The Work Of Nations
Interview by Terry Morrison
The challenge facing all nations in the future is to improve its citizens' standard of living by enhancing the value of what they contribute to the world economy.
Robert Reich is one of those rare renaissance individuals whose formal education and mind ranges over disparate disciplines. He holds a degree in law from Oxford University and a Ph.D. in economics from Harvard University. A policy advisor in both the Ford and Carter administrations, he is currently professor of public policy at Harvard's John F. Kennedy School of Government. In addition, he is contributing editor of The New Republic, Chairman of the editorial board of American Prospect, a frequent contributor to Atlantic and the Harvard Business Review, and a regular commentator for both radio and television.
During the decades of the seventies and eighties, Professor Reich displayed a remarkable ability not only to sense the contours of the future in economic and social life, but also to convert that understanding into a series of policy choices and options. In the early eighties, in his book The Next American Frontier, Professor Reich cogently outlined the new world of international competitiveness and highlighted the dramatic changes which were affecting the structure and processes of economies. He was one of the first scholars to chart the shift from a national resource-based to an information-based economy.
Professor Reich is noted for his calls for an end to what he terms “paper entrepreneurialism” and the need to develop a future-focused industrial strategy. Depending on one's vantage point, Professor Reich is either famous or infamous for his views.
This year, Robert Reich published a bold and major new work, The Work of Nations, which is nothing less than a panoramic analysis of the state of the world as it edges toward the next century.
In describing Robert Reich and The Work of Nations, Harvard economist John Kenneth Galbraith noted that, “it is one thing to be productive, another thing to be continually challenging and right. Robert Reich is both.” You may not agree that Reich is right, but you would be wrong not to examine The Work of Nations. I spoke to Robert Reich in his office at Harvard University.
Aurora: In your new book, The Work of Nations, you argue that we are witnessing the disappearance of what you call national economies; however, you prescribe several “national” policies and strategies, particularly for the United States. Is there any contradiction between the disappearance of national economies and the prescription of national policies for those economies?
Reich: The question I raise is that even though national economies are vanishing, societies remain behind. People feel a natural affinity with one another and a commitment to improving the capacity of one another to be productive in the new global economy. It's a question. I'm not sure of the answer.
In societies such as Japan and Germany which have a strong nationalist tradition, although their economic borders are becoming blurred, people feel a strong sense of solidarity and are willing to commit vast resources to improving the capacity of one another to succeed. I don't know that that is the case in the United States. The top 20 per cent of Americans are in many ways seceding from the rest of the United States into enclaves of good schools, good parks, recreational systems, and state-of-the-art infrastructure, leaving the remainder of American citizens with fairly poor schools and infrastructure. Thus the top 20 per cent is becoming more successful and more competitive internationally, while the rest are becoming less competitive. In sum, the difference is not so much between national economies and nationalism, as between national economies and national societies.
Aurora: The title of your book is a play on the words of Adam Smith's The Wealth of Nations. In what ways are your thoughts similar to or different from Adam Smith's thoughts?
Reich: The primary principles that Adam Smith relied upon were the notions that national wealth depended on factors of production such as raw materials and skills, and that comparative advantage was relatively static. That is, each nation should stick to what it was good at. For example, England should stick to textile production; Portugal should specialize in wine production. Every nation would be better off through trade. It has come to be understood as a case for free markets. I don't take strong issue with that.
I think in many respects Adam Smith's logic is still relevant, but my emphasis is very different. The reason I use the word “work” is that these days, a return to natural resources or a return to financial capital is less relevant than a return to skills. The well-being and the standard of living of societies in the twenty-first century will depend to a large extent on the skills and insights of their citizens. Citizens will be able to add value to an ever more integrated world economy through those skills and insights.
Surely natural resources can help improve a standard of living if you are lucky enough to be living on an oil well. Or if a nation saves a great deal and invests its savings all over the world, the nation's standard of living will be relatively higher than otherwise. But when all is said and done, the skills and insights of the citizens are the most important variable. Regardless of all other factors of production, “human capital” (and this is a terribly cold-blooded term which I don't like to use) will be the most important factor in future societies' well-being. Of equal importance is the infrastructure, such as the transportation and communication systems, necessary to link the human capital together and to the rest of the world.
In contrast, in addition to Adam Smith's views, human capital can be developed and competitive advantage can be acquired if a group of people in a nation gain experience doing complex things, such as research development, applications engineering, fabrications, or other complex knowledge-intensive activities. These people become more valuable over time because they gain experience necessary for doing even more complex activities in the future. Thus it is not static competitive advantage, as Adam Smith might have supposed. It really is a very dynamic process of learning.
