protectionism foreign competition investment nationalism

Foreign firms create jobs on American soil
mature economy global economy

Selling of American Economy argues against protectionism

Disappearing jobs instill fear, but are jobs the only way to qualify for an income? This 2009 book review is from USA Today, Nov 23.

by Jon Rosen

Whither the American worker? As US manufacturing jobs vanish, unemployment rises, and industry shifts across the Pacific, it's a question that continues to prod the national psyche. With the future of "Made in America" uncertain, protectionist sentiment has intensified, and many in the US regard foreign companies as threats to the American way of life.

Yet lest we blame all our woes on outsiders, argues Micheline Maynard, senior business correspondent at The New York Times, we must consider the other side of the story. Foreign firms, it turns out, play a critical role in creating jobs on American soil. In The Selling of the American Economy, Maynard takes us on a tour of an industrial America being revitalized by foreign investment.

The book focuses on the US operations of four international giants: Chinese appliance maker Haier Global, Indian conglomerate Tata, European aerospace firm EADS, and Japanese automaker Toyota. In a series of vignettes, Maynard presents workers and their families transformed by the arrival of foreign plants, politicians lobbying to reel in overseas investment, and foreign executives strategizing their entry into US markets -- frequently setting up shop in Southern states, where start-up costs are lower. From Georgetown, Ky., to Columbus, Miss., the story of affected communities is much the same. While foreign executives aren't greeted with red carpets, locals come to appreciate their presence once the windfalls of their investments materialize.

As Maynard writes, "Economic reality generally trumps stubborn nationalist pride. ... No matter how much some pundits would wish American companies to have a lock on every dollar earned in the United States, we cannot expect an economy fueled only by American investment -- nor should we want one."

Maynard certainly has an argument. As a nation that's shed nearly one in four manufacturing jobs this decade, the US is in no state to say no to sources of job creation, no matter the nationality. As it is, foreign direct investment (defined as spending by a foreign-owned company on ventures or investments in the US) makes up 15% of gross domestic product. Companies based overseas also provide jobs for approximately 5 million Americans, 10% of the country's industrial workforce.

Not only do foreign firms create employment, but they also form a vital source of new ideas and innovations. In a business world no longer framed by national borders, an economy that refuses to look outward -- even if it is the world's largest -- is bound to lose a competitive edge.

The problem with the book, then, is not in Maynard's conclusion, but in her lack of cogent analysis. While her on-ground reportage is adequate, she fails to address some key empirical questions. She might tell us:
* Do levels of US foreign direct investment compare with those in other advanced industrial nations, both today and over time?
* What are the forces that have rendered American industry in such dire need of foreign saviors?
* Is the decline of manufacturing an inevitable systemic flaw of a mature economy unable to stay at the cutting edge of innovation -- in this case, the signal of a superpower in decline?
* Is there something in the state-driven industrial policy of Tokyo compared with that of American capitalism -- or perhaps differences in managerial strategy -- that helped Toyota thrive while General Motors floundered?

Perhaps Maynard hopes we'll find the answers elsewhere -- either in her 2003 book The End of Detroit: How the Big Three Lost Their Grip on the American Car Market, or in 2005's The World is Flat by New York Times colleague Thomas Friedman, which she repeatedly cites.

At times, she hints at tackling these larger questions but ultimately gets lost in her penchant for the inconsequential. She provides a hasty overview, for example, of the differences between worker-manager relations at Toyota and GM, while giving in-depth treatment to the personal rise of Toyota Chairman Akio Toyoda -- a story that, while engaging, is peripheral at best to her central argument.

The book fails to answer a question that should be central to any book on this subject: What are the greater forces at play that make the "selling of the American economy" inevitable?

It's too bad, because Maynard's thesis -- that the American worker can and should benefit from the forces of a global economy -- is one that policymakers need to address if the US is to remain an internationally competitive industrial power.

JJS: Is national pride the only reason to reform? Why not make basic changes in order to win prosperity and economic justice for everyone? We could attain justice plus regain stature by adopting the same solution: geonomics. That is, shift taxes off labor and capital while recovering the value of land and resources and shift subsidies from special interest while disbursing a dividend to the citizenry. Then you could lock the hood on the economy because everyone would be so well off.

---------------------

Jeffery J. Smith runs the Forum on Geonomics.

Also see:

China Can't Buy Enough Bonds as Dollar No Deterrent
http://www.progress.org/2009/chinese.htm

US budget deficit tops $1 trillion for first time
http://www.progress.org/2009/uschina.htm

Another call for the rule of law
http://www.progress.org/2009/investor.htm

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