Butcher, baker, unemployment line maker

November 22, 2008|By JAY HANCOCK

In normal times, self-interest keeps society working and increases the wealth of nations. Corporations earn profits but also supply needed products. Consumers furnish their nests but also create jobs.

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest," wrote Scottish philosopher Adam Smith, who figured this out two centuries ago.

These are not normal times. As shoppers threaten to go on strike, as bankers shrink from lending, as investors flee the markets, behavior that makes sense for one family or one company is proving poisonous for us all.

This includes you, employers. The United States lost more than a half-million jobs in September and October. New layoff announcements arrive daily. If the country is to avoid the worst downturn in 70 years, butchers, bakers and other employers need to question their instinct to fire people as a response to weak business conditions.

Your employee is somebody else's customer, breadwinner and mortgage payer.

This is not a plea to outlaw layoffs, have companies keep workers at all cost or hire people they don't need. When bankruptcy and breakup are the alternatives, layoffs are unavoidable. What economists call a "flexible work force" lets companies adjust to change and keeps the United States ahead of its competitors.

But at the margins, until this crisis is past, the fewer layoffs the better.

It's not like companies can claim investors will punish them if they don't slash and hack. Everybody's stock has already tanked. Share values bear little relationship to profits. A fatter payroll-to-sales ratio for a few quarters won't hurt anybody's bonus if the company's survival is not at stake.

And companies can afford it, as long as they're not General Motors or Citigroup. Last June, cash held by nonfinancial corporations in the Standard & Poor's 500 index hit an all-time record of $648 billion, says S&P analyst Howard Silverblatt. He's still crunching numbers for the third quarter, but he doesn't expect them to be substantially different.

That's a nice pot of rainy-day money to tide over the work force and the economy.

For some reason, we never exhort retailers, manufacturers, law firms, hospitals and other employers to do a little extra with payrolls to push the economy over a bump.

There's always some stimulus for consumers and the command to shop heavily. Washington is beating on financiers to lend to somebody - anybody! - even though heedless lending got us into this mess. Warren Buffett and other tycoons are urging people to buy stocks.

But those with the power to create and destroy jobs seem to get a pass. It's time to bring employers into the national self-help group. The economy is in grave danger. Enormous financial institutions are crumbling. Yesterday, Goldman Sachs predicted U.S. unemployment will reach 9 percent, the highest since the early 1980s.

As taxpayers spend what's likely to be more than $1 trillion to help Corporate America, Corporate America ought to return the favor by minimizing layoffs.

I know what you're thinking. Businesses have a legal duty to maximize profits for shareholders. It's not strictly true. Courts give corporate boards broad authority to balance the interests of owners with those of employees and community. Otherwise shareholders could sue to stop United Way donations and other efforts toward the greater good.

The financial meltdown threatens everybody. Self-interest is making things worse. It's Independence Day, when Americans and Russians, Arabs and Israelis need to drop their differences to fight the greasy aliens.

Adam Smith, whom everyone quotes on the virtues of selfishness, realized philanthropy gets you only so far. But he also knew that "beneficence" is part of human nature and valuable for recipients as well as givers.

"How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others and render their happiness necessary to him though he derives nothing from it except the pleasure of seeing it," he wrote.

Going easy on the layoffs in coming months can certainly produce that kind of dividend. But if employers' beneficence helps the economy avoid the abyss, it'll eventually boost everybody's bottom line, too. Including theirs.

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