Aurora: In the world of economic competition much has been made of the distinction between “them” and “us.” Who is “us”?
Reich: In any given society, the way of defining national interest, that is the way of ascertaining who is “us,” is to look not at the nationality of the corporations that inhabit the nation, not at any other particular criterion of ownership, but rather at the human capital of the nation.
In the United States and probably in Canada as well, there is the supposition that national competitiveness is tantamount to the profitability or world market share of the nation's major corporations. That is no longer the case. Corporations head quartered in whatever nation are rapidly going global and employing large numbers of non-nationals, often to do complicated work. To the extent that a corporation is profitable or enjoys a large world market share, the citizens of that nation may or may not benefit. Perhaps some of them will benefit by having larger dividends, but they may not be getting the best jobs or the most important experience. The “us” is the nation's people and their intellectual capacities.
Aurora: Corporations today transcend national boundaries so that international products, although they have national brand names, are not really national in any way, shape, or form. Where does the corporation fit in your thinking, particularly given the forces that are affecting those corporations?
Reich: As the larger corporations, such as IBM and Northern Telecom, go global, as they hire workers to do complex things all over the world, and as they export all over the world, they are having less impact on their own nation's citizens' standard of living. Even with regard to national security, one must be less assured that prosperous national corporations have any bearing upon national security. If American corporations undertake complex production outside the United States, in the event of a national emergency in which international lines of communication and transportation are severed, national security would be jeopardized. Far better to have corporations head quartered elsewhere undertaking complex production in the United States, in the event of a national emergency. Ford in Germany in the Second World War ended up fabricating tanks and trucks for the Nazis. Now in the 1990s we have many more examples of nationally based corporations that are undertaking complex production outside the nation.
Aurora: What about the other side of the corporation and management? Where do workers and trade unions fit in your analysis?
Reich: The traditional blue-collar worker who is relatively unskilled or semiskilled is a vanishing species in much of North America. Unskilled manufacturing jobs are going to Southeast Asia, Latin America, and to places around the world where they can be undertaken more cheaply than in the United States or Canada.
That is not to say that we should write off blue-collar workers. We need to make sure that they have the skills to survive and to be productive in this new emerging world economy so that they can get better jobs and generate high incomes of real value. Most former blue-collar workers are now working in the local service economy as hotel, restaurant, or retail workers, or taxi drivers. Most of them are earning little more than the minimum wage.
In fact what is developing is a two-tier labour force. At the top are what I call symbolic-analytic workers. They are managerial, professional, and highly trained technical workers who manipulate symbols in abstract ways and who have a good four-year college education under their belt. The second tier consists of local service workers who are hobbling along close to the minimum wage. There is not too much in between. That is the long-term trend.
The challenge for society is to make sure that as many workers as possible get into the high value added category of symbolic-analytic work and also that the productivity of local service workers is as high as possible. A check-out clerk at a grocery store, sitting behind a computer, who is able to look at data on the merchandise coming out of the store and use the data to control inventory can be a highly valued employee and summon a relatively high wage. So we should not focus exclusively on the so-called symbolic-analytic worker.
Aurora: To what extent is higher education structured and able to prepare people to cope with the world that you are describing, and what changes, if any, are needed in higher education?
Reich: Of all levels of education, higher education is relatively successful. Somebody who graduates from a four-year college or university program probably has many of the rudiments of problem solving, problem identification, experimentation, collaboration, and other elements of a good symbolic-analytic education. Indeed, higher education in North America is far more successful than higher education in Japan. Japanese universities are jokes. There's very little that goes on inside them.
Were I to suggest changes in higher education in North America, I would emphasize more generic forms of learning rather than specific preoccupational skills. Pre-med, pre-law, and pre-business courses are fine as long as they focus on the critical skills necessary for rapid learning of new knowledge and rapid problem solving in a whole new environment, an environment that bears no relationship with the environment of law or business or medicine today. I worry sometimes that those preprofessional curricula are a bit too narrowly defined.
The skills people need to develop have to do with problem solving and identification, developing critical facilities, understanding the value of experimentation, and the ability to collaborate. In other words, given that economies are changing so rapidly, the most valuable skills someone can acquire are the skills to learn rapidly and efficiently and to go into almost any situation and figure out what has to be learned.
Aurora: Higher education also has to adapt to changes in knowledge just by virtue of knowledge production. Do you see a role for new technology in higher education from the teaching and learning perspective?
Reich: Absolutely. The lecture system, for example, comes from the late fifteenth century, a time at which books were just being invented. Students sat and took lecture notes, verbatim. That makes no sense. If my students want to find out what I have to say, they can buy my books. I don't lecture; I don't think people ought to lecture.
