Omar Azam
1992
In his book, The Work of Nations, Robert Reich attempts to redefine modern economics by showing that today's world is very different from the world and its institutions during the mid-twentieth century. He also explores why this has become to be, and more importantly, why this trend must not be ignored. In part one of his work, Reich historically surveys modern economic systems; in part two, he starts presenting his unconventional views, showing how national corporations have given way to international global webs, and how nationalistic CEO's and top-of-the ladder professionals have given way to cosmopolitan problem-identifiers, problem-solvers, and strategic brokers. He then gives this trend global proportions, and thus concludes his basic model of a world in which high-value firms are the real winners. In this changing world, the fortunes of companies and nations are much more susceptible to quick turnarounds: changes in global markets and decisions radically affect all international companies. Due to the rapidly changing nature of Reich's model, some companies can make it big overnight, others can fall in as much time. Reich gives many examples of American firms that have become as profitable as core corporations in much less time. And on the international scale, he points to the success of German engineering firms and British advertising agencies. But what Reich believes, or at least leads the reader to believe, is that the world is increasingly becoming a land of opportunity for those creative enough to find it; a man who has creative insight can make it as rich, as quick, as a formally educated man who lacks creative drive. Furthermore, it seems that Reich holds that a whole country's economy can be swept up by the successes of a few good businessmen within that country. Again, he provides many examples, but many are misleading; specifically, third world countries aren't doing any better, or likely to do any better once high-value economics takes firm root. Once we have examined how third-world countries are reacting to the new high-value game, it becomes evident that the very nature of the new high-value economy encourages economic exploitation even more than the old system of high-volume imperialism. Reich's analysis of the world economy, taken a step further, transforms the brave new economic world into a free-for-all game where the rich nations will get richer and the poor, poorer.
Although his global outlook misses part of the point, Reich's grand model is, for the most part, on the mark. His observations of changing economic structures are accurate, at least from the American standpoint. It is obvious that the U.S. is no longer a neat array of various-sized, encapsulized corporations. Now, the American economic landscape has a patchwork of multi-national mini-sized powerhouses in addition to the standard corporations. Reich offers examples of corporations in other countries to prove that the high-volume to high-value trend is international. Problem-solving West German engineers and problem-identifying British marketing consultants work with companies worldwide instead of for a single core corporation. As a result of this global interplay of firms, it is not so easy for a single corporation to hold a region of the world afloat. In the older days when GM was American, it had the ability to keep American workers employed (on the small scale), and keep the American economy competitive in the global market (on the larger scale.) Now, the decisive players are not mammoth corporations, but interwoven firms. Also, due to their geographic mobility and the intense competition of the global arena, the players are no longer tied to a single region of the world, and therefore have no real interest in keeping a certain country's (or region's) economy afloat. As transportation and communication continue to turn the world into one big market, symbolic analysts are becoming global citizens. "In fact, the top executives of American corporations are among the loudest in the world in declaring that their job is to maximize shareholder returns, not to advance public goals." (Reich, 140) According to a top executive of Colgate-Palmolive, "There is no mindset that puts this country first." (Reich 141) Traditionally, government stepped in here, and directed profits gleaned from their national champions into public projects. Now, the globally competitive firms direct the fate of citizens more than governments; therefore, if they find their national governments too stifling, they will simply move to another location on the globe. The social ramifications of this economic development will be addressed later. ********** The mentality of the Colgate executive is proof that America cannot rely on past national champions to save its economy.
How then can third-world countries, which unlike America, never had an economic advantage to begin with, buy into this system? Reich does not give an answer to this question, but he tries to give examples of countries that are supposedly adjusting to meet the needs of the new system of high value. These "countries on the move" can't just be lumped together, and this is just what Reich does. One one hand, Reich brings up examples of affluent nations, such as France and West Germany, who have produced such high-value firms as Bull and Siemens. The makeup of these high-value firms is not really brand-new though; valuable human resources (computer wizards, scientists) that used to reside in large national corporations have just reorganized themselves into smaller groups that have more autonomy and fit more advantageously into the high-value market world. In other words, France and Germany are working with talent they already had. In the same boat, Reich lumps another very different group of countries that are expected to come up with talent out of nowhere.
