The Problem Isn’t Outsourcing. It’s that the Prosperity of Big Business Has Become Disconnected from the Well-Being of Most Americans

President Obama is slamming Mitt Romney for heading companies that were “pioneers in outsourcing U.S. jobs,” while Romney is accusing Obama of being “the real outsourcer-in-chief.”

These are the dog days of summer and the silly season of presidential campaigns. But can we get real, please?

The American economy has moved way beyond outsourcing abroad or even “in-sourcing.” Most big companies headquartered in America don’t send jobs overseas and don’t bring jobs here from abroad.

That’s because most are no longer really “American” companies. They’ve become global networks that design, make, buy, and sell things wherever around the world it’s most profitable for them to do so.

As an Apple executive told the New York Times, “we don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing profits big enough to continually increase our share price.”

Forget the debate over outsourcing. The real question is how to make Americans so competitive that all global companies — whether or not headquartered in the United States — will create good jobs in America.

Apple employs 43,000 people in the United States but contracts with over 700,000 workers overseas. It assembles iPhones in China both because wages are low there and because Apple’s Chinese contractors can quickly mobilize workers from company dorms at almost any hour of the day or night.

But low wages aren’t the major force driving Apple or any other American-based corporate network abroad. The components Apple’s Chinese contractors assemble come from many places around the world with wages as high if not higher than in the United States.

More than a third of what you pay for an iPhone ends up in Japan, because that’s where some of its most advanced components are made. Seventeen percent goes to Germany, whose precision manufacturers pay wages higher than those paid to American manufacturing workers, on average, because German workers are more highly skilled. Thirteen percent comes from South Korea, whose median wage isn’t far from our own.

Workers in the United States get only about 6 percent of what you pay for an iPhone. It goes to American designers, lawyers, and financiers, as well as Apple’s top executives.

American-based companies are also doing more of their research and development abroad. The share of R&D spending going to the foreign subsidiaries of American-based companies rose from 9 percent in 1989 to almost 16 percent in 2009, according to the National Science Foundation.

What’s going on? Put simply, America isn’t educating enough of our people well enough to get American-based companies to do more of their high-value added work here.

Our K-12 school system isn’t nearly up to what it should be. American students continue to do poorly in math and science relative to students in other advanced countries. Japan, Germany, South Korea, Canada, Australia, Ireland, Sweden, and France all top us.

American universities continue to rank high but many are being starved of government funds and are having trouble keeping up. More and more young Americans and their families can’t afford a college education. China, by contrast, is investing like mad in world-class universities and research centers.

Transportation and communication systems abroad are also becoming better and more reliable. In case you hadn’t noticed, American roads are congested, our bridges are in disrepair, and our ports are becoming outmoded.

So forget the debate over outsourcing. The way we get good jobs back is with a national strategy to make Americans more competitive — retooling our schools, getting more of our young people through college or giving them a first-class technical education, remaking our infrastructure, and thereby guaranteeing a large share of Americans add significant value to the global economy.

But big American-based companies aren’t pushing this agenda, despite their huge clout in Washington. They don’t care about making Americans more competitive. They say they have no obligation to solve America’s problems.

They want lower corporate taxes, lower taxes for their executives, fewer regulations, and less public spending. And to achieve these goals they maintain legions of lobbyists and are pouring boatloads of money into political campaigns. The Supreme Court even says they’re “people” under the First Amendment, and can contribute as much as they want to political campaigns – even in secret.

The core problem isn’t outsourcing. It’s that the prosperity of America’s big businesses – which are really global networks that happen to be headquartered here – has become disconnected from the well-being of most Americans.

Mitt Romney’s Bain Capital is no different from any other global corporation — which is exactly why Romney’s so-called “business experience” is irrelevant to the real problems facing most Americans.

Without a government that’s focused on more and better jobs, we’re left with global corporations that don’t give a damn.

This post originally appeared at Robert Reich’s Blog and is posted with permission.

