Ronald R. Pollina, Ph.D., Founder and President, Pollina Corporate Real Estate (1/4/2010)
Editor's Note: This article is excerpted from Selling Out a Superpower: Where the U.S. Economy Went Wrong and How We Can Turn It Around with the permission of Prometheus Books.
Globalization is a critical component of the 21st century American economy. It's happening and there isn't anything we can do to stop it, nor should we. America must be an integral part of the global marketplace if it is to remain a superpower. Thus far, as a nation, we have done a terrible job integrating ourselves into the 21st century global market. Many American corporations have done a masterful job and have benefited, but the majority of Americans have not. The fact that many American corporations are successfully integrating into the global economy does not mean that America or the American public is benefiting.
To believe that these large companies will rehire Americans when the economy finally starts to rebound is wishful thinking at best. It is in the world's emerging economies that market growth is occurring. It is also where they were hiring the greatest number of employees and offshoring American jobs well before the recession.
Stephen King, chief economist for HSBC bank in London, found that of the world's 40 largest international corporations, 55 percent of their work forces are located in foreign countries and 59 percent of their earnings come from abroad. If the growth in profits is from abroad, it's not surprising that this is where the lion's share of their investment in new plant and equipment will take place.
Over the next decade, the United States would need to create at least another 10 million jobs to keep pace with population growth. During the 1990s, the United States was creating approximately 2.2 million jobs per year, and this number dropped to less than half that number from 2000 to 2008. It is not just the recession that has caused this decline. As a nation, we simply do not have the ability to create the high quality jobs we once did. In past decades, we were able to replace good, well-paid jobs lost in industries like consumer electronics, automotive, and textiles with jobs in industries developed in the United States, such as personal computers, cell phones, and Internet and software development. As these jobs have been shipped offshore, no new industries have emerged to replace them.
There is no white knight industry that can produce the millions of high-paying jobs needed to replace the jobs lost during the recession. As new energy sources are being developed to replace carbon fuels, or developments are made in other areas, the jobs that go with production are often shipped offshore immediately. Increasingly, the scientific development of new products is also shipped offshore for further development and refinement.
The real threat of moving more manufacturing, research and development, and high paying service jobs offshore has been used successfully to keep wages down in the United States and has also been felt by employees in terms of their healthcare and pensions. With growing numbers of employees located offshore and an increasing share of investment taking place there, the line between domestic and foreign companies is certainly blurring.
Take American car companies for example. While they continue to lose market share in the United States, they are doing much better in emerging markets. In recent years, 65 percent of GM's sales were generated abroad. In 2009, the U.S. government bought 61 percent of General Motors and eight percent of Chrysler to prevent bankruptcy.
Early in 2009, GM outraged the United Auto Workers when it said it would be producing the Chevrolet Spark in China for export to the United States. Automotive News reported that based on a document circulated among federal lawmakers in May of 2009, GM plans to sell 17,335 China-made vehicles in the United States in 2011 and 51,546 by 2014. The plan called for a reduction of United States workers and more vehicles coming from Mexico and South Korea. The percentage of GM cars manufactured in China, Mexico, and South Korea and sold in the United States will rise from 15-23 percent over a five-year period, according to the document given to lawmakers.