By the same token, new technologies such as two-way interactive videodisc technology puts large numbers of people together in a network of computers where they can have conversations or where someone can provide questions and provocative insights, and others can respond. We can learn in a variety of ways, not just between the ages of 18 and 24 but continuously throughout our lives.
Finally, we ought to abolish tenure, which is another system remaining from the Middle Ages. It was originally conceived of as a way of protecting freedom of thought and freedom of research, but actually it has the converse results. The young people seeking tenure in our colleges and universities are often productive, innovative, thoughtful people. Yet instead of really experimenting intellectually, they have to tow the line and do what their superiors want them to do in order to get tenure. After they have tenure, many of them stop being as productive.
Organizations of the future, whether they are universities or businesses or even government, will offer less job security simply for the sake of security. There may be income security, but that is different from job security. We don't want people to fear that they may lose their income, but there is no reason that people should assume that regardless of the quality of the job they do, they should find themselves with exactly that same job tomorrow.
Aurora: Some jobs that are disappearing from North American economies are being relocated in the Third World. What impact do these changes in the way the developed world is conducting business have on the Third World? Is this a positive thing?
Reich: Yes, it will be a positive thing. The danger is that if the advanced postindustrial economies try to save their old jobs, particularly their old manufacturing, pink-collar, service, and data processing jobs that could easily go elsewhere, they begin putting up protectionist walls. They may even try to control capital flows. This has been a disaster for the Third World.
The Third World needs to take on many of these manufacturing jobs. It needs to be able to export manufactured goods, agricultural goods, and agricultural processed goods back to the advanced industrial nations. It also needs to have access to investment capital from advanced industrial nations. If the advanced nations take seriously my prescriptions for economic growth, I think we could discover a positive-sum gain in which the advanced nations continue to grow, but the lesser developed nations also continue to grow. Over the next 25 or 30 years, I anticipate that the developing nations will adopt more of the manufacturing base of the developed nations, and a larger portion of their populations will become symbolic analysts.
Aurora: Can one have a competitive economy, in your terms, in a society that faces serious inequity, either in gender terms, in racial terms, or with social problems?
Reich: I consider this one of the greatest challenges of national competitiveness. I am not defining national competitiveness in terms of a nation's corporations or savings rates or technology. I define national competitiveness in terms of the ability of the nation's people to add value to this increasingly innovative world economy.
In many advanced nations, particularly in the United States and Canada, even in the traditionally social democratic Netherlands, there is a pulling apart of the populations. Those with the best education and the most highly developed skills are at a premium in a new world economy that places ever greater value on conceptual insight. Supply and demand is working in their favour.
But relatively unskilled people who have not gone to college, who do not have the conceptual problem-solving skills of the future, are finding themselves in competition with millions of unskilled people around the world who are eager to work for a small fraction of their minimum wages. Thus, supply and demand is working in precisely the opposite direction for much of our populations.
In the United States in the last 15 years, the top 20 per cent of our population has seen their real inflation-adjusted incomes increase by about nine per cent. The bottom 80 per cent of our population has seen their inflation-adjusted incomes decrease by around 11 per cent, and the forces of globalization are having a centrifugal effect on that.
The problem with competitiveness is that while 20 per cent of our population is becoming more competitive, 80 per cent is becoming less competitive. No nation can long endure with that divergence. It ceases to become a nation. It ceases to become a single society, and that, in the final analysis, is the issue before us. Are we a single society even though we are no longer in a unique economy? That is the central issue.
The Work of Nations: Preparing Ourselves for 21st-Century Capitalism. Alfred A. Knopf, 1991.
The Resurgent Liberal and Other Unfashionable Prophecies. Random House, 1991.
The Power of Public Ideas. Harvard University Press, 1990
Tales of a New America. Random House, 1987.
New Deals: The Chrysler Revival and the American System. Times Books, 1985.
The Next American Frontier. Times Books, 1983.
Minding America's Business. Harcourt Brace Jovanovich, 1982.
Article originally published Fall 1991
Robert Reich is currently Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies and is national editor of The American Prospect . He served as the nation's 22nd Secretary of Labor during President Clinton's first term.
He has written thirteen books, including the best sellers Aftershock
and The Work of Nations. His latest book is Beyond Outrage. As
well, his new film, Inequality for All, is now available on Netflix,
iTunes, DVD, and On Demand.
Updated March 2012
More information on Robert Reich can be found at:
Updated April 2002
Aurora Online
Citation Format
Morrison, Terry (2001). The Work Of Nations: An Interview With Robert B. Reich. Aurora Online: