Foreign Languages and the Post-Recession Export Imperative

Arguments about our sovereign debt seem to prevent us from doing anything about putting Americans back to work. Once we settle our differences, what will actually create jobs? It is less likely than ever that the Federal government will step up to the plate with a massive work program. Most of us will admit that innovations and brilliant American entrepreneurs can add jobs, with the appropriate financial underpinning.  There are an increasing number of them out there, like Micah Toll with "Pulse Motors" in Pittsburgh. It is possible that more economic certainty, sensible patent reform, and reasonable regulatory environment will help us. However, our pre-recession economy was nearly 70% dependent on the purchasing power and behavior of the American consumer. If we are informed and truthful, we know and admit that this scenario is permanently gone. No president or congress or sovereign debt solution will bring it back.

We must understand why this is so and why we must change before we proceed to any solutions for our unemployment dilemma. Companies don't hire purely on economic environment certainty, desire for lower taxes, more market capital, or regulatory simplification. They hire only because the market demands more product than their current workforce is able to produce.  We have tirelessly created and cultivated the desires and behavior of the American consumer, as noted by observers from the post-World War II era, at the foundation of modern marketing. The tools necessary to facilitate desirable consumer behavior, that is disposable income and/or reliable leverage system, are no longer available here.  In truth, the average American consumer had little disposable income even in the pre-recession economy. For those working, real wages have declined. At present, 69% of our wealth is controlled by 5% of our population. The wealthy participate in the consumer economy considerably less, by percentage of earnings, than do the rest of us. Tragically, over 25 million American participants in the labor force are now unemployed and underemployed, one out of every 6 in our workforce. 15.1% of American households were at the poverty level ($22, 314/year) or below in 2010. This year there are about 46.2 million people considered in need. The state of the American middle class is certainly not supportive of economic growth; between 2000 and 2010 the average middle-class household income fell by 7% to $49,445.  According to the National Employment Law Project, 60% of the total jobs lost since 2008 were in the middle-wage group, those earning $13.53 to $20.66. these are the backbone of our consumer economy.  45.8 million Americans depend on food stamps, and many wait until midnight of the last day of the month so their checks can clear to buy food. According to the 2010 Census, one in two American is poor or low-income.  Indeed, the consumer is essential for the creation of jobs, just as jobs will bring more consumer dollars into the economy.  However, consumer spending has stumbled since the beginning of our recession.

Even with jobs, there was no real discretionary money in the previous economy.  Our pre-recession consumerism was often based on an illusion of discretionary money materialized by over-maxing credit cards, and then paying off the debt where possible from home equity loans. This faulty leveraging system fell apart because we believed that housing values would continue to increase, and our equity with them. From the point where the bubble burst in August 2007, housing prices have dropped 32% nationally, and home equity has sunk to nearly its lowest point since World War II.  An article in the Journal of the American Enterprise Institute states that the "value of U.S. residential real estate almost doubled between 1999 and 2006". The bursting of the real estate bubble stripped it of $6.5 trillion of its value between 2006 and 2010. Using the estimated 2006 count of 75.4 million homeowners, we have an $86,206 per home owner loss of residential real estate value. Even in our current low-interest environment, higher FICO scores required from borrowers are supressing the numbers of home loans made. So much for the myth of eternal growth in home equity. A certain part small business funding was also somewhat reliant on this myth of eternally growing property equity. We know that at least 4 trillion U.S. dollars have been lost since 2006 to early 2010 on commercial real estate. Unfortunately, small business had been the pre-recession jobs engine of our economy, creating  64% of all jobs from 1994-2006.  Consumer dollars available outside of this false and failed leveraging system are often engaged in CDs, 401Ks, gold (which has been as high as $1800/oz) and other forms of savings. The US savings rate, 3.5% in January of 2000, rose to 5.4% in January of 2010. Some Americans not saving are paying off credit card debt, which has risen to a per-debtor average of over $14,740. The median American family's net worth dropped from $126,400 in 2007 to  $77,300 in 2010.  Students loans are as severe a handicap as credit card debt to the ability of the Armerican consumer to be an active and consistant participant in rebuilding the economy, since they owe nearly a $ trillion. All of us recognize that every penny's increase in the average gas price removes an enormous amount of discretionary income from the consumer's pocket and increases delivery costs.  Meredith Whitney says that the regulatory frenzie in the wake of our credit crisis is "debanking" the American middle class, and marginalizing them as consumers. Is it any wonder that the Consumer Confidence Index, registering a 105 in June of 2006 had fallen to 56.7 by June of 2011? Anyone who sees the American consumer as the growth engine of a revitalized economy is simply turning a blind eye to the facts.

