Why the Private Sector Alone Cannot be Counted On

Talking to my best friend Tuesday night after the President’s State of the Union (STOU) address, I remarked that I knew what I would write about this week in Birth of a Notion—the STOU of course!

Reviewing the video online of the speech, I realized it would take more than one blog post to provide my own analysis so I watched Mitch Daniels, the Republican Governor of Indiana who provided the GOP’s response to President Obama’s speech. While it certainly was more civilized than the Michele Bachmann fiasco that was rejected by her own party last year, it was still out of touch with reality. And, as the President focused a great deal on jobs, so too did the Governor. I think it only makes sense then for me to follow in their footsteps and focus in this blog post on the matter of jobs in America.

When the dust settles around this issue, the question left standing is this: Who should have the primary strategic responsibility for making American workers globally competitive—the private sector or government? This will of course be a defining issue in the 2012 campaign which because of the Republican primaries, and now the President’s speech, is finally in full swing.

President Obama on Tuesday night made the case that while the private sector must play a role in helping America become more competitive on a global scale, there is also a vital role that government must play. The GOP as a party disagrees. Mitt Romney charges the President is putting “free enterprise on trial” while Newt Gingrich merely pontificates about “liberal elites.”

The point that Republicans miss is that American business by itself is not only incapable of leading the way to more and better jobs in America—it cannot accomplish that task alone because the private sector is increasingly global with a rapidly diminishing stake in America. We know this is the case because the President in his address on Tuesday night had to propose strategies to award American firms who keep jobs in America while penalizing those who insist on shipping jobs to points outside our borders. The other reality that no one wants to say out loud is that the American corporate sector is driven by the need to create profits, not jobs.

America’s share of global Research and Development (R&D) spending is plummeting. From 2000 through 2009, our global R&D spending fell from 38 percent to 31 percent while Asia’s rocketed from 24 percent to 35 percent. Ironically, part of the Asian surge in global R&D investment is due to American firms who doubled their own R&D investment in Asia within that same time period to more than $7.5 billion. A vivid example of this is an announcement by General Electric who recently disclosed a $500 million expansion of its R&D facilities in China on top of an existing $2 billion investment.

To the dismay of many Obama supporters, General Electric’s CEO Jeffrey Immelt chairs the President’s Council on Work and Competitiveness. I am fairly convinced that Mr. Immelt the American citizen is as concerned as the rest of us about the plight of the American worker today. As CEO of General Electric however, he is not paid to be concerned about you and me, he is paid to be concerned about General Electric shareholders. There is no common ground regarding these concerns.

To add insult to injury, the United States Commerce Department says U.S. global-based corporations from 2000 through 2009 added 2.4 million workers abroad in their foreign placed operations while simultaneously cutting their America-based workforce by 2.9 million.

As I drove home from my office Tuesday, NPR announced that Apple Computer in the final quarter of 2011, the first full quarter without Steve Jobs at the helm, earned $43 billion dollars with a staggering $13 billion in profit. Apple employs 48,000 people in the United States but contracts with over 700,000 workers abroad. Apple manufactures iPhones in China not only because of low wages there but also because of the ease and speed with which their Chinese contractors are able to mobilize their workforce at almost any hour of the day or night. In a recent New York Times article, an Apple executive was quoted as saying, “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

The sad truth is that most executives of American companies agree. If they are able to make their products better and cheaper in China or elsewhere, that’s where they will be made. What they really want is lower corporate taxes, less regulation and fewer unionized workers. That sounds good as a bottom line sound bite but none of those things will result in good jobs here in America. They may lower the costs of production, but our global competitors will always find a way to do it cheaper.

Global corporations, inside and outside of the United States, will create good jobs for Americans only if Americans are productive enough to earn them. Unfortunately, as the President pointed out in his STOU address, a large and ever growing portion of our workforce is simply not equipped to be productive.

In the richest country in the world, we are shackled by a deteriorating system of education including college tuitions that are out of reach for most American families. There is also the decaying infrastructure and declining investments in basic R&D. All of this puts us on a self-made path to economic and financial suicide.

Unfortunately, as with almost everything, politics get in the way. The American corporate sector has huge influence in Washington. They retain a multitude of lobbyists who prowl the halls of Congress, pouring ungodly amounts of money into political campaigns facilitated by the U.S. Supreme Court’s Citizens United ruling. The justices gave their blessing to corporations and other Super Political Action Committees (PACS) to give as much as they want to their candidates of choice.

Yes, Democrats benefit from this ruling as well, but Republicans have for decades been trying to convince you and me that the government is our enemy. Well, corporate America is not our friend and without bold action by President Obama and government on behalf of the American worker, good American jobs will continue to vanish.