What's going on here? Did someone paint a big bull's-eye on Corporate America and invite Republicans to take target practice? There was right-wing demagogue Pat Buchanan, inciting the New Hampshire masses by pillorying "these cold-blooded characters with the green eyeshades." It was a good line, too good for Bob Dole to resist: The erstwhile champion of free enterprise suddenly condemned the evils of corporate profits and layoffs. Within days, Newsweek's cover brought us mug shots of "Corporate Killers."
Populism took on Big Business in New Hampshire--and won handily. Buchanan's first-place finish was no overwhelming mandate against the free-market system, but it did demonstrate that the nation's growing distrust of business resonates. Workers feel little security. They resent sluggish wage growth. They fear for their kids' futures.
Are they justified? Sure, AT&T is cutting 40,000 jobs--perhaps the most politicized restructuring ever. But the expanding economy keeps creating new employment, month after month, for a total of 8 million jobs in three years. The unemployment rate has fallen to 5.6%, half the level of Europe. Inflation is less than 3%, and the "misery index" popularized by Ronald Reagan is lower than when he was President.
DEMONIZATION. More than that, the U.S. economy has fared well in an extraordinary time of transition. The technology revolution and globalization of markets have, in a decade, rewritten the rules by which business operates. Yet American business continues to innovate and improve productivity. Exports are booming. Silicon Valley has not picked up and moved to Japan. Real wages are rebounding, and the U.S. standard of living continues to rise.
Still, the demonization of Big Business persists. In part, it's a misunderstanding of business' role. Companies don't exist to create employment; rather, jobs follow an effective strategy for making money. "The function which we should expect from the private sector, to create the goods and services we need and want, is a function that it is indeed fulfilling," says John M. Hood, president of the John Locke Foundation, a free-market think tank.
Layoffs appear especially arbitrary and cruel when employers fail to explain the strategy behind them. Even the most cogent corporate rationalizations, though, will lack relevance for the New Hampshire workers seduced by Buchanan's protectionist promises. Their pay continues to decline, falling further behind that of better-educated employees in high-wage occupations. The result: "banana republic politics" that increasingly divide poor from rich, says Marc Tucker of the National Center on Education & the Economy.
Protectionism will only make things worse; surely we can't bring back jobs in textiles and shoes. Rather, low-skill workers have to retool themselves for a high-skill economy--and business should help. Raychem Corp., for one, offers employees job training even if the new skills lead to jobs in other companies or industries. In short, if companies can't guarantee employment, they ought to guarantee employability by providing training.
Here's one more suggestion, perhaps the most important: Share the sacrifice. Reduce pay of top executives and directors at companies that ax workers. And why not fire the CEOs whose strategic backfires lead to layoffs, as was the case at AT&T? Business needs the freedom to restructure and become more efficient. But it also must have the gumption to take on its share of the risk and help workers through the transition. Otherwise the New Hampshire backlash can only get worse.