For example, if country X (most likely third world) has no spectacular higher-education institutions (which Reich asserts is the only way to a monetarily secure life), and is busy sustaining itself through high-volume labor directed by a company in a richer country Y, how is it expected to come up with firms of its own? At best, all this relationship will produce is a crop of people entrenched in the habit of monotonous labor. Reich astutely notes that a dangerous cycle may emerge. "Because people learn through practice, the value of what they do usually increases as they gain experience. This system is not self-correcting....People fortunate enough to have...on-the-job experience doing complex things can become steadily more valuable over time, making it difficult for others ever to catch up." (Reich, 109) While the symbolic analysts of the world steadily become better at what they do, the working man loses much ground: people can't become creative leaders by working labor jobs that shun creativity.
So what will become of country X, a land that can develop no new talent? The answer is unknown as of yet, because at present countries such as these are still in a state of high-volume production. A defendant of Reich might ask, "How do we explain, then, the success of a country like India, whose software experts are among the best in the world?" Apparently, India is doing a good job at buying into the high-value world system. In reality, though, only the firms are buying in. India, as a whole, is not benefiting from the success of its software firms. Like other world governments, India's is not in the dominant position of the past, where it can extract profits from its national champion. India's software firms, if they see government coercion, can take their talent elsewhere on earth. Most importantly, the people of developing countries cannot become players in the new high-value economy automatically; educational institutions are lacking and so is the governmental money that used to come from national corporations. As time goes by, an international talented elite will float around the world more and more opportunistically until the world become a free-for-all game for them.
The threat of such elitism is frightening. In the new system of high-value there are not the restraints to domination that existed in the olden days. No longer are companies limited by their vast size and bureaucracy; in the new system, it is truly individuals who make the decisions that influence thousands of people. And what about labor? In the mid-twentieth century, unions protected labor workers from being mistreated. Now, however, if labor gets too demanding, employment opportunities will be given to a different region that settles for less. In short, the new high-value system of economics invites economic exploitation to a much greater extent. A fundamental characteristic of high-value firms is their ability to serve a select group of clientele that expects the very best ideas. Problem-identifying, problem-solving, and strategic brokerage firms work within a certain web of companies whose ultimate consumers are the rich. In other words, much of the work that goes on in the high-value system ultimately is paid for by wealthy, demanding consumers, not middle or lower class consumers, whose part in the high-volume system was crucial. Common sense tells us that if less incentive exists to sell to consumers with middle incomes, then less attention will be paid to their interests. America of the 1950's was so productive because the middle classes did most of the labor and bought most of the products. Without this balancing factor, the new high-value economy will likely focus on those people who can afford the new technological gadgetry. At the present rate, Reich sees no way in which the rich will stop getting richer; the high-value system is and will keep promoting this divergence.
The position of third-world countries is even more frightening, as illustrated earlier. On the grand scale, though, it is not only developing countries, but the whole world that has now become open to fiscal geographic irresponsibility. The social trend towards ever-greater mobility and internationalism has reduced concern for one's nation to the point that there is no real reason to fix up what needs to be fixed; if a symbolic analyst is born in country A, educated in country B, and working in country C, to which country does he owe his loyalty? If there are problems in country A, B, or C, he/she will most likely move to another country instead of wasting revenues and time fixing up the other countries' problems. This trend is a progression with a long history. The rise of bustling cities and frequent international transportation has been accompanied by a lessening sense of community responsibility. Problems in cities are not the problems of lifelong inhabitants eager to clean up "their ancestral home." As global mobility becomes easier for the select few, it will also become easier to escape problems that linger in the countries of the poor. The great tradeoff between labor and capital is beginning to vanish as capital begins to run the show. There are no clearcut answers on how to solve the problem, but it is important that we address this point on a third-world level that Reich glossed over. His answers to America's indefinite future may be applied to developing countries to help get them involved in the new high-value economy, but it is important to note that they have no capital to begin with. As Reich knows, their only true asset is their work force, but they cannot fix their standing in the world machine with just bare hands.
Copyright 2003 Omar Azam