Part 3: Manufacturing and Economic Revitalization

We’ve looked at the slow repatriation of jobs from abroad. We’ve examined what’s missing in the middle path for American manufacturing. Now it’s time to go up against all the mythology directly. Even if manufacturing is headed in the right direction, does the promise of economic prosperity hang in the balance? There are still quite a few questions for those who argue that a rising manufacturing tide will necessarily lift all boats.

Brockton Mill
Factory buildings in Lowell, Mass, 1940 Dec. Photo: Jack Delano, Library of Congress

Will manufacturing employ as many, and as many unskilled, workers as it used to?

Probably not and definitely not, respectively. See my previous post on workforce mechanization for more: the strictly manual labor of yesteryear’s factory is on its way out the door, if not down the street already. That will definitely mean fewer unskilled manual workers, and probably fewer overall. Even if there’s a renaissance in manufacturing, it may be a form of jobless recovery, with expanded output but not jobs.

That being said, employing as many people isn’t really the best measure of success. High quality, well-paying and fulfilling work is what really matters. I’d certainly rather work in the manufacturing industry of the 21st century than the 20th century. New manufacturing work is likely to be more intellectually engaging and safer than ever before. The stop in the freefall of manufacturing jobs is in itself an accomplishment. Even if jobs are created slowly, hopefully their quality will set them apart from other growing sectors of the US economy.

Is the industry stable? Will it lose 2.5 million jobs during the next recession? 

There is no question that manufacturing is susceptible to a downturn; when demand shrinks, so does production of consumer goods and all the supplies that go into their production. It’s impossible to say that the jobs that are developing now will be immune from shocks. This is why we need to keep in mind the growing importance of economic resilience. Economies built around a single variable (the price of oil, the ever-increasing value of homes, the demand for goods in China) are always more vulnerable than those that have flexibility and backup plans. Manufacturing redevelopment should be built around this principle, and in turn it can help provide resilience to local economies.

New Balance
New Balance shoes are one of the few clothing companies to manufacture widely in the US, although not every element is produced here.
Source: Made in the USA – New Balance Factory: Skowhegan, Maine by Flickr user David Salafia

The reasons for manufacturing’s current ascendance are fickle. Energy costs could go up. Wages could go up. Overseas transport costs could go down. If this resurgence is built merely on cost comparison, it will inherently be a footloose sector. What we need is an industry and a public that have made the connection between the products they buy and the work that goes into them. “Made in America” is one of the vanishing number of ideas with bipartisan supporters. The problem is that we have to get people to back up with their dollars what they say is important.

What about other countries? Will companies move to Cameroon when their labor costs become 5 cents cheaper than China’s?

In terms of flight to other countries, I think the news is relatively good (at least in comparison to the onslaught of the 90s and 00s). As technological innovation becomes more important, the cost of labor declines as a part of manufacturing costs. Although this means fewer people will be employed, it also means that having rock bottom wages matters less in the final calculus. It’s difficult to gaze in the crystal ball and see exactly what’s next, but mass production under sweatshop conditions is probably less likely in the future, not more likely. Robot sweatshops, maybe.

How long do we have to wait for this to take off?

Lawrence Factory
Railroad cars and factory buildings in Lawrence, Mass. 194[1] Jan. Photo: Jack Delano, Library of Congress
There’s a lot of preliminary groundwork for manufacturing, something the cheerleaders rarely acknowledge. There’s the workforce issues (in post 1). There’s the critical mass of flexible medium sized businesses (post 2). There’s the declining rates of entrepreneurship and support for research and development in the US, both of which form the basis for innovative manufacturing. There’s no agreement on which of these issues is the chicken or egg, and you’re likely to see a lot of dithering while people argue about it.

But since you come to this blog for easy answers, I’d say that it will be decades before we know if this thing is for real. As I’ve argued in other posts, we need to say a qualitative rather than a quantitative shift. Success will not be based on numbers of jobs coming back from overseas; success will be in the form of a robust cluster of industries that supports communities and is working hand-in-glove with institutions to create a highly technical workforce.

Can it turn around the fortunes of a place where everything has gone wrong?

