Boeing Is the Canary in the Trickle-Down Coal Mines

The Pitch: Economic Update for April 11th, 2024

Friends,

“When a faulty door plug explosively blew out the side of Alaska Airlines Flight 1282 three miles above Portland, Oregon, back in January, leading to the massive recent corporate shakeup at the company, it wasn’t just shoes, cell phones, seat cushions, and the gasping breath of terrified passengers that got violently sucked into the cold, thin air,” my colleague, Civic Ventures Senior Fellow David Goldstein, writes at Democracy this week.

He continues, “Out through that gaping hole in a spanking new 737 MAX 9 flew the last tattered shreds of Boeing’s once lofty reputation. And whatever the proximate cause of the aircraft maker’s latest self-described ‘quality escape,’ the root cause was clear: It was neoliberalism.”

We’ll get back to Goldy’s piece soon. But first, I want to do some table-setting. Even if you don’t follow the news closely, you likely know that airplane manufacturer Boeing is in trouble for endangering its customers. Boeing was at one time one of the great American brands, praised by presidents and envied by corporations in other nations. And Boeing was especially beloved in my home city of Seattle, which for decades was known as “Jet City” because the corporation was headquartered here. When they were buying tickets for a plane trip, Boeing workers and Seattleites lived by the mantra “If it’s not Boeing, I’m not going.” 

But all that was a long time ago. Boeing moved its headquarters twice—first, in 2001, to Chicago to create distance between management and workers, and then, two years ago, to Virginia, where it’s easier to lobby federal lawmakers and regulators. Over the last two decades, the manufacturer increasingly moved a substantial part of its operations away from union-friendly Seattle and to South Carolina, where ferociously anti-union laws ensured that the company could hire a workforce at rock-bottom wages. 

The problems began almost immediately. The South Carolina Boeing plant was accused of “shoddy production” that resulted in dangerous planes that even Boeing employees did not feel safe using. But without the protection of a union behind them, these workers weren’t empowered to raise concerns with the manufacturing process. 

Finally, after two decades of cost-cutting across the company, two Boeing 737 planes crashed within a less than six-month span—the first in October of 2018 and the second in March of 2019—killing a total of 346 people. Those crashes resulted in a 20-month grounding of Boeing’s entire 737 fleet, which experts estimate cost the company somewhere between 20 and 25 billion dollars. That crisis had just started to recede into memory when this year’s door plug incident occurred. That, and other mishaps that seemed to be the result of faulty construction, forced Boeing to submit to an FAA audit of its entire 737 jet production line, and it badly failed that test. 

“A six-week audit by the Federal Aviation Administration of Boeing’s production of the 737 Max jet found dozens of problems throughout the manufacturing process at the plane maker and one of its key suppliers,” writes the New York Times’s Mark Walker. Now, the inverted phrase “if it’s Boeing, I’m not going” has started to spread among nervous travelers, and trust in Boeing has dropped to unprecedented levels. 

Some trickle-downers would argue that Boeing’s failures are a sign of the free market working—if consumers and airlines shirk Boeing, then the market will decide and the company will go out of business. But that simple-minded thinking doesn’t reflect the fact that Boeing is already representative of the free market’s failure. Thanks to decades of corporate consolidation, it’s one of two manufacturers capable of producing planes at the scale that the global economy requires, and that glaring lack of free-market competition is what allowed Boeing to fall apart in the first place.

And this isn’t a matter of one bad company doing itself in. Boeing is now so big that its failures threaten to do egregious economic damage to other corporations in the air travel sector. “United Airlines is asking its pilots to take time off in May because of delays in receiving new planes that the airline ordered from Boeing, which is struggling with production due to manufacturing problems,” reported the Guardian this month. It seems unlikely that they’ll be the only airline to announce cuts thanks to Boeing’s unreliability and diminished reputation.

So how did Boeing get to be too big to fail? Let’s return to Goldy’s piece, which correctly identifies an important moment in the company’s fall from grace:

Neoliberalism is an ideology that attempts to subject all of human activity to the invisible hand of the market, and since 1997, when Boeing acquired rival McDonnell Douglas (and more consequentially, its management), it has been neoliberalism that has guided the company on its decades-long flight from quality. It was neoliberalism that persuaded Boeing’s new management that its only fiduciary responsibility was to maximize value for shareholders. It was neoliberalism that caused management to fritter away the most skilled, experienced, and proud workforce in the industry. It was neoliberalism that literally unhinged Boeing from its glorious past.

