Crash Course in the New Economy

What would the ticker symbol be for Air Tegucigalpa?

Harold Meyerson has a nice commentary in the American Prospect that starts with JetBlue's near miss last week at LAX and the troubles with outsourcing airline maintenance, and then segues into the larger, and in some ways thornier, issue of how American workers (and consumers) might weather globalization.

The non-crash, for those who might have missed it, involved the emergency landing of an Airbus A-320 with jammed wheels. News that this isn't an isolated problem with this plane, which was likely inspected and/or overhauled either in Canada or El Salvador, was eclipsed by the much easier headline that passengers had watched the near-catastrophe on TV monitors from their seats. Almost as post-modern as the economy that underlies the debacle, no?

Meyerson recaps this, and then borrows a few sage thoughts on the bigger economic picture from "End of the Line: The Rise and Coming Fall of the Global Corporation," a new book by Barry C. Lynn, a fellow at the New America Foundation and the former editor of Global Business magazine. According to Meyerson, the book provides a thorough, but still easily digestible, discussion of the role outsourcing has played in the success of some of our more lauded corporations.

Dynamite. But from where I sit, the better comments concern the fundamental shift that has changed the very goal of the game.

There are multiple culprits in this tale, but the primary one is the rise of unchecked shareholder power over the new-model corporation. Today's corporate leader is expected to dismantle and disaggregate his corporation whenever there's a buck in it for his shareholders. The chief executive, writes Lynn, is no longer "the company's man in the boardroom [but has become] the investors' man in the company."

This shift in corporate control goes a long way toward explaining the anomalies of the current recovery -- the first in post-World War II America in which profits have soared but wages have flat-lined, median family incomes have actually declined and few new jobs have been created. What CEO, answerable to his shareholders and fearful of competitors answerable to theirs, would dare give his employees a raise? What would have happened to JetBlue's stock if its executives had decided to employ their mechanics in-house and in the United States?

It makes intuitive sense that running an airline as cheaply as possible might not be as smart as running, say, a lean, mean bra factory. But there are precious few economists willing or able to articulate why. I wish I'd had these thoughts at my disposal when I wrote extensively last spring about Northwest's desire to increase the outsourcing of its maintenance.

And while we're on the topic of planes that threaten to fall out of the sky, how did our local dailies manage to miss this Rapid City Journal story about a Northwest flight that was forced to return to Minneapolis shortly after takeoff: "When the plane landed, a number of fire trucks, police cars and other emergency vehicles were standing by." Passengers told the South Dakota paper that they were told the problem was a broken rudder damper. A Northwest spokesperson would say only that the incident was "under review."

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