Business Schools and Inequailty

You may not be aware of the article that has created quite a storm on the New York Times website. It is about inequality at Harvard Business School and the insidious consequences of the emergence of a “class” system there.

Don’t laugh.

If HBS is now afflicted by class issues and the social disaster of inequality, then we can assume the rest of the country is in worse shape. HBS is, of course, partly responsible for the inequality we now suffer from through its relentless production of clever people with great connections who exploit finance and consulting without adding on offsetting social value.

Disclaimer: I graduated from HBS in 1979. Things seem to have changed enormously since I was there. Sure we had our contingent of super privileged kids, but the bulk of our class seemed to me to be from pretty ordinary backgrounds. The obnoxious oppression of class was largely absent. At least we could ignore the super wealthy and the quasi aristocrats because they were too few to have much impact.

Since then things have changed. But it isn’t just HBS that has slipped from an attempt at merit and hard work meaning something. America has fallen too. Fallen steeply. Fallen sharply. Fallen into the shadows where money accrues mostly to a few who perpetuate their grip on the cash register by pouring money into elections, buying off politicians, undermining democracy, and diverting most of the gains in the economy to themselves.

Case in point: of the entire increase in wealth the US has seen since 2009, 95% has gone to the top 1% of earners. That is a stark and living testimony to our plutocracy.

Just as America sacrificed large chunks of its freedom to fight spurious pseudo-wars against terror – let’s all say hi the NSA analyst listening to our phone calls – it has willingly sacrificed a goodly part of its democracy as it pursues corporate profit.

During my time here in the US – I came to go to HBS in 1977 and stayed afterwards because of the opportunities i imagined here – the country has deteriorated rapidly. It has adopted a market mentality where everything is measured against its sale value. The Reagan era, which I define as 1980 through to today, is characterized by the devaluation of social or communal cohesion and a rising epidemic of money obsession that borders on worship. America is a nation steeped in a tradition of individualism, but that has been hijacked by the powerful and used to demean and undermine any efforts at cooperation. Even where cooperation is obviously more profitable or cost effective. Health care reform being a current example.

The era of deregulation, neo-laissez faire, defunding of social programs, banking recklessness, and dominance of finance in our business world has led to an amoral, borderline unethical, and definitely anti-social set of managerial practices. Exploitation is hidden beneath catchy consulting phrases. Nastiness is expressed as hard headed and necessary calculation. Greed is, well, greed. It has become acceptable for the elite to set prices for their services that have no bearing on their contribution. They are, after all, both judge and jury on the value of that contribution.

I lay much of the blame for this squalid outcome at the feet of those who gave it intellectual cover. Unfortunately there are famous economists who rank high on the list of villains and whose legacy is now the inequality they still regard with a wicked indifference unbecoming of anyone purporting to be a “social” scientist. Their deep and not-too-well masked disregard for democracy has allowed them to turn a blind eye to the failures both of their theories and to the pillaging undertaken by those they taught well – too well. I shudder at the callous core of thought that infects our boardrooms. And no amount of ersatz “social responsibility” – which is usually window dressing anyway – can offset the appalling way in which modern business pursues profit and dismisses its workforce as a barrier to that profit.

I think I understand the nature of the change in capitalism. Far too few economists do. They still, I fear, live in the simple world of the 1800’s where capitalists were entrepreneurs, factory owners, and shareholders all rolled into one. Capital, labor, and land are still the common grist for the economic theory mill, even though they are imprecise, amorphous, and slippery concepts. That time of original capitalism is long gone. Today’s capitalism is a shadow of that raw world. Our modern version is dominated by bureaucrats. My class mates. Executives as they prefer to be called, but bureaucrats all the same. Technocrats perhaps. Steeped in antiseptic theory that devalues people and overvalues cash-flow. Willing, and able, to twist the market into any shape they want. Without effective oversight. Or, rather, with oversight provided by their like minded peers. Which is to say no oversight. Legally empowered to pay themselves without regard to their performance. And when challenged to do so, they set the bar for performance low and preferentially so they cannot lose. They then fire workers in order to boost profit and thus earn those egregious bonuses. And thereupon strut proudly and noisily across the social stage as they preen in the glow of their own self-importance.

These are who we call “job creators”. Unchallenged, overpaid, vain, and of little lasting value they populate our decision making elite. They are the plutocrats of Wall Street, consulting, and industry whom our business media fawn over and praise for their acumen. Never questioning what that acumen may be, or what its value is.

And many of them started their rise to this exalted status at HBS, which is my shame as well as theirs.

Put is this way: in the decades of the Reagan era, which encompasses much of the working lives of our elite, what has happened? What have they accomplished? Is our industry more competitive? Are our businesses better run? Are they engines of growth and prosperity? What did that business education create?

Wealth for the 1%. And nothing else. Worse: it destroyed, or is destroying, the very fabric of our society. It is engendering a social decay that manifests itself in rising political extremism on both wings of ideology. It is undoing the great American middle class. It is putting in place an American aristocracy – plutocracy – and obliterating the notion of opportunity for most citizens.

And our elite then decries those citizens as “moochers” when they have the temerity to put out their empty bowls and ask for more.

Well, it’s good to see HBS mired in the very swamp it helped create. It isn’t the only cause of our problems. But it sure didn’t help. And it’s also sobering to see its own management splutter about ineffectively when challenged by class. I doubt they ever thought they would have to talk about class. Yet they, their ideas, and their product have made us all have to deal with it.

For shame.