Monday, January 16, 2012
Money / Politics / News / $$$ / Clout City Aon's outta here—we shouldn't be surprised
Posted by Deanna Isaacs on 01.16.12 at 11:32 AM
Here's historian Jerry Harris, in the Reader, six weeks ago:
[T]ransnational corporations and those who run them have less and less invested in any one particular country. They can make money anywhere, and the logic of capitalism itself drives them to lower their cost of production and increase their efficiency. If they don't do that, they become less competitive. They're driven to globalize, and as they do, they're less invested, for example, in the education system at home. They don't need as many engineers and scientists coming out of the United States when they can use Chinese, Indian, and Brazilian graduates at lower cost. The same logic drives their tax strategies. There are more corporate headquarters in the Cayman Islands than there are people there.
Here's the rest of what he had to say.
Comments (5)
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It's not quite that simple, which is why some companies have moved their call centers back onshore, and why it's possible to pass over the unintelligible Indian CSR by requesting an onshore rep.
But back for a minute to Jerry's steel-mill example, because I happen to know a little about the decline of US steel, what it was like on the floor with the old furnaces, and what the Europeans and others were doing as we declined. We lost that industry not just because foreign labor was (much) cheaper, but because domestic steel managers refused to believe that anyone else could make steel worth buying. These outfits were run by packs of alcoholic schmucks. But if you went to Europe in the early, mid-80s, you'd see that the competition was roughly a century ahead of steel in the US in terms of manufacturing process, including worker safety. It was another planet entirely. I remember visiting at a Belgian operation back then and understanding, for the first time, just how deeply fucked we were. We do not pay attention here, and it costs us tremendously.
Back to his larger argument, which is also old-fashioned (his omg-sovereignty argument was popular in the 1970s, too, only TNCs were called multinational corporations then):
Culture counts. Language counts. It's expensive to deal with confusion that arises from lack of understanding local culture, and expensive to lose customers and goodwill. Labs segregated by language are unhappy labs. Ideas are not discussed, opportunities not seen; people feel slighted. Foreign engineers who can't communicate well with domestic clients -- or, worse, don't believe it's important to communicate well -- can be serious liabilities. Lab managers who don't understand political and regulatory cultures and processes in major-market countries are billion-dollar losses waiting to happen. It's not merely patriotism that pushes the likes of Gates and Jobs to call for serious improvements to US STEM ed; they're not kidding when they say they want to hire Americans. It's often cheaper and grants more opportunity, even if the salaries are higher than they'd be offshore. If they can't find enough smart, qualified ____s, though, then yes, they'll look elsewhere.
The analysis also overlooks the question of where the markets are. When TNCs have major offshore markets -- say in China -- then yes, of course they want to hire Chinese to staff them. They're not only cheaper, they're attuned to the market and other staff. But a company headquartered in China with a US market will not likely leave the US marketing to an office in Shenzhen. In other words, you cannot look at a TNC as one business: it's a concatenation of businesses scattered over the globe, some of which outsource some or all of their work. It doesn't matter where the HQ is except for taxes: what you want is the jobs, and to be a significant enough market to pull facilities. Incidentally, as the EU shows, that's the real threat to sovereignty: the desire to become a large and tasty market. The existence of TNCs is a mosquito bite by comparison.
About hiring Americans: The unfortunate reality is that our K12 ed sucks in comparison to other industrialized nations', and no serious improvement is on the horizon. The problems are particularly serious in math and science, but they're certainly not limited to STEM subjects. We're not serious about ed in this country, and I see that in nearly every K12 project I work on. The point is never to see that the kids get to wrap their hands around what's most interesting in a subject and prepare to do serious work in it. The point is to have them pass a test that the requisite proportion of kids can pass. Result: Kids show up at college so miserably prepared that half of all STEM majors will drop the major; freshman courses are often remedial. High school kids doing exchange programs from elsewhere say they're surprised by how backwards and slow the classes here are, and some will have to repeat the year when they go home; they accept that as the price of a year's immersion in American language and culture. None of this is going to change until we get serious about education, which will mean unpopular reforms to teacher training and recruitment, and very unpopular changes to the way we use schools as one-stop social-services-delivery stations.
In the meantime, it's not helpful to get myopic, look at the enormous gap between the children of well-educated parents (who'll generally cram the kids full of ed, doing an end-run around lousy, dug-in schools) and poorly-educated parents (who generally won't) and decide that the better off are evil and selfish. It will be helpful to do a serious analysis of what kind of ed is needed and then stop fucking around.
