Looking beneath a consulting firm's facade of objectivity
Several experts Remapping Debate spoke with said that, although the report held itself out as a neutral and objective analysis, its language often reflects advocacy of particular policies.
The tip-off, for many, is the report’s last sentence: “As long as it provides a favorable investment climate and flexible labor force, the U.S. can look forward to a manufacturing renaissance.”
Cynthia Williams, a professor at the University of Illinois College of Law, read the sentence’s implicit message as saying that the U.S. won’t be able to look forward to a manufacturing renaissance if current policies relating to investments and the labor force are changed. She speculated that one BCG concern was that, in reference to potential changes to the tax code, “there may be some tinkering with that that is unfavorable to investors.”
Others, like Stein, saw the sentence as a warning to policymakers, particularly a warning about not creating union-based or other obstacles to the availability of a pliable work force. In fact, she said, “They seem to stress that throughout.”
Joel Joseph, the chairman and general counsel of the Made in the USA Foundation, a nonprofit that promotes American manufacturing, agreed, adding that the last sentence is aimed not only at policymakes but directly at unions, as well.
“It’s a warning to unions that they shouldn’t be too aggressive about demanding wage increases, or you’re not going to have any jobs at all,” he said.
A one-dimensional value system
According to Stein, the report reflects a vision of society in which the market is the only value that matters and that there is no need to consider any others.
Rob Scott, an economist at the left-leaning Economic Policy Institute (EPI), agreed that the report venerates the free market and fails to consider any other values besides the ability of companies to move capital as easily as possible between countries.
“They’re trying to reinforce the same ideology that has been dominant over the last 30 years and that has channeled all of the increases in productivity into profits instead of into wages,” he said.
Price agreed, adding that there are a host of other values that should have been included in the report as factors that companies would want to consider when making decisions about location.
“They’re not worried about the overall level of economic growth, or the health and sustainability of communities,” he said. “They are worried about the particular, narrow-minded interests of business.”
Remapping Debate sent BCG a follow-up inquiry by email regarding what values the firm thought should inform a report not produced for a client (that is, a report generated on the firm’s own account and for public consumption). The inquiry gave as illustrations of potential considerations “economic, social or environmental factors.”
BCG’s response cited only the values of being “objective and unbiased,” not mentioning any economic, social, or environmental factors. BCG added that it “hoped our reputation speaks for itself.”
Remapping Debate asked McKinsey & Company the same question it had asked BCG. McKinsey declined to respond.
Quoted in Labor Notes, however, Michael Zinser, one of the BCG report’s co-authors, appeared to suggest that broader, societal considerations are irrelevant.
“Location is agnostic,” he told Labor Notes. “It’s a question of what the market will bear.”
When asked what values she would have liked to see considered in the report, Stein said, “I would think that in this day the first one would be employing Americans. You could argue that every corporation owes its existence to the fact that it is in the United States and that it has been nurtured and should have a responsibility to the American people.”
McKinsey long claimed that offshoring is a “win-win game”
In the last decade, McKinsey continued to be a cheerleader for globalization. According to Ron Hira, of the Rochester Institute for Technology, one report was especially influential. Titled Off-shoring: Is It a Win-Win Game?, the report was released in August of 2003 and, throughout the next several years, was widely cited by policymakers and the press as evidence that offshoring was beneficial to the American economy.
“The McKinsey report had a huge impact,” Hira said. “It was immediately picked up by the political punditry and the press, and from then on it was just reported as fact that Americans would be winning from offshoring.”
The “prime motivation for offshoring,” the Win-Win report said, “is that it reduces labor costs.” That sounds like a win for business, so why is it a win for all?
“Fears about job losses,” the report says first, “tend to overplay the likely impact of offshoring. But there is a more fundamental factor to understand: Offshoring creates wealth for U.S. companies and consumers and therefore for the United States as a whole…The more companies innovate, the more competitive they become and the more benefits are passed on to consumers.”
McKinsey frankly realized the nature of its challenge: “The starting point is convincing people of the probability of re-employment.”
Then it argued, “Unless we pander to protectionism, there is no good reason to believe that our dynamic job creating economy cannot absorb the level of change posed by offshoring.”
When President Obama assumed office, in 2009, he appointed Diana Farrell as a deputy director of the National Economic Council, serving directly under then-director Larry Summers. Farrell had been the director of the McKinsey Global Institute since 2002, and had contributed to McKinsey’s offshoring analyses for many years prior.
“There’s a real irony there given that Obama ran on a platform that offshoring had hurt America. Then, [in Nov. 2008] Obama went to India and used the exact same language, that offshoring was good for everyone,” Hira said.
In Hira’s view, the government carries the primary responsibility for the fact that reports on issues like offshoring are left to be produced by private firms with corporate interests. The government, Hira said, has created a “void” in political discourse by not speaking loudly on the issue or producing its own, more thorough reports.
“I don’t think any rigorous economist would take these reports even half-seriously,” he said. “But that begs the question: Why hasn’t the government done reports? Why hasn’t the National Academy of Sciences done some reports?”
“No matter how you measure it the studies below were very successful in getting their agenda adopted,” Hira continued. “That message was, ‘don’t worry, be happy. Offshoring is a win-win.’”