American Competitiveness, and the President’s New Relationship with American Business

obama immelt

President Obama and just-appointed Jeffery Immelt

Whenever you hear a business executive or politician use the term “American competitiveness,” watch your wallet. Few terms in public discourse have gone so directly from obscurity to meaninglessness without any intervening period of coherence.

President Obama just appointed Jeffery Immelt, GE’s CEO, to head his outside panel of economic advisors, replacing Paul Volcker. According to White House spokesman Robert Gibbs, Immelt has “agreed to work thorugh what makes our country more competitive.”

In an opinion piece in the Washington Post announcing his acceptance, Immelt wrote “there is nothing inevitable about America’s declining manufacturing competitiveness if we work together to reverse it.”

But what’s American “competitiveness” and how do you measure it? Here are some different definitions:

  • It’s American exports. Okay, but the easiest way for American companies to increase their exports from the US is for their American-made products to become cheaper internationally. And for them to reduce the price of their American-made stuff they have to cut their costs of production in here. Their biggest cost is their payrolls. So it follows that the simplest way for them to become more “competitive” is to cut their payrolls — either by substituting software and automated machinery for their US workers, or getting (or forcing) their US workers to accept wage and benefit cuts.
  • It’s net exports. Another way to think about American “competitiveness” is the balance of trade — how much we import from abroad versus how much they import from us. The easiest and most direct way to improve the trade balance is to coax the value of the dollar down relative to foreign currencies (the Fed’s current strategy for flooding the economy with money could have this effect). The result is everything we make becomes cheaper to the rest of the world. But even if other nations were willing to let this happen (doubtful; we’d probably have a currency war instead as they tried to coax down the value of their currencies in response), we’d pay a high price. Everything the rest of the world makes would become more expensive for us.
  • It’s the profits of American-based companies. In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.
  • It’s the number and quality of American jobs. This is my preferred definition, but on this measure we’re doing terribly badly. Most Americans are imprisoned in a terrible tradeoff — they can get a job, but only one that pays considerably less than the one they used to have, or they can face unemployment or insecure contract work. The only sure way to improve the quality of jobs over the long term is to build the productivity of American workers and the US overall, which means major investments in education, infrastructure, and basic R&D. But it’s far from clear American corporations and their executives will pay the taxes needed to make these investments. And the only sure way to improve the number of jobs is to give the vast middle and working classes of America sufficient purchasing power to get the economy going again. But here again, it’s far from clear American corporations and their executives will be willing to push for a more progressive tax code, along with wage subsidies, that would put more money into average workers’ pockets.

Robert ReichIt’s politically important for President Obama, as for any president, to be available to American business, and to avoid the moniker of beiing “anti-business.” But the President must not be seduced into believing — and must not allow the public to be similarly seduced into thinking — that the well-being of American business is synonymous with the well-being of Americans.

Robert Reich

Robert Reich’s Blog

Published by the LA Progressive on January 24, 2011
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About Robert Reich

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.

Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

Comments

  1. Richard Packard says:

    It is said “if you fail to learn from history you are in danger of repeating it”, well what president Obama is doing is right out of the “Bill Clinton re-election playbook”. And who would know this play better than Robert Reich, former labor secretary under the Clinton Administration. For Mr. Reich to state that “the president must not be seduced into believing-and must not allow the public to be similarly seduced into thinking-that the well-being of American business is synonymous with the well-being of Americans” sounds hypocritical from a “chorus” member of the “NAFTA” choir! Where was Mr. Reich when the Clinton administration was trying to “seduce” the American people and labor against their better judgement about the benefits of NAFTA and the creation of American jobs? President Obama’s appointment of Jeffrey Immelt, GE’s CEO to his outside panel of economic advisors is a calculated move to “appear” more “centralist” for his re-election bid in 2012. This appointment helps “other” fortune-500 corporations breath a sign-of-relief that President Obama “is” practical and not completely submerged in the “pool of left-wing ideaology”. I’m always amazed by the American people when they say things like “I can’t believe that so and so did this or that”, President Obama is like every other politician he just happens to be American of African-descent. The color of his skin doesn’t remove the “character flaws” that is found in most people seeking power and influence likewise, Mr. Reich demonstrates those same flaws even while trying to present his intellectual argument about the buzz word “American competitiveness”.

  2. Whenever I hear the words “business friendly”, I know immediately that the workers in this country are in trouble. I am appalled that our president, who I worked so hard to elect, would do this! This is why Jeffrey Cohen has founded the new website for people to get organized and pull together for the AMERICAN PEOPLE, NOT THE CORPORATIONS. CORPORATIONS ARE NOT THE PEOPLE!!!!!! Please go to http://www.RootsAction.org and become part of a people’s movement to stop this move of this administration towards the far Right. If you have any doubts about what is happening read the article in the Wall Street Journal last week in which President Obama proclaimed his assurances to Big Business to “do them no harm” and that he plans to reduce regulations that are hindering them. Has he forgotten what brought our economy down????? I cannot believe this! (http://www.rootsaction.org)

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