Don’t take my word for it. Harry Stonecipher, the former McDonnell Douglas CEO who eventually assumed the reins at Boeing, was never shy about his management philosophy. “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” boasted Stonecipher—who was apparently blind to the irony that it was this “great engineering firm” that had acquired his struggling aircraft business, not the other way around. 

But even though he began the company’s assault on its unionized workforce, we can’t point the finger at Stonecipher as the sole object of blame. Throughout the 21st century, Boeing has consistently hired executives who have transformed Boeing from one of the greatest manufacturers in history to just another corporation seeking to spike its profit margin and please the shareholders.

For another example of how Boeing’s culture has deteriorated over the last quarter-century, Maureen Tkacik digs into the story of John “Swampy” Barnett, the Boeing 787 whistleblower who was found dead last month.Barnett, Tkacik writes…

…was mired in an institution that was in a perpetual state of unlearning all the lessons it had absorbed over a 90-year ascent to the pinnacle of global manufacturing. Like most neoliberal institutions, Boeing had come under the spell of a seductive new theory of “knowledge” that essentially reduced the whole concept to a combination of intellectual property, trade secrets, and data, discarding “thought” and “understanding” and “complex reasoning” possessed by a skilled and experienced workforce as essentially not worth the increased health care costs. CEO Jim McNerney, who joined Boeing in 2005, had last helmed 3M, where management as he saw it had “overvalued experience and undervalued leadership” before he purged the veterans into early retirement.

“Prince Jim”—as some long-timers used to call him—repeatedly invoked a slur for longtime engineers and skilled machinists in the obligatory vanity “leadership” book he co-wrote. Those who cared too much about the integrity of the planes and not enough about the stock price were “phenomenally talented assholes,” and he encouraged his deputies to ostracize them into leaving the company. He initially refused to let nearly any of these talented assholes work on the 787 Dreamliner, instead outsourcing the vast majority of the development and engineering design of the brand-new, revolutionary wide-body jet to suppliers, many of which lacked engineering departments. The plan would save money while busting unions, a win-win, he promised investors. Instead, McNerney’s plan burned some $50 billion in excess of its budget and went three and a half years behind schedule.

The most tragic thing about all of this is that Boeing had more than enough money to invest in a strong union workforce that hewed to the multiple safety redundancies that the company used to bake into its manufacturing process. It could have spent enough money to ensure that every plane with the Boeing name printed on its side was perfectly safe—the same way Boeing had ensured that rock-solid safety record for 70 years before the company began cutting corners—and still turned a profit. 

How do I know this? Because over just the last ten years, Boeing has returned some $59 billion dollars in profit to shareholders, in the form of $20 billion in dividends and the rest in stock buybacks. That’s tens of billions of dollars that used to go to wages, benefits, and safety precautions that the company instead chose to hand off to investors with no strings attached. All Boeing got in return for those offloaded profits was an artificially high stock price that didn’t reflect the increasingly poor quality of the product the company was selling.

We return one more time to Goldy:

There are few products as complex as a modern jetliner, and the greater the complexity embedded in the aircraft the more complex the networks of highly cooperative specialists required to create it—from the machinists to the inspectors to the engineers and yes, even to the corporate bean counters in the corner office. It’s a complexity that Boeing further exacerbated through the intricately complex supply chains it constructed in pursuit of disempowering workers and cutting costs. But increased complexity requires increased cooperation, and importantly, cooperation is always grounded in trust. So, when a trove of internal messages obtained by congressional investigators in the wake of the two MAX 8 tragedies revealed a 737 MAX worker complaining, “I honestly don’t trust many people at Boeing,” the writing was on the wall. It had taken 80 years to nurture and build the complex networks of knowledge, knowhow, cooperation, and trust from which Boeing had so spectacularly prospered, but only a decade or so to blow it out a door plug at 16,000 feet.

Boeing was always more than just a great engineering firm. It was a great manufacturing firm, and great manufacturing firms are built by great workers—something Boeing didn’t so much lose sight of as intentionally misplace: “When the headquarters is located in proximity to a principal business—as ours was in Seattle,” then CEO Phil Condit explained in 2001 about why Boeing was moving its headquarters to Chicago, “the corporate center is inevitably drawn into day-to-day business operations.” As if that’s a bad thing.

