Ask a president of the United States how to create good jobs for American workers. He will say: exports.
That’s what Bill Clinton says, and what every president before him, Republican and Democrat, has said for 30 years and more.
“Every time we sell $1 billion of American products and services overseas, we create about 20,000 jobs” at home. That’s Clinton in 1993.
“Each additional billion dollars in exports creates nearly 20,000 new jobs here in the United States.” That’s George Bush, in 1991.
“Every billion dollars by which we increase exports, 100,000 new jobs will be created.” That’s Lyndon B. Johnson, in 1964, when a billion dollars went a little further.
It has become an enduring article of faith in Washington: If U.S. manufacturers can sell more goods through unrestricted global trade, the American factory worker will have a bright and secure future.
Just one problem: It doesn’t work.
For the last 30 years, Washington has marched steadily in the direction of “free trade” - and the American worker has just as steadily lost ground.
Blue-collar wages have eroded; good-paying manufacturing jobs, once the mainstay of the middle class, have dwindled. America is moving toward a two-class society of have-mores and have-lesses.
The problem with Washington’s free-trade-equals-jobs formula is that it ignores the other half of the equation - the negative impact of imports.
For if $1 billion in exports creates 20,000 jobs, then $1 billion in imports eliminates a like number.
That’s the minus of free trade.
And under Washington’s open-door policy, imports have far outpaced U.S. exports. America is creating jobs - in Malaysia, Taiwan, Honduras, Japan and China.
The open doors
In all the presidents’ statements extolling global trade, you’d be hard-pressed to find the number of American jobs lost because of imports. And no wonder:
Since 1979, 2.6 million manufacturing jobs have been eliminated.
That’s equal to the entire work force of the state of Maryland.
In the last two decades, Washington policymakers have thrown open the doors of the world’s most lucrative consumer market to foreign products without adequate regard for the consequences - either for American workers or for the long-term health of American industry.
While the dropping of most U.S. tariffs on imports has meant big profits for big companies, it has been a disaster for American workers, their families and many small businesses.
Not that exports didn’t account for new jobs. They did. From 1980 to 1995, the value of exports more than doubled. They went from $224 billion a year in 1980 to $576 billion in 1995, creating millions of jobs. But they were swamped by imports, which tripled, to $749 billion in 1995, wiping out millions more jobs.
In the global economy, U.S. corporations with operations around the world find it far more profitable to manufacture in low-wage countries than at home. Instead of exporting products made by U.S. workers, they increasingly employ workers in other countries to make products for foreign markets.
Today, many U.S.-based multinational companies, with operations abroad, have barely a nodding acquaintance with the word “export.”
General Motors Corp., the world’s largest automaker, says it shipped 95,000 cars and trucks abroad from the United States in 1995 - or just 2 percent of the 4.3 million vehicles GM made here. The rest of its worldwide sales were of vehicles made overseas.
Indeed, a vast number of familiar “American” brand names now are produced elsewhere and imported into this country.
Take Colgate-Palmolive Co., the giant household products company.
The cover of its 1994 annual report to stockholders sums up Colgate’s goals: “GLOBAL BRANDS; GLOBAL INVESTMENT; GLOBAL GROWTH.”
From modest beginnings, peddling candles on Wall Street in 1806, the New York-based company now sells toothpaste, soap, shampoo and other products in nearly 200 countries.
More than 70 percent of Colgate’s $8 billion in annual sales comes from outside the United States.
That should mean plenty of exports and thousands of export-generated American jobs, right?
Lynne and Ed Tevis can tell you why.
One day in 1985, Colgate-Palmolive announced plans to close the factory in Jersey City, N.J., where they worked. The Tevises could consider themselves fortunate because Colgate was going to keep them on.
True, they would have to move halfway across the country to Kansas City, Kan., where a small part of the Jersey City operation was to be transferred as part of a “restructuring.” Unlike most corporate executives who relocate, they would have to pay for the move out of their own pockets - $5,000 to $10,000.
But the Tevises each had been with Colgate for 12 years. And while 1,200 others at the Jersey City plant were laid off, the Tevises were among the 80 or so families who had made the cut. So they sold their home, uprooted their family, and left relatives and friends behind to move 1,200 miles west.
At Colgate, they had accumulated pension credits and other benefits. All they would lose, they were told, was their seniority.
Job security: that’s what the Tevises prized most. Ed, then 50, had 12 years to go until retirement, so his wife had asked a midlevel manager in Kansas City how safe their jobs would be there.
“He reassured us about moving,” she said. “He told us, ‘Your husband will definitely retire from here.’ He was less certain about me because I was younger.”
Less than two years later, the Tevises were thrown out of work.
The reason? Another Colgate “restructuring.” From 800 employees in 1988, the Kansas City work force would be reduced to about 200.
The first group laid off included many new arrivals from Jersey City who had relinquished their seniority.
Meanwhile, as the company was thinning out its American work force, it was hiring by the thousands overseas, where it could pay far lower wages.
Look at the people who make Colgate products today - and remember the Tevises and their futile trek to Kansas City.
From 1980 to 1996, a total of 15,390 Colgate workers in the United States lost their jobs. The company cut its domestic work force from 21,800 to 6,410.
During that time, Colgate added 4,490 workers overseas, bringing employment in foreign countries to 30,890.
In short, the number of workers on Colgate’s U.S. payroll plunged 71 percent while the number on its foreign payroll went up 17 percent.
Looked at another way, U.S. workers accounted for 45 percent of Colgate’s total work force in 1980. By 1996, U.S. workers accounted for just 17 percent.
If Colgate’s American employees are faring none too well, the company itself is doing quite nicely. In the last decade, while Colgate was cutting its U.S. work force:
Dividends paid to holders of common stock went up 137 percent, from 65 cents to $1.54 a share.
The stock price shot up 287 percent, from $16.38 a share to $63.38.
And profits soared 374 percent, from $122.5 million to $580.2 million.
As is increasingly the case with foreign trade by U.S. multinationals, the flow of Colgate goods is largely in one direction. The company manufactures products abroad and ships them into this country, but it makes little here for sale overseas.
That so many of the imports that kill American jobs are made by U.S. multinationals such as Colgate, which once manufactured most of their products here, is a grim irony. It was particularly grim for the small band of Colgate workers from Jersey City who demonstrated faith in their employer and trooped out to Kansas City, to be fired.
“A lot of families were destroyed by what happened,” said Terry Darago, who relocated with her husband, Stanley, a Colgate worker. “People split up. People got divorced. Some people had to sell their houses. Others had their cars repossessed. People struggled. They didn’t have the income anymore.”
Ed Tevis has had three jobs since Colgate - the first for a glass-cutting company, which later closed; the second for a pharmaceutical maker, where he was laid off. He now is a production worker for a bottle maker.
Lynne Tevis went back to school and learned secretarial and bookkeeping skills. She briefly kept the books for a health-care company until the firm closed the office. She has not worked since, and in the spring of 1996, Lynne, 40, gave birth to her third child, a girl.
The more the company sells abroad, the less it makes at home; the more money it spends overseas, the less it invests in the United States; the more money that goes to shareholders, the less that goes to employees; and the more plants it closes, the fewer jobs there are to be had.
In that, Colgate is representative of what is happening across much of corporate America.
MEMO: Next: How well-paying manufacturing jobs - and whole industries - are drying up.