Paper Capitalism

Just some musings on my part, but it seems to me that a lot of industry and business productivity is wasted by what I'll call, "paper capitalism".  I overheard some colleagues this morning discussing a neighbouring company's latest corporate machinations: parts were being sold, other sectors and lines were merging with another company, and one part was being set up to stand alone.  A lot of uncertainty and disruption was occurring among the staff and employees.  Having lived through a division, sale, and later restructuring at the industrial site where I work, I have experienced how much time and energy these processes demand of those people who actually make the product and work to make it in a cost effective manner.  These processes are a distraction and disruption for those charged with actually creating value by making a superior and price competitive product.

Now, I'm not an economist, my major in University was in History and my studies of economic theory were somewhat general and limited to their affect on social history.  I've started reading, the French economist Thomas Piketty's, "Capital in the Twenty-First Century", but have only managed to slog so far through the first third of the book.  Despite having a diploma in Engineering Technology, the equations and statistics in his book give me a headache.  However, my experience and instinct suggest to me that the buying, selling, and restructuring of companies or portions of companies does not bring any real increase in value, productivity, or economic growth to the country as a whole.

This is what I'm defining as, "paper capitalism", short term economic gains through the re-arrangement, restructuring, reorganizing, splitting and unifying, buying and selling of production units, sectors, and lines on paper.  Not only does this not produce any real value, increase in productivity, or economic growth on its own, it actually decreases those things by taking up resources and energy on a non value adding activity within the industry or business.

Changes in ownership or alliance in industry or business often involves taking time to educate staff and employees on the "new" business philosophies, practices, company rules, regulations and processes. It may also involve changes in business systems, processes, and software.  All of which takes up staff and employee time to learn and slows their productivity as they make the transition.

This takes up time and energy that could better be devoted to improving production, finding efficiencies, improving reliability and cost effectiveness, and generally creating lasting value.  It would seem to be the same mentality as shown in some companies that give CEO's ever increasing salaries and bonuses to layoff and reduce worker wages along with production costs cutting in maintenance, repair and other areas that will create a short term increase in stock value in the current quarter for their investors.  Once the short term effects are realized these CEO's collect their bonuses and use their "success" as a stepping stone to negotiate an even higher salary with a different company, leaving the first company behind to deal with the longer term economic fallout of their actions which are generally a decreased ability to create value or generate profit.

These CEO's seem to operate under a primitive philosophy of Taylorism, as in, "what is the absolute minimum I can feed a horse and still keep him alive and get some work out of him".  In this case the purpose is to minimalize short term expenditure to make the short term profitability look good at the expense of long term sustainability or growth. This is not a philosophy that builds value and grows the economy, but starves industry and production until it is no longer viable.

I have to admit that my opinions above are not well researched and are somewhat sweeping and generalized.  They are more my views and observations on what I think is going on and not a well documented and reasoned case looking at specific industries and companies.  If anyone knows of studies or data that either confirms or denies these views, I would be interested in looking at them.

I have pulled together a quick list of sources that explore these questions in more depth:

Harvard Business Review

https://hbr.org/2014/09/profits-without-prosperity

Harvard Business School

http://hbswk.hbs.edu/item/the-high-risks-of-short-term-management

The Washington Post

https://www.washingtonpost.com/opinions/the-ceo-backlash/2015/06/21/8dd31c14-169e-11e5-9ddc-e3353542100c_story.html

Sources on Corporate Restructuring

http://smallbusiness.chron.com/disadvantages-restructuring-organizations-33848.html

https://www.researchgate.net/publication/13140906_Benefits_and_disadvantages_of_corporate_restructuring--the_hospital_view