continue to pine for a Mad Men-style top-down economic world, which was always a bit overstated and is now no longer even possible, it will distract all of us from the opportunities the new world presents. Don't expect to be able to lay back and get fat, it'll probably never be like that again. In truth there was never any real job security — that was luck — and everything is and always will be temporary. We'll have to learn to see that as a good thing.

There is certainly an important role for economic policy to play in helping build what Peter Vogel calls "entrepreneurial ecosystems" to support this kind of business culture. Check it out.