Made in America: More Than Just a Patriotic Concept

For many years, U.S.-based companies' shipment of jobs overseas has distressed many Americans. Given the state of the American economy, though, it's becoming more apparent that bringing some jobs back is an economic need, not a knee-jerk principle.

Unemployment is still high, and many Americans continue to suffer. They're unemployed or underemployed. Many have taken part-time jobs; they're working hard and still can't make ends meet.

Some huge American companies aren't helping. They're still eroding our advantage by engaging in counterproductive behaviors like mass layoffs. Fortunately, there are glimmers of hope. Some companies' positive moves may be more about economics than altruism, but they're a step in the right direction in terms of helping America.

Bottom-line narcissism
Some of the disappointments are galling. Cisco (NASDAQ: CSCO  ) announced its plans to lay off 4,000 employees, despite the fact that it remains profitable, reported good sales figures last quarter, and has cash on the balance sheet.

In terms of our current topic, Cisco is no new offender. If you look up the record, it's conducted many mass layoffs over the years. In 2011, it slashed 9% of its workforce, or 6,500 jobs; it then turned around and said it would ship 5,000 jobs to Mexico and to the infamous Foxconn in China.

I can think of many reasons not to invest in Cisco; serial layoffs and shipping jobs overseas are the tip of the iceberg. For example, the currently haunting idea that Cisco may be becoming less competitive should bring up one key question: Has its serial layoff strategy hurt it, even if short-term traders cheered it on?

Elementary economics
As disappointing as that may be, though, some companies are indicating a sea change under way, bringing jobs back to our shores.

In August, MarketWatch reported on a manufacturing summit attended by some of our most massive companies and public officials, and some corporate heads revealed interesting news.

Jeffrey Immelt, the well-known head of General Electric (NYSE: GE  ) , pointed out that that household name is increasingly manufacturing energy-efficient light bulbs in the U.S.

It was easy to view Wal-Mart's (NYSE: WMT  ) vow to stock $50 billion worth of "Made in the USA" items over the next decades with a jaundiced eye. At the summit, Wal-Mart's U.S. head pointed out that the economics of bringing jobs here make "total sense."

Of course the economics are elementary, for Wal-Mart and many other companies. Just last week, Wal-Mart's quarterly tidings continued to echo a frightening refrain for America. Its core customers are struggling; their budgets are constrained by rising food and energy prices -- in other words, necessities.

Today, there's something shameful about companies that are crippling the American economy with pure short-term bottom-line motives. They're ignoring the fact that they may be laying off their own customers; other companies' layoffs also reduce their own revenues and profits.

Looking at long-term bottom lines, here and abroad
Some companies have recognized the value of employment far beyond the kind of near-term bottom-line thinking that companies like the Cisco example applies.

Apple is currently manufacturing some Macs in the U.S. It's also creating jobs through construction of giant solar arrays. There's long been the theory that Apple had the kind of big money to embark on big thinking about bringing jobs back.

In a more impressive example, Whole Foods Market (NASDAQ: WFM  ) manages an admirable balance between helping folks overseas and here at home. Many of its programs and products help support struggling economies across the world, helping increase many people's fortunes and futures through programs that give them a major platform to sell their products as well as enjoy the fruits of fair trade.

However, Whole Foods also carries a wide variety of what I'd call micro-local goods. Alert Whole Foods Market customers can find produce grown by small farmers located within miles, baked goods from local bakeries, and hand-made items by American artisans.

Local products aren't simply about American pride. They also reduce costs associated with factors like transportation, as well as negative externalities that are too often passed along to the general public, like damaging environmental footprints. These are different kinds of value proposition that many investors don't even contemplate when they look at stocks and future growth, but they're real.

Real life, real people in America
If Americans can't purchase, many companies' revenues suffer. Jobless Americans aren't good for the long-standing idea that consumer spending makes up two-thirds of our economy. Recent anemic consumer spending data doesn't please investors. However, traders never seem to quite recognize how consumer spending relates to real life and real people.

The average American citizen can become more constrained in myriad ways, and in ripple effects. They eschew some items so that they can buy others -- often basics. They may allocate more of their funds to help struggling relatives. In addition, public assistance relates to all of us, too.

Sadly, this isn't really a sudden decision to do the right thing. In many cases, the reasons that some of these companies are moving jobs back to the U.S. is simply that China's becoming more expensive for manufacturing.

The saddest part of this is that many companies' managements have likely failed to understand that they have been part of the problem, not the solution, over the years since the financial crisis. Even worse, many companies may be failing at innovation. At some point, skeleton crews of workers whose morale has been beaten down likely won’t execute on the most innovative dreams.

