The Reality of Multinational Corporations

The Wall Street Journal recently reported that many large U.S. corporations are hiring, but hiring more people in other countries than they are here at home.

Eager to highlight the evils of multinational corporations, Think Progress reported on the report, noting that some companies had even cut jobs in the U.S. while hiring abroad. References to the problem of outsourcing and a look at the article’s comments section make clear how Think Progress and the left see this issue, and that this sort of information is their evidence.

Here’s what they overlook. Think Progress calls out Wal-Mart specifically (because who doesn’t love to hate Wal-Mart), and then posts the chart at right. The bottom section is the group guilty of layoffs in America while hiring overseas.

But these aren’t outsourced call centers and sweatshops. UPS, Starwood Hotels, International Paper. Think about what these companies do. UPS employees get in trucks and drive packages around their city, or work in warehouses necessary in every city they deliver to. UPS isn’t going to hire a driver in Detroit to deliver packages in Peru. Attacking UPS won’t save any jobs, it will just make it more expensive to order products online. In the same way, it makes no sense to blast Starwood Hotels for hiring people in Brazil to staff their hotel in Brazil. It’s not like hotel chains run sweatshops in China. They open hotels all over the world, and staff them locally.

They go out of their way to mention Wal-Mart, though they didn’t even make the list. But Wal-Mart has opened almost 700 stores abroad since 2009, giving them almost 1200 more stores abroad than they have here at home. And they still employ almost twice as many people in America as they do in other countries (around 1.4 million). Are they supposed to fly cashiers from Minnesota to Singapore every day so that they can use American labor? Yet these are the numbers the left points to when they complain that businesses need to be more regulated and punished for not hiring American workers. This is the standard counterargument whenever someone uses the term “job creators.”

As it turns out, manufacturing in America is still strong. We’re still, by far, the most productive country in the world, and manufacturing salaries continue to rise (currently averaging around $50,000). International Paper, also on this list of offenders, is a good illustration of manufacturing in the modern world economy. International Paper runs paper mills and distribution centers in America to sell to America. They also have dozens of mills, offices, and centers in other countries. To do business in those countries. Just like Toyota and Honda have factories in Indiana and Ohio to make cars to sell in America. Just like American auto makers have opened factories in China–gasp!–to sell their cars in China. Doing otherwise would be inefficient and make their product more expensive. Attempts to impede companies’ ability to operate where it makes sense to operate will not save any jobs–it will only drive up the cost of products and services. It will make all stuff more expensive. Helping the poor, that ain’t.

I know there are companies that make use of cheap overseas labor. Yes, Apple has a lot of components put together in China. But they also employ 47,000 people here at home, more than twice as many people employed abroad. And that’s only direct Apple employees–that business supports literally hundreds of thousands of other US jobs in affected industries providing raw and technical materials, services, transportation, health care. If you forced the 23,000 employees in other countries out of their jobs, Apple might be able to hire some here, but they’d also lose a lot of their sales when the price of the new iPhone doubled, and have to lay those workers right back off. And thousands of people in China would be kicked off the lifeline that’s finally pulling that country out of a peasant economy.

So if you think Apple’s overseas factory is the reason for 14% real unemployment here in America, you’ll be disappointed to see the hundreds of thousands of American workers harmed by making it harder for Apple to do business. And since the most common fixative I hear liberals support in order to deal with this supposed problem is to levy extra taxes on companies that do business overseas, you’ll be disappointed when all that does is make your vacations and Amazon purchases more expensive. Most of all, if you think damaging UPS and Starwood Hotels’ business is worth it just to “get” companies like Apple, keep in mind the hundreds of thousands of US workers you’re “getting” at the same time, and driving up the cost of goods for every single one of us.

All the supposed solutions simply make imports more expensive. If you make imports more expensive, then the end product will be more expensive too, and that’s bad for the customer and manufacturer alike. That just means less business gets done, and you and I have access to less stuff. Protectionary tariffs are one of the things that led to the Great Depression. If you threaten businesses here, some may submit, but none will choose to do business in America any longer if they can help it.

Conservatives have an alternative. Free trade makes the world a better place. It’s hard to get many economists to agree on anything, but they generally agree on that. More jobs here, more jobs abroad. If one company moves a call center to India, another company opens its doors here in America. Cheaper goods everywhere. And the more markets we open for American goods to be sold abroad, the more American manufacturing jobs can be created.

If you really want to help the poor, that sounds like a good start.

