Scribblings
Guns or Butter?
Should employees get a say in the products or services the company they work for makes or sells? Should they get a say over who the company does business with? Or, if they do not like what the company makes or the services it offers, or who the company does business with, should they move on and find a company that is more congenial to their tastes and political values? How should companies react to “political activism” on the part of employees when such activism focuses on the company itself?
Should the business of business be strictly business, or should it be swayed by considerations of political values? I use the term “political values” rather than morals or ethics because this is what is in play when businesses need to make decisions that are deeply political. And, as we know, there is little social consensus on political values. Canons to the right of you, canons to the left. Into the valley of death, as the poem puts it.
These questions are prompted by media reports of some disquiet in Google over a contract it signed earlier this week with the Pentagon. It inked a deal for its technology to be used by the US military for classified work for “any lawful government purpose”, joining OpenAI and Elon Musk’s xAI in doing so, according to newspaper reports. Other companies signed similar deals later in the week, according to the Financial Times.
Those who are interested in these things will remember back to 2018, when employee objections led to Google deciding not to renew a contract for work with the Department of Defence (now called the Department of War by Pete Hegseth), known as Project Maven, on a system designed to analyse satellite and other imagery to assist special forces operations.
Before Google signed the deal this week, just over 500 employees out of a workforce of over 180,000 sent a letter to Sundar Pichai, the chief executive, calling on him to refuse to let the US government use its artificial intelligence technology for classified military operations.
“We are Google employees who are deeply concerned about ongoing negotiations between Google and the US Department of Defence,” the letter read. “As people working on AI, we know that these systems can centralise power and that they do make mistakes.”
They added: “We want to see AI benefit humanity, not to see it being used in inhumane or extremely harmful ways. This includes lethal autonomous weapons and mass surveillance, but extends beyond.”
Now, as it happens, I tend to agree with the sentiments expressed by the letter writers. We still live in a human world, and I want the decisions that impact my life to be made by humans, and not by some machine that knows what it knows because it has scraped every last bit of knowledge off the internet. I want decision makers to be guided by moral considerations.
But that is not the point at issue here. The point at issue is who gets to decide what companies do and who they do business with. Management or micro groups of activists? For me, the answer has to be management.
500 or so Googlers may have signed a letter protesting the Pentagon contract, but how many of the other 180,000 employees approved of it? Google has about 100,000 employees in the US out of the 180,000 it employs globally.
In the last presidential election, the US electorate split almost 50/50 between Trump and Harris. So you have to figure that even if Googlers lean progressive, many thousands of them must have voted for Trump. The 500 letter signers only speak for themselves. They have no mandate to speak for anyone else.
There may have been a moment back in 2018 when what Alan Wild and myself termed “activist capture” controlled events. By this, we meant that small, highly motivated groups could capture worker representative institutions or frame the narrative because of the indifference of the majority. In the climate of the times, management retreated in the face of such activism.
That time has passed. The logic of corporate capitalism is slowly reasserting itself.
As Robert Armstrong notes in the Financial Times:
… AI companies and their models will follow one rule before all others: they will seek to maximise returns for their shareholders, up to the limits set by law. When the law of profit conflicts with the company’s internal principles, profit will win every time.
Of course, Armstrong is right. With a putative Pentagon budget of $1.5 trillion for 2027, what corporation is going to want to pass on a share of that because a handful of employees have moral scruples?
US corporations have been engaged in defence work since the US first had an army and a navy. Companies such as RTX, Boeing, General Dynamics, and Lockheed Martin have been manufacturing defence materiel forever, and employ hundreds of thousands of workers in good-paying jobs. Are these workers morally compromised because they work for defence contractors? I very much doubt they think they are. In fact, they probably see themselves as patriotic Americans working to make their country safe.
Would well-paid VW workers in Germany object if the factory in which they work switches from making cars to making tanks or other military vehicles, needed to stave off Russian aggression, because, when it comes to cars, VW can no longer compete with smarter Chinese competitors? I somehow doubt it, if the alternative is the closure of their factory and the loss of their jobs. I cannot see IG Metall taking the position that it would rather see workers on the dole than making drones.
Indeed, the future of manufacturing in Germany may hinge on what has been called in the past “Defence Keynesianism”, governments pumping money into the economy through defence spending. It is often overlooked that it was the splurge of WWII spending that as much ended the Great Depression as Roosevelt’s New Deal.
What is sometimes referred to as the “ordinary working class” has always been fiercely patriotic and finds no problem working in defence industries, whether it be shipbuilding or aircraft manufacture, or producing guns and bullets. They have never questioned what the company they work for does, or who it should be doing business with.
When they are recruiting, companies should make clear: “This is who we are, and this is what we do”. And they should ask: “Are you good with that?” A prospective employee can decide if this is a company they want to work for. If not, they can walk away.
Of course, companies change course and pivot to new areas of work as markets evolve, and what was once in demand is no longer in demand as new “stuff” emerges to make the old redundant. If you want to stay in business, you need to forget the old and get with the new.
Employees may be uncomfortable with where the company they work for is now going. We are not all on the same ethical or political page. In circumstances where your own values clash with the new corporate direction, exit should be facilitated on appropriate terms. Call it the “ethical exit package”. Let them leave on decent terms.
But it is management that is answerable to the shareholders for what the company does. Management cannot be dictated to by a small minority of activist employees. That’s the system in which we live and work.
It is management which gets to decide whether to make guns or butter.
Graham, I understand all you say, but it does not take away from my basic point. Who gets to decide what companies do, management or micro groups of activist employees? What happens if there is more than one activist group and they do not agree with one another?
You ascribe to senior management an objectively that seldom exists. The interests of shareholders aren't necessarily optimised by senior management in a listed company. Their income and job security are usually linked to the short term financial performance of the company, partly because the institutional shareholders that look after individuals' money also have short term objectives. They may pay lip service to active engagement with senior management but if they don't like performance they're much more likely to sell their holdings than sit it out for the long term.
Private equity should in theory avoid this problem, but in practice the shareholders as usually hedge funds, often using financial instruments to extract revenue from the company. Too often in practice this is little more than asset stripping.
I don't have an answer to the original binary choice you offered, other than law makers should think more about the balance between over regulation and under regulation. This is a political choice. Unfortunately the current generation of politicians are unwilling to make it clear to voters that every decision comes with a cost.