THE WORK OF NATIONS: PREPARING OURSELVES FOR 21ST-CENTURY CAPITALISM
By Robert B. Reich
Knopf -- 331pp -- $24.00
Picture the following: You've been laid off as creative director of a large New York ad agency. After six months of job-hunting, you join the ranks of the home-employed. You install a computer and a fax on the sun porch and spend your days seeking free-lance work. Right now, you have a French client and a couple of promising leads.
Al, your golfing pal, managed to hang on when his employer, a multinational in Stamford, cut 10,000 jobs. He now works for one of 100 small business units the company set up. Even though he's on salary, Al hustles every day to create new ventures. If he can't make something work, his group may be cut, too.
Sandra, an old friend from Detroit days, seems to have landed best. Fired by Chrysler, she got picked up by Honda as a systems specialist for its new Ohio engine plant. Since Honda is doing well, Sandra thinks her job is secure for now and maybe even permanent.
One day, you read that a Harvard University economist, Robert B. Reich, has written a book that says you three are models for the next century's economy. You think it must be about a new kind of impoverishment. But no. Flexible, creative people like you, says Reich, will skim the cream from the global economy by applying your talents anywhere you choose. In fact, Reich is worried that success will make you so smug and self-satisfied, you'll forget your responsibilities to less talented Americans.
A decade ago, when it was fashionable to prescribe cures for America's industrial decline, Reich wrote a good book, The Next American Frontier, which pointed out that all international companies are not alike. He distinguished between "national multinationals," mainly Japanese, that act for the good of their home country, and "international multinationals"--shareholder-driven American ones--that work the globe for their own interests. Reich argued for an industrial policy that would help American business meet foreign competition and strengthen U. S. multinationals at home.
Reich's new book, The Work of Nations: Preparing Ourselves for 21st-Century Capitalism, flips that logic on its head. Now, he argues that it's foolish to discuss economic policy in national terms, or, by extension, to worry about trade balances, investment restrictions, or national economic security. What happened in 10 years? Well, for one thing, liberal Democrats such as Reich found that voters aren't interested in industrial policy and declining competitiveness.
But his efforts to disguise those issues with feel-good globalism doesn't work, either. The result is a muddled, jargon-filled book in which Reich puffs up some real international manufacturing trends into an unsupportable theory topped by a long wheeze about new international elitists.
These clever people, whose ranks include planners, coordinators, project managers, engineers, creative directors, and researchers, never dirty their hands. They get by on brains--and, of course, on past corporate experience. Their work is to design, develop, and direct strategies for employing the world's vast "enterprise web." As a group, moreover, they are antitax, members of exclusive clubs, and tend toward "laissez-faire cosmopolitanism," which supposedly makes them less socially responsible.
Reich spews out all kinds of data to show how business crosses borders. He's fascinated, for example, with offshore manufacturing. General Motors makes the Pontiac LeMans in Korea to sell here; Honda makes cars in Ohio that it exports to Japan; Boeing makes sections of its planes in China, Italy, and Canada for assembly in Seattle. Reich's conclusion: It's not where a product is made, but the place where the value is added, that counts.
Japan's Foreign Ministry couldn't put it better. The problem is, Japanese companies are skilled at adding value where Japan benefits--at home. What's more, their market strategies differ sharply from those of U. S. companies. When a Japanese manufacturer hands a sales budget to a U. S. subsidiary, it expects the target to be hit no matter what it takes in losses. U. S. companies, by contrast, strive to avoid red ink. Because they continually balance growth against profits, they often lose market share.
It's true that more foreign companies are exporting from the U. S. and that more U. S. companies are shipping finished goods back from overseas, but it's no big deal. Less than 3.8% of Honda's U. S. output goes abroad, and GM sold fewer than 40,000 of its Korean-made Pontiac LeMans models here last year.
Reich's book has the same disquieting ring as the wave of 1960s books by Brits that rationalized Britain's industrial decline by finding a future in that nation's service economy. Poor folks from Hong Kong, Taiwan, and Southern Europe would look to Britain for sales, advertising, and financial advice, and nobody would have to make things anymore. What those books left out was that Britain's services wouldn't be needed once these outsiders figured out how to provide them. Reich's book is also about decline--this time, America's. Sandra, Al, and I would have liked it more if he just had the guts to say so.