Our house of cards

Shortly after the Taiwan earthquake, some observers feared a global economic crash was beginning. That didn't happen. But a key lesson should have been learned. There was no backup plan. There were no other factories that could produce those chips, in the short term. A bigger earthquake, one that might reduce to rubble the science park where Taiwan's top chip plants are located, could have had devastating consequences.

Lynn argues that similar disasters are waiting in the wings -- that they are the inevitable result of an economic mandate to outsource and move offshore every possible step in the supply chain. Calculating risk, says Lynn, is no longer a priority for the modern corporation. That's left to contractors in other nations.

The crucial problem is that the modern corporation is only responsible to its shareholders, not to its workers, or society at large. The single most important consideration for the executives of state-of-the-art American corporations is to deliver good enough numbers each financial quarter to keep those shareholders happy. Thus they are under constant pressure to do whatever they can to keep their costs down. The aspiring workers of China and India are happy to help them in this regard, but this also means that, in the long term, the United States' manufacturing base is eroding, and becoming more and more vulnerable to events that are out of its control.

"Every day by its nature," writes Lynn, "its built-in urge to use every iota of material within the system in the absolute most efficient way possible and hence the most unique way possible, its blind desire to strip all redundancy from the system and shift that wealth into the pockets of the shareholder, today's global production system undermines its own foundations, excavating the brick it uses to build our ever-finer spires from the deepest columns on which we all stand."

Lynn's rhetoric sometimes get a bit overheated, and one has to acknowledge that the idea that the American corporation is beholden to its shareholders is hardly breaking news. (For plenty of Milton Friedman-esque economists, that's exactly how it should be.) By maximizing efficiency and profitability, so the theory goes, such companies create more wealth to be invested in the economy than they would if they were weighed down by overpaid workers, environmental regulations and ruinous taxes.

Such trickle-down theories rarely comfort workers who have been downsized, or had their benefits cut, or watched their jobs sent overseas. What makes "End of the Line" so interesting is that it doesn't waste time belaboring the standard left-wing analysis of how workers get screwed in unregulated capitalism. Lynn's argument challenges the current dominant paradigm on its own terms, making a compelling case that the long-term economic effects of shareholder-run capitalism will be disastrous, for both balance sheets and the realpolitik arena of international relations.

That there are serious instabilities in the global economic system as currently set up seems indisputable, given the evidence marshaled by Lynn. But is the fact that the American corporation enjoys "the freedom to do business wherever in the world a company wished and the freedom to operate only for profit, unburdened by any sense of responsibility to any community or any individual," really all Clinton's fault?

The movement of American manufacturing overseas started long before Clinton's tenure, and the social primacy of the shareholder traces its roots back at least as far as the so-called Reagan revolution. Which is more important, the deregulatory impulses given full flower by Reagan or Clinton's role in pushing the North American Free Trade Agreement and his failure to obstruct American businesses in their pell-mell rush to move jobs, manufacturing capacity and billions of dollars of investment capital to China and India? Both play a role, but one president fundamentally altered the terms of engagement in the political landscape, while the other merely did little to resist what was already fast becoming a fait accompli.

Ultimately, the question of who is to blame is less important than the need to comprehend what is currently going on. In that respect, "End of the Line" is a welcome eye-opener. Flexibility is rigid; interdependence implies vulnerability; the actions of the best-run corporations can lead to the worst consequences. Tighten your seat belts, the rest of this century is going to be a bumpy ride.

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