Thursday, September 9, 2010

The Thin Ice

You might have heard of the low cost airline Ryan Air which operates in Europe. It has made news around the world many times for its ferocious cost cutting measures, including charging passengers for checking in, and slapping extra fees on credit card bookings, checked baggage and so on. Last year Ryan Air attracted widespread condemnation for announcing its intention to install coin slots on its toilet doors, and has even suggested flights with standing room only so that more passengers could be squeezed in. It’s an idea which brings a whole new meaning to cattle class, but at least there’d be no chance of falling over with so many passengers all packed in up against each other. Now, the latest suggestion from the boss at Ryan Air is that airlines could abolish co-pilots.

C. E. O. Michael O’Leary reportedly said, “Why does every plane have two pilots? Really, you only need one pilot. Let's take out the second pilot. Let the bloody computer fly it.” He went on to suggest that a flight attendant on each flight could be trained to take over in emergencies and assist with landing, completely ignoring the obvious fact that in an emergency is the very time when you most need properly trained and experienced pilots to handle the crisis. The man is obviously a lunatic and shouldn’t be permitted to be in charge of a lollypop shop, let alone an airline. Thankfully, authorities are unlikely to approve of his more outlandish ideas, but the fact is that this is just a symptom of a much wider problem, not just in airlines, but throughout the corporate world.

The fact is that this approach to maximising profits by aggressive cost cutting measures is widely embraced throughout the business community. This particular brand of management philosophy is the recipe which has led to overblown executive salaries for the chosen few at the expense of the income and job security of the people who must do the actual work, whatever that might be. The corporate elite see themselves as demigods, or in the parlance of Wall Street “Masters of the Universe”, who profit from playing with the pawns on the chessboard of life. Those pawns are you and me. The evidence is plain to see in the statistics on executive pay. While average wages have generally grown more or less in line with inflation, executive salaries have grown by almost ten times that much.

An even more startling statistic is the proportion of total income which goes to the wealthiest one percent of people. In the 1970's, in the United States, the richest one percent of families took in about 9 percent of the nation’s income. In 2007 the top one percent took home almost 25% of the money. Former United States Secretary of Labor Robert Reich recently wrote in the New York Times that the last time the ratio was so heavily weighted towards the wealthy was in 1928, just before the Wall Street crash and the Great Depression. Those are American statistics, but the point is the same in any part of the world. The point is that all this is the natural result of the business philosophy which dictates that profits can be grown by driving down both employee numbers and incomes, rather than maintaining an equitable share in the prosperity for all of those who contribute to its creation.

The inescapable fact is that if an airline keeps on cutting costs, sooner or later it is going to crash, and the same principle applies to the economy as a whole. If the participants in a consumer economy can no longer afford to buy the goods and services that they produce, the whole economy will crash. That has been a significant factor in causing the Global Financial Crisis, and despite all of the stimulus packages and rescue bailouts, that fundamental imbalance has not been corrected. Until it has, the world will continue to skate on thin economic ice, and people like Michael O’Leary at Ryan Air are only making it worse.

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