President Obama will consult with 20 CEOs of major U.S. companies today to get their advice on how to stimulate U.S. economic growth and create more American jobs.
The premise of these kinds of meetings is that the heads of American headquartered companies like GE, Google, PepsiCo, and Motorola have a special concern for the fate of the U.S. economy and useful advice on how to fix it. But do they? Are these really American companies in any way other than that they happen to be incorporated in Delaware of some other U.S. state, and do these CEOs have or even can they have the best interests of the American economy at heart?
Remember that most of these companies sell and produce far more outside the United States than inside. They often have many more employees outside the United States than inside and a large proportion of their shareholders are also not American. They must deal in most cases with more than 100 presidents and prime ministers of countries in which they have major interests. In the case of the European Union they must deal with officials in Brussels who are responsible for an economy that is about a third larger than the United States. In Beijing and New Delhi they must deal with governments that are currently driving the development of economies that are almost surely going to become larger than the U.S. economy in the next twenty to forty years.
Also remember that these companies have greater financial power and greater production capacity than all but a handful of countries. They are quasi-sovereign entities and their CEOs are in many respects more akin to powerful heads of state than to your average everyday businessman. It is not a criticism of them to point out that their interests may or may not be congruent with America's interests. Motorola and Cisco, for example, do a large portion of their production in China. They benefit from China's undervalued yuan that allows them to have artificially low production costs. Obama badly needs China to stop manipulating its currency to be undervalued if he wants to realize his goal of doubling U.S. exports. But a halt to China's currency manipulation is not necessarily in the interests of the companies that do a lot of their production there. So what will the CEOs say to Obama about currency manipulation?
A particularly troubling aspect of the global business situation is the affect of the asymmetry of global political organization. In democratic Washington, for instance, the CEOs of these companies are major political players. They have their PACs, legions of lawyers and lobbyists, and ready access to the highest levels of government. Moreover, they can take the U.S. government to court anytime and win. In authoritarian Beijing, on the other hand, not only are the CEOs not political players, they need to pay careful attention to which way the winds are blowing. So in a funny way, they may have to be more responsive to the wishes of the authoritarian governments than to those of the democracies. And certainly it is easier for them to lay off workers and close facilities in the U.S. than it is in most other countries in which they operate including the EU and Japan.
This is not to say that Obama should not be meeting with them. Some CEOs like GE's Jeffrey Immelt seem to have had some second thoughts about off-shoring their production and have even brought some production back to the U.S. from abroad. So it will no doubt be informative for Obama to listen to what they all have to say. But he must do so with a clear understanding of the fact that his problems are not necessarily their problems and indeed may be the source of some of their success.
It would really help if the U.S. government had a clear articulation of the U.S. national economic interest. But it does not, and this is all the more reason for Obama to be non-committal about what he hears.
Indeed, rather than listening too much, the President ought to use this occasion to act like Chinese, Singaporean, Israeli, and French leaders and tell the CEOs that they really need to invest in America. He could remind them that when they need help in protecting their intellectual property and in protesting discriminatory policies abroad, it is not to the Chinese or E.U. or South Korean or other authorities to whom they turn for help. Rather it is to Washington. He could also remind them that more of their innovation comes out of U.S. laboratories and universities than anywhere else and that to keep it going more investment and U.S. based production is also necessary. He should make it clear that he'll be watching their investment announcements and that while he will strive to make America more attractive for their investments, he also expects the companies to do their best to make it or provide the service in America.
After all, what America makes (including services provision) makes America.
Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.
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