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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

December 29, 2010 at 9:40 AM

The dissonance between globalization and American jobs

The survey showing many American corporations hiring overseas even as unemployment stays at post-Depression highs at home confirms what I’ve been hearing from readers for some time. They’ve written that their companies are indeed hiring, but not here.

The reasons for the dissonance are complex, but the excuse that overseas markets are recovering while the United States languishes won’t provide much comfort. Once upon a time, major companies here were export giants with factories in America. Thus, stronger demand overseas would have meant jobs for Americans. This helped sustain a consensus that trade was a good thing for America.

Since the 1980s, more American corporations have moved operations offshore. This has given them closer access to emerging markets and the benefits of much cheaper labor. But many nations, especially China, have demanded that foreign companies set up shop there as the price of admission to the market. Profits still flow back home, but not as many jobs.

Now, according to the Wall Street Journal, “some of the world’s biggest companies are taking a risky but potentially rewarding second step — folding pieces of their world-wide operations into partnerships with Chinese companies to do business around the globe.” General Electric, for example, is in a 50-50 joint venture with a Chinese company to produce avionics, a direct challenge to Boeing. Not only will this produce no American jobs, but eventually the Chinese company, having learned all it needs from GE, will kick the American company to the curb.

It’s no wonder that now more Americans are hostile to trade and wonder if American CEOs have America’s best interests at heart. As Clyde Prestowitz wrote in a thoughtful piece in the Foreign Policy blog, “remember that these companies have greater financial power and greater production capacity than all but a handful of countries. They are quasi-sovereign entities and their CEOs are in many respects more akin to powerful heads of state than to your average everyday businessman.”

Today’s Econ Haiku:

December’s rally

Hot Fed money let traders

Sail the QE2

Comments | More in Aerospace/Boeing, China economy and business, Global economy, International economy, Jobs/Unemployment, Trade

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