The Globe and Mail May 20, 1996
GURU OF DOWNSIZING CHANGES HIS MIND
By Fred R. Bleakley
The Wall Street Journal
The Cheeky British media are at it again. But
this time it isn't Princess Di or an indiscreet
member of Parliament: It's Wall Street economist
Stephen Roach, who recently switched his views on a
highly controversial issue: corporate downsizing.
For years, the Morgan Stanley & Co. economist
argued strongly that the wave of corporate
restructuring and downsizing that had caused the
elimination of millions of jobs in the United States
and Europe would lead to greater productivity, which
in turn, would boost the economy, lift employment
opportunities and create widespread prosperity for
all. Morgan Stanley & Co. is the brokerage arm of
Morgan Stanley Group Inc.
Even though many other economists continue to
believe that productivity gains will rebound in the
years ahead due to corporate downsizing, Mr. Roach
has suddenly changed his mind. On May 9, in a report
sent to clients and reporters, Mr. Roach said it's
"highly debatable" whether plant closings, layoffs
and other "tactics for improving efficiency" would
result in long run improvements for the economy and
workers in general. He also suggested that
corporations had put too much emphasis on "slash-and-
burn restructuring strategies that have put
extraordinary pressures on the work force," rather
than investing in new technology and worker
retraining.
Although his musings received little attention in
the United States, they touched off a wave of highly
critical and impassioned coverage in the London
press. "Guru of 'Downsizing' Admits He Got It All
Wrong," a four-column Page 1 headline said in the
Independent. The Daily Mirror, a tabloid, headlined
its piece, "Jobs Guru Cut Down to Sighs." In it,
columnist John Williams wrote, "The sack is not
something you would wish on anyone except your worst
enemy, which is why I am happy to wish it on Mr.
Stephen Roach."
The British Broadcasting Co. began an interview
with Mr. Roach by stating, "The downsizing cult is
over. But we have its former leader in our New York
studio." The interviewer, the BBC's Jeremy Paxman
(often described as the Dan Rather of Britain) asked
the startled Mr. Roach if he "wanted to apologize"
for all the pain and suffering he caused workers by
his incorrect assessment of the merits of downsizing.
Retorted Mr. Roach: "Is this a joke?"
Some observers have been surprised that the
British press would make front page news out of
economic theory, which is usually the subject of
academic debates. But in a country where the jobless
rate is nearly 8 per cent and where the subject of
job losses has created considerably anxiety, Mr.
Roach's turnabout was viewed as a smack in the face.
For his part, Mr. Roach thinks the British press
is 'making a "scapegoat" of him, "as if I was the one
who controlled the strings in corporate boardrooms."
He added: "They've finished with Lady Di and O.J.
Now it's my turn."
