Posted by: Michael Mandel on June 27
I’m going to make a forecast: Over the next couple of years, U.S-based companies will begin to realize that they made a big mistake relying so heavily on off-shoring.
Ironically—or perhaps not so ironically—it may be GE leading the way, just as GE and Jack Welch led the massive offshoring wave to India. Here are excerpts from a speech by Jeff Immelt, GE’s CEO, in Detroit last Friday: (Thanks to my regular commenter LAO for pointing this out)
Throughout my career, America has seen so much economic growth that it was easy to take it as a given. We prospered from the productivity of the information age. But, we started to forget the fundamentals and lost sight of the core competencies of a successful modern economy. Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy – and somehow still expect to prosper.
That idea was flat wrong. And what did we get in the bargain? We’ve seen a great vanishing of wealth. Our competitive edge has slipped away, and this has hit the middle class hard.
As a nation, we’ve been consuming more than we earn, saved too little and taken on far too much debt. Growth in research and development has slowed. Our country has made too little progress on some of the defining challenges of our time – like clean energy and affordable health care. Our budget and trade deficits have reached levels that are clearly not sustainable.
While some of America’s competitors were throttling up on manufacturing and R&D, we deemphasized technology. Our economy tilted instead toward the quicker profits of financial services. While our financial services business has performed well, I can’t tell you that we were entirely free of these errors. We weren’t.
Leaders missed many opportunities to add to the capabilities of America. In 2000, the U.S. had a positive trade balance of high-tech products. By 2007, our trade deficit of the same products reached $50 billion. We have already lost our leadership in many growth industries, and other new opportunities are at risk. Trust in business is badly shaken, and it is going to take awhile to get it back.
Third: We must make a serious commitment to manufacturing and exports. This is a national imperative. We all know that the American consumer cannot lead our recovery. This economy must be driven by business investment and exports.
We should set a national goal to create high value added jobs and have manufacturing jobs be no less than 20 percent of total employment, about twice what it is today. And we should commit ourselves to compete and win with American exports.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.