Saved

Saved

#business important:1 #americanism
How McKinsey Destroyed the Middle Class - The Atlantic
How McKinsey Destroyed the Middle Class - The Atlantic

The rise of management consulting firms like McKinsey played a pivotal role in disempowering the American middle class by promoting corporate restructuring that concentrated power and wealth in the hands of elite managers while stripping middle managers and workers of their decision-making roles, job security, and opportunities for career advancement.

Key topics:

  • Management consulting's role in reshaping corporate America
  • The decline of the middle class and the rise of corporate elitism
  • McKinsey's influence on corporate restructuring and inequality
  • The shift from lifetime employment to precarious jobs
  • The erosion of corporate social responsibility
  • The role of management consulting in perpetuating economic inequality
what consequences has the rise of management consulting had for the organization of American business and the lives of American workers? The answers to these questions put management consultants at the epicenter of economic inequality and the destruction of the American middle class.
Managers do not produce goods or deliver services. Instead, they plan what goods and services a company will provide, and they coordinate the production workers who make the output. Because complex goods and services require much planning and coordination, management (even though it is only indirectly productive) adds a great deal of value. And managers as a class capture much of this value as pay. This makes the question of who gets to be a manager extremely consequential.
In the middle of the last century, management saturated American corporations. Every worker, from the CEO down to production personnel, served partly as a manager, participating in planning and coordination along an unbroken continuum in which each job closely resembled its nearest neighbor.
Even production workers became, on account of lifetime employment and workplace training, functionally the lowest-level managers. They were charged with planning and coordinating the development of their own skills to serve the long-run interests of their employers.
At McDonald’s, Ed Rensi worked his way up from flipping burgers in the 1960s to become CEO. More broadly, a 1952 report by Fortune magazine found that two-thirds of senior executives had more than 20 years’ service at their current companies.
Top executives enjoyed commensurately less control and captured lower incomes. This democratic approach to management compressed the distribution of income and status. In fact, a mid-century study of General Motors published in the Harvard Business Review—completed, in a portent of what was to come, by McKinsey’s Arch Patton—found that from 1939 to 1950, hourly workers’ wages rose roughly three times faster than elite executives’ pay. The management function’s wide diffusion throughout the workforce substantially built the mid-century middle class.
The earliest consultants were engineers who advised factory owners on measuring and improving efficiency at the complex factories required for industrial production. The then-leading firm, Booz Allen, did not achieve annual revenues of $2 million until after the Second World War. McKinsey, which didn’t hire its first Harvard M.B.A. until 1953, retained a diffident and traditional ethos
A new ideal of shareholder primacy, powerfully championed by Milton Friedman in a 1970 New York Times Magazine article entitled “The Social Responsibility of Business is to Increase its Profits,” gave the newly ambitious management consultants a guiding purpose. According to this ideal, in language eventually adopted by the Business Roundtable, “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” During the 1970s, and accelerating into the ’80s and ’90s, the upgraded management consultants pursued this duty by expressly and relentlessly taking aim at the middle managers who had dominated mid-century firms, and whose wages weighed down the bottom line.
Management consultants thus implemented and rationalized a transformation in the American corporation. Companies that had long affirmed express “no layoff” policies now took aim at what the corporate raider Carl Icahn, writing in the The New York Times in the late 1980s, called “corporate bureaucracies” run by “incompetent” and “inbred” middle managers. They downsized in response not to particular business problems but rather to a new managerial ethos and methods; they downsized when profitable as well as when struggling, and during booms as well as busts.
Downsizing was indeed wrenching. When IBM abandoned lifetime employment in the 1990s, local officials asked gun-shop owners around its headquarters to close their stores while employees absorbed the shock.
In some cases, downsized employees have been hired back as subcontractors, with no long-term claim on the companies and no role in running them. When IBM laid off masses of workers in the 1990s, for example, it hired back one in five as consultants. Other corporations were built from scratch on a subcontracting model. The clothing brand United Colors of Benetton has only 1,500 employees but uses 25,000 workers through subcontractors.
Shift from lifetime employment to reliance on outsourced labor; decline in unions
The shift from permanent to precarious jobs continues apace. Buttigieg’s work at McKinsey included an engagement for Blue Cross Blue Shield of Michigan, during a period when it considered cutting up to 1,000 jobs (or 10 percent of its workforce). And the gig economy is just a high-tech generalization of the sub-contractor model. Uber is a more extreme Benetton; it deprives drivers of any role in planning and coordination, and it has literally no corporate hierarchy through which drivers can rise up to join management.
In effect, management consulting is a tool that allows corporations to replace lifetime employees with short-term, part-time, and even subcontracted workers, hired under ever more tightly controlled arrangements, who sell particular skills and even specified outputs, and who manage nothing at all.
the managerial control stripped from middle managers and production workers has been concentrated in a narrow cadre of executives who monopolize planning and coordination. Mid-century, democratic management empowered ordinary workers and disempowered elite executives, so that a bad CEO could do little to harm a company and a good one little to help it.
Whereas at mid-century a typical large-company CEO made 20 times a production worker’s income, today’s CEOs make nearly 300 times as much. In a recent year, the five highest-paid employees of the S&P 1500 (7,500 elite executives overall), obtained income equal to about 10 percent of the total profits of the entire S&P 1500.
as Kiechel put it dryly, “we are not all in this together; some pigs are smarter than other pigs and deserve more money.” Consultants seek, in this way, to legitimate both the job cuts and the explosion of elite pay. Properly understood, the corporate reorganizations were, then, not merely technocratic but ideological.
