RBC’s Apology and the Limits of Capitalism

Before we all became riveted on the problem of terrorism over the last 2 weeks, I had planned to write about another story that garnered much national attention here in Canada but has, since Boston, faded from the headlines. While my fellow 14th floorer Sean Callaghan has done an admirable job working through the philosophical complexities of terrorism, I thought it was time to turn our attention back to an equally thorny problem for thought in our times: the economy.

In early April, RBC Chief Executive Officer Gord Nixon apologized for outsourcing 45 Canadian IT jobs to an offshore supplier. What was particularly angering in the RBC case was that Nixon had the Canadian workers train their foreign counterparts, who had been brought over from India under Canada’s temporary foreign worker program. In effect, the Canadians were ordered to teach the cheaper foreign laborers the skills that were then used to price them out of a job in their own country.

The perceived dishonor of having to hand over your skill set to the very people whose cheaper labor will replace you was too much for the Canadian public to bare. There was a flurry of outraged editorials and negative blog postings over the alleged over-use of the temporary workers program by Canadian companies looking to cut costs.

Within a week RBC was forced to apologize, pushed to act as customers threatened to pull savings accounts out of the banking giant. The disgraced bank admitted that it should have been more sensitive to the displaced workers, who they guaranteed would be brought back and given other jobs at the bank. A stern-faced Nixon promised to redouble the bank’s efforts to become a “leading corporate citizen,” although there was no guarantee that they would not continue to outsource in the future.

Gord Nixon made 11 million dollars in 2010. In 2013, he outsourced Canadian jobs.
Gord Nixon made over 11 million dollars in salary in 2010. In 2013, he outsourced Canadian jobs.

And like that, all seemed to end well: the IT workers got their jobs back, the big bad CEO offered humble remonstrance, Canadian labor pride was buffeted, and the media patted themselves on the back for standing up for the little guy.

All in all, a strident economic nationalism found expression.

And yet few of the many venerable editorial writers, professors, and pundits who weighed in on the matter felt the need to start a serious conversation about why RBC decided to outsource this work or what the economic dynamics that pushed them to make the move were.

Indeed, the naive myopia that was displayed by our national media as to the way capitalism actually functions was astounding. As editorial after editorial chastised RBC for their treatment of the displaced workers, one was given the impression that all that was needed to avoid this thorny little problem of unemployment was for companies to act a bit nicer, to care a little bit more for the little guy, and all would be well. As if through the force of a little bit of good old Canadian compassion we could solve the nasty bits of capitalist life that we don’t like!

The national media has a tremendous platform to reach hundreds of thousands of readers across the country on a daily basis, setting the tone of our national debate. One simply wishes they could actually take on issues with the intellectual rigor they require. Too often, what they write lacks sharpness, analytical focus, and a true understanding of the social forces involved in the issues they report on. The Canadian reading public needs to be informed in a much more critical way than they are now.

The RBC case is a perfect example. The bank chose to let the IT workers go because outsourcing is an effective way to maximize profits for the bank itself. It allows it to cut administrative costs and still offer the same services as before, making a small contribution to ensuring that its rate of profit will continue to climb.

It is that rate of profit that every bank manager needs to keep in good stead in order to appease his shareholders. A stagnating rate of profit is, for any enterprise in the contemporary marketplace, absolutely unacceptable. Growth in every quarter must occur, lest the company lose money and face a crisis in market confidence and, potentially, overall liquidity.

The decision to outsource was not, and never will be, some kind of grave ethical dilemma for an entity like RBC. It is not that they really wanted to be a good corporate citizen and just failed to live up to their ideals. It is that the logic by which their enterprise operates- the insatiable demand for profit- forced the bank into outsourcing these jobs. If it was not outsourcing, they would have found other mechanisms to ensure profits continue to climb, whether it be laying off staff in other areas of the bank, increasing fees on borrowers and customers, or making riskier moves in their investment operations.

And here we get to what is really at stake in the RBC story: it was the structure of profitability itself, by the very run of its own logic, that forced RBC to act this way. They were just doing what any corporation would- finding a cheaper way to offer a high quality service to customers. In the process, they shuttled 45 jobs from Canada to India and saved a couple of hundred thousand dollars to boot.

A Banking Giant that Just Tried to keep its Rate of Profit Up
A Banking Giant That Tried To Keep Its Rate Of Profit Up

And so to look sternly at RBC and to admonish them for unpatriotic behavior misses the point entirely. Canadian companies, like their European and American counterparts, will always seek to offer their services for as cheap an input price as possible. The developing world, particularly India and China, has “caught up” in a plethora of industries, offering cheaper labor for the production of all kinds of manufactured commodities and services, including those in the IT field. There is absolutely no way for Canadian workers to compete for those jobs except by taking a massive pay cut and seeing a large reduction in their overall wealth.

Why would a company pay a Canadian worker 60,000 dollars a year to field calls about IT problems in Toronto’s downtown core when the same work can be done for 10,000 dollars a year by a Chinese or Indian worker well-versed in English? Corporations are not institutions that operate out of the good graces of their hearts. They are for-profit entities. The very logic by which they operate forces them to cuts costs and raise profits as much as possible, which leads them to the imminently rational principle of outsourcing.

And so this story is not a simple question of one bad bank forgetting its Canadian identity. Rather, it is about the very nature of our economic system itself: when the rate of profit falls, as it inevitably does in every marketplace, steps will always be taken to keep those profits up. That means layoffs. That means outsourcing. That means rending our social fabric in the face of recession.

