Unbridled Growth and Companies that Never Learn

This week, Los Angeles City Attorney Mike Feuer famously filed suit against Wells Fargo claiming that the bank’s high-pressure sales culture set unrealistic quotas, spurring employees to engage in fraudulent conduct to keep their jobs and boost the company’s profits.  

Allegedly (and in my personal experience as I bank with Wells Fargo), the bank would open various bank accounts against its customer’s wills, charge fees for the related “services,” and refuse to close the accounts again for various official-sounding reasons, making it very cumbersome to deal with the bank.  The bank’s practices often hurt its customers’ credit rankings.

Employees have described “how staffers, fearing disciplinary action from managers, begged friends and family members to open ghost accounts. The employees said they also opened accounts they knew customers didn’t want, forged signatures on account paperwork and falsified phone numbers of angry customers so they couldn’t be reached for customer satisfaction surveys.”  

The city’s lawsuit alleges that the root of the problem is an unrealistic sales quota system enforced by constant monitoring of each employee — as much as four times a day.  “Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas,” the lawsuit claims.  Last year, 26% of the bank’s income came from fee income such as from fees from debit and credit cards accounts, trust and investment accounts.  The banking industry is currently set up in such a way that around 85% of institutions would go bankrupt if they do not have fee income.  

This comes only three years after Wells Fargo agreed to pay $175 million to settle accusations that its independent brokers discriminated against black and Hispanic borrowers during the housing boom and treated these borrowers in predatory ways.

All this in the name of “growth,” traditionally thought of as the sine qua non of industrialized economies, even in financially tough times where simply maintaining status quo – and not going out of business – would seem to be acceptable for now from at least a layman’s, logical standpoint. 

In recent years, more and more economists have advanced the view that unbridled growth or even growth per se may simply not be attainable or desirable.  After all, we live on a planet with limited resources – financial and environmental – and limited opportunities.  This especially holds true in relation to the “1% problem.”  Nonetheless, questioning growth has been said to be “like arguing against gasoline at a Formula One race.”  So I’m making that argument here, although I acknowledge that I am not an economist: by setting our national (and personal) economies up for ever-continuing growth, we are playing with fire.  There is only so much of a need for various things and services, as the above Wells Fargo suit so amply demonstrates.  Granted, the global population is growing, but much of that growth is in developing nations where people frankly cannot afford to buy many of the products and services often so angrily pushed by modern companies worldwide.  In the Global North, C-level managers are often rewarded via measurements of growth and if they cannot produce the expected growth results, they risk being fired.  Sometimes, simply doing the right thing by customers and employees may actually be enough as long as the company would remain sound and in business.  Of course, this requires a shift in thinking by shareholders who contribute greatly under our current investment models to the demand for never-ending growth.  Overconsumption and waste is a vast ecological problem as well.  It has been said that “we must reform economics to reflect ecological reality: nature is not, after all, just a pile of raw materials waiting to be transformed into products and then waste; rather, ecosystem integrity is a precondition for society’s survival.”

Growth is, of course, good and desirable if possible.  But if, as seems to be the case, it’s coming to a point where we destroy our own chances of healthy long-term survival and wreck the emotional and financial lives of employees and clients in the meantime, something is seriously wrong.