This past weekend investor Warren Buffett, to a vast fanfare from the media, announced
his decision to donate some $37 billion worth of shares in his firm, Berkshire
Hathaway, to five charitable foundations. The largest recipient (receiving some
$31 billion) will be The Bill & Melinda Gates Foundation, which specializes
in global health and education projects.
That one solitary human being has nearly forty billion dollars to dispose
of, with a good deal left over, is appalling in itself, at a time when 1.1 billion
people, one-fifth of the world’s population, live on less than $1 a day
and some 3 billion on less than $2. The planet’s three wealthiest individuals
in 2005 (including Messrs. Buffett and Gates) had greater wealth than the combined
gross domestic product of the world’s 48 poorest nations.
There is, in any event, something intrinsically degrading and demeaning
about philanthropy. A society in need of philanthropists is one rooted in inequality,
in which the deprivation of the many is supposedly addressed by the largesse
of the few. No one can seriously suggest that social problems will be solved
in this manner. Especially in America, where an aristocracy has taken shape
before our eyes over the past decade and the Bush administration is taking blind,
reckless measures to eliminate all restrictions on the accumulation of personal
As for Mr. Buffett himself, there are no doubt immense personal contradictions
in his life. If one takes the media accounts at face value, he seems an honest
and civilized man. Among many unsavory, rotten types, he appears to stand out
as something of an exception. He has liberal views on social issues and has
put his money to use in a number of worthy causes. He lives modestly in a home
bought decades ago.
It is worth noting that Buffett’s lifestyle puts the lie to the claims
by the media and the assorted apologists for corporate thievery that the fabulous
sums paid to American executives are necessary to retain “the best and
the brightest.” For Buffett, at least, the accumulation of personal wealth
seems not to have been the principal motivation.
There can hardly be any doubt about his abilities as an investor. Highly skilled
at what he does, this is clearly a man who knows his way around money. And his
success has earned him a devoted following.
While we have no intention of taking part in the current media adulation, there
is no reason to demonize Buffett, as an individual, on account of his great
wealth—or Bill Gates either, for that matter. In the final analysis, the
issues raised by their fortunes don’t go to their personal moral qualities.
That said, those tempted to get dewy-eyed on hearing of Buffett’s
billion-dollar donations to good works would do well to consider certain facts
of economic life. Whatever his intentions, Buffett has played a part in recent
economic processes that have had devastating implications for large numbers
of people. Under consideration here is not Buffett the individual,
but the social process he embodies. Its terrible impact on the lives of workers
may be painful to him and, in fact, “extremely demoralising,” as
Oscar Wilde suggested the burdens of possessing private property often are for
the rich, but that is only a further argument for socialism.
Notwithstanding his evident personal decency, Buffett is one of those figures
who have helped drive the ever more ruthless exploitation of the American working
class. The very mechanisms by which he earned his billions, a portion of which
he now intends to give away, have contributed to the growth of poverty and social
inequality. An analyst, Jonathan Davis, describes Buffett’s operations:
“His holding company Berkshire Hathaway is built around a core of cash-generative
insurance companies; the cash they generate provides the capital that Buffett
and his partner Charlie Munger then invest on their shareholders’ behalf.
Capital allocation is what Buffett and Munger see as being their ‘core
“Buffett is well-known for his large ‘semi-permanent’ minority
holdings in a handful of America’s largest companies, the likes of American
Express, Coca-Cola and Gillette. Yet these represent only one part (and a declining
one) of the company’s overall investment activities. In addition to his
insurance operations, Berkshire Hathaway now owns outright a string of industrial
and retail companies, many in deeply boring but lucrative fields of business.
While many of these were originally family-owned companies, an increasing number
are now former quoted companies that Buffett has acquired outright on the stock
Buffett’s operations, his organization of mergers and acquisitions, are
inevitably tied in with corporate structural reorganizing aimed at generating
a greater return on investment. His business is to see that assets are deployed
more effectively, i.e., more profitably, and his success indicates his brilliance
at that. There is nothing sentimental in Buffett’s approach. He can undoubtedly
read a balance-sheet like few others.
Buffett’s financial maneuverings have an objective character, i.e., his
decisions are always understandable from a business point of view. His concerns
for his employees may be very real, but, as “capital personified and endowed
with consciousness and a will,” in Marx’s expression, he hardly
has a choice. Buffett’s goal is, of necessity within the capitalist market,
to increase the per-share value of Berkshire Hathaway, at any cost. He may draw
only a modest salary, but the werewolf-like investors must be satisfied.
Buffett has inevitably left a trail of closed facilities and ruined communities
behind him. He may find it regrettable, it may play a role in his decision to
give up tens of billions, but that should not blind anyone to implacable economic
realities. On the contrary, the fact that a decent man is forced to destroy
jobs and lives is the strongest argument against those, in the trade unions
and in left-liberal circles, who would have workers appeal to the ‘humanity’
of the capitalists.
Buffett began cutting jobs at the age of 32, when he purchased Dempster, a
windmill manufacturing company, and placed one Harry Bottle in charge. “Bottle
cut costs, laid off workers, and caused the company to generate cash,”
notes a commentator. The same year he discovered a textile manufacturing firm,
Berkshire Hathaway, which was selling for less than $8 a share. It became one
of the springboards to his empire.
