Corporate Responsibility and its Elite Opponents

Out of Sight: The Long and Disturbing Story of Corporations Outsourcing Catastrophe
Erik Loomis, 2015

The story Erik Loomis tells in this dissertation-book is basically about hiding externalities. I picked this up because I've been thinking about how I'm going to talk about economic externality in my American Environmental History class this spring. Loomis argues pretty effectively that the two big reasons for American companies moving offshore or contracting with foreign producers are evading environmental regulations and reducing labor costs. I've been focusing on the environmental, but I think Loomis has convinced me to add a bit of labor history to this section of my course.

Loomis begins with New York City's Triangle Shirtwaist factory fire in 1911. He mentions in the first few pages that millions of American workers faced dangers, and lists the death-tolls of several mine accidents in the early 1900s. But the Triangle fire is important because it was so visible. The fire happened someplace where the consumers of the factory's product as well as upper-middle class and elite activists could actually witness the charred corpses in the locked factory and the broken bodies of women who had jumped to their deaths rather than being burned alive. The horror of these events and the complicity people felt when confronted with them both helped set the scene for reform.

In my lecture and
chapter on industrialization, I mention the Pemberton disaster of 1860, when a textile factory in Massachusetts collapsed, killing 145 workers and injuring another 166. This was a visible disaster, too, and in terms of what happened was probably a closer match to the 2013 Rana Plaza factory collapse in Bangladesh that killed 1,134 workers and injured at least 2,500. But unlike the Triangle fire, the Pemberton collapse didn't result in any consequences for the factory's owners, and didn't really change anything. I think this supports Loomis's point that when these things happen out of sight, they're easy to push out of mind.

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The most memorable moment, for me, was when Loomis quoted Lawrence Summers, the nephew of famous economist Paul Samuelson who has been Chief Economist for the World Bank, President of Harvard, and partner in a $30 billion private equity firm. Summers, who advocated deregulation of the derivatives markets while Deputy Secretary of the Treasury, is still a respected adviser of neo-liberal politicians like Clinton and Obama. Loomis quotes Summers's attitude toward externality:

"
I've always thought that under-populated countries in Africa  are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City." Loomis didn't include Summer's conclusion, but here it is: "health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."

Read that again. Let it sink in.

The fact is, based on the way many economists define their field, the economic logic behind dumping really is impeccable. This is NOT how all economists define their field, but it's worth remembering that Summers became a professor of economics at and president of Harvard long after his thoughts on these issues were well-known. This narrow approach to economic logic illustrates why important issues cannot be decided using only the decision-making tools provided by mainstream economics. Academic economists might object that the work they do is much more nuanced than the Summers memo suggests. If so, they need to stand up and challenge this type of argument when it is made by a Chief Economist of the World Bank, just as historians need to stand up and challenge presidential candidates when they misuse history. (In an ironic coda,
Harvard Magazine basically forgave Summers for his "whopper" of a mistake in 2001. The article's concluding paragraph equates the dangerous worldview of the memo with a "break of service" in a company-picnic tennis game. See, Harvard says, it's no big deal. Larry's a great competitor and a swell guy.)

But back to
Out of Sight. Loomis argues that the era of relatively active government regulation following the Great Depression gave us strong labor unions and later, environmental regulation. Organizations like the EPA and OSHA were essential, Loomis argues, to help codify and cement the gains made by labor activists and environmentalists during periods of high popular awareness and support. Loomis describes the conservative attack on "nanny" government regulation in the 1980s. And then he says the most effective tactic of businesses seeking to avoid labor and environmental oversight was to move to places without regulations.

There are several items along the way I thought were particularly interesting. First, I was struck by how many times in the 19th century labor disputes weren't caused by workers banding together to force employers to give them more, but when they objected to employers demanding they take less. Rent increases in factory dormitories, wage reductions, and higher prices in company stores caused strikes. Not workers deciding they wanted something new and unprecedented that the company couldn't afford to give them. This is a fact that has been forgotten in most history textbooks. While it would be completely legitimate for people to desire workplace improvements, especially when the companies they work for are wildly profitable, workers were usually fighting corporations seeking even more profit by squeezing out costs.

Loomis shows the movement of industry to lower-wage regions didn't begin with NAFTA. The textile industry moved to the South in the early 20th century, and then to Latin America and Asia. RCA moved from New Jersey to Indiana in the 1930s; then to Tennessee and Mexico. Loomis calls attention to the fact that the Obama-supported TPP would create a free-trade zone including Vietnam, which has a 28 cent per hour minimum wage. Loomis says a former Federal Reserve vice-chairman estimated TPP would result in an additional 36 million jobs moving to Asia. I'm not really sure how neo-liberals like Obama and Clinton suppose we'd recover from that.

The only problem I see with the idea of returning to a society where government is used to check the excesses of the market is that last time, it took the Great Depression to wake people up to the need for government involvement in markets. Several times when Loomis describes the gains of the twentieth century, I find myself thinking it would help to explain how bad it had to get, before people supported change. In the end, Loomis calls for a return to effective government regulation that imposes reasonable requirements on businesses, no matter where they operate. Basically, he's suggesting that if businesses selling to American consumers are not allowed to trash the environment or poison their workers in America, they shouldn't be allowed to do it in Bangladesh either. I agree completely. The question is, how do we get there?