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All Cost Savings Lead to Layoffs. The Only Question Is Where.

Woolly-headed thinking should be criticized wherever it is to be found, and the student group that is trying to stop the College from effecting layoffs should be right at the top of anyone’s list. Yesterday The D reported:

Students Stand with Staff [SSWS] have criticized administrators’ reliance on layoffs to cover $5 million of Dartmouth’s two-year, $100 million shortfall.

Forget the $5 million that the College will save through layoffs and look at the remaining $95M of spending that will be pared each year going forward. Exactly how is that money going to be saved? The College talks endlessly about purchasing efficiencies (“supply chain management” is one of President Kim’s favorite phrases), and reorganization and restructuring are other vogue terms that get bandied about. But what do they really mean?

Answer: in any situation where savings are to be had, people will be laid off — however in 95% of the present cases, they just won’t be Dartmouth employees. Let’s look at an indicative example. In his recent Wall Street Journal interview, President Kim described some ways that money will be saved:

By consolidating the number of different products we were using across departments, decreasing the size of the trash bags to minimize waste, and bidding with new suppliers, we will see a savings of over $294,000 per year.

Tease out the economic meaning from this phrase. By changing the products that the College uses to less costly ones, the factories that produce these items will have less business, and therefore they will lay off people. And by finding more efficient distributors of these products, we will take away business from less efficient distributors, and therefore they will lay off people.

Think of the Law of Conservation of Energy, but in economic terms. In the short term at least, everything that we do to save a dollar for ourselves will result in a dollar being lost to someone somewhere else in the system. And when enough of those dollars are lost, then people lose jobs; and when a great many dollars are lost, then businesses go under. Of course, all we see directly is cheaper trash bags, but the reality is just like laying off people at the College. By cutting $100 million from the College budget, we are destroying thousands of jobs, even if only a small fraction of them are Dartmouth jobs.

If it is true that every time that we cut the College’s budget, we affect someone’s life somewhere — and it is — then by the logic and morality of the SSWS group, we should never cut a penny anywhere. Does that work for you?

Joseph Schumpeter forecast the demise of free markets because they would generate such surpluses that great segments of the population would forget how markets function, and therefore these people would behave in inefficient, market-destroying ways. If you are looking for proof of this proposition, SSWS should be your first exhibit.

Note: Of course, the College lays people off every year and it has always done so: think about faculty members who don’t get tenure and adjunct faculty whose contracts are not renewed. Where is the SSWF for these people? Another well known Germanic philosopher would judge that our students reserve their activism for proletarian victims of capitalism, not for bourgeois academics. False consciousness rides again.

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