I want to be clear: this isn’t just a story about the American aviation industry. Ultimately, we’re all paying attention to Boeing because lives have been lost and many Americans are experiencing anxiety about air travel that is probably unmatched since the days of high-profile hijackings back in the 1970s. It’s the most high-profile corporate failure in the world right now, and everyone is gawking. Just this week, the engine cover fell off of a Southwest-owned Boeing plane just after takeoff and seriously damaged the plane’s wing. Nobody was injured, though Boeing’s reputation took another hit. And now a new set of whistleblowers are suggesting that the 787 and 777 lines might have “serious structural flaws,” ensuring that this story will continue for the foreseeable future.

But Boeing is far from the only American corporation to lead itself down this self-destructive path.The list of corporations that have cannibalized themselves in the name of shareholder profit is too long to list in this newsletter. Users of Google and other prominent tech companies have been complaining that the companies seem to be destroying their own user experience in the name of pumping the product full of ads and profitable, but useless, results. There’s even a word for this practice—enshittification, coined by science fiction novelist Cory Doctorow. 

And it’s not just the tech industry, either. Rather than pay skilled journalists, many news sites have embraced inaccurate AI-written articles that mislead readers. Retail chains seem to care more about making the customer shopping experience absolutely miserable than they do selling products. Fast food chain Dunkin famously dropped the “Donuts” from its name in 2017 in an effort “to make its name less product-specific,” which, as NPR’s Vanessa Romo explains, “is typical among companies seeking to expand their brand identity into new areas.” It’s why Starbucks dropped the “Coffee” from its name and Joann Fabrics is now just “Joann.”

 Wall Street demands consistently record-breaking profit growth from companies, and so companies become more and more vague and less purpose-driven in an effort to attract the broadest number of consumers. And so the world’s best manufacturer of planes stops being about manufacturing planes. News sites have given up informing readers. Search engines stop being about internet searches. Doughnut shops pivot away from doughnuts. Instead, they’re now all in the business of consistently turning record profits in order to enrich shareholders, first and foremost. Everything else is just a margin to be trimmed and a balance-sheet item to be eliminated.

Cynical young people like to identify this practice as the natural end result of capitalism, but that’s too broad a target. It’s specifically the result of 40 years of trickle-down economics, which has wrongly centered the wealthy and powerful as the source of all prosperity. The economic policies passed by those in power for the last four decades has prioritized the accrual of excessive shareholder wealth over everything else. It’s shifted more than $50 trillion dollars out of the paychecks of working Americans and into the bank accounts of the super-rich.

The Reagan Administration’s legalization of stock buybacks resulted in the transferral of more than one trillion dollars every year from workers to the wealthy. Buybacks encourage companies to stop investing profits back into their work force, their customer experiences, and their ensured longevity. Instead, businesses are looting themselves in exchange for big paydays for the super-rich. 

We’re noticing the end results of this policy choice first in Boeing because the margin for error in aeronautics is so slender that just a few mistakes can result in a catastrophe. But Boeing is just trickle-down’s canary in the coal mine. We’re seeing whole industries fail in plain sight. But because stocks continue to rise, we’re supposed to believe that everything is going exactly according to plan.

Policy choices got us into this mess, and policy choices can get us out. The Biden Administration has taken some meaningful steps toward reversing the cycle of trickle-down deterioration: Biden has passed the first-ever tax on stock buybacks, and he’s proposed tripling that tax in the months and years ahead. The Justice Department and FTC have begun blocking big corporate mergers that kill competition, shrink wages, and jack up prices. He’s passed thousands of small laws and regulations that are aimed at growing the paychecks of American workers, not the offshore bank accounts of a handful of super-rich people. 

It’s a significant first step, but we can’t turn the tide of this extractive trickle-down corporate self-destruction without more middle-out policies written into federal and state law. You can’t change a culture in three years—it takes time and intention to reorient the flow of the economy and recenter the American people as the true source of prosperity. 

Now that so many people are paying attention to Boeing and other major corporate failures, I’m optimistic that this conversation is already changing.  We built the greatest economy in the history of the world in the 20th century, and I have no doubt that we can build an even better economy—a truly inclusive economy built on principles of environmental sustainability—in the 21st century. 

Be kind. Be brave. Take good care of yourself and your loved ones.

Zach