This is a tough one. Will manufacturing have the power to help a place that is badly economically dislocated (often, because of the previous flight of manufacturing)? If the renaissance is going to be real, will it help not just a Worcester, MA, but a Gary, IN?

The status quo isn’t entirely encouraging. The current beneficiaries of a manufacturing revival, such as it is, are the places with rock bottom wages – that is, usually the South. People in these areas need jobs, no doubt. The problem is that the combination of relatively low wages and fewer jobs overall isn’t the sort of economic activity that helps a community rebound.

A further question is whether developing this type of labor is inherently unstable, which will be even more destructive for long suffering regions. Again, competing on cost alone is a dangerous precedent. If wages start to rise too fast, the companies will leave, making meaningful economic development and private sector success at odds with one another. Take a brief moment to envision how China’s feeling right now: the primary reason for the momentum in manufacturing towards the US is because Chinese workers are quickly entering the middle class and demanding awful things like a living wage and benefits.

Mt Holyoke Rubber Factory
Mt. Holyoke, Massachusetts – Paragon Rubber Co. and American Character Doll. Pressing rubber bodies, 1936. Lewis Hine, U.S. National Archives

Can it support a community?

This, to me, is the ultimate question. Can manufacturing be the base of broad community resurgence, the way it was, however imperfectly, in the past? There’s some good news here: the historic perception of manufacturing companies as greedy robber barons exploiting immigrant labor is extremely outdated and is belied by the connectivity of many small and medium enterprises that take pride in their work, their workers, and their community.

In my experience, the manufacturers that haven’t left (or couldn’t) are some of the most engaged, passionate businesspeople out there. This is especially true in Massachusetts, which is not a low cost state. They’re not running a charity, but if they were looking to cut costs to the bone they’d at least start by moving to New Hampshire (if not Alabama, if not China).

If manufacturing is to surge again, it has to be of the community, with the interests of the community in mind. We need to avoid creating company towns in the mold of the 19th and 20th centuries. An American Mittelstand can and should be built on the base of the companies that have remained.

Conclusion: The Promise of Manufacturing

As I look back on this series, I think I’ve probably come off a bit harsh on manufacturing. While I do have a lot of questions, digging in to what’s happening in the sector has certainly give me a lot of hope as well. That might not come across because I’ve never had any patience for silver bullet solutions – that “all we need” is “insourcing”  to “put America back to work.” That kind of platitudinous promises is rife in political conversations. “All we need” is to break up teachers’ unions for schools to thrive. “All we need” is to subsidize wind power to solve climate change. In a similar vein, big promises abound in manufacturing.

But just because manufacturing isn’t all we need doesn’t mean that it won’t be a vital sector of the American economy again, one that will generate a lot of wealth, jobs, and social advancement. My big takeaway from this series is that the next decade or two is a crucial time for these trends to take shape, and that the path is not yet well determined. Most of all, it will take more than haphazard economic planning for the sector to make an impact.

Part 2: The Missing Middle

I got my first exposure to economics studying abroad in Portugal. The year was 2005, and the conversations we had in class were mainly about the differential economic growth in EU member countries, an issue that the world would become intimately familiar with during the recession and the Euro crisis.

The problem, my teacher explained, was that Germany and the core EU countries were growing quickly, while Portugal, Italy/Ireland, Greece, and Spain (the PIGS, an acronym whose English meaning was not lost on my classmates) were either stagnant or growing slowly.

He showed a graph that looked like this:

The PIGS were supposed to catch up with the core over time, but even when they continued to grow, they ended up further away from their neighbors than when they started. Although this foreshadowed the currency problems the area would face, the more pressing was: why the PIGS were growing so slowly?

The main problem from our teacher’s perspective was that Portugal couldn’t catch up because it had lost the ability to compete at either end of the economic spectrum. Portugal was once a center of textile production – in another time, it was Europe’s sweatshop. In the globalization of the 21st century, Portugal had been caught out: it could not compete against the low wages of China or Hungary, but it also couldn’t easily shift into the high margin production of Germany or the high culture fashion of Paris or Milan. Portugal was stuck in a middle gear, with no infrastructure to perform at that level.

