This post was updated on March 12 at 9 am.
The first move after the Ethiopian Airlines 737 Max 8 crashed on Sunday, March 10, was to point a finger at the African airline running the plane. Africa is a land of stupid people. They can barely run an economy. What in the world are they doing flying planes in the first place? This was the attitude. (Read: "The racist reaction to the Ethiopian Airlines crash was all too predictable.") But, dear racists, Ethiopian Airlines is actually a highly respected carrier with a solid flying record. Also, the plane was carrying a few Africans and many Westerners and Easterners. Soon after the predictable racist impulse dissolved (or was disproved—the black African captain, Yared Getachew, "had flown more than 8,000 hours with an 'excellent flying record'"), it was reported that only five months ago, a 737 Max 8 owned by Indonesia's Lion Air also crashed. Both planes were new. Both crashed soon after take off. Both crashed vertically, thus removing any chance of finding survivors.
PHOTO: "We are deeply saddened by the news of the passing of our dear Yared," the family of Yared Getachew, the pilot of Ethiopian Airlines flight ET302, says in statement; "he was one of the youngest in Ethiopian Airlines history to captain a Boeing 737." https://t.co/OuuXCR16wp pic.twitter.com/V2IZ734XV5
— CBS Evening News (@CBSEveningNews) March 11, 2019
Now, Asians, on the racial hierarchy of the West, are higher than Africans, and are often used, by white racists, as proof that the problem of black poverty and misery is not systemic, but cultural (blacks are bad because their culture is bad). But an Asian airline experienced a crash in the same type of plane as the black African one. The attention then shifted from race to the makers of the jet. Is the 737 Max 8 safe? Is there some flaw in its design? What do you want to believe? That Africa has nothing but dumb-ass pilots? Or that there is a problem with the product? Puget Sound Business Journal reports that seven countries have grounded their "Boeing 737 Max 8 jets." CNN reports that the UK, Singapore, and Norway have also grounded the plane. Sen. Dianne Feinstein wants the FAA to do the same. 737 Max 8 jets heading to the UK have been told to stay away from the island's airspace, and fly back to wherever they came from. Boeing's stock is crashing.
That said, let's turn to Boeing's recent buy-back bonanza.
Boeing is a corporation that has, over the past 20 years, spent an enormous amount of its resources oppressing its workers and transferring its profits to its execs and shareholders. Here, the word "maximization" is important. Also important is the company's departure from Seattle in 2001, and its consequent transference of a large part of plane production to the red state of South Carolina with the obvious goal of undermining the power of its unionized workers in the blue state of Washington. For the past 20 years, many at the top have concentrated not on what the corporation makes, but on how to extract more value from those at the bottom of Boeing.
Now, there are two consequences of the mad rush by execs and shareholders to extract as much of this corporation's profits as possible. The first is to make the position of the employees who make planes precarious. These employees have no sense of stability because the ideal at the core of their corporation's philosophy, which is shaped by shareholder value maximization, is not their presence but non-existence, or redundancy. This feeling cannot result in job satisfaction. The company does not see you as a person contributing to a great enterprise, but as a liability, as an individual who is simply taking what those at the top want all for themselves.
The second is by means of buybacks, which puts money in the pockets of shareholders and top management instead of research and development (R&D).
On 17 Dec 2018, CNBC's business reporter wrote:
Despite growing concerns that the global economy is slowing down, Boeing sent a big message to shareholders it remains upbeat about its business. The board voted Monday to raise its quarterly dividend 20 percent to $2.05 per share in 2019.
"Boeing's strong operational performance, financial health and positive future outlook underpin our continued investments in our people and our workplace, in innovative products and services, and in select strategic acquisitions and partnerships that accelerate our growth strategy," said Boeing Chairman and CEO Dennis Muilenburg.
Additionally, the Dow component's board approved a $20 billion stock buyback plan, replacing its prior authorization.
Now, for some economics. Mariana Mazzucato has pointed out that buybacks (which is basically a company buying back its own shares with the goal of increasing the value of those shares) have exploded in recent years. This has had two consequences. One, money that should be channeled to improving products is now simply extracted by those who, for reasons that should be described as forms of madness, apparently cannot have enough money. The second is this: Because the growth of a share's value is based entirely on the growth of profits, and profits, under normal conditions, grow gradually, there is increased pressure to make profits grow rapidly. This results in a vicious short-termist cycle. More and more needs to be claimed from the corporation in less and less time.
In the past few weeks, [a] team of progressive Senators Bernie Sanders (I-Vt) and Chuck Schumer (D-NY) have locked arms with normally pro-business Republican Marco Rubio of Florida to denounce the boom in repurchases for killing jobs and spreading income inequality. Now, Senator Chris Van Hollen (D-Md) is claiming that America’s CEOs and other top executives are abusing buybacks to dump shares at inflated prices.
Later in the article:
[A] SEC study found that while top managers apparently orchestrate, and benefit from, a short-term pop to cash out, the gains quickly reverse: Ninety-days after the announcement, the company’s shares underperform the market on average by 8%.
Are we to believe that this insatiable profit-hunger, this constant inflation of stock value has had no impact on the quality of corporate products? Expect Boeing to say it hasn't. Its fear is not that its planes are falling out of the sky, but that its ever-growing extraction of profits might be checked.
And now for a lesson from philosophy. Jean-Jacques Rousseau, the 18th century Genevan political philosopher, believed that a large part of the casualties from the earthquake that hit Lisbon in 1755 could be blamed on bad city planning (making things cheap so that landowners could make greater profits), and the fact that, after the earthquake, many people ran to their homes out of fear of losing their possessions, when they should have instead run for the hills.
From the Independent:
Lisbon had indeed been a punishment, Rousseau said. Not for sin or anything boring or old-fashioned like that. But for stupidity and incompetence. In his open letter to Voltaire, Rousseau pointed out that humans, not Nature, had crammed 20,000 houses, some six or seven stories high, into one small site. Enlightened town planning, with low-rise housing over a far wider area, would have avoided most of the casualties. And many Lisbon people, he went on, had brought about their own deaths by their own greed, hanging around in the ruins to hunt for their possessions until they were killed by the next tremor.
I'm just putting this out there, because no other publication will: Two planes recently made by a corporation that over the past 20 years has increasingly focused on what Mazzucato, a heterodox economist, described in her new book The Value of Everything, as value extraction rather than value creation, have, in the small space of five months, crashed and killed over 300 people.
BREAKING NEWS: According to the pilot on the holding point behind Yared Getachew's who requested to return after take-off, the plane had Unreliable Speed Indications. Whether pilot's actions or the infamous MCAS led to erratic flight path remains to be seen. #ethiopianplanecrash pic.twitter.com/0u2zBkn4yD
— Crash Investigators (@CrashInquirer) March 11, 2019
And now for a word from our dumb president:
Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT. I see it all the time in many products. Always seeking to go one unnecessary step further, when often old and simpler is far better. Split second decisions are....
— Donald J. Trump (@realDonaldTrump) March 12, 2019