It is all part of the cyclical workings of the market system. In this sense, this is a story about how that system pushes us to act in some ways and not others. It is about what the limits of our behavior can be within a society arranged in this way. It has never been and will never be a question of individual will. It is not that CEOs just need to act a little better, just need to keep in mind the needs of the little guy, and all will be well.

The structure itself, the logical principles upon which it is based, pushes companies to act in socially destructive ways- i.e. to downsize Canadian workers, consign entire families to poverty, and destroy the dream of middle class existence.

Clearly, the way out of this nightmare is not to appeal to CEO’s to be more compassionate, as if they were structurally capable of producing a humane form of business where no unemployment would ever occur. In a “challenging marketplace” there is no room for compassion. You either find ways to cut costs, or your company loses money.

RBC's Gold-Panned Headquarters in Downtown Toronto
RBC’s Gold-Paned Headquarters in Downtown Toronto

It is this structural limit of the very economic system that governs our lives that the pious, good-willed liberals in the media have not adequately assessed. In this sense, it is the conservative money-managers and the Bay Street titans that, ironically enough, appear sharper within this debate. Because at least they don’t hide the truth. At least, if pushed, they will tell you: there are winners and losers in this economic system. It has its casualties as well as its victors. It is not capable, if left to its own devices, of producing social wealth in a crisis-free way, as if profits could just keep on rising forever and there will be jobs for us all!

The Bay Street elite have no compunction about informing us: our economic system, as a coherent structure, totters from booms to busts, from the thrill of market expansion to the crisis of cyclical unemployment. It has been that way for the last 150 years. It will be that way forever in this system.

Now if the media had taken this opportunity to talk about the structure of our economy, its limits and its impulses, then we would have had a national conversation that is sorely needed. In place of that, we were given liberal cant about all of us getting along in a world that, structurally, is always at risk of dividing us. For my company can always fire me if they can find someone to work for cheaper, especially if that person is overseas. I am always at risk of falling beyond the ranks of the respectable into unemployment, whenever my company feels my labor is no longer necessary.

These are the fundamental disagreements, the divides over security and stability, that are built into our economic system.

The dream of a smooth capitalism, of a market whose growth never falls, is an impossible one, given the structural drives that actually determine economic life in this world.

The Dream of Smooth Capitalism
The Impossible Dream of Smooth Capitalism

Even many well educated, analytically sharp columnists in our national media seem unwilling to starkly admit the structural limits of the free-market system. Take, for example, Thomas Walkom, the wonderful national affairs correspondent for the Toronto Star. Walkom is an important voice of moral conscience in our national political debate, a man who backs his writing up with a strong understanding of the economy. He has a PhD in economics from the University of Toronto and can in no way be accused of ignorance towards the logic of the market.

In his recent columns, Walkom has eloquently diagnosed the violence inherent in the free market system and how it, structurally, has an interest in keeping wages depressed in times of market trouble. And yet when it comes to the question of what we can do about it, Walkom seems stumped. At the end of that same column he concluded:

“In order to deal with these problems, the entire nature of work has to be rethought. Labour has to be treated as more than a commodity operating at the whim of market forces. Instead it needs to be seen as something valuable in itself….a complete rethinking of the economy is required. The free market is not working. A more active government wiling to engage in Keynesian-style spending and tax measures would help. But free trade must be rethought as well.”

And yet here Walkom ends his column, just when he needs to push further! What would a world in which work is not treated as a commodity but is “seen as something valuable in itself” actually look like? What is this new logic towards labor that Walkom is gesturing towards but seems unwilling to specifically enunciate? We know that, from the perspective of capitalism, a world in which labor is not treated as a commodity is impossible: the first rule of capital is that all labor is commodified as the basic mechanism by which value can be produced for a company. So Walkom seems to be gesturing towards a world beyond capitalism without either knowing what that would be or having the language with which to describe it.

What is this impossible dream? Why do we not have a language for it, even if we know our current system is causing so much violence to so many people?

It is on that question of impossibility in our current economic times that we need to dwell on more thoroughly. Unfortunately, you will find little discussion of this in our national papers.

But remember this, dear readers: there can be no capitalism without capital. And capital works first and foremost to ensure its own profitability.  And in that sense, Gord Nixon was just doing his job.

Capitalism has never been and will never be a question of individual ethical choice. We can’t just “seek to be good” in this system and all violence will be dispelled. As a structure, it pushes managers to cut costs whether they like it or not, and that means the terrible violence of unemployment for the middle-class in times of recession.

It is on this level of structural operation that capitalism must be engaged with if we are to make sense of it at all. The critique of capitalism is a structural one- i.e. how it works on the macro level of the whole. It cannot be made on the vacuous grounds of moral or national sentiment that misses the whole point of the system entirely.

Really, when faced with the ups and downs of market life, you have to ask yourself the philosophical question: how can something be different than what it essentially is?

Gord Nixon was, after all, just doing his job.

Mark McConaghy is a doctoral candidate in the East Asian Studies Department at the University of Toronto. He studies aesthetics, political economy, and the dynamics of historical change in the 20th century. An avid cinephile, he also reviews films for the Toronto Review of Books. At the moment, he his integrating his political interests into a variety of aesthetic projects, spanning from poetry to experimental film.

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