This fairly simple observation is one that has affected my thinking ever since. Even accounting for the Portuguese penchant for melodrama and nostalgia, this accurately described a cause of economic malaise in Portugal as in many places.

I have observed similar questions facing manufacturing in all kinds of places in the US: the question of the missing middle. These type of questions help me explain the immense gulf between believers and doubters of the manufacturing renaissance as outlined in Part 1.

When paths toward economic stability diverge, there is often a shrinking middle ground for countries that do not totally commit themselves towards one or the other. The middle ground represents healthy economic capacity that needs careful support and planning. This missing middle can be interpreted three ways: in terms of labor, products, or companies.

The Missing Middle Quality Products

At the risk of Oregonian self-parody, I like to know where the products I buy come from. When it’s possible, I like to support local manufacturers and craftspeople, who are more likely to circulate that money locally.

Based on my informal research, I have found a few consistent roadblocks to depending on local goods. When it comes to goods manufactured for personal consumption, there’s no middle ground: there are very low quality products (often produced abroad) and very high quality products, with prices to match. A number of platforms have sprung up to connect people to locally produced goods including Etsy and CustomMade, but many of them have sky high prices that keep out all but the most well off.

I think there is a huge market developing for that next level down that people have not yet figured out how to fulfill. Furniture, for example, that costs a bit more but not so much more – the equivalent of affordable organic produce. This is starting to emerge, but in many places the only choice is either shoddy products or handcrafted art pieces produced for wealthy patrons.

The Missing Middle Skill Work

When academics talk about the US competitive advantage in manufacturing, they usually mention that wages are low and productivity is high, relative to other developed countries, and that our top universities are the best in the world. There’s an inherent problem in this, though: usually places have at most one of these characteristics – it’s very difficult to have both rock bottom wages and excellent human capital. Most places operate somewhere in the middle, not at the extremes of low wages or at the absolute technical peak of a National Laboratory.

This may not always be a problem. The US provides a huge breadth of work environments within the borders of a single country or even many states. A major competitive advantage to the US is that we can have a low wage area like a Mississippi or a Tennessee a short distance from knowledge centers like Huntsville or Oak Ridge National Laboratory (to use some Southern examples).

The problem arises when it comes to particular places that have neither: small, disconnected regions, legacy cities, rural areas. This is a question of middle skill work, similar to the position Portugal found itself in. How is a mid sized city in Ohio supposed to compete with either Cambridge, MA or Mississippi? It will never have the technological capabilities of the first or the low wages of the second.

What about a mid-level state, one with neither outstanding educational institutions, rock bottom wages, or other advantages like natural resources? Consider Massachusetts. It’s in an odd position: while widely perceived as high tech and high end, many areas outside of Boston areas have the disadvantages of the rust belt: high costs, high unemployment among large numbers of unskilled workers while benefiting only marginally from the excellent schools and wealth of the state capital.

Another concern is that without this middle skill work, we prolong the belief that we can support a two-speed or two-focus economy, with low skills and low wages in some parts and high wages and high skills in others. Maybe we can. The growing gap between rich and poor in this country, though, gives at least some cause for concern. Graphs of the United States since the 70s look remarkably similar to the one my professor drew on the board (if not worse). A two speed economy could further the creation of Portugals and Germanys within the same country.

The good news  is that within particular manufacturing companies, middle skill employees are in high demand. Most companies do not need many more assembly-line automatons or people with PhDs in engineering. They need reasonably educated and self-motivated competent middle-skill people. The “missing middle” I’m talking about is in the demand for places, not people. There just isn’t the demand there needs to be for Youngstown, OH or Gary, IN.

A Missing Middle Tier to Growth

Finally, there’s a missing middle set of firms that will enable actual growth in the sector. Many of the most valuable manufacturers are small and medium size enterprises that react to changing circumstances with the necessary speed but are also large and established enough to keep the ship upright in a storm.

The media’s need to construct a narrative is obscuring this important issue. In newspaper headlines, manufacturing is either booming or falling apart. Selective coverage gives the impression that every manufacturer operating in this country is a mega-corporation moving back from overseas or tinkerers operating out of their garage.

