Web Assignment 10: Robert Reich's Domestic Neoliberalism

Robert Reich over at Berkeley's policy school, Secretary of Labor in the Clinton administration, has made a career out of trying to plot political strategy for attaining largely social democratic ends though largely neoliberal means. The Work of Nations may be his best book: an attempt to grapple with how the coming of the second great era of globalization and information technology together change the balance of political-economic forces in the world's most developed economies.

Surf over to http://delong.typepad.com/pe101/virtual_discussions/ and then to http://delong.typepad.com/pe101/2007/08/web-assignme-10.html. Write a comment of at least 200 words on what you think the biggest strength or flaw in his argument is. Contribute to the discussion that is ongoing at http://delong.typepad.com/pe101/2007/08/web-assignme-10.html--that is, react and respond to not just Reich but, to the extent it is appropriate, the earlier posters and commenters on the webpage.

Due by 5 PM on November 6

Comments

[Glory Liu]

Reich’s work is incredibly compelling, especially because it predicts, over a decade ago, almost exactly what America looks like today: it is becoming increasingly difficult to define who Americans are, where the boundaries of American economic power lie, and to what extent we actually control our standard of living. However, one particular sentence caught my eye astonishingly. Reich states at the end of Chapter 24 (section 8): “In sum, because in-person servers and routine producers need symbolic analysts much more than symbolic analysts need them, the former have little political leverage over the latter…the politics of secession are relatively peaceful, in other words, because the other side lacks any political artillery.”

I had to stop and pause for a moment because to me, this statement seemed to contradict his entire argument about Americans becoming increasingly more dependent on an unseen global web of huge corporations and their workers. I would argue the opposite of Reich: symbolic-analysts are actually more dependent on in-person servers and routine producers than they think. Symbolic analysts, being the ones in the “rising boat,” merely like to THINK the others are dependent on them—obviously, the symbolic analysts are the ones who have had the proper education and the capacity to essentially mold the success of America.

Until this point in the book, Reich was essentially arguing that the United States has yet to recognize its increasing dependence on the “success of its giant corporations” (34). Whether these corporations involve enormous branches in ten different countries, or branches in different states, there are only a few of Reich’s symbolic analysts commanding an enormous force of the other two workers. So aren’t symbolic analysts outnumbered by the sheer number of routine-workers and in-person servers in America? Would symbolic analysts be able to succeed without the tools necessary for their work (computers, calculators, people to clean the house when they’re gone) without the fruits of the labor of factory workers assembling such tools, or in-person servers organizing their schedules? To ask very bluntly, where would all the lawyers be without the baristas at Starbucks? How much would our lives as student at UC Berkeley, receiving the education of symbolic-analysts, be affected if we were not as dependent on the routine-workers and in-person servers we interact with everyday—even if it’s the barista at Starbucks to give us a caffeine shot so we can finish our PEIS homework. Then again, don’t the baristas need us to keep buying coffee so they get paid…which makes Starbucks the global monstrosity that it is today.

The last example was pretty extreme, but the point is: who is really dependent on whom? It’s the “chicken or the egg” question that I felt Reich brought on himself; and whether he did it intentionally or unintentionally, I feel it’s a very important question to answer for 21st century America, especially since one of Reich’s proposals is his idea of “positive nationalism.” This feeling of “we’re all in this together” should make us feel warm and fuzzy inside, but it seems to me almost too optimistic. The transition of reducing overcapacitated workforces would cause so much upheaval between the symbolic-analysts and the camp of “sinking boats,” (the routine-workers and in-person servers) that Reich’s argument that the latter have hardly any political leverage seems implausible.

[Irina Zeylikovich]

I think the strongest part of Reich’s argument is that he focuses on the individual as the key actor rather than the nation. Actually, it was a bit surprising (not to mention impressive) given that the book was published in 1991, before the internet was as widely available and established as it is today. I think the growth of internet technologies in the 15 or so years between The Work of Nations and now only make Reich’s argument stronger: our world is no longer defined by almost arbitrary lines drawn on a map, and the economy has begun to ignore these lines; what matters now is the skill-set an individual is able to offer not just to a national economy, but to a global one.

Given that he was writing in the early 90s, I think the book was ahead of its time. I don’t quite think the transformation to a truly global economy has been fully realized even today, but it seems that we are well on our way. Reich points out that information, money, and resources rapidly cross borders almost as if they don’t exist, but many governments ignore this facet of globalization just as they ignore the inherently global problems (global warming, AIDS, drugs) that require international cooperation.

