In the good old 1950s, when U.S. cars dominated the planet, it was famously said that what’s good for General Motors is good for the country. But as GM and many other companies move jobs offshore, that assertion is now being challenged.
The first wave of offshoring took place in manufacturing. Automakers set up plants in Mexico. Garment companies emptied their lofts on Manhattan’s Seventh Avenue and sent their designs to be sewn everywhere from the Dominican Republic to Sri Lanka.
The next job exodus came from the service industries. Large, well-trained Indian workforces now write computer programs for major U.S. corporations. Call centers in the Philippines answer customer queries for insurance firms.
And now jobs that require even higher skills are quickly being moved offshore. Chinese engineers bid to create blueprints for chemical plants for U.S. multinationals, and integrated circuits are designed in Singapore. Boeing may soon manufacture planes in China.
What Ross Perot described as that “giant sucking sound” in his 1992 presidential campaign is getting louder. With a stalled economy and increased productivity driving unemployment rates higher, some politicians are proposing legislation that would restrict the movement of jobs out of the United States.
But this country’s response to offshoring cannot be protectionism — although protecting a few jobs in certain places will be necessary. The forces of globalization, cheap telecommunications, and vastly improved logistics are too strong to buck. Besides, such companies as GM must now send work wherever it can be done the most cheaply and in the best quality. Otherwise, these corporations won’t be competitive, and even more jobs will be lost.
The ultimate response to the outflow of jobs lies in a combination of new-job creation, a return to quality in manufacturing, and policies that encourage critical skills to remain onshore. Solving the problem starts with facing a brutal reality: Some jobs will never return, not when the cost of highly skilled offshore technical talent is less than a third of the cost in the United States.
But danger, as ever, creates opportunity. The solution lies in American ingenuity and innovation. Good jobs can be created by focusing on the right industries, providing incentives for research to spur the growth of those industries, and continuing policies that support startups. It’s possible that the next wave of opportunity lies somewhere in the life sciences. Industry, academia, and government should be partnering to stimulate business in those areas. The decision of the Swiss pharmaceutical giant Novartis to shift its primary research activities from Basel to Cambridge, Massachusetts, suggests that we have something to offer. And our major research universities, pharmaceutical makers, and large hospital systems are world leaders in health care.
But I would not give up on manufacturing. Our economy cannot survive just on selling pills, even expensive ones. Several European companies — most of which keep work onshore and have higher costs than those of U.S. companies — remain profitable by focusing on quality. French-made fashions and German-made cars maintain strong positions in world markets. And the Six Sigma movement has also demonstrated that a relentless focus on quality improvement can lead to lower costs. Imagine a world in which U.S. products are so admired that they might even demand a premium. Just as British engines and German optics were once the envy of the world, U.S. manufacturers should view superquality as a frontier, rich with opportunities waiting to be seized.
We also need government policies that keep certain jobs onshore for reasons of security as well as competition. What if we completely lost our ability to manufacture aircraft? But these policies should be based on aggressive encouragement, not protectionist legislation.
The U.S. educates many of the world’s finest mathematicians, scientists, engineers, and physicians. Students come here seeking the best training. Why not encourage more of them to stay, rather than drive them home, as some of our current policies seem to do? Talent and diversity produce the kind of innovation that we need in business, especially in a multicultural, global economy.
Smart job creation is also clearly essential for America’s well-being. The free-market movement of people, goods, money, and information may well have changed the world economic order — but we cannot afford to leave new-job creation to chance.
James Champy (email@example.com), chairman of Perot Systems’ consulting practice, is the author of X-Engineering the Corporation (Warner Books, 2002).