Book Review: (page 1 of 2)

The Work of Nations
By Robert Reich
Vintage Press
New York City, 1992
340 Pages, $12 Paperback

Reviewed by Carl Davidson
Networking for Democracy

Robert Reich's appointment as Secretary of Labor did not sit well with many lobbyists in Washington. Corporate interests were generally worried that he might be too liberal and "anti-market." Union officials, on the other hand, saw him as an elitist "free-trader" and "job exporter" detached from their concerns.

While there is some truth behind all these critical labels, they all miss the main point about Robert Reich. The most important thing about the new Secretary of Labor is the fresh perspective he brings to the vast restructuring of the labor market caused by the collapse of "smokestack" industries in the U.S. and the growth of industry in the third world.

Reich's views are clearly laid out in his latest book, The Work of Nations, which is both a futurist vision of the work force of the 21st Century and an old-fashioned polemic against "economic nationalism." Old-fashioned liberals and conservatives alike will find plenty to disagree with in its pages.

The book's main focus is on the U.S. crisis of de-industrialization and what to do about it. Unlike many liberals and union officials, Reich opposes tariffs and other restrictions on trade designed to "protect" American mass production from global competition. In his view, the shift of lesser skilled jobs to low-wage regions is a natural process that could even have positive results overall. But unlike many conservatives, Reich doesn't hold out much hope for the free market's ability to take up the slack by generating adequate high-skilled employment or high-wage incomes without substantial assistance from government.

So what does Reich propose? First, he argues for assessing the wealth of a society's economy in a different way: not by adding up what its business class owns, but by adding up what value its working class and small producers can impart to their products in the process of production. Actually, Reich's analysis here is quite old- fashioned. Like both Karl Marx and Adam Smith, he sees the dynamic economic value of a nation residing in the relative size, skill and productivity of its labor force. In fact, his book's title, The Work of Nations, is an implicit tribute to The Wealth of Nations, the 1776 classic of Adam Smith.

Reich begins by reviewing the history of the interplay between the American state and economy. He brings out a number of interesting points, especially on the historical importance of protectionism. For its first 150 years, for instance, the American market was far from a free market: until 1913, an average duty imposed on imported goods was as high as 50 percent. In the early 20th Century, he also shows how anti- trust legislation, intended to promote competition among these home-grown, hot-house capitalists, in fact promoted the growth of large corporations that swallowed their competitors and restricted competition.

Massive corporations grew in tandem with the techniques of a mass production where products were standardized for a mass market. The mass market in turn required a mass culture of consumption. According to Reich:

"Americans took it as their patriotic duty to consume, and understood the purpose of the American economy as enabling them to do so. `Economic salvation, both national and personal, has nothing to do with pinching pennies,' declared a 1953 advertisement for Gimbels, the New York department store. `Economic survival depends on consumption. If you want to have more cake tomorrow, you have to eat more cake today. The more you consume, the more you'll have, quicker."

Mass production, however, had an important impact on the character of the work force. On one hand, American workers were more productive than ever; on the other hand, their skills had declined relative to their forerunners in the craft unions. Reich shows how the mass production industries today are still seeking out the low-wage, unskilled and semi-skilled work force. Only now they do it on a global scale, often finding it easier to export the factories rather than import the workers.

Here is where Reich raises a critical question. Does the future of the American economy reside in competing with the third world in order to retain relatively low skill and low wage manufacturing jobs within the borders of the U.S.? Reich doesn't believe there are any winners in this kind of competition: not American consumers, for whom protected trade means higher prices; not the unemployed in the third world, for whom fewer new factories means semi-starvation; not even, in the long run, for the unskilled in the U.S., who are losing their jobs to automated machinery anyway.

Protectionism in a global market, moreover, simply doesn't work anymore. Too many products and too many companies no longer have a distinct or single nationality. If one wants to buy a car made mainly by American labor, one would do better purchasing a Honda from Ohio than almost any Chrysler vehicle made anywhere. What is an "American" company, Reich asks, in a global web where by 1990 "Chrysler owned 12 percent of Mitsubishi...Ford owned 25 percent of Mazda...[and] General Motors bought more than 40 percent of Isuzu?"

Reich makes a convincing case that it is both impossible and reactionary to try to prevent the globalization of the market. Instead, he poses a strategic question: Rather than trying to prevent low-wage, low-skill jobs from leaving the U.S., why don't we try a policy that would encourage high-wage, high-skill jobs to come into the U.S., regardless of the nationalities of the investors?
It's an important point--Reich identifies the process as shifting from "high volume" production to "high value" production. It is especially crucial, he adds, because new job creation is not going to come from the corporate giants of the past. More >>