According to the Department of Commerce, foreign affiliates of American multinational corporations employ about 10 million workers. As many as 400,000 jobs annually are being lost as a result of foreign outsourcing. Another study revealed that three years after layoffs about one third of displaced workers were still unemployed. Moreover, about half who did find jobs suffered substantial wage reductions. Millions more blue and white collar jobs are expected to go abroad by the end of this decade, leaving behind the damage—mass unemployment, underemployment, poverty, and even substantially higher mortality rates, as a study at Johns Hopkins showed.
The federal stimulus package will ease this dire situation somewhat. But the catch is that a substantial proportion of the stimulus will do more to stimulate foreign economies, which supply us with a growing share of what we purchase. Take for example the following: An astonishing 97 percent of the clothing we wear is manufactured abroad. Green technology is also mostly imported. For instance, 70 percent of wind turbines purchased here are manufactured abroad. And patriotic Americans should know that even the American flag they are waiving might be one made in China. Significantly, about half of all our imports come from foreign subsidiaries of American multinational corporations.
The millions of jobs that are being lost and the decline in wages as a result have contributed immensely to the economic downturn. Leo Gerard, the president of the steel workers union is right when he complained that “We cannot work our way out of this economic mess unless we refocus on making things in America.” But we have a big problem on our hands. The federal government has been complicit with the corporations in deindustrializing America. The government has been continually involved militarily and politically to assure multinationals a low wage and union free environment abroad. Various bodies and agencies of the federal government have been intervening in Latin America, Asia and Africa on behalf of American multinational companies
Congress and various federal agencies, including the Commerce Department, Agency of International Development (AID), and the Internal Revenue Service (IRS) have aided multinationals to relocate and remain abroad. For example, congressional legislation exempts foreign subsidiaries from corporate taxes unless the profits are remitted to the United States. As a result, many corporations pay no taxes at all because they shift their domestic profits to their foreign subsidiaries. An IRS investigation could easily uncover the scam. But instead the IRS is looking the other way.
The media on rare occasions gives us glimpses of government complicity in encouraging corporate foreign outsourcing. A few years ago the TV program 60 Minutes exposed the attempt by AID to encourage businesses to take advantage of cheap labor and relocate to El Salvador. The Department of Commerce at taxpayer expense has done the same. In fact, a congressman complained that the Department co-sponsored a conference with the U.S. Chamber of Commerce to encourage companies to relocate to Mexico. The loss in domestic purchasing power, precipitated by the unemployment and underemployment that is created as a result of foreign outsourcing, is barely touched by the stimulus package. In fact, the purchasing power created by the stimulus is dwarfed by the considerable economic loss suffered by American workers.
What is to be done? First, legislation, taxes, and bailout policies should be constructed to persuade and even require corporations to manufacture domestically. For example, rather than encouraging GM to retrench as a condition for the bailout money, the federal government should insist that GM set aside some of the factories it is closing to manufacture subway and light rail cars for public transportation, which it is quite capable of making. Also, instead of the government giving foreign subsidiaries more favorable tax treatment than domestic based enterprises, the federal government should impose a higher tax on foreign subsidiaries.
Second, millions of decent paying jobs must be immediately created. The administration estimates that over three million mainly private sector jobs can be in place in two years. To put the unemployed to work swiftly, FDR’s right hand man, Harry Hopkins in 1933 instead generated public sector jobs. In two months over 4 million unemployed were working in mainly manufacturing and construction related jobs.
Although stimulus money will certainly reduce the pain for many workers and should be supported and expanded, public policy that favors corporate desertion must be radically changed. To continue on our current path may forebode a bleak America with no end in sight.
Harry Brill is a Berkeley resident.