Germany has a legendary group of businesses called the Mittelstand that has sustained family owned businesses, humane practices and economic growth in that country for decades. These companies have built a reputation for providing extremely high quality goods, being responsive to customer concerns, and working collaboratively to train and support their workforce.

Generations of job destruction in manufacturing means that the middle size companies that remain are among the most hardened and devoted companies, a perfect basis for an American Mittelstand. However, they lack the number, standing, or self-image of their German equivalents. In the quest for stability in the manufacturing sector, the US is missing its own Mittelstand to form a support structure.

It’s no coincidence that Mittelstand translates as the “middle tier”. Without these missing middle tier firms, goods and work, the American manufacturing experiment of the 21st century is likely to crumble from its center.

Part 1: The Promise of “Reshoring”

Recently, popular articles about manufacturing have taken one of two approaches. One type is filled with breathless claims about how this ain’t your grandpa’s manufacturing and it’s coming home from overseas better than ever. The other type notices that there sure has been a lot of attention paid to manufacturing lately, and goshdarnit, the actual numbers don’t meet the wild claims. Both are somewhat true.

Many of the “renaissance cheerleaders” point to the Boston Consulting Group report “Made in America Again” to bolster their case. The core of the BCG report makes a compelling argument: the advantage China faced in manufacturing is eroding, making the decision to locate manufacturing in the US easier than it once was.

The report and the trends it cites have certainly increased attention on manufacturing, but the general ideas behind manufacturing are an easy sell. As far as economic strategy goes, promoting manufacturing is a non-partisan and populist way for politicians to promise to “put people back to work.” Like I pointed out in the introduction to this series, manufacturing connects to nostalgia and historical pride better than any other sector.

Nothing gets in the news these days without a snappy cultural meme, and this story is no exception. The words “reshoring” and “insourcing” were quickly coined to combat the vast vocabulary we have to describe jobs exiting the country (“offshoring,” “outsourcing,” “sending jobs overseas”). But the question remains: is reshoring real?

Cultural and Economic Shifts In Favor of US Manufacturing

Lincoln Logs
Lincoln Logs are now made in America again. Our long national nightmare is over. 
Source: http://www.dailyfinance.com/2014/12/25/lincoln-logs-america-made-again/

If the tide is turning back to the US, it’s happening for good and bad reasons. Cost of labor (known from the worker’s perspective as wages) is stagnant in the US while steadily mounting in China. Companies are paying more attention to flexibility and are increasingly asked to produce highly specialized products; having the engineering and design of products in one country and the actual production in another adds to complexity and cost in ways that offshoring companies didn’t account for. Non-labor costs also tilt in the US’ favor: overseas shipping costs have become much higher in recent years, and US domestic energy cost is low.

There are also important trends that don’t show up in macroeconomic data. The reversal in fortune for US manufacturing is built on an interesting dynamic with something in it for everyone. Some like the reduced environmental impact, many find American-made goods higher quality, some see purchasing American products as an easy form of patriotism. What doesn’t seem to work is moral superiority alone; the goods need to be somewhat comparable in price, of unquestionably higher quality, and connect their origin story well to their customer.

Just as people increasingly want to know if their food is local, people want to understand where and how a product is made. New platforms to support local manufacturing are becoming, if not more prevalent, at least more possible.The cultural shift operates through a dual mechanism: access to greater information through the internet (people can easily pay a bit more to support a thing they like, and they say they like American-made products) and public shaming. With the support of social media and platforms like Etsy and americansworking.com, there are ample opportunities to call people’s attention to the gap between what they say they want and what they buy.

I’ll illustrate with an anecdote. Several years ago, when strolling the grand boulevards of Walmart, I came across a “Toby Keith” brand cowboy hat, festooned with an American flag. Even before inspecting it closely, I anticipated the delicious irony of what I would inevitably find on the underside: a tag that proclaimed that this piece of outrageous patriotism was, of course, Made in China.

