[W[hen millions of American workers are facing severe hardship, driving our strongest companies with the best-paying jobs overseas certainly won’t help. … The … U.S. cannot rest on past success and take its multinationals for granted. Policy makers must partner with business leaders to craft policies aimed at sustaining an environment in which U.S. multinationals can thrive…
—from “The Global Jobs Competition Heats Up” (Wall Street Journal, July 1) by Martin Bailey, Matthew Slaughter, and Laura D’Andrea Tyson
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The notion that the U.S. government has been “tak[ing] its multinationals for granted” and “driving them overseas” is certainly a novel proposition, coming after three decades in which federal policy has been more closely aligned than ever with the demands of these huge global corporations.
It is particularly revealing that this urgent concern is being expressed by Laura D’Andrea Tyson, a top economic advisor to President Bill Clinton and an influential voice in Democratic policy circles. Clinton’s notable achievements included the passage of the North American Free Trade Agreement (job toll: over one million US jobs transplanted to Mexico and counting) normalization of trade relations with China, and China’s admission to the World Trade Organization (2.2 million jobs lost and rising).
Yet Tyson and her colleagues are advancing this argument for more solicitous treatment of multinational corporations at a particularly bizarre moment: Corporate profits are skyrocketing, employment remains sharply reduced with devastating human costs, and wages represent a record-low share of national income.
BREAKING THE LINK BETWEEN PROFITS AND JOB CREATION
Among the 175 companies in the Standard & Poor’s 500-stock index that have released their second-quarter reports, the New York Times reported Sunday, revenue rose by a tidy 6.9 percent, but profits soared by a stunning 42.3 percent. Profits, that is, are increasing seven times faster than revenue. The mind, as it should, boggles.
How can America’s corporations so defy gravity?
Ever adaptive, they have evolved a business model that enables them to make money even while the strapped American consumer has cut back on purchasing.
A key part of this success for multinational corporations, about whom Tyson and her fellow scholars are so deeply worried, is an emerging model of corporate globalization that is built on near-slave labor abroad and slashing wages in the U.S.
On the production side, multinational corporations are increasingly relying on operations in low-wage nations exemplified by Mexico and China. On the consumption side, they are selling overseas to the richest 10% of Mexico, China, India, and other “emerging nations,” as well as to high-wage workers in Western Europe.
NOT WORRIED ABOUT SPENDING POWER OF AVERAGE U.S. FAMILY
As for Henry Ford’s belief that well-paid workers were vital to selling his products, that sentiment has long ago been tossed overboard. In their study of corporate off-shoring, Kate Bronfenbrenner and Stephanie Luce found that the relocation of U.S. manufacturing has been targeted at high-wage unionized operations:
Even though only 8 percent of U.S. workers in the private sector belong to unions, 29 percent of production shifts out of the United States are from unionized facilities, including 44 percent of firms moving jobs from the United States to Mexico and 29 percent of firms moving jobs to China…Overall, 39 percent of all jobs leaving the United States are union.
As Meyerson puts it:
… [transnational corporations] are increasingly selling and producing overseas. General Motors is going like gangbusters in China, where it now sells more cars than it does in the United States. In China, GM employs 32,000 assembly-line workers; that’s just 20,000 fewer than the number of such workers it has in the States. And those American workers aren’t making what they used to; new hires get $14 an hour, roughly half of what veterans pull down.
The GM model typifies that of post-crash American business: massive layoffs, productivity increases, wage reductions (due in part to the weakness of unions), and reduced sales at home; increased hiring and booming sales abroad.
In this context of rising profits, multinational corporations — envisioned by Tyson as somehow suffering and in dire need of federal assistance — see no need to invest in new equipment or hire new workers in the U.S., since other U.S. workers lack the spending power to move the products off the shelves.
INVESTING IN JOBS? SURELY YOU JEST!
While we watch Republican members of congress proclaim the vast job creation that would be unleashed by more corporate tax cuts and extending Bush’s tax cuts for the wealthy, they are encased in their own private cocoon removed from the operating strategy of the corporate executives. As Meyerson further explains:
Another part of that model is cash retention. A Federal Reserve report last month estimated that American corporations are sitting on a record $1.8 trillion in cash reserves. As a share of corporate assets, that’s the highest level since 1964.
Why invest in new plants, offices and workers, particularly here at home?
Thus, it seems that the very transnational firms that worry elite Democratic advisors like Tyson, et. al. so much are “thriving” very nicely and choose to move abroad mainly to raise already-high profits. Meanwhile, both U.S. workers and consumers are no longer even “taken for granted,” but are increasingly seen as irrelevant to the new economic model.