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"I happen to know a little about the decline of US steel"
Yeah, my mom also worked for a trade magazine publisher.
"Culture counts. Language counts."
Take it away, Pat Buchanan!
On the supposed shortage of American scientists:
http://www.cjr.org/reports/what_scientist_…
"you'd see that the competition was roughly a century ahead of steel"
Er, right.
@FGFM: Like I tell my third-grader: Read the entire sentence. The competition was roughly a century ahead of steel in the US. And they were. US steel mfrs refused to rip out the old furnaces, build the kind of new mills the rest of the world was building. The result was that guys like Jerry worked in filthy and dangerous conditions, the pollution was unreal, and the efficiency was not so hot, despite those obscene efficiency experts they used to hire. I don't know, but I'd guess the tolerances were also not comparable.
We still have small mfrs using open vats here, and steelworkers still die when hot metal blurps up on them.
@Deanna: Again, it's not that simple.
There are engineers, and then there are smart engineers. Amend the Gates/Jobs call to "smart engineers". Yes, we graduate a lot of BS engineers, and if you saw how that sausage got made, you'd worry a lot more every time you went over a bridge. Google has no use for people who get by and get the degree but aren't that smart. Don't forget that universities are in the business of selling degrees. They can't set the bar higher than the prospective student population can manage, and that has much to do with K12 prep.
When you look at the non-Googles (not that I'd use Goog as the poster child for "knows what it wants"), while Ralph is right they get fussy for dumb reasons, it isn't just that people are being shut out because they're brilliant and creative but haven't got specific skills. It's that often they haven't got the skills (or there's some other irregularity) plus they're not so hot. Despite what Ralph says, people at less exciting tech companies are still aware that there's a limit to how many not-too-bright people you can hire before you drive the good ones away and fly the company into the ground.
About shortages: We have a pretty good glut of life scientists now -- in, I think, the last 20 years we've doubled our output of life-sci PhDs. If you look at those programs, though, you'll find that increasingly the candidates are foreign nationals. That's a trend long in the making (again, look to American prep), but it's not unusual now to find a program where Americans are in the minority. What it means is that if the foreign students can get good jobs here when they graduate, they stay; otherwise their visas expire, they go home, and eventually the jobs follow them there, again in part because they live in another major market. (In other words, yes, we're creating our own problem. Your Sri Lankan physical chemist from Cornell may not only have gotten a good chemical education; after 8-12 years in the US he may have a very good grip on American culture. No advantage to the monolingual, one-culture American chemist there.)
Life sciences aren't all of STEM, though, and the numbers aren't huge in some of these fields. Shake out the foreign nationals, and the number of qualified US graduates isn't so impressive.
You also have to look at the age and paths of the graduates, which returns to unspoken parts of Ralph's point. Scientists and engineers are notoriously stuffy cv-readers, and a 45-year-old American who hasn't kept the cv burnished to a high lustre, or has bouts of unemployment, or has taken career detours, may as well not exist as far as the job market goes. Same with the American who's done two postdocs or three fellowships and not hit anything out of the park. So while on paper, yes, we have all these MS/PhD scientists hanging around, they're not necessarily what the employers are after.
So: take the whole pool of qualified sci/tech/engr people, shake out the deadwood, the gone-nowhere, the wanderers, the meh, and the foreign nationals, and no, it's not wall-to-wall American STEM brilliance.
As the former third-world nations catch up -- and they are catching up or have caught up, in terms of both education and health, and eventually infrastructure -- we're also at a disadvantage in terms of population. India and China, over 2bn people. Us, what, 350m. The top 0.1% of 2 bn, that's 2 million very smart people; on our side, 350,000. At a certain point, employers say, "We can drag them over here, pay more, and deal with the immigration and cultural issues, or we can just go there." That's easier said than done, because, as I said before, culture counts: people running an American company will want to behave like Americans, and the company's culture will be American. Emigration isn't easy, even if you do it by setting up a division or partnership elsewhere & make the transition slowly. So "pay more" is not a simple calculation. But when the combined pressures of markets, costs, and labor pools get high enough, then yes, an ambitious company will change. Even the most rigid do this: look at how Ikea's changed in the last 20 years to deal with American markets, laws, etc.
It comes back to the same point: it doesn't matter whether you pick capitalism or Animal Farm. Both roads lead to "We must do better." Personally, I'd rather skip Snowball.
