The Work of Nations: Preparing Ourselves for 21st-Century Capitalism

September 1 st 1996

The Work of Nations: Preparing Ourselves for 21st-Century Capitalism by Robert B. Reich (New York: Vintage Books, 1992, 339 pp., $15.00)

Robert Reich describes the transformation of the American economy in a book that is genuinely enlightening and interesting. Reich, formally a professor at Harvard's Kennedy School of Government, now serves as President Clinton's Secretary of Labor. His major thesis is that the structure of the American corporation has changed radically, bringing along with it changes that affect workers' futures and that of the entire society.

In the first section of the book, Reich describes the rise of the large, centrally controlled corporation (which produces products in high volume) and its replacement by a form of corporate organization which he describes as a "decentralized enterprise web" (which instead produces products of high value). Control once maintained in a top-down hierarchical manner (staffed by World War II generation managers accustomed to military discipline) has given way to a much more decentralized management structure centred around individual "profit centres." The impetus for this change came from increased international competition and a need to respond quickly in the marketplace.

Another major theme of the book is the implications of the growing internationalization of corporate structures. Reich claims that there is no longer a meaningful way to tell whether a product is American or Canadian, even though consumers within a nation perceive a product as foreign or domestic. As corporations become what Reich calls "global webs," corporate nationality no longer matters. What is important is which country's workers are being used for production (and having their skills developed), not where the company happens to be incorporated. A nation's assets are no longer the buildings or even the corporation itself, but the "skills and insights necessary to invent."

As a result of these two trends, Reich suggests that work is now divided into three types: routine production services, in-person services, and symbolic-analytic services. For the four-fifths of the population that performs these first two types of work, their prospects are uncertain. Production workers face competition from around the globe that will keep their wages steady.

In-person service workers (those who provide their service directly to other people; for example, waiters, secretaries, and security guards) face labor force competition from new entrants to the workplace, displaced production workers, immigrants and labour-saving technology. Reich expects their wages to be stagnant also.

For those who engage in symbolic-analytic work, their opportunities have been expanded by the growing internationalization of the economy. Through technology they are easily connected with other such workers worldwide. The need for this type of work is growing worldwide as are the rewards. Reich attributes these new developments in the workplace for the increased income inequality in the U.S. (and some other Western nations) of the last 20 years.

According to Reich, the "symbolic analysts" also have less need for the other types of workers, causing them to withdraw into their own cloistered communities; here they have little interest in and little contact with the rest of the population. As a result, the sense of community that held these types of workers together with poorer Americans is diminishing.

New opportunities

In response to the problems generated by the transformation of the economy, Reich suggests some conventional solutions including a more progressive tax system and increased spending on education and infrastructure. However, although he professes great care for the future generations of American workers, he doesn't deal with the legacy of debt that has already been left to future generations. His solutions don't deal frankly with the scarcity of financial resources available. Piling on more debt will only help to diminish our possibilities in the future, and taxing the rich will not solve all of the problems that we face today.

Reich's book is a valuable analysis of the rapidly changing economy, and well worth reading. If his analysis of the transformation of the economy is correct, the future of the poorer four-fifths of workers within the U.S. does not look bright (nor does that of the population of developing nations). Those who have the skills and can acquire them will succeed; those who don't will not.

Reich suggests, however, that we are at "a rare historical moment" where there is an opportunity to make the world better. He promotes the notion of a "positive economic nationalism," where each nation's citizens take responsibility for enhancing the possibilities of their countryman's lives, while not engaging in policies that beggar their neighbours. Given the track record of the United States and other Western nations, such a new commitment seems very unlikely.

Those who wonder how to deal with the new economic realities are not without hope. As Christians who work both as labourers and managers develop new models for cooperation and service, they provide a vision for the rest of the world to follow. In Christ, all things are possible.


Todd P. Steen is the Granger Professor of Economics at Hope College in Holland, Michigan, where he has worked since 1988. He earned his Ph.D. at Harvard University, where he studied under President Obama's chief economic adviser Larry Summers. His favorite economists are Summers, Greg Mankiw, and Bob Goudzwaard.