In 2013, Walmart announced a “Made in America”initiative to great fanfare, promising to source $250 billion worth of products from US manufacturers. Although they’ve reportedly run into some problems with supply of goods, you better believe Walmart doesn’t do things that it expects to lose money. I take it as a sign of health for the future of manufacturing that Walmart is trying to take steps to reverse the perception that it relies on the lowest quality Chinese-produced goods. As in their recent embrace of organic produce, Walmart is a lagging rather than a leading indicator of change.

Overly Optimistic Projections?

Manufacturing Share
Source: Wall Street Journal analysis of WTO data.

A number of studies in recent years have argued that reshoring is less a wave than a trickle. The recently released ITIF Report “The Myth of America’s Manufacturing Renaissance,” refutes nearly every claim for the overall health of manufacturing. Don’t break out the party hats yet: recent employment growth probably represents the slow pickup of factories shuttered in the last 10 years. If labor is getting more expensive in coastal China, low cost labor is still available in interior China or other countries like Vietnam.

There is an important philosophical distinction ITIF makes with the likes of Boston Consulting Group, which is probably the most important: over and over, estimates of rapid growth of manufacturing in the US depends on the most conservative assumptions possible. The most expensive areas of China are compared with the cheapest parts of the United States (a tendency I’ll revisit in part 3 of the series). The underlying theory is that all we need to do is to continue on a path towards cost parity, and the rest will take care of itself.

In some ways, the doubters overstate their case: even the most fervent defender of manufacturing doesn’t contend that the jobs have come close to matching those lost in the recession. Harry Moser of the Reshoring Initiative, who is quoted in approximately 100% of the articles about this topic, has said that the flow of jobs between the US and China is net neutral: right now, about the same number leave as reshore.

In short, the evidence points to trends in the right direction, but the much hoped for inflection point has yet to materialize. Without a different mindset, I’m not sure it will. On reshoring specifically, I think we ought to be cautiously optimistic although It certainly doesn’t make sense to count these jobs before they’re hatched.

The Missing Link: Workforce Development

While I think the long-term trends are in favor of a continually growing manufacturing sector, it is not predestined. We could still fumble this chance horrifically. In fact, I don’t believe it will happen without excellent planning. If we focus merely on lowering costs relative to China, it will never work. There is always somewhere cheaper – we need to have a flexible, intelligent and competitive workforce. The money spent on labor in the US has to buy a better product.

Manufacturing Age Gap
Source: Manufacturing Alliance for Productivity and Innovation analysis of BLS and CPS Data

Several major reshoring efforts have stumbled on an inability to hire enough qualified workers. There are many factors underlying this trend – a rapidly aging workforce that is already older than the rest of the economy, an educational system that leaves many students without basic literacy and numeracy, and an industry that may be unwilling to pay higher wages for higher skills.

But regardless of the ultimate cause, we’re at an impasse. The damage to the reputation of manufacturing has been done over decades, creating a positive feedback loop. Because generations of families were brought up not to trust the stability of manufacturing, young people are less likely to enter manufacturing careers, meaning there’s less of a pipeline, meaning manufacturers struggle to find workers, meaning reshoring efforts are slowed, meaning that the reputation of manufacturing can’t improve. Potential employees argue that it used to be the employers’ responsibility to train the employees they need; manufacturing companies say that the workers are poorly prepared by the system and aren’t loyal enough to justify millions of dollars in training. 40 years of mistrust doesn’t reverse overnight: each side is expecting the other to take a leap of faith.

What if it’s already too late to lay this groundwork? Training efforts take a long time, and some have argued that the lost expertise of a generation ago may prevent knowledge from forming. Manufacturing and advanced industries not as thick as they once were, making it more difficult for any one manufacturer to make it on their own.

It’s going to be a tough road ahead, but workforce quality is one of the foremost elements that need to reach an inflection point before success of the manufacturing renaissance is assured. Although manufacturing usually gets set in its own category, employers in this sector – as in almost all others – are looking for people with skills in critical thinking, literacy, basic math and a willingness to learn. Building that base for workforce is an undeniable good thing, but we’re unfortunately not there yet. Fortunately, unlike in past generations, making sure our workforce can meet this need does not require us to put all of our eggs in the manufacturing basket.

