In December 1992, according to Bob Woodward's The Agenda, President-elect Bill Clinton was about to announce Laura Tyson's appointment as chair of the Council of Economic Advisors, when Tyson mentioned she and Robert Reich had debated in The American Prospect whether the nationality of a firm was important. Suddenly recalling the debate, Clinton said, “You know what? You were right, and [Reich] was wrong.” So we decided to ask them now: Bob Reich, were you wrong? Laura Tyson, were you right?
In my debate with Robert Reich, I made two main arguments. First, the competitiveness of the American economy is linked to the competitiveness of American multinational companies. Second, economic policy should focus on maintaining America's position as an attractive location for high-wage production by both domestic and foreign companies. Since then, the number of U.S. manufacturing jobs has plummeted; the U.S. trade and current account deficits have exploded; and improvements in information technology have enabled offshoring to low-wage locations. But my two basic arguments hold.
American multinationals still account for about 25 percent of the gross domestic product and more than 20 percent of total employment. Despite their extensive and growing foreign operations, these companies remain decidedly American in their production, capital spending, and employment. In 2001, 77 percent of global production,
79 percent of global capital spending, and 74 percent of global employment by U.S. multinationals occurred at home. The at-home shares for production and capital spending were just about the same as in 1977, while the at-home share of employment was somewhat higher then, at nearly 78 percent. Between 1991 and 2001, American multinationals added about 5.5 million jobs for American workers.
Reich is right that American corporations are expanding foreign operations and sucking imports into the United States, but wrong to conclude that American companies -- even truly multinational ones -- are losing their American identity. For the foreseeable future, the ability of the American economy to create good jobs for American workers will continue to depend on the competitiveness of American companies.
Globalization is here to stay, but rapid globalization only confirms the basic policy conclusion, which Reich and I share, that the overarching goal of U.S. economic policy should be to enhance the competitiveness of the U.S. economy as a place for global companies -- domestic or foreign -- to locate high-wage activities.
First, the United States must dramatically increase national saving. The trade and current account deficits have exploded since 2001, not because American companies have gone on an offshoring binge but because the gap between what America spends and what America produces has jumped.
Second, the United States must invest more in its workforce, transportation, utilities, and communications infrastructures, and its research base -- the most important im- movable assets on which national competitiveness depends. The Bush administration's economic agenda, driven by large tax cuts for the well-off, fails spectacularly on both counts.
Given the growing disparities in wealth and income in the United States, perhaps the critical “who is us” question is not whether the U.S. economy will reap aggregate benefits from globalization -- I am firmly convinced that it can and will given the right domestic policies -- but how these benefits will be shared among American workers and their families. tap
Laura D'Andrea Tyson is dean of the London School of Business. She was President Bill Clinton's chief economic adviser.
