The Consequences of a No-Sacrifices-Environment

Several recent news reports caught my eye, not as individual stories but as closely connected pieces of the same continuum:
  1. Adam Davidson’s November 20th “Skills Don’t Pay theBills” piece in the NY Times Magazine highlighting the fact that despite high unemployment rates and advanced jobs training programs nearly 80 percent of manufacturers have jobs they can’t fill.
  2. The tragic factory fire in Bangladesh that killed 112 workers, earning on average $43 per week apiece, and the leading consumer brands the garment factory was producing for.
  3. Mixed reports on 2012 holiday season retail sales, where the one accepted fact seems to be deep discounting is the only true stimulus for making the cash registers ring, following a 0.2% decline in October consumer spending.
  4. The Bureau of Economic Analysis’ report showing record profits for US corporations in the 3rd quarter 2012.
  5. Around the clock coverage of the looming fiscal cliff that pretty much says nothing because it sure doesn’t seem as if there’s been any progress in DC.

Business’ truest measurement is profitability and if Q3 2012 produced record profits then executive management is doing its job, superbly.  In part we can attribute the nearly $72 billion increase in 3rd quarter profits to greater cost-efficiencies, but top-line revenue growth certainly had significant impact. But where cost management and sales/marketing might once have been opposing forces, the trends further convince me the lines between revenue generation and cost controls have not only blurred they have merged.

If consumers now value every product and service as little more than a commodity then companies have no option but to meet this demand by so reducing costs they can profit by winning the discount game.  Labor usually represents a substantial business cost and it is little wonder that manufacturers are finding it difficult to hire trained workers if they are paying less than a McDonald’s shift manager earns, as Adam Davidson reported.  I have nothing but contempt for modern day sweatshops like the Bangladeshi factory, but racing to the bottom is inevitable when any industry is caught in commodity hell.

It’s very easy to blame business and “heartless executives”, and whenever there’s an easy answer for anything I grow suspicious. Consider this:

The consumer is really the most accountable participant in this vicious cycle by making price the single largest success factor! The same person who laments stagnant wages, off-shoring and the overall shaky economy demands prices that are sure to perpetuate these conditions. 

Politicians are usually the best reflection of the era they serve in. As the Obama administration and congress continues its food fight over the massive problems we will face at midnight December 31st they seem no closer to resolving anything because they, too, want easy answers with no sacrifice on the most complex issues.

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