Ever Heard of Insourcing?

Wriston, Walter B.

Ever Heard of Insourcing? by Walter B. Wriston for The Wall Street Journal

Ever Heard of Insourcing? by Walter B. Wriston for The Wall Street Journal


For better or for worse, we all live in Marshall McLuhan's "global village" and Chicken Little runs through our living room on every hourly newscast. This does not mean that there are not real problems in the world. There are. What is relatively new is that today one politician can command coast-to-coast attention by repeating some assertion over and over—a power not given to an absolute monarch a few years ago.

But in a world where the war on terrorism is the central problem of our time, it is ironic to hear some politicians and the mainstream media whipping up a perception that we have a major problem of exporting a lot of jobs to far-away places and receiving nothing but increased unemployment in return. This situation, we're told, is the dark side of globalization. Some commentators have gone so far as to suggest that American CEOs whose companies outsource jobs should be censured or fired. This lament would make more sense if it came from countries around the world that are outsourcing their jobs to the U.S. in huge numbers.

The balance of jobs we import from abroad greatly exceeds the jobs we export abroad. Every time a foreign company decides to build a plant or opens an office in the U.S., Americans are put to work to man these facilities. Examples abound. Honda increased its U.S. manufacturing last year by 15%. And it is not only manufacturing that is attracted to our shores, but also intellectual capital. Novartis is moving its huge world-wide research and development operation from Switzerland to Massachusetts. Texas is the beneficiary of a $500 million investment from Samsung to build a new semiconductor plant. In some cases—described in this paper recently as "the second wave of Nafta"—Mexico is now able to invest abroad, and that investment is creating "thousands of jobs" for U.S. workers. Many countries with ample capital have poured a steady stream of job-creating investment into the U.S.

The Organization for International Investment keeps track of the number of jobs that are outsourced by other countries to the U.S. While we are exporting some jobs to other countries, the greatest beneficiary of outsourcing is the U.S. itself. We are importing many more jobs than we export. Indeed foreign companies of all kinds from all over the world are attracted to our stable political environment, our relatively low corporate tax rate and the huge growth in productivity by American workers. Many foreign companies trying to compete in the global market carry the cost of the residual socialism found in some European countries, and they look to the U.S. as a far more salubrious business climate.

The latest figures show that as German and Japanese auto makers, foreign drug companies and banks outsource to the U.S., some 6.4 million American jobs were created in 2001, up from 4.9 million in 1991. Contrary to the political static, some 34% of these imported jobs are in the manufacturing sector of our economy. These foreign companies operating in the U.S. are creating more jobs for Americans than homegrown U.S. companies. In the heartland, where the drumbeat against "exporting jobs" is the loudest, data shows that Ohio has imported 242,000 jobs; Indiana has attracted 163,000; and in Michigan some 244,000 jobs, about 6% of the workforce, are imported. And the list goes on. Sometimes the loudest laments originate from the states that have imported the most jobs.

In addition to creating jobs for Americans, many of the U.S.-based foreign companies also export products. Indeed, these exports now constitute about 22% of all American exports. At a time when some worry about our trade balance, this is not an insignificant achievement. Because of globalization, which is currently under attack in some quarters, it should be noted that in addition to the annual payroll of $350 billion flowing to American workers, American investors benefit by owning 20% of the common stock of the largest of these foreign companies. These job-creating foreign investments in the U.S. are "win-win" situations for all concerned.

Mr. Wriston, former chairman & CEO of Citicorp/Citibank, is a trustee of the Manhattan Institute.


This document was created from the article, "Ever Hear of Insourcing?," written by Walter B. Wriston for the March 24, 2004 edition of "The Wall Street Journal." The original article is located in MS134.003.029.00022.

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