17 Responses to "The Problem Isn’t Outsourcing. It’s that the Prosperity of Big Business Has Become Disconnected from the Well-Being of Most Americans"

  1. Valli Genevieve   July 19, 2012 at 10:56 am

    I have never understood the argument that corporations are people. How can corporations pour money into campaigns when corporations cannot vote. Are voter is a person.

    By the same token, if a corporation is a person, why can't this "person" be tried criminally in court? Why can't this "person" be sentenced to death when it's crimes toward the citizens of the country are egregious? Corporations have ensured that tails they win, heads we lose.

    • gzuckier   July 20, 2012 at 10:59 pm

      The occasional corporation gets the "death penalty"; IG Farben, for example, after WWII. (Although IG Farben Corporation actually still exists, technically; corporate zombies?) But in general, of course, you are correct; any "person" which is potentially immortal is going to be able to amass wealth and power to a greater degree than any person who isn't, which tends to put human beings at a disadvantage with respect to corporate "persons".

  2. John1025   July 19, 2012 at 1:25 pm

    Corporate personhood was established bt the Supreme Court in 1819 and has been reaffirmed by the Court many times. The doctrine does not hold that corporations are "people" in the literal sense, nor does it grant to corporations all of the rights of citizens. It is a legal concept that a corporation may sue and be sued in court and they can also commit crimes in the same way as natural persons or unincorporated associations of persons. This doctrine in turn forms the basis for legal recognition that corporations, as groups of people, may hold and exercise certain rights under the common law and the U.S. Constitution. Corporations as having the same rights as natural persons to contract and to enforce contracts. The 14th Amendment forbids a state to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. The basis for allowing corporations to assert protection under the U.S. Constitution is that they are organizations of people, and that people should not be deprived of their constitutional rights when they act collectively. corporations are not able to claim constitutional protections that would not otherwise be available to persons acting as a group such as the right of self discrimination in the 5th Amendment. Of course corporations, as a person can e tried in court. One of the key cases regarding corporate personhood was the case where Santa Clara County took he Southern Pacific Railroad to court over taxes. Last summer the Department of Justice brought criminal charges against the Brigham Oil & Gas Co., Newfield Production and Continental Resources for unlawfully killing mallards.

  3. Ron Freeman   July 19, 2012 at 6:23 pm

    Robert Reich is a mouth piece for the Democrats. Plain and simple

  4. guest   July 19, 2012 at 7:06 pm

    Americans are dumb.

  5. A Guest   July 19, 2012 at 10:31 pm

    We have spent the past century dumbly assuming that the 'invisible hand' would cure all our social problems. The amazing thing is that it worked as well as it did for as long as it did. Commerce is not in the business of social concerns; that is the role of government, one that both parties have abrogated.

    Talking about 'improving' US schools as the cure-all replaces one simplistic notion with another. German workers are better educated because companies use their services for their entire working lives. That gives German companies an incentive to insist that students are properly schooled before they enter the workforce, and then to keep them productive by ongoing training.

    American companies, by contrast, see workers as expenses, resources to be used up as they leave college and then discarded as soon as their classes become irrelevant, or the workers build up seniority and demand higher wages. This model ensures that Americans never reach the level of expertise that takes a lifetime to acquire; they are the ultimate disposable temps, just what 'third world' workers used to be.

    • gzuckier   July 20, 2012 at 11:01 pm

      An old Dilbert cartoon had the boss telling the employees "You are our greatest resource! Whenever the company gets in financial distress, we lay off a bunch of you, and our stock price rises!"

  6. Aint No   July 20, 2012 at 2:43 am

    No, Robert Reich was an apologist for outsourcing under Clinton and he still is. Ross Perot may have been a bit paranoid—alright, a lot paranoid— but he was right about outsourcing. No nation has ever survived the destruction of it's manufacturing base, he said in 1992.