Reich spends a great deal of the book articulating his argument and showing evidence to support his claims; what I would have liked to see was more elaboration on the prescriptions he gives for a better future (steering away from trade barriers but not fully avoiding government intervention, especially in the realm of education). He gives the advice, but I felt it was not nearly was thoroughly developed as the rest of the book was. I also have to disagree with Glory, Reich says the ‘sinking boats’ do have political leverage: their numbers. What plagues them seems to be the notion that nothing will change even if they participate in the system since both parties are being funded by the richest 20% of the population.

[Connie Lim]

Robert Reich’s work is valuable in its analysis of the United States of America’s economic development within the context of a globalizing economy. (To be considered is the fact that Reich does not utilize the word “globalization” in his work, since his work comes before today’s interpretation of the word. Same goes with his main ideas; they are very relevant today, but since there has been so much development since his writing of the book, some of his ideas regarding the economy may seem incomplete. ) Reich effectively tracks the western world’s approach towards nationalism in from the early 17th century to the 20th century to give the reader context of the developing perceptions of wealth. From mercantilist focus on the monarch’s wealth to the more modern focus on the well-being of the public, people’s perception of wealth and nationalism changed from an absolutist to a more democratic approach. By tracking the development of the core corporation and pointing our attention to the decrease in importance of the core corporation, Reich shows the reader that people’s attention should be placed onto the development of relevant skills for the global economy through more creative education.

I felt that Reich’s tone was of a more hopeful one; one in which people still have control to obtain a desired lifestyle. He grades the American work force into three main groups, having the symbolic analysts as the most promising and advanced of the three. I agree with him in that these positions are the most valuable and resistant jobs; those who get to have education and job training will be able to obtain higher-earning jobs that work with symbols and creative innovation. These jobs are immune to the constant outsourcing and subcontracting methods of our post-Fordist economies. One of his recommendations for people is to provide their children with adequate education that will enable them to think creatively and become more conducive for symbolic analysis.

I do appreciate his emphasis upon education, but question his belief that America will stay superior because the crème de la crème of our society is still superior to those top workers/students of other countries. I don’t know if the US can truly maintain a sense of authority over other nations, even if more of our workers of today are capable of symbolic analysis. Technology is helping certain countries, like China, to obtain our specialized information without cost. For example, people from China are subscribing to a big number of UC Berkeley’s webcasts; our advanced educational information can be easily obtained and absorbed now.

These countries that are capable of executing in person services and production are able to more quickly catch up with our intellectual and symbolic analytical methods from technologies like the web. Also, other countries that have traditions and cultures that are more conducive to creating a productive and disciplined work force (India and China) will have an advantage over America once they are able to stabilize with their production and in person services. Perhaps Reich’s faith in the US is a bit too great, and he is a bit too optimistic in the system of education, and its role in helping the US maintain superiority within the global economy. He does not consider certain pending issues that may hold our country back, such as a disastrous healthcare system that may eventually lead to economic dry-up for much of the American population; even if we do have educational superiority in the higher echelons of our education system, we may not have the necessary infrastructures to help maintain a reasonable state of getting by for a large portion of our country.

[Karina Tregub]

In The Work of Nations, Robert Reich addresses the end of what he 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. He asserts that the profitability and productivity of the American corporation is becoming less and less representative of the strength of the national economy. The global web of enterprise has transformed the way in which companies operate. Reich describes two developments that have been crucial to this transformation. First, corporations increasingly link specialized needs with customized solutions, stressing services over goods. Second, many large companies have lost their American character, and the company’s production and services can now move freely across borders, with different units (i.e. production, distribution, design, marketing, etc.) being dispersed throughout various countries. By means of international partnerships, these companies exploit the problem-solving abilities of skilled people while contracting with unskilled laborers in low-wage countries for "whatever must be standardized and produced in high volume." Reich maintains that these two factors have made economic well-being of Americans dependent on the value they add to the global economy through their skills and experience, and that this ultimately determines their standard of living. He then goes on to divide American labor into three categories, where “symbolic-analysts” (engineers, attorneys, scientists, professors, executives, journalists, and consultants) make up the top 20% of the population, and enjoy nearly 50% of the national income. Reich claims that “national borders no longer define our economic fates. We are now in different boats, one sinking rapidly [routine producers], one sinking more slowly [in-person service workers], and the third rising steadily [symbolic analysts]."

