Globalization Hits Home
Don't Blame NAFTA: Virginia Must Retrain
• How Global Trade and NAFTA Hit a Vital Virginia Business
• Hard-Working Mexican-Americans Flock to the Old Dominion
• South of the Border, an Eager Work Force Waits for Jobs
By James A. Bacon
The sad demise of the apparel industry in Virginia is a story
that's happened before and will happen again. Virginia once had a
respectable leather-products industry, but competition from Brazil and
other low-wage countries left cobblers barefoot and bereft. By late
1999, only 400 employees remained. Another sector due for a drubbing
may be furniture and fixtures, with 22,000 employees. Furniture
companies have been slow to modernize, seemingly oblivious to the fact
that there's nothing about the labor-intensive task of running jigsaws
and sanders that can't be replicated in Indonesia, Brazil or any other
country with abundant hardwoods and lower wages.
So what should Virginians do? Compete with brains, not brawn.
That means embracing the values of innovation, flexibility and
productivity, all made possible by smarter, more highly skilled
employees. It means accepting that dislocations from churning economic
forces are inevitable. And it means giving workers the tools Ð the
education and training Ð they need to adapt.
The wrong thing to do is to curse Mexico, NAFTA or the forces of
globalization. If the U.S. hadn't opened up its economy to "unfair"
competition from low-paying Third World countries, some people argue,
we wouldn't have lost so many jobs. The economy may be booming, they
say, but the blessings are distributed unevenly. Virginia's least
skilled and most vulnerable workers are paying the price for free trade
while multinational moguls and Internet gurus skim the profits from new
technology and open markets.
Yes, life is unfair. But protectionism is not the way to make it
fair. Do we really want to channel our resources into preserving
Virginia's lowest-paid occupations? Would we really be building a
better commonwealth if we could somehow salvage those last 400
leather-products jobs — average weekly pay, $358 — before they all
migrate to Latin America? Would we truly be helping Virginia's
low-income citizens by preserving the remaining 10,000 or so apparel
jobs — yielding wages of $360 weekly — before they skip off to Mexico
No. The United States is defining a new role for itself in the
world economy: keeping the high productivity, high-paying jobs close to
home and shipping the low productivity, low-paying jobs abroad. The way
to address the loss of low-wage jobs is not to protect them, but make
sure that all Virginians have the education and skills to climb the
ladder to high-productivity occupations. Protecting crummy jobs doesn't
motivate people to make the sacrifices in time, energy and effort to
acquire better ones. Erecting barriers to competition doesn't goad
communities into developing the educational and training resources that
will help their citizens make that transition. Necessity is the only
spur that works.
The key to boosting living standards is by adopting what Harvard
business professor Michael E. Porter terms the "productivity paradigm."
Best known for his path breaking work, "The Competitive Advantage of
Nations," Porter preaches that economic development depends on
productivity, not control over resources, economies of scale,
government favors or military might. Fighting over the distribution of
wealth is a losing strategy. The United States, its regions and its
localities should focus instead on how to make its companies and
workers more productive.
The productivity paradigm, says Porter, encompasses a complex
but related set of attitudes: "Innovation is good, competition is good,
accountability is good, high regulatory standards are good, investment
in capabilities and technology is a necessity, employees are assets."
He stresses the advantages of industry "clusters" in which suppliers,
customers and members of the supporting infrastructure —particularly in
government, education and trade groups — interact to promote innovation
and productivity. "Connectivity and networks are essential," continues
Porter in a chapter he contributed to Culture Matters: How Values Shape
Human Progress. "Education and skills are essential to support more
Virginians understand that protectionism leads to stagnation. As
I travel around the state, I hear few calls for tariffs, quotas,
boycotts or other weapons of trade war. Virginians instinctively grasp
the productivity paradigm: They know that businesses, workers and
communities must work together to reinvent themselves if they want to
reach the next level of economic development. They know they must
stress education and training more than ever before.
In some communities, the emphasis on education is second nature.
In others, it's not. In dozens of mill and mining towns across
Virginia, high school and college degrees long were luxuries that
offered little financial payback. Anyone who wanted a job could quit
school in 10th grade and collect a paycheck cutting coal or running a
loom. Employers didn't champion education: All they wanted was workers
with basic literacy. Why push for higher standards — and higher taxes?
The spread of the Knowledge Economy has changed that mentality.
Even the simplest jobs today require technology skills and aptitudes.
Every business executive in every community I've encountered across
Virginia recognizes the need to boost the skills of his workers. The
question isn't if their community needs to improve educational
outcomes, but how to improve them.
Ingenious experiments — often based on long-distance delivery of
educational programs — are taking place in higher education. Virginia's
rural counties offer more college-level educational options than ever
before. Meanwhile, a commission headed by Secretary of Commerce and
Trade Barry DuVal has been wrestling with ways to reallocate nearly
$500 million spent annually by federal, state and local governments in
Virginia on work force training. With luck, the Gilmore administration
will present a significant reform proposal to the General Assembly in
the 2001 session.
The tougher challenge, it seems, is raising the expectations for
the K-12 level. Powerful forces — from a teachers guild that resists
change to permissive cultural attitudes that obstruct the raising of
standards — thwart the effort to boost educational performance in
public schools. I don't pretend to know the answers. I suspect it may
involve some combination of more money, more accountability and more
freedom to experiment. In the end, each community will have to find its
own way. But nothing is likely to happen unless business leaders step
in and help make it happen.
A parallel change must take place in the economic development
profession. For several decades, economic developers have defined their
job as creating jobs and increasing the tax base by recruiting outside
industry. Insofar as they thought about creating the conditions for
growth, developers focused on "hard" infrastructure — roads, utilities,
industrial parks and shell buildings.
Those are still prerequisites, but development today also requires a
"soft" infrastructure that includes not only a skilled workforce but
unbearably fuzzy stuff like "connectivity and networks."
Community leaders and economic developers should act as local
proponents of the "productivity paradigm" and catalysts for creating
the soft infrastructure. An extra $1 million a year spent on teaching
best management practices to small manufacturing companies or
supporting a local technology council may pay bigger dividends than
adding a couple of lanes to 100 yards of Interstate.
The developing world knows that investing in education and
productivity is the quickest way to leapfrog the advanced economies.
Through education, India has built a world-class software industry.
Through education, Ireland has transformed itself into the
fastest-growing economy in Europe. The new president of Mexico has
promised to double educational spending south of the border. Clinging
to outmoded apparel jobs that Mexico may snub in another 20 years is no
way to build Virginia's prosperity. By embracing the creative
destruction of the marketplace, we can be the masters of change before
it masters us.