BERKELEY – At a recent conference in Washington, DC, former Treasury Secretary Larry Summers said that US policymakers should focus on productive activities that take place in the United States and employ American workers, not on corporations that are legally registered in the US but locate production elsewhere. He cited research by former Labor Secretary Robert Reich, who, more than 20 years ago, warned that as US multinational companies shifted employment and production abroad, their interests were diverging from the country’s economic interests.
It is easy to agree with Summers and Reich that national economic policy should concentrate on US competitiveness, not on the well-being of particular companies. But their sharp distinction between the country’s economic interests and the interests of US multinational companies is misleading.
In 2009, the latest year for which comprehensive data are available, there were just 2,226 US multinationals out of approximately 30 million businesses operating in the US. America’s multinationals tend to be large, capital-intensive, research-intensive, and trade-intensive, and they are responsible for a substantial and disproportionate share of US economic activity.
Indeed, in 2009, US multinationals accounted for 23% of value added in the American economy’s private (non-bank) sector, along with 30% of capital investment, 69% of research & development, 25% of employee compensation, 20% of employment, 51% of exports, and 42% of imports. In that year, the average compensation of the 22.2 million US workers employed by US multinationals was $68,118 – about 25% higher than the economy-wide average.