Right now, more focus on "Made in America" items would be a boon for our struggling economy and others overseas; visionary companies that find ways to balance both are the dream we should aspire to. People can't help others much until they can help themselves. Thankfully, more signs point to some paths home.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (23) | Recommend This Article (20)

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  • Report this Comment On September 04, 2013, at 9:26 PM, CHill8008 wrote:

    Getting laid-off is not a death sentence. It is a sign of a flexible workforce, a necessity for a market-based economy. Getting laid-off was one of the best things I've ever done. Preparing for the eventuality of the lay-off is what is needed, by having multiple revenue streams, or even multiple employers, and investing (be a capitalist). Always be looking for a job, have a resume up to date, and go on interviews occasionally. It takes like 30 minutes a month. And it feels really good to turn down a job offer. Holding these constant is exactly the rigidity that is subversive to markets, and to the associated creative, generative, and artisanal human nature, presuming, as I do, that markets are populated by humans. The Chinese and Mexicans, all those in the developing world as it turns out, are people too. Nationalism is a disease of the mind.

  • Report this Comment On September 04, 2013, at 9:55 PM, JayCoburn wrote:

    obvious that chill is a stockholder instead of being in touch with reality. This article is absolutely great and absolutely true, and it says some things that need to be said. Also, let us not forget the part that the US govt played in letting the walmartization of America happen. Greed for money made corporate patriotism a thing of the past.

  • Report this Comment On September 04, 2013, at 10:24 PM, mike28584 wrote:

    Some of what is said in this article is good, but you all left out the Unions. They keep demanding more and more, and companies are in business to make a profit. jay you can call it greed, but that is the American way to make money. Yes the rich get richer, but they also create jobs. In 1966 I bought a Dodge SS for $3500, then union wages where somewhere around $5.00 per hour. Now the auto union wages are around $35.00 per hour plus perks that bring it up to $85.00.

  • Report this Comment On September 04, 2013, at 10:28 PM, CHill8008 wrote:

    Yes I'm a stockholder, Jay. This is a website for stockholders. Being one, becoming one, so forth. The flagship product is called STOCK ADVISOR. All the clues are there bud.

  • Report this Comment On September 04, 2013, at 10:41 PM, TMFLomax wrote:

    CHILL8008,

    I concede a few of your points but disagree with your overall argument. Yes, in some cases companies do have to conduct layoffs, but in a responsible marketplace maybe it should be because they are in REAL financial dire straits. (Personally, that's what I believe. That is too often not the case in the US marketplace these days.) Some companies are serial job cutters, obviously managing short-term profits on a quarter by quarter basis. If a company is profitable and has revenue, I tend to think that it's not impossible to innovate and avoid lackadaisical job cutting. Plus, I believe management can often be blamed for not having hired more judiciously if it overexpanded, and for conducting mass layoffs at the blink of an eye. Unfortunately layoffs are often cheered by traders, which is an absolutely chilling behavior.

    Having been laid off several times, I can say that sometimes, over the long run, it can actually turn out to be a good thing like you say. However, when it is happening to you, in a deep economic trough or recession, it is an incredibly unpleasant experience. With few or no jobs, it is a nerve-wracking experience, and loads of qualified people all vie for the same, very few positions. While you're walking that walk, it is not the most pleasant thing to endure, to put it lightly, and right now, many Americans are.

    Meanwhile, it is seriously bad for worker morale when employees at a company get the sense the ax is going to fall and it might be on themselves, they themselves get the pink slip, OR they suffer survivor guilt if colleagues are fired.

    This can do terrible things to a long-term business. And again, I believe managers who manage well can help salvage jobs, and help bring back jobs, which will reinvigorate our economy, and in the real economy, there are still plenty of Americans who need work.

    I'm not against some jobs provided by American companies being overseas. However, I do not believe as many should be as currently are. Companies that do business overseas of course help local economies. However, there are different ways to help the entire world flourish through trade than sucking all the jobs out of our own economy because too many companies have viewed axing their own workers as a perfectly rational or even great solution without thinking about the bigger picture.

    And of course, I haven't touched upon the fact that "cheap" overseas labor to make "cheap" products has often been conducted in a fashion uncomfortably close to slave labor. That's another ugly side -- it's not something we'd see here, and it's certainly not a nice concept. I don't believe it's responsible business.

