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When Fair Trade Ain't
 
   
 

 

Reed is Evil


 

by David Silverman

 

 

"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."

 

David Silverman is the autho of Typo: The Last American Typesetter, or How I Made and Lost 4 Million Dollars, forthcoming from Soft Skull Books.



Posted April 8, 2007 1:06 AM

 


 

Backtalk

I made an error in this article. It should be "oligopsony" is the consolidation of buying power and can lead to "monopsony," or one buyer. "Oligopoly" is a consolidation of suppliers, and the road to monopoly. And if you like this article, I've got more at www.agman.com.

Posted by: David Silverman at May 9, 2007 4:38 PM




 

 

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