corporate reorganizations have deprived companies of an internal supply of managerial workers. When restructurings eradicated workplace training and purged the middle rungs of the corporate ladder, they also forced companies to look beyond their walls for managerial talent—to elite colleges, business schools, and (of course) to management-consulting firms. That is to say: The administrative techniques that management consultants invented created a huge demand for precisely the services that the consultants supply.
Consulting, like law school, is an all-purpose status giver—“low in risk and high in reward,” according to the Harvard Crimson. McKinsey also hopes that its meritocratic excellence will legitimate its activities in the eyes of the broader world. Management consulting, Kiechel observed, acquired its power and authority not from “silver-haired industry experience but rather from the brilliance of its ideas and the obvious candlepower of the people explaining them, even if those people were twenty-eight years old.”
A deeper objection to Buttigieg’s association with McKinsey concerns not whom the firm represents but the central role the consulting revolution has played in fueling the enormous economic inequalities that now threaten to turn the United States into a caste society.
Meritocrats like Buttigieg changed not just corporate strategies but also corporate values.
GM may aspire to build good cars; IBM, to make typewriters, computers, and other business machines; and AT&T, to improve communications. Executives who rose up through these companies, on the mid-century model, were embedded in their firms and embraced these values, so that they might even have come to view profits as a salutary side effect of running their businesses well.
When management consulting untethered executives from particular industries or firms and tied them instead to management in general, it also led them to embrace the one thing common to all corporations: making money for shareholders. Executives raised on the new, untethered model of management aim exclusively and directly at profit: their education, their career arc, and their professional role conspire to isolate them from other workers and train them single-mindedly on the bottom line.
American democracy, the left believes, cannot be rejuvenated by persuading elites to deploy their excessive power somehow more benevolently. Instead, it requires breaking the stranglehold that elites have on our economics and politics, and reempowering everyone else.
·archive.is·
How McKinsey Destroyed the Middle Class - The Atlantic
Elon Musk’s Shadow Rule
Elon Musk’s Shadow Rule
There is little precedent for a civilian’s becoming the arbiter of a war between nations in such a granular way, or for the degree of dependency that the U.S. now has on Musk in a variety of fields, from the future of energy and transportation to the exploration of space. SpaceX is currently the sole means by which NASA transports crew from U.S. soil into space, a situation that will persist for at least another year. The government’s plan to move the auto industry toward electric cars requires increasing access to charging stations along America’s highways. But this rests on the actions of another Musk enterprise, Tesla. The automaker has seeded so much of the country with its proprietary charging stations that the Biden Administration relaxed an early push for a universal charging standard disliked by Musk. His stations are eligible for billions of dollars in subsidies, so long as Tesla makes them compatible with the other charging standard.
In the past twenty years, against a backdrop of crumbling infrastructure and declining trust in institutions, Musk has sought out business opportunities in crucial areas where, after decades of privatization, the state has receded. The government is now reliant on him, but struggles to respond to his risk-taking, brinkmanship, and caprice
Current and former officials from NASA, the Department of Defense, the Department of Transportation, the Federal Aviation Administration, and the Occupational Safety and Health Administration told me that Musk’s influence had become inescapable in their work, and several of them said that they now treat him like a sort of unelected official
Sam Altman, the C.E.O. of OpenAI, with whom Musk has both worked and sparred, told me, “Elon desperately wants the world to be saved. But only if he can be the one to save it.
later. “He had grown up in the male-dominated culture of South Africa,” Justine wrote. “The will to compete and dominate that made him so successful in business did not magically shut off when he came home.”
There are competitors in the field, including Jeff Bezos’s Blue Origin and Richard Branson’s Virgin Galactic, but none yet rival SpaceX. The new space race has the potential to shape the global balance of power. Satellites enable the navigation of drones and missiles and generate imagery used for intelligence, and they are mostly under the control of private companies.
A number of officials suggested to me that, despite the tensions related to the company, it has made government bureaucracies nimbler. “When SpaceX and NASA work together, we work closer to optimal speed,” Kenneth Bowersox, NASA’s associate administrator for space operations, told me. Still, some figures in the aerospace world, even ones who think that Musk’s rockets are basically safe, fear that concentrating so much power in private companies, with so few restraints, invites tragedy.
Tesla for a time included in its vehicles the ability to replace the humming noises that electric cars must emit—since their engines make little sound—with goat bleats, farting, or a sound of the owner’s choice. “We’re, like, ‘No, that’s not compliant with the regulations, don’t be stupid,’ ” Cliff told me. Tesla argued with regulators for more than a year, according to an N.H.T.S.A. safety report
Musk’s personal wealth dwarfs the entire budget of OSHA, which is tasked with monitoring the conditions in his workplaces. “You add on the fact that he considers himself to be a master of the universe and these rules just don’t apply to people like him,” Jordan Barab, a former Deputy Assistant Secretary of Labor at OSHA, told me. “There’s a lot of underreporting in industry in general. And Elon Musk kind of seems to raise that to an art form.”
Some people who know Musk well still struggle to make sense of his political shift. “There was nothing political about him ever,” a close associate told me. “I’ve been around him for a long time, and had lots of deep conversations with the man, at all hours of the day—never heard a fucking word about this.”
the cuts that Musk had instituted quickly took a toll on the company. Employees had been informed of their termination via brusque, impersonal e-mails—Musk is now being sued for hundreds of millions of dollars by employees who say that they are owed additional severance pay—and the remaining staffers were abruptly ordered to return to work in person. Twitter’s business model was also in question, since Musk had alienated advertisers and invited a flood of fake accounts by reinventing the platform’s verification process
Musk’s trolling has increasingly taken on the vernacular of hard-right social media, in which grooming, pedophilia, and human trafficking are associated with liberalism
It is difficult to say whether Musk’s interest in A.I. is driven by scientific wonder and altruism or by a desire to dominate a new and potentially powerful industry.
·newyorker.com·
Elon Musk’s Shadow Rule