A Tale Of Two Contrarians


The Corporate Squeeze of Working Americans

and the Myth of Managerial "Downsizing"

By David M. Gordon

Free Press -- 320pp -- $25


Markets and Choices in a Free Society

By Robert J. Barro

MIT Press -- 191pp -- $20

Economics is a science based on conventional wisdom. Far too often, economists line up to parrot the mainstream view, even if it doesn't fit the facts.

But for those who like their economics contrarian, here come two well-written and provocative books from opposite ends of the political spectrum. Fat and Mean is an original work written by David Gordon, a radical economist at the New School for Social Research in New York who died last March at age 51. Getting It Right by Robert Barro, a conservative economist at Harvard University, is based substantially on that writer's occasional columns for The Wall Street Journal. Barro is an economic adviser for Republican Presidential candidate Bob Dole and a potential member of Dole's Council of Economic Advisers.

Of the two, Gordon's book is more academic, packed full of statistics and charts. Still, the heart of his argument is simple. Gordon observes, quite correctly, that the number of managers and executives has been increasing, despite repeated downsizing among large corporations. In 1989, managers and executives made up 12.7% of the workforce. Today, they account for almost 14%. This trend has been spread over almost every sector of the economy. Rather than getting lean, companies are getting "fat and mean."

For Gordon, this increase in supervisors reflects a decision by American corporations to use a stick, rather than a carrot, in dealing with workers. Companies are motivating their workforces by threats and increasing supervision, he argues, rather than by offering job security and rising wages.

Because companies need to pay a growing cadre of supervisors, there's a smaller piece of the pie left for everyone else, he reasons. This helps explain why the wages of most workers, adjusted for inflation, have stagnated in recent years. Writes Gordon: "The weight of the bureaucratic burden has actually been growing, not contracting, through the mid-1990s."

Moreover, Gordon suggests that too many supervisors are weighing down the economy and holding down productivity growth. Indeed, he claims that overall economic performance would actually improve if corporations adopted the carrot approach to labor relations. "Other leading economies such as Japan and Germany take the high road," he writes, "fueling their growth with cooperation and trust." Gordon presents statistics showing that "cooperative" economies do better on productivity growth, investment, inflation, and unemployment. To move the U.S. economy onto this high road, Gordon would substantially raise the minimum wage, make unionization easier, and reward companies that cooperate with workers.

The problem with Gordon's analysis is that he starts with the undeniable fact that managers have increased in number and assumes that all of these are unproductive workers. But most managers do far more than just supervise--they plan, organize, and coordinate, all essential functions.

Rather than reflecting more intense supervision, the increase in managers should be seen as part of a broader shift from a manufacturing economy to a knowledge-based economy. The number of professionals such as accountants, teachers, and computer programmers in the economy is increasing as fast as or faster than the number of managers. And despite Gordon's premise of increased supervision, the number of shop foremen and clerical supervisors--the people who actually monitor workers directly--has been shrinking lately.

Gordon is also on weak ground when he compares the U.S. with other countries. The good performance of his cooperative economies is mainly due to his inclusion of Japan in that group. But Japan, with ineffective unions and an antediluvian attitude toward women in the workplace, is hardly a model that U.S. workers would want to follow.

All such concerns would seem incomprehensible to Barro, a free-market devotee who describes himself as a libertarian. In his wide-ranging book, Barro lays out arguments that may make even his fellow conservatives wince. Take macroeconomic policy, for example. Barro marshals theoretical and empirical evidence to argue that the size of the federal budget deficit has little economic impact on either real interest rates or private investment. That's near-heresy at a time when many Republicans in Congress have taken the need for a balanced budget as their mantra.

Barro also delves into the realm of social policy. Consistent with his libertarian philosophy, he offers economic arguments as to why government should not intervene to reduce cigarette consumption. Instead, suggests Barro, illegal drugs should be legalized under the same sort of rules that currently govern cigarette sales--heavy taxes and limits on sales to minors.

Perhaps the most controversial section of Barro's book deals with the Civil War. In an essay examining whether small countries are economically viable, he notes that the U.S. government typically opposes secession movements around the globe, in part because of its own experiences. But Barro suggests that it may not have made sense to fight such a bloody war to keep the country together. "Instead of being the greatest of American presidents, as many people believe, Abraham Lincoln may instead have presided over the largest error in American history," he avers.

This is not a conclusion that many readers will agree with. Furthermore, Barro's book fails to transcend its newspaper-column origins, leaving the reader hungry for greater justification for such controversial conclusions.

Despite their flaws, however, both Fat and Mean and Getting It Right are stimulating and well worth reading. And, at least for now, what they say represents fresh thinking.

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