One of the country’s leading authorities on these issues, perhaps surprisingly, is a historically minded political scientist who first built her academic reputation in the 1970s by studying French peasants. Over the last three decades, Suzanne Berger, the Raphael Dorman-Helen Starbuck Professor of Political Science at MIT, has increasingly focused on globalization and its effects on the economy — and, currently, on manufacturing, which now accounts for fewer than 10 percent of U.S. jobs, compared to more than 30 percent in 1950.
Berger is now co-chair of MIT’s new Production in the Innovation Economy (PIE) project, which analyzes manufacturing. And she has played a key role in two Institute-wide research teams that produced influential books on the subject: 1989’s Made in America, written by several co-authors, and 2006’s How We Compete, written by Berger.
Berger’s views form a kind of unconventional wisdom about manufacturing. For instance, she does not think globalization creates unyielding pressure that forces all large firms to move operations overseas in search of lower labor costs.
“Companies have real choices about what strategies they choose with respect to outsourcing and offshoring,” Berger says, “and can be equally profitable using different strategies.” By extension, she adds, “countries also have real choices about how they want to handle their policies with respect to taxes and social welfare. The idea that we’re being forced into a race to the bottom to compete in global markets does not stand up.”
The need to explain
Berger completed her undergraduate studies at the University of Chicago and received her PhD from Harvard University in 1967, making a quick impact with research showing the deep political continuities within modernizing Brittany, a province in France. “At that time social scientists believed economic modernization would automatically change people’s politics,” Berger says. “What I discovered was different. If you mapped the politics of the region, there was almost perfect overlap between voting in the 1970s and how villages lined up during the French Revolution.”
Speaking of revolution, Berger arrived at MIT in 1968, amid student protests against the Vietnam War. “Those were very dramatic years,” Berger recalls. “My department was particularly under attack, but my colleagues were always willing to discuss the issues with students. I’ve found that at MIT, people feel the need to explain themselves — not just retreat behind authority.”
People at MIT, Berger found, also frequently felt the need to voice skepticism about the social sciences. “From the moment I came to MIT, people were asking me about the use of my studies. The idea of knowledge for its own sake is always challenged here. That inner tension at MIT is powerful. There many times when I’m simply fascinated with something in itself: How could a political pattern persist for 200 years in an area that has undergone profound economic transformation? But at MIT, you are pushed to ask, ‘What good could it be just to know this?’”
One useful observation emerging from Berger’s studies of France is that globalization is not an inexorable historical force changing everything in its path, including social values and political traditions. In the early 20th century, she notes, “people also thought that globalization was irreversible,” only to see it slow for decades thereafter.
Berger’s interest in the relationship between politics and economic forces helped steer her toward the study of manufacturing — which she thinks has a similarly practical value. “The use of this work is to show a space for choice,” Berger says. “We really can make decisions about what kind of companies or society we want. The idea that we’re being forced into something can blind us to the opportunities we really have.”
Why chasing cheap labor is ‘not sustainable’ as a profit model
That is not the common image of globalization’s effects, but Berger believes it is convincing once you study the evidence.
“Dell outsources just about everything,” Berger notes of the computer maker, “whereas Samsung is making many of the same products, but they're trying to keep as much as possible in-house. Over the years they have been very profitable companies. If we take industries that are under the most ferocious competitive pressures in the world — consumer electronics, apparel, automobiles — we see there are real choices for those companies.”
It is not the case, Berger says, that companies must use manufacturing plants in developing countries to reduce labor costs as much as possible. “Labor costs are a very small part of overall costs,” Berger says. Probably a more important driver of firms’ decisions to locate activities abroad is the emergence of millions of new consumers in developing countries; selling to them leads firms to produce goods in those markets.
More strongly, Berger asserts that chasing lower labor costs can be a self-defeating strategy for many firms.
“If you get your advantage by reducing labor costs, then you’re in a place where your advantage is not sustainable,” Berger says. “Your margins will be thin and evanescent. There will always be someone who can undercut you, because there will always be other regions where people are willing to work for less. Instead, profits come from being able to do something that another company cannot easily replicate.”
And while U.S. manufacturing has hit hard times, Berger is relatively sanguine about its future: There may be many paths to prosperity out there. As Berger sees it, a more sustainable future for U.S. manufacturing would be one in which its comparative advantage comes from new products, ideas, and business models; from skilled workers; or from quality advantages that are hard to replicate, in fields ranging from energy and transportation to pharmaceuticals, among others.
“There are a lot of pressures,” Berger says, “but they do not force us down the path of only one solution.”