    Best,

    Alyce

  • Report this Comment On September 04, 2013, at 10:48 PM, TMFLomax wrote:

    mike28584,

    Granted, unions often do ignore economic reality and yes, that is not part of the article. Sometimes their demands can be from a distorted view and put companies in the exact financial dire straits that really would make layoffs necessary.

    In the case of our auto companies, during the bailout frenzy there was a good argument to be made that between union demands AND highly compensated managements, those companies were being destroyed. There is a point where concessions are necessary on both sides. (And of course, I have no problem with firings for poor performance. I just don't believe many mass layoffs really have to do with individuals' poor performance these days -- just cost cutting, and managements may simply cut to the bone and lose a lot of intellectual capital.)

    I guess that could be a different article for a different day, but it is a good point to bring up.

    Best,

    Alyce

  • Report this Comment On September 04, 2013, at 11:33 PM, CHill8008 wrote:

    Lomax,

    It has happened to me. In a recession. Treating a simple transitionary period in one's life as a tragedy does no good. These are manageable, and also foster working memory and other cognitive processes: real problem solving. Companies that are "serial job cutters" may also be serial job-creators. This is the fluid, dynamic reorganization of a market. It allows the flow of intellectual capital. And we have seen the types of low-wage labor here, this is the enriching process. And you are certainly entitled to your beliefs, but when your beliefs become someone else's obligation, especially by means of coercion, I bristle. It is exacerbated when you refer to such arbitrary, authoritarian, top-down approaches as "market-based". It is not for you to decide if a company is in "REAL" financial trouble. Those are beliefs that are antithetical to a bottom-up, emergence-oriented, market-based system. There is a wisdom in the free and voluntary interaction of individuals. There is no "bigger picture" only empty narrative.

  • Report this Comment On September 05, 2013, at 9:22 AM, TMFLomax wrote:

    CHILL,

    I'm not actually sure when I said anything about "coercion" or that my beliefs create a sense of "obligation." Honestly, I'm not a fan of coercion. I'm a fan of managements that look at the big picture, invest instead of cost cut in damaging ways.

    Maybe it's not up to me to decide what companies are in "real" financial trouble, but it's not difficult to come up with an opinion on that, for example, profitable companies that still have cash on their books don't sound like they're really in trouble. That's not a difficult opinion to come to, really.

    I am a big fan of the free and voluntary interaction of individuals. However, I believe most people view the free and voluntary interaction of individuals as defined as mean and "tough luck." And I think that is very sad. Freedom actually means one can make kind decisions.

    Smart managements make better decisions, not the cheapest moves right now.

    I have a feeling we aren't going to agree on this, but I'm not sure where it said I was advocating "coercion."

    Alyce

  • Report this Comment On September 05, 2013, at 1:38 PM, CHill8008 wrote:

    Lomax,

    Say I own a business and I have fostered a business relationship with several industrious Canadians or Indians or what have you. Though those relationships are voluntary, they may be, in an America you've imagined, illegal. Can I say "no thank, I like my employees now"? Will I be imprisoned? Fined? Coercion both. Alternatively, an employee has the ability to terminate a relationship with their employer at will. It is a voluntary relationship. That voluntary nature needs to go both ways. Will you enforce standards for CEO's of companies that are not, in your opinion, in REAL financial trouble? Will they be enforced with punishment? That is an advocacy of coercion. Even if it is consistent with the "big picture", which doesn't exist.

    Freedom actually means one can make decisions, even if you do not find them "kind". There is just so much hate in your articles. If you want a paycheck, force some one to give it to you. If you don't like how much some one else has, take from them. If you want a college degree make some one else pay for it. Just so much hate in this serial existence you advocate. The reason I no longer fund the fool.

  • Report this Comment On September 06, 2013, at 9:02 AM, invafl wrote:

    It is my opinion that it be mandatory for everybody to be in business for themselves! The world would be a better place!

  • Report this Comment On September 06, 2013, at 1:31 PM, Foosballking wrote:

    Alyce - companies have a responsibility to their stockholders to maximize return. This seems to be lost on you and many others. Labor isn't "shipped" as is dishonestly stated here and many other venues. Companies have to minimize ALL of their costs - therefore, they seek labor which is less expensive. Wait until the full impact of this impending destructive, governement (but I repeat myself) medical boondoggle is felt. See what our unemployment rate is then...probably will be as dishonestly advertised as it is now.... Additionally, given the regulatory environment businesses are forced to endure - let alone the fact that we're the highest taxed business environment in the world; it should be NO surprise that we have the poor level of unemployment. Layoffs are a natural by product of these things. We get a song and dance about 7.4% unemployment...the number is advertised at that level to make Obama look good and nothing else. We're probably between 12 - 15%.