    He was right then, he's still right today. The German Social Economy is no longer all it once was but it still provides a basic partnership between business and labor. China practices state capitalism and with a health dose of central planning. And the US waits in vain for the gilded age of Finance to come back again. We need a new political-economic model and a rebirth of US manufacturing aimed at our own enormous domestic market is the first step towards it. How to begin? Start with a Carbon Tax.

  7. Phil   July 20, 2012 at 6:09 am

    So America would be better off with working class slaves, Right? Free labor for the worlds corporations is really where we need to be headed, after all what's good for the worlds CEO's is really what America needs to be doing. From this article, I strongly suggest that we all submit to slavery. At least Apple and the likes would be happy.

    • gzuckier   July 20, 2012 at 11:11 pm

      Well, people historically tend to assume that the circumstances under which they were born and grew up are either "normal" and/or somehow an optimum, towards which history has been moving. For instance, a prosperous and burgeoning middle class. But of course, in the scope of human history, that's been just the blink of an eye, and the majority of humans who ever lived (not including primitive tribes) , including most living today, lived in some sort of feudalism with a well defined ruling caste and a vast serf/fellah underclass. We have no real evidence that the middle class will turn out in the long run to be anything more than an interesting historical oddity which was soon overcome by a strong tendency for human society to organize under a two-class paradigm.

  8. One more thing   July 20, 2012 at 8:15 am

    The direction in China, if not in India, is towards the German model: treat workers as lifelong assets to be nurtured and encouraged. The Foxconn-type manufacturing jobs may well return to the US as wages fall; we just shouldn’t assume that the highly-skilled jobs won’t make the opposite journey to China.

    As long as business has absolutely no commitment to its labor force — and it will assuredly have no such obligation under either of the current two leading candidates for presidential office — schooling (I refuse to call it education) will continue to be nothing more than a baby-sitting service for employees and a way of milking a credulous population of its future earnings.

    • paul arcidiacono   July 29, 2012 at 10:31 am

      I agree.

  9. llisa2u2   July 20, 2012 at 12:17 pm

    NO, the problem is NOT outsourcing. And, NO, the problem is not that big business has become disconnected from most Americans. The problem is that the present operations concept for big business is based on predation of any documented and monitored wealth still held by the majority of American citizens who cannot keep facts of any existing wealth secret, and inaccessible to significant demographic analysis.

  10. spider   July 21, 2012 at 10:25 am

    Reich is lying about the role of the left in dumbing down schools and its reasons – racial – for doing so. Until he – and the country – face up to those realities America will continue to fall behind.

  11. barf   July 22, 2012 at 9:05 am

    calling a corporation a "person" is flat out a mis-reading of the law. they are a CITIZEN and hence they are granted the protections and rights as any other citizen…but they are to be held to account when their "citizenship" threatens or attacks the protections and rights of all the rest of us citizens. This article is PURE garbage. British Petroleum comes to mind. Were we suppose to celebrate their "goo" as it awashed up on our pristine shores "in the name of the network"? Obviously not…nor is the Court at any level going to make that claim now. The totality of the American people are not going to have their rights extirpated because the Government invented the internet but business discovered a way to bankrupt the country in order to use the network for PURELY private gain. The enthusiasm and novelty has long worn out on this Internet thing. The time for clear headed thinking on its public purpose…which was never discussed at the requisite institutional level ever…has long since passed. One need only look at Egypt to understand the awesome power of this "network" to TOTALLY overturn and overthrow…and leave nothing but chaos in its wake. This is not to say a "networked" economy needs government control of course! But some oversight among our PUBLIC officials (instead of pawning it off in the worst possible place-the intelligence community!) has been so long in coming i'm not sure if we're ever going to get it. And as a consequence the nation is LITERALLY poorer AT EVERY LEVEL INCLUDING THE LEVEL OF PRIVATE ENTERPRISE.

  12. iPhone stylus pen   June 7, 2013 at 5:07 am

    I think big business gets a bad rap for becoming "disconnected with people". I think certain things come with growth, and detachment from certain things is one of them.