A Return to American Competitiveness?

As several of the economists that we’ve read have predicted, we are now seeing the return to American competitiveness. This is occurring in part because of rising wages in China, but also because American companies that pursued outsourcing are now reevaluating the bases of those decisions. As Charles Fishman of The Atlantic reports, industry is returning, as demonstrated by General Electric’s (GE) recent domestic projects. What Fishman fails to address, however, is what this really means for the future of American labor.

Fishman’s article centers on Appliance Park, Louisville, Kentucky, General Electric’s flagship production facility. Appliance Park endured a dramatic decline in employment from the 1990s to today. Seeking lower labor costs, GE looked to oversees production. But now, GE’s CEO is reversing course. He is now reinvesting in Appliance Park, and bringing manufacturing back to the United States, simply because he views this move as a good business decision.

The author admits that this phenomenon is currently fairly unique to GE. Overall statistics still show manufacturing in decline in the United States. But GE is confident with its decision. Seeing rising shipping costs, rising Chinese wages, and continuously high US labor productivity (outpacing wages), GE believes that more companies will follow it in the future, bringing jobs back to the United States.

Fishman acknowledges that one of the driving forces of recent insourcing is a re-born American labor environment in which unions more easily accept wage concessions. Beaten down by the threat and effects of outsourcing, American unions are now significantly weaker. But the author is very optimistic that, despite a weaker labor movement, business will continue to create better workplaces. As he writes, “Management, more keenly aware of offshoring’s perils, is also trying to create a different (and better) factory environment. Hourly employees increasingly participate in workplace decision making in ways that are more like what you find in white-collar technology companies.”

But GE has a long history of refusing to compromise on any labor demands. In fact, during the mid-twentieth century, GE pioneered a practice of positive anti-unionism, providing all employees with political education on the problems of unionization. Historian Kim Phillips-Fein details GE’s strategy in a chapter titled, “How to Break a Union” in her book, Invisible Hands: The Making of the Conservative Movement from Roosevelt to Reagan. Phillips-Fein exposes GE’s deliberate attempts to keep unions out of their factories, by taking a very proactive stance against unionization. In her assessment, the company and the professionals that it hired to keep labor out made anti-unionism seem both moral and flashy. These tactics spread throughout American business, helping to weaken the labor movement on a national scale.

One of the tactics that GE adopted during this phase was to enhance workplace conditions in order to weaken the claims of labor. But the company only made this changes when pressured to do so through the threat of unionization. Fishman, in his Atlantic article, expresses optimism that GE will continue to adopt improvements to the workplace today, despite what he characterizes as a “more flexible” labor movement. This seems hopeful if not naïve.

That GE is moving jobs back to the United States is great news for those currently unemployed and underemployed. Perhaps manufacturing will make a comeback in the United States. But as a staunch supporter of the labor movement, I fear that having GE at the helm for this return is not a good sign for enhanced labor autonomy. One of the main reasons that the company is returning is that American labor has been severely weakened in the decades since outsourcing began. The company undoubtedly seeks to take advantage of these conditions.