    Finally - I see there are those who think that businesses should just conjure jobs because they have higher than normal levels of cash. Companies build their cash levels for a reason...a significant one being they can't trust what is going to be done to them by the governement.

    The author would do well learning about economics from sources other than the "social justice" idiots...

  • Report this Comment On September 06, 2013, at 1:32 PM, Timkatt wrote:

    Chill,

    Serial job cutters do indeed increase the flow of intellectual capital. Unfortunately it's away from those companies. If you are a great mind why would you want to work for a company know to frequent layoffs. Why work at a company where in 12-18 months you'll get the ax all in the name of the next quarters profit or earnings. This shows how short sighted the senior management and C-level people are. Long term growth is not about planning for the next quarter, it's about planning for the next decade. Serial job cutters are rarely good at this, and are rarely a good investment.

  • Report this Comment On September 06, 2013, at 1:45 PM, Timkatt wrote:

    Foosballking,

    Companies do indeed need to minimize their costs. They would do a better job at it if the CEO's and CFO's would take pay cuts. Many companies put in (non-binding) say on pay resolutions. A lot of shareholders have voted that the executives should not get the wages and bonuses that their boards have approved. Cash rich companies would do more to reward their shareholders by paying out a dividend and/or reinvesting that capital on improved processes, more research and better products. A failure to do this will cause many of the to lose any competitive advantage they may have and potentially lead them down the road to more layoffs.

  • Report this Comment On September 06, 2013, at 1:53 PM, TMFLomax wrote:

    Foosballking,

    I have read Milton Friedman, so I do know exactly where the point you're trying to make about my "misunderstanding." I've also read Hayek. I know some people might be shocked judging by the comments, but I agree with a lot of the dangers of skewed incentives and interventional tactics. (PS Chill: I really don't believe my article ever said anything about making things "illegal" in this sense, I am pushing for change of heart and changes in how investors view business responsibility.) However, I believe Friedman's oft-cited opinion regarding the social responsibility of business is WAY off, or at the very least horribly misinterpreted. I wrote an article on this a long time ago and I feel strongly critical about that common argument that has become the fabric of many arguments about social responsibility.

    Timkatt, thank you, your thoughts reflect my points eloquently. These are factors that many investors consider intangibles (to the extent that many are unwilling to even consider them, apparently) that end up coming back to haunt these companies and their investors. I also believe few managements even know who the heck to cut -- and like you say, that means they lose intellectual capital. I also love your comment speaking to planning for the next DECADE -- exactly what true long-term investors, not traders who could care less about long-term business quality, should keep a sharp eye on.

    Best,

    Alyce

  • Report this Comment On September 06, 2013, at 1:54 PM, TMFLomax wrote:

    Timkatt,

    Good show on second comment too. Outrageous CEO pay is an excellent place to cut costs when it's disconnected from performance, reflects worker ax-wielding, short-term thinking, and so forth.

    Alyce

  • Report this Comment On September 06, 2013, at 2:17 PM, Mathman6577 wrote:

    One of the reasons some companies outsource jobs overseas is trouble finding qualified candidates (or candidates willing to do a particular job) in certain STEM discliplines such as engineering.

  • Report this Comment On September 06, 2013, at 3:02 PM, CHill8008 wrote:

    Timkatt,

    Planning for a decade isn't going to solve any problems, it is hard enough to plan for a quarter. The decade in very brief review:

    The invasion of Iraq, the ensuing war;

    A student in Tunisia sets himself on fire inciting the Arab Spring;

    Facebook is started, permeates everyones lives, inspires an award winning film, goes public in a media frenzy;

    Statements are made commonly in 140 characters or less;

    The Fukushima power plant disaster and the earthquake/tsunami that preceded it;

    The Boxing Day Tsunami;

    Hurricane Katrina;

    The iPhone and iPad begin a movement that quickly topples the venerable PC;

    50 Shades of Gray;

    The Haiti earthquake;

    The Benghazi Attacks;

    North Korea becomes Nuclear Capable;

    One of the greatest economic expansions and lowest unemployment rates along with high home-ownership followed by...;

    One of the greatest recessions;

    The first African-American President of the US;

    The Sovereign Debt Crisis in Europe;

    The Swine Flu panic;

    Obesity becomes an epidemic;

    Wikileaks

    Same-sex marriage is allowed;

    Hurricane Sandy;

    Apps;

    Samsung overtakes Nokia in phone sells;

    Youtube;

    The end of ALL MY CHILDREN and ONE LIFE TO LIVE;

    Obamacare;

    All of these events had some impact on some business somewhere (and were just a few that came to mind), and likely on jobs. They were each unplanned for by a sizable population. And these are big events, there are a multitude of tiny ones that similarly went unplanned but may have had tiny impacts. The idea that one can successfully plan for a decade is a toxic mix of arrogance and stupidity. And such plans would be nothing more than official science-fiction. Planning is a chimera, like the 'big picture". It is better to prepare, each of us.