Reshoring has not yet caught up with the hype, but the sector has seen growth. While most of the news about this trend focuses on the movement of jobs between US and China, the workforce development work that remains to be done will help build the basis of a manufacturing economy (or any economy, really) even if the cost savings from overseas stall or reverse.

Series: Is Manufacturing Back?

The manufacturing industry is uniquely embedded in the American collective imagination.  This blog does not have the budget for any “man on the street” interviews, but if I asked 10 people for their perception of manufacturing, I bet I’d get 11 opinions. Whether the industry brings to mind the union strikes and assembly lines in your history book or fat cat executives and the betrayal of offshoring could depend on your age and location. Manufacturing images – “Rosie the Riveter,” the “maker” movement or high-tech spinoffs – connect to the distant past and the economy of the future. No other part of our economy brings to mind so many (sometimes contradictory) narratives.

Midnight_at_the_glassworks2
Many perceive manufacturing to be some combination of these two images – a bizarre mix of empowerment and exploitation.
Above: “Glassworks. Midnight. Location: Indiana.” by Lewis W. Hine. Right: “We Can Do It!” by J. Howard Miller.

We_Can_Do_It!


So what does it mean that in 2015, manufacturing is the talk of the town? States across the  union are starting programs to promote manufacturing and using words like “rebirth” and “renaissance” to describe its future. Over the next few weeks, I’m going to publish a mini-series on the past, present and future of manufacturing.

Discussing the future of manufacturing can be problematic: in addition to the difficulty disentangling its past, the woes of manufacturing are intimately familiar to American society. While many economic changes happen at a remove (very few people spend any time thinking about stock market bubbles, mortgage lending or credit default swaps) manufacturing is a tangible narrative. I’ve yet to visit a place in the US that doesn’t tell a story about how sometime in the past the “good jobs” left the region never to return. When that story isn’t about taking some finite resource out of the ground, it involves manufacturing something. Manufacturing is associated indelibly with the “good old days” a nebulous postwar period in which, in the public imagination if nowhere else, society generated wealth somewhat equitably and upward economic mobility was improving.

There are other reasons it’s difficult to discuss manufacturing rationally. Differing political opinions take a similar fact (manufacturing’s decline) and connect it to wildly varying causes (NAFTA, the decline of unions, and multinational corporations on the left, and environmental regulations, the strength of unions, and burdensome government on the right). It’s even connected with complicated cultural shifts such as views about masculinity itself – some curse the day when a man stopped being able to provide for his family and his country from the sweat of his brow (for an excellent update on this in the “maker” age, read Debbie Chachra’s “Why I Am Not a Maker” in The Atlantic).

What you know already is 100% correct: recent decades have not been good to manufacturing (in the US, anyway). According to BLS data, manufacturing employment reached its peak in 1979. The decades since then have seen a number of large drops in manufacturing employment – in the early 80s, early 2000s, and most severely in the period leading up to the recession (2007-09). Since 2010, manufacturing employment nationally is on the rebound, but as skeptics of “the manufacturing renaissance” are quick to point out, the number regained is nowhere near the number lost since pre-recession levels.

Manufacturing Employment

Given this tangled history and long decline, the idea of a rebirth in manufacturing might seem not just counterintuitive but counterproductive. Even if the freefall of manufacturing jobs has slowed, do we really want to attach ourselves to an industry based on a romanticized past? If we can’t even agree on what brought us to this point, can we actually predict what will happen 20 years from now?

This series will look at these questions from a few different angles. I’ll try to apply a nostalgia-free look to what’s happening on the ground to see what’s actually underlying the recent interest in manufacturing.

Part 1: The Promise of “Reshoring”

Part 2: The Missing Middle

Part 3: Manufacturing and Economic Revitalization

The Market Basket Case

If you don’t live in New England, you undoubtedly missed out on the story of the summer for regional news outlets: the Market Basket saga of 2014. Whether “Greek tragedy” or “war of attrition” is overblown to describe the corporate troubles of a regional supermarket chain depends on your perspective. It’s a great story to make fun of, but it also offers some takeaways that people in other regions might find interesting but would have no reason to know about.

