Tuesday, January 31, 2012

Jobs, Jobs and Cars

Jobs, Jobs and Cars


Paul Krugman


NY Times Op-Ed: January 27, 2012




Mitch Daniels, the former Bush budget director who is

now Indiana's governor, made the Republicans' reply to

President Obama's State of the Union address. His

performance was, well, boring. But he did say something

thought-provoking -- and I mean that in the worst way.


For Mr. Daniels tried to wrap his party in the mantle

of the late Steve Jobs, whom he portrayed as a great

job creator -- which is one thing that Jobs definitely

wasn't. And if we ask why Apple has created so few

American jobs, we get an insight into what is wrong

with the ideology dominating much of our politics.


Mr. Daniels first berated the president for his

"constant disparagement of people in business," which

happens to be a complete fabrication. Mr. Obama has

never done anything of the sort. He went on: "The late

Steve Jobs -- what a fitting name he had -- created

more of them than all those stimulus dollars the

president borrowed and blew."


Clearly, Mr. Daniels doesn't have much of a future in

the humor business. But, more to the point, anyone who

reads The New York Times knows that his assertion about

job creation was completely false: Apple employs very

few people in this country.


A big report in The Times last Sunday laid out the

facts. Although Apple is now America's biggest U.S.

corporation as measured by market value, it employs

only 43,000 people in the United States, a tenth as

many as General Motors employed when it was the largest

American firm.


Apple does, however, indirectly employ around 700,000

people in its various suppliers. Unfortunately, almost

none of those people are in America.


Why does Apple manufacture abroad, and especially in

China? As the article explained, it's not just about

low wages. China also derives big advantages from the

fact that so much of the supply chain is already there.

A former Apple executive explained: "You need a

thousand rubber gaskets? That's the factory next door.

You need a million screws? That factory is a block



This is familiar territory to students of economic

geography: the advantages of industrial clusters -- in

which producers, specialized suppliers, and workers

huddle together to their mutual benefit -- have been a

running theme since the 19th century.


And Chinese manufacturing isn't the only conspicuous

example of these advantages in the modern world.

Germany remains a highly successful exporter even with

workers who cost, on average, $44 an hour -- much more

than the average cost of American workers. And this

success has a lot to do with the support its small and

medium-sized companies -- the famed Mittelstand --

provide to each other via shared suppliers and the

maintenance of a skilled work force.


The point is that successful companies -- or, at any

rate, companies that make a large contribution to a

nation's economy -- don't exist in isolation.

Prosperity depends on the synergy between companies, on

the cluster, not the individual entrepreneur.


But the current Republican worldview has no room for

such considerations. From the G.O.P.'s perspective,

it's all about the heroic entrepreneur, the John Galt,

I mean Steve Jobs-type "job creator" who showers

benefits on the rest of us and who must, of course, be

rewarded with tax rates lower than those paid by many

middle-class workers.


And this vision helps explain why Republicans were so

furiously opposed to the single most successful policy

initiative of recent years: the auto industry bailout.


The case for this bailout -- which Mr. Daniels has

denounced as "crony capitalism" -- rested crucially on

the notion that the survival of any one firm in the

industry depended on the survival of the broader

industry "ecology" created by the cluster of producers

and suppliers in America's industrial heartland. If

G.M. and Chrysler had been allowed to go under, they

would probably have taken much of the supply chain with

them -- and Ford would have gone the same way.


Fortunately, the Obama administration didn't let that

happen, and the unemployment rate in Michigan, which

hit 14.1 percent as the bailout was going into effect,

is now down to a still-terrible-but-much-better 9.3

percent. And the details aside, much of Mr. Obama's

State of the Union address can be read as an attempt to

apply the lessons of that success more broadly.


So we should be grateful to Mr. Daniels for his remarks

Tuesday. He got his facts wrong, but he did,

unintentionally, manage to highlight an important

philosophical difference between the parties. One side

believes that economies succeed solely thanks to heroic

entrepreneurs; the other has nothing against

entrepreneurs, but believes that entrepreneurs need a

supportive environment, and that sometimes government

has to help create or sustain that supportive



And the view that it takes more than business heroes is

the one that fits the facts.

© 2011 The New York Times Company

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