If you’ll forgive me for honing in on Erik’s racket, Dayen notes that Carrier is shutting down its Indiana plant even though it’s part of a profitable section of a profitable company:
A look at United Technologies’ annual report reveals even more good news: Commercial and industrial products, Carrier’s category, make up over half of UTC’s $56 billion in net sales. Climate, Controls & Security had 3 percent growth in 2015, the highest in the company; it was the only division to increase its profit margin year-over-year. “Organic sales growth at UTC Climate, Controls & Security was driven by the U.S. commercial and residential heating, ventilation and air conditioning (HVAC) and transport refrigeration businesses,” according to page 14 of the report. In other words, air conditioners – what the workers are making in Indianapolis – drove the growth of the best-performing facet of United Technologies’ business.
So why would a profitable, growing business need to ship jobs to Mexico? Because their shareholders demanded it.
He also makes a very important point about how this isn’t just about trade deals, but about changing norms:
Things like free trade and opening the doors to competition with China are the tools by which shareholders are satiated with hefty corporate profits. But the cause is the philosophy of shareholder value, the idea that a corporation exists solely for the benefit of its investors. While this may sound intuitive, that’s just because it’s been drummed into our heads by every business page and CNBC shouting head for decades. The thing is, shareholder value is actually a relatively new phenomenon.
It’s not that trade deals are unimportant. But, in particular, tariffs have limited value to stop capital movement when the labor costs are so much cheaper. (And, of course, a high tariff regime would also limit the purchasing power of workers.) There’s a broader problem in that corporate norms increasingly place little or no weight on the interests of workers or communities or anything but shareholder value. I don’t have a good solution for how to rearrange the incentives (although steeper progressive taxation would be a good start), but it’s a serious problem.