Andy Grove on Trade, Globalization, and Defending America’s Economy

AP Photo/Paul Sakuma, File

In this May 19, 2004 file photo, Intel Corp. founder Andy Grove looks on after the Intel shareholders meeting in Santa Clara, California. 

Andy Grove, who died Monday at 79, was a central figure in developing the technology that has shaped 21st-century life. The first employee hired by Gordon Moore and Robert Noyce at their start-up—Intel—Grove became the company’s CEO in the ‘80s and ‘90s, pushing Intel to develop the microprocessors and Pentium chips that became the basis for our digital age. Known as the Father of Silicon Valley, Grove’s non-hierarchical approach to management became the model for many high-tech companies.

In retirement, Grove became concerned about the decline of American manufacturing: When he was CEO, Intel not only performed its research and development in the United States, but its manufacturing as well. He was greatly disturbed that more and more American companies produced their products abroad. Concerned about the erosion of the American middle class, he also helped Service Employee International Union leaders Andy Stern and David Rolf conceptualize new ways that the American labor movement might once again flourish. 

In the December 2011 issue of the Prospect, we ran a special report entitled “Can America Make It?” which looked at the prospects for returning to the U.S. jobs that had been offshored, and, more broadly, at the future of manufacturing in an increasingly high-tech economy. For the report, Grove provided the following piece, in which both his skepticism towards conventional wisdoms not rooted in data and his creativity in reformulating problems and suggesting solutions are on exemplary display.

—Harold Meyerson

There are three distinct causes for the jobs we’ve lost. First, the declining demand for products. So everybody focused on the stimulus—they assumed that the demand cycle and the employment cycle are related like they used to be. But they’re not. I don’t understand pure Keynesianism at a time of global flows like we have now. If we turn on a spigot to increase demand for consumer products, we need to have some factor that measures the portion that goes to a domestically made product. That portion in the last ten years must have changed in a very major way. You want a measure? How about asking for the sourcing from China as a percentage of the goods sold at Walmart plotted as a function of time? When people run to Walmart and spend their money, the majority of that money may go to the Chinese economy. I don’t know the numbers, but it’s a knowable question.

The second problem is the hysterical love that we lavish on innovation. We never talked about it at my job—innovation was followed by production in the same factories where we innovated. Today in high-tech, there’s a separation between the discovery of the product and the ramping up of production. Discovery can take place here, but it doesn’t follow that the manufacturing will be here.

The third problem is that supply-chain management allows production to move to anyplace. Japanese companies come to the United States, American companies go to China.

There’s no single policy that can address all three of these. The Fed can worry about the first one. The Department of Energy can worry about the second. But somebody should worry about the third! Apple alone employs hundreds of thousands of people abroad. That suggests millions of people working abroad for all our companies. That’s probably half of our job loss.

Why don’t we track the inflow and outflow of existing jobs by company? How many jobs have we brought to the U.S., Toyota-style? How many have migrated out? Instead, we get speeches on competitiveness, clichés wrapped in more clichés. What objection can an American company have about releasing this kind of information? There’s no competitive disadvantage if everyone has to do it. They have to report the square-footage of their facilities but not their employment numbers.

I met with a member of the government six months ago. I made a point that there is a marketing issue—the conventional wisdom that perpetuates the story that the U.S. is a bad place to manufacture. In the absence of good analysis, people respond more than the numbers would justify, and outsource more since “everybody knows the U.S. is more expensive.”

Nobody knows. Everybody takes it for granted. How do we know, I asked him, how do we know what the numbers are? It didn’t mean anything to him.

I haven’t seen this subject discussed the way I would discuss it as an Intel issue. If somebody inside Intel was assigned this problem, he would have to answer the question, what is our strategy to x this?
 But nobody demands this for the economy as a whole. We are
 working hard to build a comfortable grave for our industry. 

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