"How is it going? Still working for the evil empire?" I asked, the young
man, just out of MBA school, who had been hired by Reed
Elsevier. I wasn't looking for a fight.
"What do you mean evil? Do think Hitler was evil?"
"Sure," I said, unsure where this was going.
"Then how can my company be evil?"
"Well, because Reed Elsevier pushed my company out of business in a single
breath."
"We're free to choose who we buy from. Aren't you? Don't you shop at Wal-Mart?"
"Um, but Reed wouldn't even let me bid on work. They wouldn't take my
phone calls when I tried to offer them the same price as the companies from
India."
"Did we break any laws by doing that?"
"No, but pushing the laws to their limits doesn't make an action like
driving dozens of typesetting companies into bankruptcy and putting all of their
workers in unemployment lines doesn't make it right."
"So you're saying you're against capitalism?"
The conversation didn't improve from there-which isn't surprising for a conversation
that starts with Hitler and heads straight towards communism.
And why do people have to go right for Hitler? Is there no measure of evil
smaller than world war combined with genocide? As the child of a Holocaust survivor,
I would like to humbly request that we keep Hitler out of discussions of the
cruelty one man deals another that falls short of those cataclysmic extremes.
Moreover, why am I anti-capitalist because I think Reed-Elsevier pushes their
weight around economically?
I admit freely that at the time, my company couldn't compete with India for
the labor intensive task of typesetting. Neither could my other competitors.
And when Reed Elsevier bought up about 25% of the publishing industry that was
my customer base, they dutifully sent the work where it was cheapest.
I don't think they were wrong. I don't think outsourcing is, by definition,
bad. But I do disagree that Reed's actions were simply the natural result of
an honest capitalist.
The reason is oligopoly-a consolidation of buying power. If I shop at Wal-Mart,
I am only one buyer making one decision among many I will make. By comparison,
Reed had become one of just a handful of buyers of typesetting, and they did
it in just over a five-year period from 1994 to 1999. The time between their
last acquisition of Harcourt, which led to them having 30% of my company's business,
and their decision to dump us was less than 6 months.
Could my company have adapted to overseas competition? Yes. And we were. We
had, in fact, established our own operation in Manila where we paid people three
times the going rate. We were well on our way to matching the prices from anywhere
in the world through a combination of technology and efficiency brought by treating
our workers with respect.
But time is what we did not have. And, as a direct result, my company's 150
employees in America and 50 in Manila lost their jobs. Because we were small
($10 million in annual sales) versus our customer (over $7 billion) we were
crushed by their choice to "shop at Wal-Mart."
Now back in the early part of the 20th century, big business argued against
minimum wage laws because they would "deny the right of employees to negotiate
with their employers." That meant, if you offered to work for a dime an
hour, that was your choice-which was ludicrous because the worker in that situation
had no negotiating power.
Does believing that it is government's duty to alleviate that natural disparity
of power that develops under capitalism make me a communist or anti-capitalist?
I don't agree with that at all. I firmly believe in "free markets."
But I also think oligopolies are no better than monopolies for the growth of
a free economy.
So was it OK for Reed not to use my company? Of course. If my company was non-competitive,
was it OK for it to go out of business? Probably. Was it legal to buy up 1/3
of my customers and then cut us off the vendor list in six months? Likely. Was
it Hitler? Not even close. But was it "good?" No.
It was evil.
And I think the Reed-Elsevier ethics manual says it best.
"Some types of conduct are always illegal under certain competition and
antitrust laws. Employees and other representatives of Reed Elsevier must avoid
even the appearance of such conduct."