Business, Finance & Economics

Foreign investments and local economies

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Story by Jason Margolis, PRI's "The World"

More Americans are looking for work today than at anytime in the past 26 years. The dollar keeps getting weaker. Times are tough for many Americans. But for foreign companies looking to invest in the United States, America looks pretty attractive. Roughly five-and-a-half million Americans work for foreign companies operating in the U.S. States across the country are vigorously competing for their business. But there are pros and cons to foreign investment. What does a state get out of the bargain?

At the entrance to Crawford, Mississippi, a large billboard welcomes visitors to the home of NFL Star Jerry Rice. Rice went on to fame and fortune, the greatest receiver in football history. But Rice’s childhood home is no tourist destination. Main Street is littered with crumbling, abandoned brick buildings. There are no restaurants in town. Forty-five percent of the people live below the poverty line. Just up the road, however, hope has arrived bearing a Russian flag.

Severstal International built a steel mill here that spans the size of 20 football fields. Each year, the mill processes enough steel to build 2 million cars. Most of the steel comes from recycled metal.

Throughout the day, a massive crane drops shredded up washers, dryers, and old car parts into a furnace. "It gets, we tap anywhere from 2950 degrees to 3000 degrees," said electrician Richard Thomas.

Thomas, who's been with the mill for three years, says it’s a real good job. Starting salaries here average about $57,000.

Thomas says he doesn’t mind working for a Russian boss. "I don’t think that really matters as much. We’re in a global economy now, so you kind of have to do it."

Besides two clocks on the wall, one on Moscow time, there’s nothing that feels Russian about the Severstal mill in Mississippi. That’s today’s multinational corporation: A largely invisible foreign owner puts up the capital. They take on the risk, but also reap the profits.

It’s largely a good deal for American workers though. And state development agencies have been competing intensely to lure foreign companies to their states for about a decade.

Mississippi has had a hard time winning many contracts. Only 2.6 percent of people in the state work for foreign firms; the national average is almost double that. But executive director of the Mississippi Development Authority, Gray Swoope, says the state is finding its groove.

“We have probably the nation’s most sophisticated mini steel mill in the world, and its Russian owned, owned by Severstal," said Swoope. "You have companies like Israeli Aerospace Industries that are doing business here. You have PSL North America, which is an Indian owned company.”

Swoope says Mississippi has been enticing foreign firms with its pro-business climate. "And that’s everything from taxation to workforce training. I know I can attract the talent pool that I need. So I can get my talent, I can get it trained, and it is a good place that a company can make a profit."

Another case in point, three years ago Toyota broke ground on a $1.3 billion dollar plant in Tupelo, "The Birthplace Of Elvis." The opening of the plant has been delayed because of slowed auto sales and the weak economy. But a Nissan plant in Mississippi is operational. It’s been churning out cars for six years in the small town of Canton.

Jerry Lousteau broadcasts a local morning radio show in Canton. Lusteau visits the morning coffee club – a daily gathering of about 10 locals. The coffee club members say that Nissan’s arrival has been a mixed bag. The plant employs some 5,000 people. But the prediction was for 26,000 new jobs in the area through the multiplier effect, the creation of new jobs at local restaurants and stores.

Lousteau says, that hasn’t happened: "We have a few new hotels at the interstate we didn’t have before. We’re getting a new Waffle House. That’s hardly 26,000 jobs."

Coffee club member and attorney Lloyd Spivey says he’s glad Nissan chose his town. But he agrees that it hasn’t been the gold rush they were promised.

"We paid a lot for it too," said Spivey. "We spent a lot of money, gave away a lot of money to get the project here, you know. The state and the federal government and all the county connections it cost us an extremely large amount of money."

Jerry Lousteau agrees. He says all those special deals for foreign companies come back to bite you. "We have a struggling public school system in Canton, Mississippi and we now have a billion dollar industry in that school district that is allowed to pay roughly, maybe, 30 percent of what they should or could pay on property taxes to the school system."

It’s a tricky game: States need to make themselves attractive to foreign companies, but they don’t want to give away too many tax breaks. Mississippi also doesn’t want to paint itself into a corner -- relying too much on what some would say is one of its main selling points: low wages.

State development director Gray Swoope bristles when he hears that. "We cannot equate low wage, with low skill anymore."

But foreign companies can pay lower, non-union wages in Mississippi. The state has the lowest per capita income in the nation. Brian Watkins, who teaches international business at Mississippi State University in Starkville, says the state faces a conundrum.

"You take a state like Mississippi, without trying to insult anybody’s origin -- I myself am from Mississippi -- but in some sense you have to look it a bit like developing country," said Watkins.

"What does a state like Mississippi want to be when it grows up? Does it want to position itself as A or B? If it’s A, ie, high value-added intellectual capital type activities, how do you get there? How do you get there in an environment where state education budgets are being cut? If it’s going to be low-wage manufacturing, then you have to ask yourself the question, is there really a future in that?"

That debate is taking place throughout the country, not just in Mississippi. What’s best for the U.S. economy? Should America be re-investing more in manufacturing? Or does it make more economic sense to let developing nations take those jobs?

Right now in Mississippi, with the state unemployment rate hovering around 10 percent, many people say keep factory jobs here.

And why not bring some foreign manufacturing to Mississippi as well.

PRI's "The World" is a one-hour, weekday radio news magazine offering a mix of news, features, interviews, and music from around the globe. "The World" is a co-production of the BBC World Service, PRI and WGBH Boston.

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