Over the last decades, downsizing strategies turned out to be part of the changes in corporate governance that happened in the context of trade and financial liberalization. Within this historical setting, the corporations’ strategies focused on downsizing, short-term profits and the distribution of dividends to shareholders. In other words, the business model of the large enterprise has aimed increasing short-term profits by means of downsizing practices or rationalization policies. As a result, managers have stimulated cost-reduction, the re-composition of tasks, labor turnover, the dismissal of workers, in addition to outsourcing agreements.
Actually, downsizing practices have also favoured mergers and acquisitions. Analyzing the general transformations in the global capital accumulation process, the well-known sociologist Zigmun Bauman states that “downsizing practices are an undetachable complement of the merger mania, since merger and downsizing condition each other, support and reinforce. It is the blend of merger and downsizing strategies that offers capital and financial power the space to move and move quickly”.
As a result, livelihoods turn out to be overwhelmed by uncertainly because of the flexibility required by downsizing strategies and mergers. In his analysis, Bauman shows how takeovers have usually required flexibility and growing cost reductions with deep effects on labor relations, employment trends and social rights and benefits.
Indeed, as Bauman warns, “flexibility when applied to the labor market announces the advent of work on short-term contracts, rolling contracts or no contracts at all”. In practice, downsizing and flexibility have meant plants displacement and closures, changing employment and labor conditions, outsourcing jobs, besides the pressure on supply chain producers in the global markets. In reality, the changing working conditions result from a continuous restructuring in order to generate cash outflows and profits in the context of the “liquid” modernity.
Bauman, Zygmunt. Liquid Modernity. USA: Polity Press, 2000.