Essentially there are two worlds right now: the U.S. and everywhere else. Everywhere else is growing. I'm always excited when I go overseas and when I come back here I'm depressed. We are facing a very slow recovery here in the U.S. We are investing here where we have growth prospects.
—Andrew Liveris, CEO of Dow Chemical
The main theme of Barack Obama's third SOTU speech was American competitiveness. The President never used the words "outsourcing" or "offshoring" in his speech, but he hinted at it—
At stake right now is not who wins the next election — after all, we just had an election. At stake is whether new jobs and industries take root in this country, or somewhere else. It's whether the hard work and industry of our people is rewarded. It's whether we sustain the leadership that has made America not just a place on a map, but the light to the world.
This historical moment requires clarity. Who is offshoring American jobs? Large multinational corporations based in the United States. How many jobs have been shipped out or created overseas as opposed to being created here? I covered this topic in A Long Term Jobs Recovery — Outsourcing (October 18, 2010).
In addition, the most recent Commerce Department data show that employment at the foreign subsidiaries and affiliates of U.S. multinational firms grew by 729,000 in two years, to 11.9 million in 2008 from 2006. Over that same period, domestic employment by such firms slipped by 500,000 jobs, to 21.1 million [data graphed below].
Now, let's flesh out the meaning of the word competitiveness. In anticipation of Obama's speech, NPR's Steve Inskeep interviewed Dow Chemical CEO Andrew Liveris. Liveris recently wrote a book called Make it in America: The Case for Re-Inventing the Economy.
INSKEEP: When a lot of Americans think about manufacturing and manufacturing jobs overseas, it seems like a very simple question of cheaper labor. There are people overseas who will work for $3 a day, maybe even $1 a day in some cases, and work for wages that Americans would never dream of matching. It'd be a disaster if Americans matched those wages. And is it more complicated than that?
Mr. LIVERIS: Way more complicated. I mean, outsourcing based on wages has really become the storyline of manufacturing, and I think that's wrong. It is more complicated than that. Take Dow as an example. We built this R&D center in China. We now have 500 Chinese scientists working there and they earn incredibly good money.
Industries that are high technology - clean energy, solar, photovoltaics - that conversation and why that is all moving overseas is not about labor costs.
OK, here's where things get interesting. 2011 has barely started, but I nominate the discussion below for "strange exchange" of the year.
INSKEEP: Well, now, that's interesting because here you are, you're the CEO of a multinational corporation, you're a big supporter of American manufacturing, you've just written a book about boosting American manufacturing, but you mentioned that Dow Chemical has opened an R&D center in China. How do you as a CEO decide which of your operations to keep in the United States and which to move abroad?
Mr. LIVERIS: Basically, the rules of the road per country. In essence, do I have in country X, do I understand their tax policies? Do I understand their energy policies? What are they doing to me in terms of regulatory policy? We look at all items on the cost line, all items on the incentive line, and make decisions on that basis.
INSKEEP: OK. What are some lines there where the United States apparently doesn't do very well, since you have moved some operations overseas?
Mr. LIVERIS: Well, I not only have high taxes, I have uncertain taxes. Right now I have more regulations coming at me that are not fact-based, not science-based, not data-based. I actually don't even know what my costs are going to be in the next five years. And so I'm sitting back waiting for regulatory reform, and the government, of course, is now engaged on that - healthcare and the uncertainty around the healthcare bill and what's going to end up happening there. Energy policy - we've got lots of uncertainty in the energy policy regimen. I mean I can keep going, but that's half a dozen.
[My note: Liveris photo from mlive.com]
I have taken the liberty of re-writing the last part of this exchange so we may achieve the clarity I mentioned earlier. I have added some parenthetical notes to Mr. Liveris' recommendations so we may achieve perfect understanding.
INSKEEP: Well, you seem like a perfect hypocrite, writing a book called Make It In America but then going off and creating a bunch of high-paying R & D jobs in China. What the fuck?
MR. LIVERIS: Look Steve, this is the relentless logic of global capitalism. Dow Chemical is a big multinational corporation. Borders mean nothing to us. We are utterly ruthless, this is a dog-eat-dog world. You're being extorted, OK? I'm blackmailing you! We have only one mission at Dow Chemical — make money for our shareholders. That's it!
Think of us as The Terminator. Listen, and understand — we are out there, Steve, you can't bargain with us, you can't reason with us. We don't feel pity, or remorse, or fear. And we absolutely will not stop, ever, until you all your jobs are gone unless you meet our demands. Here they are:
- New infrastructure [you must build it]
- R&D that’s cutting edge [you must pay for it]
- Education that leads the world [make it so]
- A pro-trade policy that creates a level playing field with limited tariffs and barriers to entry [no restraints on trade]
- An alternative energy strategy that will secure the abundant energy that industry needs to remain competitive [free energy for business and plenty of it]
- Regulatory reform [no restraints on business practices]
- U.S. tax policies that support manufacturing – not mitigate against it [no taxes]
- Reform in civil justice needed to support advanced manufacturing and end lawsuit abuse [complete immunity from the law]
Give us what we want—all of it! Or you can kiss your precious jobs goodbye. Am I clear?
You are perfectly clear, Mr. Liveris.
Listen, and understand. That terminator is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead.
Despite the inflated ego of the average American, we represent only 5% of the world's population. Since when has 5% of anything amounted to anything? On top of that, every level of our society is bankrupt, living on printed money.
Here is a telling interview on CNN:
http://money.cnn.com/video/news/2011/01/26/n_davos_nouriel_roubini.cnnmoney/
The Fed's master plan may be working, in the short term:
"Improvements in the stock market have also helped give consumers more confidence, reducing the drive to choose saving over spending. The savings rate, which had climbed to 7.2% in early 2009, had fallen to near 5% by the end of 2010. "People got bored with being frugal. It's much more fun to go out there and spend money," said Wyss."
http://money.cnn.com/2011/01/26/news/economy/consumer_spending_rebound/index.htm?hpt=T2
But maybe not:
"It's two steps forward, one step back. In the first week of January, Gallup Poll Chief Economist Dennis Jacobe noted that daily consumer spending in stores, restaurants, gas stations, and online dropped dramatically. Spending averaged $55 in the week ending January 9 – down as expected but also well below the $68 average for the same week during the previous year. Whatever reasons for the big drop, Jacobe says "there are no signs that consumer spending will improve much in early January 2011.""
http://finance.fortune.cnn.com/2011/01/14/three-signs-consumers-are-inching-back/?iid=EAL
And on the jobs front:
"The move eliminates 1,700 middle management positions as the company "flattens" its management structure into two levels instead of three, now represented by store managers and assistant managers. At the same time, Ahearn said Lowe's is also hiring between 8,000 to 10,000 part-time workers nationwide to improve customer service in stores over the weekends."
Wow, replace full time jobs with lower paying part time jobs. Let me guess, no benefits.
So who exactly is going to be spending more, other than the government?
CBO announced the deficit should increase $1.5 trillion this year. Yipee. Keep the printing presses running. The American public refuses to assume more debt, especially with underwater homes, so Washington will assume the debt for them. Yes, good times are here, for Wall Street, which just went over 12,000, for no real reason at all, other than to make paper holders believe they are richer. The next crash is going to hurt.
http://money.cnn.com/2011/01/26/news/economy/budget_outlook_cbo/index.htm
Posted by: BJ | 01/26/2011 at 11:10 AM