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| Corning�s Layoff Policy: �Fire the Americans First� |
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Saturday, November 24th, 2001
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Why does the Corning glass corporation axe jobs in the United States but not in Japan? The answer lies in the workings of Japanese industrial policy. By Eamonn Fingleton.
TOKYO. According to a recent Reuters report, Corning glass corporation has announced layoffs totaling 12,000 so far this year. That number is disturbing enough in itself given that Corning has long been regarded as one of America�s strongest high-tech manufacturers. What is even more disturbing is that while Corning is firing many workers in its American plants, it is making no similarly sweeping layoffs in its important Japanese operations.
Why? It is a good question. After all it is hardly as if Japan is corporate America�s idea of a cheap-labor paradise. Quite the reverse: measured at current market exchange rates, labor costs are probably at least 20 percent higher in Japan than in the United States. Moreover other production costs run 50 percent to 100 percent higher in Japan than in the United States. Rents in Japan, for instance, are exorbitant by American standards (even if they have fallen significantly from the ludicrous levels of ten years ago).
On the face of it, if Corning were abiding by the normal laws of Western economics, it should have laid off its high-wage production workers in Japan first before cutting jobs in the United States.
Corning on the defensive
When I asked Corning what was going on, the company could hardly have been more defensive. Spokeswoman Monica Ott first ignored my e-mailed questions. When I persisted she finally � after a delay of two months � gave me answers that really merely compound the mystery. I asked in particular about the company�s important business manufacturing a special type of high-tech glass used in liquid crystal displays. This is a field in which Corning evidently enjoys a world-beating lead. Why, I asked, does the company manufacture this glass in Japan when it should surely be cheaper to do the manufacturing in the United States?
�Corning chooses to manufacture some of its LCD glass in Japan because of its proximity to the marketplace,� said Ms. Ott. �It is also the site of one of our research and development facilities.�
There are several problems with this answer. Remember that in these days of rampant globalism, lightweight high-tech materials such as Corning�s LCD glass are routinely shipped around the world by air. Thus supplies from a factory in Corning�s home base in upstate New York could reach customers in Japan almost as quickly as customers in California. It is precisely such speedy � and cheap �global transport links that are driving the whole globalism phenomenon. As for the point that Corning does research and development in Japan, this simply reinforces the relevance of my question. After all research and development is highly labor-intensive and is therefore even more vulnerable to Japan's high wage rates than manufacturing is. Moreover the United States has traditionally believed�with good reason�that it has a comparative advantage in research and development. Given all the circumstances, Corning�s decision to locate research and development operations in Japan seems even more inexplicable than locating important manufacturing operations there.
I also asked Ms. Ott what percentage of Corning�s LCD glass sold in Japan is made in the United States. She pleaded �competitive reasons� in refusing to answer. She used the same lame excuse to refuse to answer my questions about where Corning makes optical fibers and where it sources the key materials used in making these fibers.
So what is really going on here? Anyone who understands the truth about America�s perennially frustrating economic relationship with Japan has little doubt that a key factor is Japanese industrial policy. Japanese bureaucrats have traditionally been concerned to maximize the productivity of Japanese labor and a key strategy therefore has long been to force American high-tech corporations to transfer their most advanced production technologies to Japan. Basically American high-tech corporations hoping to sell in Japan these days are welcome only if they do much key manufacturing there (or, failing that, if they source key components or materials from there).
From the point of view of American corporate executives pursuing short-term profits, there is little downside in complying with Japanese policy in this respect. The downside rather is for the American nation, whose long-term economic health is at risk from the rapid hollowing out of high-tech manufacturing. But in this era of globalism, American executives no longer feel much need to worry about their country�s long-term economic health.
Eamonn Fingleton is the author most recently of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Houghton Mifflin, 1999).
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Contact Eamonn Fingleton |
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