Question 3
Tom Friedman, The New York Times Foreign Affairs columnist
Let me get the panelists to respond to Ron's point about job opportunites. Because implicit in it, and correct me if I'm wrong, it challenges the sense that the pie is somehow infinite in both size and diversity.

Answers

Diana Farrell, Director of McKinsey Global Institute
As distressing as the loss of jobs is, it does betray this notion that the economy has a fixed number of jobs. That is just flawed as a concept.  A vibrant, dynamic economy is one that bundles activities into increasingly higher value added activities.  Now, certainly, some people get left out of that process and we need to have a conversation about what do we do about that.  But, there is nothing to suggest that the U.S. has reached anywhere near a limit to that bundling of increasingly high value added activities.

The Bay Area economy, I'd like to point this out, is twice as productive as the U.S. average. So a Bay Area worker is twice as productive as the American worker. This suggests that even within the U.S., we have the ability to keep concentrating into higher and higher value activities. That's not because there are a whole bunch of high tech companies alone.  It's because the activities within every industry are higher value activities. That's a microcosm for where the U.S. needs to migrate to over time relative to the rest of the economy, if we can address the innovation and competitive challenges.  But this notion that we're either going to hold on to the aerospace job, for example, that existed today or it's going to go away is not borne out by fact.

The current discussion on joblessness would suggest that we have some enormous unemployment problem. We do have a disappointing job creation but that is because our base is 2000. We have a 5.7 percent unemployment rate.  In a historical context, we do not have an enormous unemployment problem.

Ron Blackwell, Director of Corporate Affairs of the AFL-CIO
The world doesn't stand still. It's going to move forward, one way or the other, with us or without us. There is not a question of a fixed pie, although there is that question with a particular job, of course. Workers understand this. The key, and I would agree with Diana is, innovation.  In a globalized economy, we can't build successful companies unless it's based on innovation.  What worries me most about offshoring is that it's diverting the attention of business leaders from building successful, innovative companies to integrating the firm's specific assets that they control to simply finding cheaper inputs.  And I think that there's nothing that's being accomplished, technologically or organizationally, by offshoring that couldn't be accomplished without it, in my humble opinion.  I'm worried because our country can't have a vibrant, growing economy with a future for all its people unless we have successful, forward looking, innovating companies.

In a globalized world, it's not just a matter of somehow labs generating technical ideas. If you can buy an idea on a market, anybody can buy it.  We need to develop companies as learning organizations that are devoted to the sole purpose of creating wealth ­ new ideas for new products and better services, not scouring the earth for cheaper inputs. That turns a company from a wealth creating institution into an income distributing institution. There's a difference between a company and a casino. Companies are supposed to create wealth, not simply redistribute it.

Jeffrey Garten, Dean of Yale School of Management
I think that offshoring is really the canary in the mine shaft because the issue isn't so much with offshoring alone as with vastly increased productivity. We may not have an unemployment problem now, though I think I would disagree with that, but it's going to get worse as productivity compounds on itself.  I don't believe in the fixed pie, but there is a limit to how much Americans are going to consume. 

The other thing that I think is acting here is the huge anxiety in the country, among the work force, about a lot of other issues.  Let's just take health care. It's kind of a cliché but this is the elephant in the closet.  Because American firms are not going to be able to afford the rising cost of health care, they will hire people elsewhere where those costs aren't so great.  And I don't know how you solve this, but the combination of health care and rising pension costs and pension insecurity, these things are not going to go away. This was not the problem in other adjustment periods.  So we are basically competing not just on innovation, but we're competing on the cost of our social choices.  And I don't think we've begun to face that.