In 1985, Buffett shut down the Berkshire Hathaway textile operations in New
Bedford, Massachusetts, throwing 425 people out of work. The closing came in
response to increased competition from Japan and Taiwan, compounded by depressed
prices and the strength of the US dollar.
In 1985, Buffett, together with Capital Cities Communications, put together
a deal to buy ABC. At the same time, Laurence Tisch took over as chief executive
officer of CBS and RCA sold NBC to General Electric. The results of this process:
“The new corporate leaders found their properties losing audience and
revenue to cable networks. Round after round of budget cutting and layoffs followed.”
One could go on. Big business is inevitably dirty business. In 2000, Buffet’s
firm purchased a stake in US Gypsum (USG), according to one web site, betting
“that the company’s legacy of asbestos litigation would soon be
resolved through some agreed-on scheme of compensation for injured workers.”
With no such measure forthcoming, USG sought protection in the bankruptcy courts
from asbestos suits, behind which lie disease and misery for thousands of workers.
Buffett is no more a savior to workers than any other capitalist. In 2003,
he declined to purchase bankrupt textile maker Burlington Industries after a
bankruptcy court rejected a $14 million fee Burlington would have had to pay
if the deal fell through.
In August 2004, Fruit of the Loom, the underwear manufacturer now owned by
Berkshire Hathaway, announced that its plant in Cameron County, Texas would
close by the end of the year and that much of its production would be shifted
to Honduras. The jobs of 800 workers were eliminated. Cameron County already
had a double-digit unemployment rate and a 33 percent poverty rate, according
to a piece in the New Yorker magazine.
“When Warren Buffett ... acquired Fruit of the Loom, the news sparked
applause on the Cameron County shop floor. Buffett, workers had heard, was smart.
They did not anticipate that a smart businessman might consider the global market
and the opinions of his shareholders and take their workplace out from under
them. The newly unemployed Fruit of the Loomers didn’t blame Buffett,
whose company would soon report doubled profits. That was just the way the system
worked.” (New Yorker)
In 2005, Buffett helped engineer the merger of Gillette, of which he was the
largest shareholder, with Procter & Gamble. Buffett reportedly made $645
million on the deal. From a news account: “This deal will spark off the
M&A [mergers and acquisitions] frenzy for the year, and expect to see more
consolidation, mergers and layoffs. P&G expects to cut about 6,000 jobs,
or about 4 percent of the combined workforce of 140,000.”
American capitalists, even the most benevolent, dominate the workplace
like colossi. An article in the Montgomery (Alabama) Advertiser provides
some sense of this. It concerns the fate of workers at a Russell Corporation
textile plant. The headline reads, “Russell Waits on Buffett,” and
the piece begins: “What does it mean to be purchased by the world’s
second richest man?
“It’s a question Russell Corp. employees are mulling over this
week after Berkshire Hathaway, a holding company led by billionaire investor
Warren Buffett, announced it would acquire the sportswear maker. The acquisition
adds both uncertainty and hope to the lives of 3,700 Russell employees working
at the company’s plants in Alexander City—where the company was
founded in 1902—and other locations in Alabama.
“Just two months ago, Russell downsized its workforce by 700 in Alexander
City and the company pledged this week to proceed with restructuring plans that
would further shave the work force by the end of 2007.”
The article notes: “Buffett has a reputation for stabilizing company
finances, but he also has proven his capacity for Machiavellian tactics like
plant closures and layoffs.”
The Advertiser piece points out that the “turnaround” at Fruit
of the Loom organized by Buffett wasn’t free of cost. “Just last
month Fruit of the Loom shuttered a yarn facility in Rabun Gap, Ga., leaving
930 workers without a job. The company blamed the continued ‘onslaught’
from Asian imports for the closure.”
This is the work of a glorified asset-stripper.
Balzac argued that behind every great fortune lay a great crime. This does
not mean that the fortune-maker, in his personal make-up, is disposed to depravity.
No, his actions may very well be driven only by the soundest business principles.
But no one accumulates billions with clean hands.
Buffett may not have directed the shooting down of workers, like his Robber
Baron-philanthropist predecessors, such as Andrew Carnegie and Henry Clay Frick,
but he has been one of the human instruments by means of which the destruction
of decent-paying jobs has taken place, with all the human suffering that implies.
His wealth is bound up with the counteroffensive against workers’ living
standards that began in earnest under Ronald Reagan and has never stopped, as
well as the parasitic stock market boom of the 1990s. In 1983, Buffett’s
net worth reached a respectable $620 million. By 1989 it had increased more
than six-fold, to $3.8 billion; it has grown by a factor of more than ten since
Carnegie and Frick also distributed millions (billions in contemporary dollars)
to charities and good causes. Carnegie declared, “He who dies rich dies
thus disgraced.” Frick was more unrepentant. He and Carnegie had a bitter
falling out; when, years later, Carnegie proposed a meeting for the purposes
of reconciling, Frick allegedly replied, “Tell him I’ll see him
in Hell, where we both are going.” Deservedly, the pair are remembered
more for their crimes than for their philanthropy.
We live in different times, and Buffett has not been called upon to defend
his billions through direct police-military force. Nonetheless, we are confident
that history will render a harsh judgment on the period in which he made his
billions and the means by which he did so.
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