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  1. #1 by Dave k on May 19, 2012 - 10:00 pm

    So, you’re telling me, that if we stay in China and use .50 cent an hour labor, that American jobs, and America’s tax base will get stronger?? I don’t see your reasoning, or how your OPINION thinks this will help Americans. — I see this as Republican Rhetoric during an Election year.
    — Prove it, and then I may listen to you. Dave K

    • #2 by basicconservative on May 20, 2012 - 1:02 am

      No, I’m telling you that that’s the wrong question to ask, because the problem isn’t what you’ve been told it is. More manufacturing takes place in America than anywhere else in the world. Today, yesterday, 20 years ago, for basically ever. Still today, by something like a 45% margin. My point is that the supposed outsourcing problem, isn’t. And forcing an ill-conceived solution to a problem that doesn’t exist in the first place would 1. not help anything, and 2. make stuff more expensive, which is bad, especially for the poor. Republicans want to help the poor too, we just want to do it in a way that actually works. That’s kind of the point of my whole blog.

      • #3 by Steve on May 20, 2012 - 6:55 am

        This is not correct. China’s manufacturing output now exceeds the United States, according to the UN, since 2010. So today, yesterday, last year, and the year before that, China beat us. We’re certainly not winning by a 45 percent margin.

        http://unstats.un.org/unsd/snaama/dnlList.asp

        • #4 by basicconservative on May 20, 2012 - 8:28 pm

          I just ran the numbers on your link, and US manufacturing output is still above Chinese manufacturing output in 2010 (the most recent data available). The specific metric I used is ISIC D, and in 2010, I show US at 1.76×10^12 and China at 1.65×10^12. The 2008-2009 recession hit our manufacturing sector hard, but we rebounded quickly. I ran a quick and dirty chart of ISIC D, 1970-2010 and I’m hoping it will attach properly here: manufacturing output

          There was this story last year: http://www.huffingtonpost.com/2011/03/14/china-us-manufacturing_n_835470.html

          I assume that this is accounted for by there being various ways to measure “manufacturing,” and the lines around what constitutes manufacturing being blurry anyway. You’re certainly right that the gap has closed quite a lot, it’s closer to 7% by these numbers (in 2010), which I failed to check since I assumed the 2011 article I posted was using the most recent figures available.

          My further question would be, even if Chinese manufacturing did pass American manufacturing, would that mean anything? There are around 1.3 billion people in China, compared to around 310 million here. The more productive they become, the more that billion people will rise out of poverty, and the more American stuff they’ll want to buy. That’s fine with me. We’re not going to strengthen our middle class by keeping other countries down. Economics isn’t a zero-sum game. It’s all beside the point of this article, which is that outsourcing isn’t what people think it is.

        • #5 by basicconservative on May 20, 2012 - 8:37 pm

          Plus the fact that if America and China are neck and neck for the top spot in raw manufacturing output, the US is doing it with 11-12 million workers compared to China’s 100 million workers in the manufacturing sector. That means each worker in America is arguably around 9 times as productive as their Chinese counterparts. I think, given that fact on top of the fuzziness around definitions of manufacturing output, it’s still perfectly reasonable to call America the most productive country in the world.

      • #6 by Steve on May 22, 2012 - 10:56 pm

        Which spreadsheet are you using, because at current prices in USD, China is at 1,922,666,293,176.89. The United States is 1,855,967,100,172.00.

        Also, I apologize if this does not show up at the bottom, only two “reply buttons show.

        • #7 by basicconservative on May 24, 2012 - 7:46 pm

          That’s the difference. I used the report showing constant 2005 USD.

          I admit I’m confused here. Both charts are in USD. I understand China keeps its currency artificially weak, but that’s a pretty major difference in results for only five years of variable inflation. And considering that it’s being measured in USD either way, wouldn’t it only be raw numbers that change, rather than the ratio or who’s on top?

  2. #8 by Dave k on May 20, 2012 - 12:32 pm

    Republicans say ”No more welfare for the poor, make them find jobs.” However, rich, wealthy CEO’s of American companies keep closing up shop in America, and sending jobs to China. Including, GM, Ford, and Chrysler. The WSJ shows pictures of young Chinese boys getting rich, and buying luxury items. What do they show in America? People on welfare. Why? Because all of the Wealthy CEO’s of American companies keep sending jobs to China for slave labor. How can anyone anywhere in the Midwest find a job, and compete with slave wages?? Welfare goes to people who can’t find jobs. What do you expect these people to do? THERE ARE NO JOBS TO BE FOUND, but go to China, and work for .50 cents an hour, and it is fine!! These are facts. Your statement is just Rhetoric, and Propaganda. Sorry, but you show me nothing of value in your statement. Furthermore, this is something a Republican Congressman wants to you to share with us to make us think Republican’s are on their side. HAHAHA

    • #9 by basicconservative on May 20, 2012 - 8:40 pm

      Your reasoning is unclear and your facts are unsupported. I’m not sure what Congressman you’re talking about, but if you’d like to make a real point, I’m listening.