Writing in 1991, it is incredible how precisely Reich pinpoints the workings of global enterprise, and the effects that this transformation has on the nation’s perceptions of economic prosperity. I would agree with Irina, that “what matters now is the skill-set an individual is able to offer not just to a national economy, but to a global one,” because nations are now much closer than they ever were, through means of transportation and communication advancements, i.e. the Internet, better aircrafts, etc. While it is true that the influence of the core corporation is decreasing, and the development of relevant skills is becoming increasingly important, as Connie notes, I feel that focusing solely on education is not the only solution. Reich contends that we can afford to invest more money in infrastructure, education, and training if we can find the political will to implement solutions that will make the top 20% of individuals spend more money on these programs. However, I feel that turning everyone into a symbolic analyst through increased educational infrastructure and training may pose a serious problem in the future. The only reason why symbolic analysts are so successful is because there are still production workers and in-person service workers, who keep the companies going on a day-to-day basis. Although much low-skilled labor is being outsourced, not all of it is going abroad. If all Americans became symbolic analysts, there would be greater issues than having no barista at Starbucks to make the coffee (although that was a good point made by Glory.)

Reich seems to be assuming that America could trust its economy to function well if most of its labor was made up of symbolic analysts, and its other two sectors were outsourced. However, that is placing a great deal of faith into global interdependence, and the ability of countries to continue working together, and helping America prosper. Recent years have shown that countries, such as China and India, want to prosper themselves, and not function as stepping stones for the American hegemon. Therefore, instigating a country of symbolic analysts means that America would lose its self-sufficiency entirely, and in today’s world, that is not yet something that it can afford to do.

[Eric Silverman]

Like everyone before me, I am truly impressed that Reich could see the “transformation that will rearrange the politics and economics of the coming century” on the horizon. The end of “economic nationalism” is a concept that could only come out of the information technology era. In my previous posts, I alluded to the notion of “rising tides” used during the Kennedy administration, but Reich suggests that the different levels of economic strata are in completely different oceans.
To get back the Starbucks example used previously (a case very near and dear to my heart being from Seattle); I don’t think Reich uses leverage in the same way that has been discussed. The crux of the argument does not so much depend upon how much the symbolic analysts need the in-person and routine workers to get through their day-to-day life, but rather that American investors are just as willing to put their money in an Italian coffee company if they get a better rate of return. Likewise, Starbucks as a company is much more concerned with their profits as opposed to their utility to the American economy. If investors decide to pull money out of the corporation, Starbucks, as a responsible company, will let people go. This is not so much a problem when the workers are 16-year olds working part-time to pay for gas, but becomes a huge issue when it involves a low-educated adult with kids to feed. They are at the mercy of a group that cares primarily on their checkbook, not on GDP or unemployment.
While the wealth of information and technology are only looking to expand and evolve, the skills of the educated become increasingly more exclusive and desirable. At the same time, the skills of the lower educated workers become ever more replaceable with less and less emphasis on national character. These mind workers 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." While he offers suggestions to fix these problems such as a progressive income tax, and education, a larger issue goes relatively un-discussed. While there may be a waning of economic nationalism, it does not necessarily coincide with the end of nationalism as a whole. Apparently, the people of Texas care very much that there are pizza places with jalapeños on their pizzas. It is almost inevitable that Neo-liberal policies will continue to create foot traffic into the United States. As economic borders are erased, physical borders also become less pronounced. With the influx of immigration (primarily from Mexico), more and more Americans find it harder to let go of their national identity. This threatens to be the major ideological hurdle of Globalization.

[Zack Simon]

I appreciate much of what previous posters have contributed in the discussion of Robert Reich’s The Works of Nations. I agree with their interpretations on Reich’s interpretation of the global economy as the driving force of our global peoples’ existence, which I see he lays out very neatly in the first paragraph:

“There will no longer be national economies, at least as we have come to understand that concept. All that will remain rooted within national borders are the people who comprise a nation…This book describes this economic transformation, and the stark political challenge it presents.” In chapter 20, “The Problem Restated,” Reich makes the argument that one of the great dangers of modern economic thought (at least the thought of almost two decades ago) is the America-centrist perspective that places too much emphasis on the activity of corporations. He recognizes the coming of a “global economy” (which, as Connie has pointed out is the precursor to “globalization” but is not exactly a synonym) where America still maintains looming ‘influence.’

