Wayne O'Leary

The Cost of Efficiency

Blame it on Fred Taylor. A self-described “consulting engineer in management,” Frederick W. Taylor (1856-1915) introduced the theory of scientific management to American industry at the turn of the 20th century. As Taylor conceived it, scientific management, by analyzing repetitive movement in the workplace, evaluating the extent of worker capacity, and determining the minimal time necessary to accomplish tasks, could produce maximum speed and efficiency on the shop floor.

The application of Taylor’s innovative ideas accelerated the replacement of skilled workers by the unskilled and led to the triumph of the speeded-up assembly line. Employees were pushed to work harder and faster in pursuit of increased productivity (Taylor’s obsession), and by the 1920s, the ideas of the “inventor of efficiency,” as John Dos Passos described him, were gospel in US business schools.

Sadly, one of “Speedy” Taylor’s theories did not come to pass. Rising productivity was supposed to simultaneously result in rising pay for workers, as compensation for their involuntarily increased effort and exertion. Taylor, who died, it was said, with a watch in his hand, never saw that in his lifetime; it has not happened yet.

The efficiency wave Taylor started, however, has become the hallmark of American-style capitalism, which regards its workforce, by and large, as so many interchangeable and expendable parts. Nothing much has changed since Taylor’s passing nearly a century ago. Employers still feel workers require the lash — figuratively, if not literally. Asked about laborers working outrageously long hours for a pittance in Apple’s overseas sweatshops, the late computer entrepreneur Steve Jobs casually observed that, so what, he worked long hours, too. The clear inference was that workers were lucky to have the employment their job creator provided — on any terms.

For about two generations following the introduction of efficiency-at-all-costs by mass-production capitalists like Henry Ford, a Taylor acolyte, certain factors made life tolerable for Americans on the job. Between roughly 1930 and 1980, union contracts and government programs (work rules, unemployment insurance, minimum wages, retirement pensions, guaranteed healthcare, job security) — what we lump together as the “social compact” — tended to offset the profit-mongering extremes of Taylorized capitalism and smooth its rough edges. There was a floor of decency under workers. Then, in the early 1980s, that floor was deliberately collapsed, and a new age of inequality began.

The idea that employers owed something to their workforces and to society in general was replaced by the notion that the welfare of shareholders (literally, the owners of the system) trumped everything else. Maximizing profit, or “shareholder value,” became the ultimate economic objective, and the holy grail of production efficiency, free from the uneconomic interference of labor organizers, environmentalists, or federal bureaucrats, became the way to achieve it.

Efficiency, in today’s world, means paying the help as little as you can get away with, while providing few job benefits and demanding periodic contractual givebacks as a condition of continued employment. It also means hiring part-timers and contractors to avoid the standard expenses (overtime, paid leave) associated with full-time workers, and being willing to dispose of “excess” employees (especially if they’re old or slow or too expensive) at a moment’s notice.

The consummate expression of efficiency, of course, is moving the worker’s job beyond his reach to another country entirely, one with minimal or nonexistent labor and environmental standards, along with a cheap wage structure. America’s capitalist class has been happily doing this for a quarter-century — outsourcing, offshoring, and downsizing its way to higher returns on investment, and damn the consequences to the national economy or the individuals and communities involved. Short of a total elimination of labor costs, exportation of work is the crowning expression of efficiency and, as such, is embraced because it undeniably enhances the bottom line, which under American capitalism is how we keep score.

As this is written, we stand on the verge of a new manifestation of economic efficiency. US manufacturing, which has been declining precipitously for well over a decade, losing a third of its jobs since 2000 and falling to 11% of GDP — the comparable figure for Germany is 21% — is poised for a dramatic turnaround. The Obama administration, having presided over the exceedingly modest creation of 500,000 new manufacturing jobs (after the wrenching loss of 5 million under George W. Bush), takes much of the credit. But what’s really going on is the work of engineers and efficiency experts, the lineal descendants of good old Fred Taylor.

US manufacturers have discovered new, “efficient” ways of producing their products that will add to factory hiring — but only marginally. Manpower is being replaced by advanced technology. Obscure and unpublicized methods, such as additive manufacturing (use of three-dimensional printers), digital prototyping, next-generation industrial robots, laser cutting and nanotechnology are creating so-called jobs-free or jobs-light automated processes leading to 24-hour, “lights-out” production minus human beings (except for designated machine minders).

Computerized white-collar factories manned by a few designers, industrial engineers, IT (information technology) specialists, marketing staff, and logistical personnel are supplanting expansive industrial facilities filled with hands-on blue-collar workers. The good news is that costs will be kept down, and domestic manufacturers will be able to compete on price with those of labor-intensive Chinese industry, thereby repatriating work from Asia; the bad news is that, according to one estimate, production will double without the need for additional workers.

The process is already underway. Even in the throes of the recent, decade-long decline in manufacturing jobs, reported the Heritage Foundation in 2010, US productivity rose by 38%. And the co-chair of President Obama’s Advanced Manufacturing Partnership, a business-university initiative, points to the dollar value of American manufacturing output reaching parity with China’s despite the use of one-tenth the manpower.

Such efficiency is good for American corporations and their stockholders, but it won’t do much for the mass of American wage earners, except for the highly specialized minority manning the new virtual factories. Employment will continue to stagnate, but creating employment is not what it’s all about anyway. Ask that noted Schumpeterian entrepreneur Mitt Romney, the guy who likes to fire people. In a candid moment, he’ll admit that business efficiencies will do what they’ve always done: benefit the 1%. It’s the American way.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy.

From The Progressive Populist, June 15, 2012