Market Basket is a cheap regional grocery store with some fanatic devotees. For many years the chain has been owned by the Demoulas family, which has struggled behind (and in front of) the scenes to wrestle control of the store from one another. The antagonists in this particular saga are cousins Arthur T. Demoulas and Arthur S. Demoulas, AKA Artie T. and Artie S (for full comic and dramatic effect one should read this in a Boston accent, IE, AH-tee).

Artie T. was pushed out by his cousin in June from his role as CEO of the stores. During his time as CEO, Artie T. had built up a substantial following for his penchant for personal relationships with employees (remembering names, attending birthdays or funerals) and more generous benefits, wages, and opportunities for advancement than other supermarkets.

The Arthurs. Can you guess which one is cast in the role of folk hero, and which is conniving corporate exec? Source: http://itsgoodtoliveinatwodailytown.com
The Arthurs. Can you guess which one is the folk hero, and which is conniving corporate exec?
Source: http://itsgoodtoliveinatwodailytown.com

Soon after the news of Artie T.’s firing broke, truck suppliers struck, Market Basket workers took up protests outside their workplaces, and supporters of all stripes enforced a customer boycott of Market Basket stores. The media picked up on the story enthusiastically during a slow news summer and a lackluster Governor’s campaign, playing out each testy meeting of the Demoulas family and reporting the newest reports of lost earnings like juicy celebrity gossip. After about 6 weeks of protests, the Arties agreed on a sale allowing T. to come back as CEO, buying the company from the rival faction.

Source: Portland Press-Herald
Source: Portland Press-Herald

Unless you just love the bizarre drama of the story (I can pretend to be above it, but there’s some pretty good lore – like apparent fistfights, switched allegiances, and surveillance wires) it has a couple interesting takeaways.

The first is the role of personality and likeability in corporate governance. There have been debates about how much one can generalize from the outcome of the MB saga, but one thing is for sure: there was a fanatic devotion to Artie T.’s controlling role. In an age where most people working for large companies have no idea who works two steps above them, a vast majority of employees had enough familiarity with their corporate executive to put their jobs on the line for him. The demise of the protests were predicted many times over the course of the strike, but the protesters got essentially everything they wanted – Artie T’s reinstatement. Beyond their belief in the leadership style of their old boss, they have no reason to expect personal gain.

It’s surely not a straightforward morality tale, but it’s hard not to side with the workers, especially when some columnists so helpfully fulfill the role of Ebenezer Scrooge by insisting that the protesters “go back to work” and that companies do not “have to dance to mob rule”.  To me, it’s a small sign that workers are not entirely powerless to improve their work environment, even if it was ultimately a symbolic issue.

Second, the entire affair was orchestrated by non-unionized labor. In a world of dwindling union membership and resources, the protests could be seen as a hopeful note for labor or a depressing death blow, depending on your perspective. This Globe article even raises the possibility that the very non-unionized nature of the workforce may have created greater possibility for success: managers and low-level workers could all work together to achieve their goals. In unionized workforces, managers and workers are usually prohibited from taking labor action together. The downside is that unions can help workers hang together during a strike, for example by helping pay a fraction of their paychecks.

If anyone – for or against unions – is predicting that this heralds a new age for labor, I don’t think they’ve thought this one through clearly. Certainly if Market Basket had been a national chain in the McDonald’s or Walmart model rather than a family owned company, the protesters would be begging to go back to work now – the deep pockets and diffuse governance structures of multinational corporations would probably make a protest untenable on the national level.

If you choose to see a morality play at work you can. I think there are more interesting questions to answer. Is the changing structure of the economy closing down the possibility of another Market Basket? How and why did employees (and shoppers) attach to the good Artie vs. evil Artie narrative so easily? Could other CEOs or workers’ rights advocates use this to their advantage, or is Market Basket is a unique case in a unique area? Whether this could even happen in a place with a less than religious zeal for its grocery chains is an open question. You’d better believe, though, that the saga of Arties T and S will be the talk of New England business school seminars in the years to come.