  3. #10 by Dave k on May 20, 2012 - 11:04 pm

    If you think America is prospering. Then take a trip to China. See the HUGE difference. Doesn’t matter to you though, because you’re a wealthy Republican! If you have money, you don’t need money!! Problem is, you will be the only one with money, so get ready to pay your share of taxes!! No more handouts for Republicans either!! Send all jobs away, rich people will pay.

    • #11 by basicconservative on May 21, 2012 - 8:12 am

      Nobody said America is prospering. You’ll notice I point out our 14% unemployment. I’d say that’s a pretty big deal.

      Continue to miss the point and make unfounded assumptions and accusations, though, please, this is entertaining for everyone I’m sure.

  4. #12 by Howieeeee on May 22, 2012 - 9:43 pm

    Just to be clear, are you saying ALL of the below:
    A) Outsourcing is no big deal, and certainly not a problem.
    B) US unemployment is way too high and a really big problem.
    C) Subtracting US jobs to add jobs overseas has no effect on US unemployment.

    Also, what do you think would help the poor more? Employment, or cheaper paper?

    • #13 by basicconservative on May 24, 2012 - 8:05 pm

      I’m saying outsourcing occurs, but is not the problem people claim it is. The referenced article is used as evidence of the evils of capitalism and abusive, profit-driven corporations. I’m saying this is evidence of nothing of the sort. Do you dispute that? Do you think it’s bad for the American working class that UPS hires drivers in other countries?

      Of course employment is the goal, but your question is a false choice. We live in a world marketplace. I know you’re a Krugman fan, his Nobel work was on that very point, and despite his blind faith in left-wing ideology, as an economist, even he accepts that free trade is a benefit to everyone. Individuals and nations do what they are good at doing, which means it all gets done more efficiently than it would if everyone were forced to do things they were bad at. That leads to employment AND cheaper goods. The problem is not globalization or outsourcing. The problem is a government which has its boot on the neck of industry.

      • #14 by Steve on May 27, 2012 - 4:30 pm

        This is the second time you’ve stated or implied that United Parcel Service has not actually moved US jobs overseas, but instead has hired local workers for local work. Do you have any source for these claims, or is it conjecture? If you do have a source, would you mind sharing it? I have been unable to verify your claim that UPS is hiring local drivers, instead of say, moving their customer service department or IT work overseas.

        • #15 by basicconservative on May 28, 2012 - 4:34 pm

          Seeing as how they employ 300,000+ in the US, something like that would make the news, and I sure can’t find anything like that. In a previous job I used to work with UPS customer service daily, and never got anyone that didn’t sound very obviously American. All I find is small layoffs here and there, regular large-company attrition, closing facilities and opening new ones, closing a hub in Cincinnati and spending a billion dollars expanding the hub in Louisille, etc. If you can find evidence that these jobs aren’t local work, I’d love to see it.

  5. #16 by Peter Sherinian on July 29, 2012 - 6:58 am

    Your conclusions are correct with some notable exception the last comment you made a new jersey call centers are you kidding me there’s no reason why those call centers can be in the united states with american employees who when you make a call if you can understand. That is the point about having the call centers here in the united states. Also clothing manufacturers. Prime example. JoS. A. Bank. One of the largest retailers of dress men’s clothing. They have all of their clothing contract made in factories all over the world, because of this they have totally cut out the middleman. Consequently there margins are around 65 percent. They could have their clothing made in factories here in the US, but then their margins would not be as high. This would force their executive team to cut the huge salaries that they’re being paid, which they are truly not entitled to. It would be one thing if they’re executive team were people who were in the clothing business, and really new the clothing business, and actually had run clothing stores, but the people in charge of this company know nothing about the clothing business. Their main focus is mass retail sales so that they can make as much money as possible. The last 2 years the board of directors voted a 1 percent annual salary bonus for all the emlpoyees, which the executive team objected to. The board of directors over road those objections and paid out the bonuses. If this company would manufactured those clothes in america they would provide a huge number of jobs and the companies margins would decrease only by about 10 to 15 percent. They would still be making huge profits. The problem that we have with your reasoning in regards to this article is the manufacturing jobs overseas that can be done here in the united states need to be done here in the united states. The reasoning behind manufacturing overseas as opposed to united states is a simple. The american manufactures don’t wanna pay wages to american workers because they would have to pay them more money. What they pay those employees in those other countries is far less this is morally and economically wrong. When NAFTA was originally set up, part of it before it was jane stated that manufactures had to pay the way the workers in other countries a shame that they would pay people in the united states. That is the real crux of the matter. This would have eliminated many manufactures from actually setting up manufacturing businesses in other countries.

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