We come out frankly stunned from reading When McKinsey Comes to Town (When McKinsey comes to town), the recent book by two journalists from New York Times, Walt Bogdanich and Michael Forsythe, on what they call “the most influential consulting firm in the world”. There is no doubt that the company, founded almost 100 years ago and employing 38,000 people in 65 countries, has offered excellent advice to hundreds of clients. Advice pays off, in any case, McKinsey claiming that, for every dollar paid to it, its clients have saved ten in efficiency gains. And since it received, in 2021, US$15 billion in revenue, do the math.
But among his councils, there are those who have done more than optimize the organization of such a company or such a ministry. McKinsey launched, or amplified, the recent evolution of capitalism.
Manufacturer of inequalities. In 1950, the CEO of a very large company pocketed 20 times the salary of one of his employees. General Motors asked McKinsey to look into boss pay. Surprise ! The firm found that they were outrageously underpaid, then repeated the same thing to all interested bosses. The gap has since increased to 350 times the average salary. By tying bosses’ pay to share value, McKinsey encouraged them to move away from stability and long-term planning to focus on the short term. In addition, McKinsey taught companies that layoffs, justified or not, generally cause a rise in share value, and therefore in their compensation.
Offshoring accelerators. From the 1980s, McKinsey suggested that a growing number of companies relocate their production to Asia, particularly to China. This trend would have taken place without her, but she was one of its most persistent promoters.
Discourage loyalty. Hired by Walmart to cut costs, McKinsey spotted the problem: “associates” who stayed with the retailer for a long time earned more. Solution: Reduce the number of full-time employees and increase the part-time ones to ensure greater turnover and lower salaries.
Maintain the nicotine flow. Once tobacco companies were deprived of advertising in the 1990s, McKinsey advised them of the “funnel approach” to familiarize young people with a tobacco brand, especially African Americans, even as she advised the Food and Drug Administration on the best way to combat smoking.
Putting the sale of opioids on the turbo. In one of its darkest pages, McKinsey was ordered to pay US$640 million in damages for helping pharmaceutical company Purdue “turbocharge” (McKinsey’s term) its sale of opioids. Example: when the pharmacy chain Walgreens, worried about numerous overdoses, refused to sell more than a certain number of tablets to a customer, McKinsey suggested contacting the latter so that he could obtain supplies online. The opioid epidemic was, and still is, most tragic in devitalized cities, the very ones where manufacturing jobs have been offshored, often at the suggestion of McKinsey.
Fooling the insured. Why was Allstate Insurance ready to pay a $25,000 daily fine for months rather than deliver a copy of McKinsey’s recommendations to a judge? Because the firm had advised him to settle, quickly and at a discount, 90% of claims, but to fight tirelessly to give nothing to the 10% of clients who hired a lawyer. Allstate has thus reduced its expenses in claims by 20%, and the wages of its bosses have jumped by 1260%. McKinsey resold its method to several other insurers.
Preparing for the 2008 crisis. McKinsey was the biggest promoter of the new financial instruments whose crushing caused the crisis of 2008. It involved converting loans into “securities” that the lender could sell on the markets. You could then buy insurance, in case the stock lost its value, which McKinsey and others said was extremely unlikely. The collapse of this house of cards plunged the world into recession, pushing, according to the UN, 200 million workers into poverty.
Help China become dominant. With its “Made in China 2025” strategy, Xi Jinping’s China wants to dominate new industries and outpace the United States and Europe. McKinsey has produced at least ten reports to support this effort, which the Biden administration deems “harmful”. The firm has advised 26 of the hundred or so companies deemed strategic by the Chinese government, which is becoming omnipresent, to the point that the Chinese state has banned its press from continuing to mention its presence. McKinsey was also involved in the development of China’s “smart cities”, which track every citizen. The technology was first deployed to put under surveillance the Uyghur population, victims of an attempted cultural genocide.
Help the Saudis hunt down dissidents. In 2018, McKinsey conducted an operation to identify the critical opinions of Saudi influencers on behalf of the government. The firm identified a Montrealer, Omar Abdulaziz. Relatives who remained in Saudi Arabia were imprisoned, Abdulaziz had to hide for fear of being kidnapped. He fears that the operation may have helped uncover a person he was in contact with at the time: Jamal Khashoggi, who was butchered shortly after by regime henchmen.
Joseph Stiglitz, Nobel Prize winner in economics, summarizes McKinsey’s work as follows: the firm “optimizes corporate greed” by being the designer, then the supercontaminator, of the worst practices of current capitalism.
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