Adopting an optimistic view of the future of our national workforce, I find Reich’s expression of an egalitarian educational milieu to be progressive and I appreciate his ideas of reform in this domain. He writes at length of government intervention that seeks to provide advanced educational opportunities for lower economic classes in order to raise their life chances. He says that this will work to further increase the number of symbolic analysts that will contribute to the global economy. Increased training, within the traditional educational systems, would be progressive, compared to contemporary trends of higher education that lends great support to those already with opportunity.

I noticed that Reich’s discussion on education still doesn’t speak enough on what is a sense of ‘a nation’. He ends his book with his landmark chapter “Who is ‘Us’?” His reiteration of his perspectives in this chapter is the keystone to understanding his argument which I find very poignant: “Rather than increase the profitability of corporations flying its flag, or enlarge the worldwide holdings of its citizens, a nation’s economic role is to improve its citizens’ standard of living by enhancing the value of what they contribute to the economy” (301). To improve the position of the bottom four-fifths will require the top 20% to share its wealth-creating capacities. The question of what we owe one another as members of the same society depends on the degree to which we feel we are all members of the same society. Many symbolic analysts feel little particular urgency in the plight of other Americans; rather, they focus on the strict monetary and fiscal policies on a broader international scale. I for one support a perspective of national introspection in today’s market economy that we see through the lens of globalization.

[Ziwei Hu]

As my classmates have already noted, Reich’s work is truly prophetic in nature. He wrote in 1991, that “as almost every factor of production- money, technology, factories, and equipment- move effortlessly across borders, the very idea of an American economy is becoming meaningless.” His words are echoed by pretty much every professor I’ve had so far when they talk about globalization: that many finished products that are sold in stores across the world are composed of parts that were made in different countries- wherever they were cheapest to create.

I find Reich’s categorization of the three different types of workers in the world to be very insightful and I believe this framework explains a lot of about how our globalized society functions. And while I believe that he clearly articulates how the system works, I’m not sure I agree with the implications and solutions he has laid out to address the problem of the growing inequality and income gap. I agree with Connie when she says that Reich is “too optimistic in the system of education and its role in helping the US maintain superiority within the global economy.” Despite admitting that “the worldwide supply of symbolic analysts is growing as well”, Reich maintains that America, because of its large supply of symbolic analysts can maintain their dominance in this field for “at least the foreseeable future”. Connie, who has the advantage of writing 16 years later than Reich, correctly pointed out that China and India are closing this gap at an increasingly fast pace.

The limitations of employing education as the solution to the problems of globalization are further articulated by Karina, who writes, “turning everyone into a symbolic analyst through increased educational infrastructure and training may pose a serious problem in the future.” Capitalism is inherently disposed to create inequality, and as everyone gains high levels of education, perhaps an even higher class of workers might be created once the supply of symbolic analysts overflows.

Towards the end of the book, Reich writes about instilling a sense of cosmopolitanism among the symbolic analysts so that they might “share their wealth with the less fortunate of the world and devote their resources and energies to improving the chances that others may contribute to the word’s wealth.” It sounds nice, but I’m not exactly sure how exactly we’re to go about in accomplishing this goal. Education is most certainly part of the solution, but by itself, will not get us very far.

[Kieran M. Duffy]

I partly diagree with both Connie and Ziwei. I feel that Reich's emphasiss on education playing such a key role in our future is crucial. I think that this is supported well in what Riech describes as the "Transformation" of the companies from "High Volume to High Value." Reich makes very clear that we live in an age where if a company let alone an individual can not add value in some way shape or form, be it a "problem sover" a "strategic thinker" one can just about condsider him or herself heading for a lowere stansdard of living. I think that education is crucial to any field of business. The smarter one may be the more efficient his or her ideas may be,the more "Value" the ideas add, the more profitable the ideas may be, the more superior the corporation will be in what is easily, without a doubt, the most competitive global economy in world history.

However, I do agree with them in the fact that our position as a global leader will be preserved because out creme de la creme elites are better positioned academically than those of foreign countries.

My favorite part of Riech's book is the "Transformation" of the global economy. I think he is dead right when he discusses the importance in surviving by "adding value."

I agree fully with his argument of how efficient and global businesses have become. Furthermore I think he hits the nail right on the head in his examples of how US companies or businesses from around the world for that matter, no longer have loyalty to countries but to adding value for shareholders of those businesses.

His example of the need for us to allow foreign investment made much sense to me as well. Politicians should be enthused to see foreign investment in the US. While our companies may not get the tangible technology ot the lion share of the profits, our workers will inherit the skills to aquire both in the future. This reminds me exaclty of the eg from the Fallows of "give a man a fish and he'll eat for a day, "teach a man to fish and he'll eat for a lifetime."