  • Report this Comment On September 06, 2013, at 3:45 PM, Thaeger wrote:

    ^ Mathman6577:

    One of the reasons many companies have trouble finding qualified candidates is because they're simply unwilling to pay for them.

    ( http://www.nytimes.com/2012/11/25/magazine/skills-dont-pay-t... ):

    "At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour...

    ...In a recent study, the Boston Consulting Group noted that, outside a few small cities that rely on the oil industry, there weren’t many places where manufacturing wages were going up and employers still couldn’t find enough workers. “Trying to hire high-skilled workers at rock-bottom rates,” the Boston Group study asserted, “is not a skills gap.”

  • Report this Comment On September 06, 2013, at 5:51 PM, CHill8008 wrote:

    Thaeger,

    Thanks for the article. I missed that one. The works of Roubini and Mankiw have elucidated this sort of "wage stickiness", and I suspect more to follow from other in the discipline. However, I think the article is myopic in its comparison of NOMINAL wages (and averages at that). For example I work as an hourly (and Union) employee at a mining facility, and as such I am Federally classified as a "miner" and thus fall under the regs of MSHA. As I am often reminded by my fellow hourly employees MSHA is "there for me" and that it is "to my benefit that MSHA is here". And I might agree. As it is in my benefit it is a form of payment that does not show up in my check. Roughly take the cost of MSHA, divide by the number of miners and then add that to each miner's check. Industrial environments tend to be more dangerous to work in than say, McDonald's, and those industrial employees benefit to a greater degree from these regs than do McDonald's employees. And that is one example, other than regs there are matters of insurance, etc. All these benefits must be included to get an accurate picture of compensation. On the employer side they incur costs to comply with these regs. All these have to be included to get a better understanding of compensation.

  • Report this Comment On September 09, 2013, at 12:31 PM, Mathman6577 wrote:

    United Technologies Corp (NYSE:UTX) is moving elevator manufacturing from Mexico to South Carolina.

  • Report this Comment On September 09, 2013, at 12:47 PM, Mathman6577 wrote:

    Thaeger:

    I have observed in my two areas of expertise (I work as an electrical engineer at an aerospace company and also teach math at the college level) it is difficult to fill many openings in spite of offering good salaries. Most "lists" of top openings are loaded with engineering and math jobs (and many go unfilled) (*).

    (*) There is a good book which documents why many people that live in Asian countries are better at math and engineering than most Americans ("Outliers" by M. Gladwell). The reason is that because of the way they "think" about numbers and equations in their native language it allows them to perform mathematical operations and solve engineering problems at a much faster rate than Western society. This results in many more Chinese, Japanese, and Korean people getting advanced degrees in STEM and why American companies go after them. IT IS NOT because American companies do not want to pay for this talent. They will pay if the talent is there.

  • Report this Comment On September 10, 2013, at 2:16 AM, DJDynamicNC wrote:

    Chill brought up a great point in the first comment:

    "Preparing for the eventuality of the lay-off is what is needed, by having multiple revenue streams, or even multiple employers, and investing (be a capitalist)."

    I would argue, however, that we as a society would be improved by ensuring that we collectively provide one of those revenue streams through a guaranteed minimum income, and/or social ownership of housing and similar shared provisioning of essential life requirements.

    This would result in a much more flexible workforce, less desperation (and, I imagine, a concurrent decrease in criminal activity) and most importantly in a more reasonable quality of life for a huge number of human beings.

    It's not hard to imagine a world in which automation makes jobs essentially obsolete. One would think that such a world would be a paradise, and so long as the ownership of the means of that production was shared socially then it would be. But in a capitalist society, a world with no jobs is a catastrophe. It shocks me that we can take a situation in which more people can live better lives by doing less work and make that a BAD thing. But here we are.

  • Report this Comment On October 30, 2013, at 5:08 AM, thidmark wrote:

    This is the kind of drivel I would expect to find at the Daily Kos.

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