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Preparing Ourselves for 21st Century Capitalism
By Robert Reich
Alfred A. Knopf, 1992, 331 pages

"We are living through a transformation that will rearrange the politics and economics of the coming century," says Robert Reich. As we move into the borderless economy, the notion of national products, national technologies, and national corporations will become increasingly meaningless. The only thing that will remain rooted within national borders are the people who make up a nation. This shift has enormous political implications, according to Reich. It means that the traditional idea of national solidarity and purpose can no longer be defined in purely economic terms. It also leads to fragmentation, Reich argues, as "those citizens best positioned to thrive in the world market are tempted to slip the bonds of national allegiance, and by so doing disengage themselves from their less favored fellows."

What we are witnessing today is the end of what Reich calls economic nationalism — the notion that the members of a nation succeed or fail together and that they share a responsibility for the economic well-being of their country. This has been the guiding logic of Western economic thought for the better part of two centuries, Reich observes. It has given us such concepts as gross national product, national economic growth, and national competitiveness. The trouble is that the picture presented by economic nationalism bears almost no relation to how the economy is organized today. "That the strength of the American economy is synonymous with profitability and productivity of American corporations is ... an axiom on the brink of anachronism."

Reich describes two developments that have been crucial to this transformation. First is the changing nature of business among the highly competitive advanced industrialized nations. Standardized mass production is giving way to products that are custom tailored. Reich calls this a shift from "high volume to high value" production. Today, specialty steel mills are replacing mammoth plants; one-of-a-kind machine tools are being routinely produced; plastics are molded to order; and telecommunications networks are designed for individual corporate clients. The result is that large corporations are breaking up into independent, specialized units. This calls for creative specialists with extensive skills and education, not, as in the past, a large work force with only general skills.

Second, many large companies have lost their American character. Today, for example, it is increasingly common to find a company headquartered in the United States, but with research, design, and production facilities spread over Japan, Europe, and North America; additional production facilities in Southeast Asia and Latin America; marketing and distribution centers on every continent; and lenders and investors in Taiwan, Japan, and West Germany, as well as the United States. As production and services move freely across borders, the decision to locate a facility in Detroit, Munich, or Osaka depends on where a company can find the most talented and experienced workers. Moreover, whether it invests in Wall Street, London, or Tokyo depends on where the returns are highest.

The combination of changing labor requirements and the rootlessness of big corporations leads Reich to talk about the growing disparity of economic prospects among Americans. He maintains that the economic well-being of Americans no longer depends on the profitability of the corporations they own, or on the prowess of their industries, but on the value they add to the global economy through their skills and experience. Increasingly, it is the jobs that Americans do rather than the success of abstract entities like corporations, industries, or national economies, that determine their standard of living.

Reich divides American jobs into three broad categories for assessing their contribution to new the global economy. These are "symbolic- analytic" services, routine production services, and "in-person" services. The first of these is carried out by what Reich calls "symbolic analysts" engineers, attorneys, scientists, professors, executives, journalists, consultants and other "mind workers" who engage in processing information and symbols for a living. These individuals, which make up roughly twenty percent of the labor force, occupy a privileged position in that they can sell their services in the global economy. They are well-educated and will occupy an even more advantageous position in society in the future.

Routine production workers and in-person service workers will fare much worse in the new economy, according to Reich. Routine production workers include those who perform repetitive tasks — assembly line workers, data processors, foremen, and supervisors. Examples of in- person service workers are waitresses, janitors, hospital attendants, and child care workers. These two categories of workers do not compete in the global work force and are at a considerable economic disadvantage. This is especially true of routine producers. The future of service workers is less clear cut since their services are in demand by symbolic analysts.

The economic fates of Americans are beginning to diverge, Reich observes. "All Americans used to be in the same economic boat. Most rose or fell together, as the corporations in which they were employed, the industries comprising such corporations, and the national economy as a whole became more productive — or languished. But national borders no longer define our economic fates. We are now in different boats, one sinking rapidly, on sinking more slowly, and the third rising steadily."

The "stark political challenge" presented by this new economic picture is the prospect of deepening social divisions. "America's problem," Reich says, "is that while some Americans are adding substantial value, most are not. In consequence, the gap between those few in the first group and everyone else is widening." The symbolic analysts are becoming increasingly insulated from the rest of Americans through intensified residential segregation by income, a widening gap in educational opportunity and achievement, a less progressive tax system, and more privatization of services, from child care to personal security. "In this way," Reich notes, "symbolic analysts are quietly seceding from the large diverse publics of America into homogenous enclaves, within which their earnings need not be redistributed to people less fortunate than themselves."

Improving the economic position of the bottom four-fifths of the American work force will require that the fortunate fifth share its wealth and invest in the wealth-creating capacities of other Americans. Reich offers a number of proposals toward this end: 1) instituting a progressive income tax; 2) providing opportunities for all Americans to become symbolic analysts by investing in education at all levels; 3) increasing the numbers of Americans who could apply symbolic analysis to production and in-person services; and 4) addressing the plight of the long-term poor.

Copyright 1993 by Scott London. All rights reserved.