Lastly, I felt his ideas of "link in" partnerships was probably most relevant to the global economy of today. Partnerships made in which partners have a chance to share in the profits/rewards of a product or service offers monster incentives and had undoubtedly had a huge impact on the profits of the global economy.

Companies that need products and services no longer attempt to build them, and own the tangible assets, and resources to create them. Global corporations outsource everything to third parties all over the world that provide the best and most efficient methods, products and sevices.
These are the companies that Riech describes as "High Value."

[Serena Yang]

I feel like Reich’s argument 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 insights” (p. 196) and his prescription that the government’s role is “to improve its citizens’ standard of living by enhancing the value of what they contribute to the world economy” (p. 301) are sprung out of some basic observations of the time: Reich has noticed that the income gap in America is widening, and I think this book is his attempt to explain this process.

As Irina points out, Reich thus defines the individual as the economic unit, rather than the nation, and focuses on what the individual can offer to the global economy. His categorization of the three basic workers is interesting and sensible, but like many others before me I find his analysis of the symbolic-analyst to be incomplete. Glory makes a good point about the interdependence of these three types--symbolic-analysts cannot run the world by themselves. But even more than this reliance, I would argue that their rising economic worth in the global economy is a man-made phenomenon, not a market-driven inevitability. Reich believes that symbolic-analysts will be the driving force of economic operations in the future, much in the way that huge corporations once were in previous centuries, yet I believe that the economic value of their work is assigned not by market forces but by the symbolic-analysts themselves. This argument is similar to the one DeLong has mentioned a few times in lecture about lawyers and law school and doctors and med school and the way in which they believe they deserve incentives (a higher income) for suffering through years and years of schooling. Therefore, Reich’s emphasis on education as the sole means of economic uplift is myopic at best and dishonest at its worst.

And even as Reich treats the question of increasing divergence in America to a less-than-convincing resolution, he neglects to adequately address divergence on a global scale at all. Indeed, I believe Reich’s main flaw is that he assumes globalization to be a far more equal and unbiased force than it really is. Throughout his book he cites examples of the various ways in which corporations cross national boundaries for the improvement of total social welfare, but notably absent is the entire continent of Africa. Reich makes an oblique reference to them when he mentions the necessity of global cooperation to fight the spread of AIDS, but the entire continent is reduces to footnote-status, and I can’t help but wonder how Reich’s prescription of individual education achievement will bring entire nations out of their poverty traps. Indeed, Reich portrays globalization as a neutral force, but in many ways it is a force than works in favor of the rich and of the educated. So in this way, I believe that Reich’s recommendation to improve education, to work within this system, is misguided and will do little to bring about any real income convergence, especially not on a global level.

[Miranda Huey]

I agree strongly with Ziwei's and Serena's point that an increase in education alone would not do the trick since Reich had overestimated America's ability to remain dominant in the symbolic analyst industry. However, I disagree with them both as well in their assertion that Reich was too optimistic about globalisation or about those who profit the most from it. Although, as the wording of this week's prompt suggests, Reich does advocate some social democratic ends through somewhat neoliberal means, Reich is not at all advocating deregulation or other free market policies.

He acknowledges that the market has some pretty strong failures. One of his assertions – that a significant portion of lawyers, financiers, bankers, and even designers of complex military equipment are a huge drain on society – might perturb many of the pre-law and pre-business students in PEIS. He argues that many in these professions engage in small activities which merely serve to slightly outmaneuver each other (within their respective industries), causing incredibly complex legal documents, financial ploys, etc. These not only waste valuable talent, but also promote a lot of distrust in society as a whole, as well as drain individual and company budgets on these ever-escalating industries.

However, Reich doesn't believe that either the free market or government intervention alone can correct this: “Each of these alternatives – exclusive reliance on markets or on government directives – invites abuse and inefficiency. The proper response is to organize the market in ways that motivate symbolic analysts to discover means of helping mankind while inflicting the least amount of harm.” (186) In essence, the problem is that the markets are not organized properly according to the total harm or total value they provide to the society (including environmental). Some possible policies, at least for the financial arena, are capital-gains taxes on short-term stockholdings, small transfer taxes on each share of stock, and eliminating interest deductions on loans used for purchasing shares of stack – which would prevent the chaos of speculative zero-sum games. For lawyers, there could be limits on the contingency fees they collect on litigation.