Ah, but the consumer dollar is not gone or inaccessible; it is just in other pockets, in other countries. In these circumstances, one of the most frequently stated arguments is that our economy needs to cultivate a trade culture much richer in exports than it is now. The President's economic team has correctly pointed out that each $1billion of export revenues from manufactured goods creates or supports over 6000 manufacturing jobs. In spite of good intentions and some action, efforts to increase our exports do not seem to be on our front burner.  Americans are certainly not the only consumers in the world, and not the richest. At last report, our 2nd quarter GDP growth rate was a dismal 1.3%. There are 116 countries with faster growing GDPs than ours. Though we are by GDP the wealthiest nation in the world, there are 5 to 8 ahead of us in GDP per capita. 95% of the world's potential consumers live outside of the United States, and only about 1% of our corporations export. Goods and services produced abroad by American companies using cheap foreign labor add nothing to the ability of American consumerism to create or support jobs. American consumers buying those same products does nothing, though they are adding to the prosperity of large international American corporations.  Nor is a trade surplus necessary to create a large number of jobs here.

In February 2011, a Time/CNN economics author, Stephen Gandel, argued against expectations for an export solution with a cost analysis argument, where he showed correctly that exports are more expensive per unit (=support of one job) than cultivating the American consumer, as we have been doing. He goes on to suggest that we should put our efforts into a continued or a renewed cultivation of American consumerism.

Times/CNN Curious capitalist blog: "Can Exports Save the Economy?" (Feb. 2 2011)

Mr Gandel's mistake is his failure to go beyond basic cost accounting observations, where he would find a very empty argument? Why? His point is only valid if the renewal of vigorous American consumerism is just around the corner. Yet, even the most casual observer would tell you this is not so. In spite of his unit cost accuracy, his argument should be dismissed as irrelevant, unless we want to see the pre-recession CDS-based leverege system build a new and even more precarious house of cards for Americans.  Cultivating American consumerism is lesson in futility; just consider the latest figures on consumer spending:

40% of consumers slash spending

Successful exporting should include the very class of companies which hire most Americans: small businesses.  These are also the least likely to set up shop and take jobs overseas. Though president Obama has formally recognized this reality in his "National Export Initiative", not much has been accomplished.  A number of experts share the president's opinion: Wayne Wilbanks, chief investment officer at Wilbanks, Smith, & Thomas, Bruce J. Katz, Vice President at the Brookings Institution and founding Director of the Brookings Metropolitan Policy Program, Howard F. Rosen, of The Peterson Institute for International Economics. According to  Manuel Mencia, senior vice president/chief operating officer for Enterprise Florida and president of SIDO U.S. companies that export grow 50 % faster than those that don’t, pay 18 % higher wages and are more profitable. Total export revenue for 2010 was $1.295 trillion, representing 11% of our GDP and supporting nearly 10 million jobs. There are signs that 2011 exports are fueling a boost to our economy.


On the Two-Year Anniversary of the National Export Initiative Successes Abound   

Exports Support American Jobs

Geithner says growing exports critical to US economy

Obama "Export Growth Leads to Job Growth"

Exports help U.S. companies climb out of recession

For U.S. jobs, it pays to look overseas

US Exports and Job Growth (C-Span)

U.S. Should Focus on Export Markets, Ag CEO Says   

Global Business Perspectives - Advantages of Exporting

There is considerable wage inflation occuring in both the Chinese and Indian economies so that some economists are discussing a possible labor cost convergence by 2015.  At a certain point, our export initiative should gain the advantage to be provided by the Advanced Manufacturing Partnership recently announced at Carnegie Mellon University, and by the subsequent expansion to the National Council for Advanced Manufacturing. This lean production initiative will encourage the repatriation of manufacturing, and will be highly adaptable for new products. In truth, it will help to speed up an onshoring process already under way in American manufacturing. Though these facilities will each employ fewer workers than old-style factories, the resulting reduction in unit costs will allow us the competitive position to benefit from free trade deals. By the repatriation of manufacturing, we can minimize supply chain interruptions, as well as risks to quality and intellectual property. Techologies analagous to 3D printing will allow manufacturers to make quick turnarounds between product design alteration and manufacturing a version of a product which is spot-on appropriate for cunsumers in different parts of the world. It is in the number of new-product plants and repatriated manufacturing facilities rather than the number workers in a single factory that we will find a true jobs recovery, and with the development of foreign markets we will find consumers for our new and differently manufactured products. Advanced manufacturing a key ingredient in a new kind of export economy.

