With tariffs and trade deficits regularly making headlines, people from Wall Street to Main Street seem to be talking every day about the U.S. economy, particularly what the future holds for American workers.
At Governors State University, (GSU) Professor of Management Olumide “Olu” Ijose knows there is no simple answer. He focuses on international business and strategic management, combining the latest in academic theory with his own experience consulting for multinational firms. Ijose also serves as Division Chair for Marketing, Management and Entrepreneurship for the College of Business as well as the Director of the newly formed Center for Global Supply Chain and International Business.
A naturalized American by way of Nigeria, Ijose offers a global perspective. “Growing up in another country, then working in Europe, America, and Africa helped me understand the role business can play in taking people out of poverty: creating jobs, raising incomes, raising standards,” he said. “I’ve seen firsthand the impact of American and global corporations on different parts of the world.”
Ijose earned an undergraduate degree in industrial sociology in his hometown of Ibadan. But he got his master’s and Ph.D. from the Fisher School of Business at The Ohio State University, the same institution where his father had earned a Ph.D. in public administration.
When he joined GSU in 2010, one of his first tasks was to update the curriculum for business students. As Coordinator of MBA Programs, Ijose led the faculty committee that made substantial changes, like developing an international business strategy course—a fairly new discipline in graduate business schools and one that was not an option for him in 1989 at OSU.
GSU Newsroom: In layman’s terms, describe a supply value chain.
Ijose: Simply, where are the companies that are part of final product? Where are things made? If Apple decides to make sensors in China, Malaysia, or India, that becomes part of the supply chain all around the world. It is what companies do to stay competitive on cost. Doing everything in America will ultimately make the final product too expensive relative to people’s income.
GSU Newsroom: What impact does that have for the U.S.?
Ijose: Manufacturing has been hardest hit by globalization, though the jobs that tend to go overseas in numbers big enough to see, are those that are labor intensive—not design, engineering, or technology related high-value jobs.
If you globalize a supply chain, you create work in places like China and Bangladesh, and the workers in those countries have a higher income. How do they spend their money? Is it on American products like a pair of jeans or Nike branded shoes? Is it on an advanced piece of equipment used to make another product? Is it on service consumption, such as a McDonald’s or Starbucks in India?
Ultimately, the money does come back here in some form or fashion, and sometimes in greater quantity than in whatever it took to produce in a foreign country. If a supply chain is not globalized, an American company’s product stands a good chance of becoming uncompetitive in price unless it is perceived as being of really high quality. In an open economy like the U.S. that’s a risk many companies are unwilling to take.
As globalization occurs, however, American plants close because capacity is taken out, and communities lose jobs. That’s the down side, which is as political as it is economic. If you ask me I’d say solution is to train displaced workers, give them incentives to compete for jobs at a higher level of the value chain.
GSU Newsroom: When did you first see trends that led to plants moving overseas?
Ijose: In the 1980s, the issue was capital mobility from the Midwest Rust Belt to the South and as a student at Ohio State University back then, I received an alumni award to study that phenomenon. Now it’s overseas, but in those years steel mills, auto companies, component manufacturers and the like, found the unions made labor very expensive in places like Michigan and Ohio, so they uprooted the plants and moved them to places like South Carolina and Tennessee where costs were cheaper.
That’s not to say that unions are bad because without them, we won’t have today’s pension plan and health insurance schemes and general level of wages and salaries, but a time came when adjustments had to be made to cost structures.
Globalization had to come. I tell my MBA students the problem was inevitable. The American economic boom of the 50s, 60s and 70s was unsustainable. After World War II, the Europeans recovered from all the destruction and got back to making things, only to have the Japanese get in, and now the Chinese and South Koreans. In addition, the rules-based global trading system, created after that war, was based on lowering tariffs and was designed to foster and support global free trade. In essence, countries like China and India were coming from day one!
The ability of other countries to make stuff Americans would buy was inevitable. That doesn’t mean we were prepared for it, though. It caught us by surprise. However, the U.S. was wise in making unparalleled investments in education and infrastructure. Today, the American educational system remains the best, ensuring a constant stream of innovation that provides support for businesses and the economy, and jobs for workers. The infrastructure quality (from political governance to hospitals, transportation systems and everything in-between) remains one of the very best in the world.
That’s one of the reasons why I’m proud to be a professor. I help support the creation and maintenance of the country’s stock of human capital and helping folks have the ability to purchase quality goods and services.