Fundamental Thought for the Crisis (1): Meyerson on U.S. Unemployment

The president recently cajoled business leaders at the U.S. Chamber of Commerce to create more jobs. As Harold Meyerson demonstrates in a recent piece in The American Prospect, that’s not likely to do much to relieve long-term trends toward U.S. decline:

When he was CEO of General Electric, in 1998, Jack Welch pithily summarized his vision for corporate America: “Ideally, you’d have every plant you own on a barge to move with currencies and changes in the economy.” . . . . As corporate profits skyrocket, even as the economy remains stalled in a deep recession, Americans confront a grim new reality: Our corporations don’t need us anymore.

A 2008 survey of 1,600 companies conducted by Duke University’s Fuqua School of Business and the Conference Board (a group of leading corporations) found that 53 percent had an offshoring strategy — up from just 22 percent in 2005. “Very few” companies, the survey concluded, “plan to relocate activities back to the United States.” . . .

The high level of joblessness has obscured another troubling story: the declining incomes of the employed. The median annual wage of American workers declined by $159 in 2009 from the previous year, to a mere $26,261 (that means half of all employed American workers make even less than that). The hourly wage for new hires in manufacturing plants, both union and nonunion, today is roughly $15 — about half of what it was just a few years ago. . . .We are, in effect, trading good jobs for lower-paying jobs.

Meyerson brings the lessons of comparativism in health care to the labor field. Just as we learned that the US’s perverse combination of excess costs and deprivation of insurance was an outlier, so too are these scorched earth employment figures:

Between 2008 and 2009, the U.S. GDP dropped 2.4 percent, compared to 2.6 percent in France and roughly 5 percent in Germany, Japan, and Britain. But U.S. unemployment has increased by approximately 5 percentage points since 2007, compared to an increase of just 1 point in France and Japan and 2 in Britain. In Germany, unemployment has actually dropped a point since the downturn began and now stands a full 2 points lower than ours.

Meyerson has previously written about the German advantage here, and extends the argument in this piece. The bottom line: look at corporate governance and the banking system.

Germany is an export giant while the U.S. is the colossus of imports. . . . German multinationals have their own affiliates overseas, but they have also maintained robust, high-quality production at home. Siemens, which is more or less the German equivalent of General Electric, has hundreds of thousands of employees who work abroad, but it recently announced a deal with its major union, IG Metall, that included a pledge not to make any unilateral reductions in its 128,000-employee German workforce. . . .

These domestic employee-retention pacts are an outgrowth of Germany’s more consensual, stakeholder version of capitalism. German workers’ organizations have a far greater say than American workers do in the conduct of their employers. By law, employees in large companies get the same number of seats on corporate boards that management does. . . .

The German experience also shows that the structure of finance can have a profound effect on the retention of manufacturing. An entire stratum of German banking, municipally owned savings banks, provides the funds that enable the nation’s prosperous, largely family-owned midsized manufacturers, the Mittelstand, to upgrade themselves into export dynamos. About two-thirds of Germany’s small and midsized businesses get their loans from these banks, which shun capital markets and are restricted to doing business in their own towns. “Over the past decade, banking largely became a self-fulfilling activity,” says Patrick Steinpass, the chief economist of the national organization of savings banks. “But our banks are restricted to doing business in their regions; they have to concentrate on the real economy.”

Meyerson’s full article is well worth reading. If the Obama administration were serious about job growth in the US, it might consult with Meyerson, rather than the leaders of the “flee America first” crowd.

Image Credit: State of Working America.
This is part of a series on economic thought in a time of crisis.

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