Are foreign languages needed in exporting?  The myth of English as the universal language of business is unraveling. Look at the list of countries whose GDP is growing faster than that of the US. How many are English speaking? Often English is adequate to frame a first deal for parties interested in each other, but for working out the wrinkles and for making a repeat business with your trading partner, you must do what you always do for success: know your customer.  How can you possibly get to know your customer without real linguistic and cultural skills?  It is not like being without a business skill; rather it is like not being able to read, do basic math, interpret your surroundings, gather basic information. What this means at the very least is that US businesses must grow in internationally proficient marketing personnel. Agents from American manufacturing companies with a range of international skills will be needed to observe and describe potential consumers in each country in a way that will allow these companies to make appropriate changes in product design and follow it up with culturally appropriate marketing. The same linguistic and cultural skills are needed in the exporter's often overlooked obligation to print service, sales and warranty messages in foreign languages, though highly technical translation is often too much for in-house speakers of the client's language. The expert observation that “ ... businesses that are proactive in their use of foreign languages achieve, on average, 45% more export sales.” is not uncommon.  How about internet work? Only about 35% of internet users are primarily English speakers, and there are an increasing number of non-English, partially or poorly translated corporate web sites. The high competition commercial density on the English-language internet means that well-conceived culturally sensitive commercial web sites in other languages are more easily noticed and have a better chance at a higher search-engine ranking than English-language commercial sites. and Cultural nuances, the real needs of a client, that urgent email that doesn't come in English; all are missed without someone in-house who speaks the language.  Here are several of the many statements supporting the obvious usefulness of foreign language and culture competency in international business:

Exports mean jobs, in any language (Startribune | business)

US behind in exports and foreign languages    

Languages needed to boost exports

Job Description of an Export Forwarder

Global Personnel Skills: A Dilemma for the Karpin Committee and Others

Foreign language use among decision-makers of successfully internationalised SMEs

Language Learning and International Business

Foreign Languages and International Business

Foreign language skills are essential for global business journalists

Foreign Languages and U.S. Economic Competitiveness     


Why Your Business Must Embrace the Foreign Language Internet

What's the importance of learning a foreign language? (The Business Journal)

The Roles of Foreign Language in Business Administration

Foreign language skills provide sharp edge in the job market (nternational Business Times)

Swift, Johnathan S. Foreign Language Competence and International Business. Liverpool: Liverpool Academic Press, 2008.

Once a solid demographic study has uncovered politically stable growing economies where potential exports can travel via efficient distribution infrastructure to customers with the money to buy them, a company's international experts, many of them, foreign-language degree holders, can research the business climate and relevant parts of the culture.

One more thing about the usefulness of foreign language graduates; far from being limited to thinking about literature, they seem to have unlimited capabilities, as we can see in the careers of 150 people who have majored in French, but who have not chosen to become French teachers or professional French translators:

You Wouldn't Know They Majored in French

If there were similar studies for other languages, they would essentially show the same thing. There can be no doubt about it; trained language and international studies specialists will be an essential component of any effort to expand exports.

Where else in business could we use foreign language and international culture proficiency?  These are some of the desired skills that keep American business from filling between 2 and 3 million available jobs. Looking at one jobs search engine alone and limiting my search to major non-English European language, I spotted over 100,000 available jobs on August 19, 2011. Oddly enough, our ailing real estate market could be one area where foreign language skills might be handy.  In 2010, foreign buyers paid  $82 billion for existing homes in the United States between March 2010 and 2011.  How about tourism? In 2010, the US had 11.2% share of world traveler spending,  with 1.2 million total jobs supported by 59.7 million international travelers, who spent $134.4 billion.  Foreigners are constantly setting up shop here. Foreign direct investment in the United States in 2008 totaled $325.3 billion,. The cumulative amount, or stock, of foreign direct investment in the United States on a historical cost basis was $2.2 trillion in 2008. Because of the complexity of the industry, nobody can say for certain how much is spent on translation per year, but estimates vary from between $15billion and $50billion. However, the US Bureau of Labor Statistics predicts that over the 2008-2018 decade, interpretation and translation jobs should increase by 22%.

Do You Speak the Language of Business?   

Indeed [job search]

Foreign buyers cashing in on U.S. housing closeout sale

The need for foreign language and international cultural skills is anecdotally and statistically apparent from many sources.  I do wonder, however, how many of these positions are satisfactorily filled and how many become just another illustration of our "skills gap". In a world where over 66 % of the population is at least bilingual, monolingual Americans have less than adequate skills for successful international business. We need international skills like foreign language proficiency to do business outside our boarders. Of course, in a country which speaks over 320 languages and where only 82% of its population claims English as a mother tongue, we may need to use our language skills in our own neighborhoods. No matter what the institution's budget situation is, we can ill afford to cut back on foreign language instruction. Cutting foreign language programs is cutting our potential for a successful economic recovery. The common sense voice of some enlightened educational leaders in this country is already being heard:

Government has foreign language deficit (May 21, 2012)    

Tongue Tied: How Budget Cuts to International Education Will Hurt the U.S. (GlobalSpin TimeCnn)

Albright, Hagel: Language cuts endanger U.S.

Presidents Call on Congress to Restore Funds to International Programs (Chronicle of Higher Education, The Ticker, July 28, 2011

Learning a foreign language is much more than a path to jobs in our recovery, as you will discover in "Foreign Languages: An Essential Core Experience".

TennesseeBob Peckham
Director, Globe-Gate Intercultural Web Project
University of Tennessee at Martin
Made in Tennessee to bring you the world