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Robert Reich
Robert Reich
The Work of Nations: 21st Century Capitalism
ISBN: 0679736158
The Work of Nations: 21st Century Capitalism
Professor Reich, former staff member of the Ford and Carter administrations, discussed his book The Work of Nations: Preparing Ourselves for 21st Century Capitalism. He discussed recent changes in national economic and industrial systems around the world and the effects of increasing industrial globalization of industry on national economies. His book examines the process through which the huge pyramidal structures of American industries in the 1950's are giving way to more flexible and geographically diverse international industries as technologies improve communication around the world. Professor Reich also discussed his experiences working as an intern in the office of Robert Kennedy, in the office of solicitor general Robert Bork, and as Director of Policy Planning for the Federal Trade Commission in the Ford and Carter administrations.
The Work of Nations: 21st Century Capitalism
Program Air Date: May 26, 1991

BRIAN LAMB, HOST: Robert Reich, in your new book "The Work of Nations", on page 95 you write, "As stated earlier, by most official measures America's 500 largest industrial companies failed to create a single net new job between 1975 and 1990; their share of the civilian labor dropping from 17 percent to less than 10 percent." Why is that happening?
ROBERT REICH, AUTHOR, "THE WORK OF NATIONS: PREPARING OURSELVES FOR 21ST CENTURY CAPITALISM": Well, a number of reasons, Brian. American corporations are changing their shape. In the 1950s, about the top 500 American corporations were responsible for one half of the gross national product in the United States and about a quarter of the gross national product of the entire world -- the free world. But they were organized like pyramids -- a few people at the top making all the decisions, huge numbers of people down below walking in lock step. The philosophy of production was high-volume, standardized, stable mass production.

That was economies of scale, and it worked like a charm in the 1950s and 1960s, but then about the mid-1970s two things begin to happen. One, the American market becomes saturated for high-volume, standardized, stable commodities -- the whole postwar pent-up demand, new family formation. You get repeat purchases, but you don't get the same big increase in purchases of your standard washing machine and your standard car. Secondly, you have global competition, new technologies of transportation and communication. Cargo ships, containerized ships, satellite communications technologies allow that old high- volume, standardized, stable mass production process to be fragmented -- parceled out wherever around the globe it could be done most cheaply. That meant that for the first time there was no longer any particular advantage in doing mass production in the United States, so those big colossal corporations based on economies of scale became endangered species by the late 1970s.
LAMB: We heard Ronald Reagan during the '80s say many times, "During my administration we've created 16, 17 million jobs in this country." If those large corporations haven't added any new jobs, where are they coming from?
REICH: Well, many of them are coming from small businesses, but be a little careful. The debate between big business and small business is complicated -- much more complicated than people give it credit for -- because a lot of big businesses are becoming, in a sense, federations of small businesses. They're decentralizing into decentralized business units or they're farming out -- subcontracting -- more and more of their work to smaller businesses. So to simply say small businesses are creating all the jobs misses the big picture, which is that you still have these big groups of companies. It's more accurate, actually, to say that American small businesses are evolving into confederations of small businesses. Large businesses are decentralizing into confederations of small businesses. What's a small business, what's a large business? Well, it just doesn't really matter any longer, but there's something in between the two.
LAMB: Where do you live?
REICH: I live in Cambridge, Massachusetts.
LAMB: What do you do?
REICH: I spend my time writing, lecturing. I teach at the John F. Kennedy School of Government at Harvard University. I consider myself primarily in my books, my writing, my lecturing, my consulting -- I do quite a lot of consulting for government agencies and for companies -- and, above all, in my teaching, I'm an educator. My goal in life, my function in life is to take a look at reality, to research it, to talk to a lot of people and then to teach what I see. Hopefully, it provokes people, it makes them see reality a little bit differently.
LAMB: Where were you born?
REICH: Scranton, Pennsylvania. A wonderful town. Don't remember it at all. I left when I was about 6 months old and moved to upstate New York -- a little farming community. My neighbors were all farmers. My father had a little soft goods store, a little ladies' dress shop. But there was an old farmer down the street whom I used to visit. I was 5 or 6 years old and used to sit on his lap. We'd talk politics. That's where I got my political education. Years later I learned that his name was Henry Wallace, a former vice president of the United States.
LAMB: How did you have access to Henry Wallace?
REICH: He was the farmer down the street.
LAMB: At what age did you start talking to him?
REICH: Five.
LAMB: How did you have access to him?
REICH: Well, it wasn't very difficult. I walked down the street with my mom and she knew him, and Farmer Henry and I struck up a conversation and a friendship. From that point on until I was about 10, I'd walk down the street, sit on his porch and we'd talk. Not difficult, you know. With farming, you don't have to have access to people. It was just a farm down the road.
LAMB: How long did you know Henry Wallace?
REICH: Let's see, he must have died when I was maybe 10, 11, 12 years old. Something like that. I have only a dim recollection of him. But we had great conversations about American politics, about farms, about where the country was going.
LAMB: Do you remember anything about what he told you?
REICH: He talked a little bit about Roosevelt. I do remember him talking about Roosevelt. I remember him talking to me about history. I must have been about 7, 8, 9 years old -- in grammar school. Talked about the Second World War. I don't remember anything about Truman. Again, I had no idea in those days that he had been vice president of the United States. To me he was just a lovely, old, kind gentleman sitting on a porch.
LAMB: Okay, what's next? I mean, that was rather unusual for somebody your age. Where did you go to school?
REICH: I went to a local public grammar school, a local public high school. Again, very small. This was a little farm community. Then I went on to Dartmouth College, Hanover, N.H. After that I went to Yale Law School and was fortunate enough to win a Rhodes scholarship. Went to Oxford University and studied economics. Then I decided I'd had enough of degrees. I was about 50 years old by then, and I had to get on with life.
LAMB: Go back to Henry Wallace and right after that. Do you point to any other factor that got you interested enough in learning that you did that well to get into Dartmouth?
REICH: Oh, I had some brilliant teachers, inspiring teachers. Even a small, farm country school in those days -- it's a big different between now and then. You know, in those days a lot of very talented women went into teaching. They didn't have many other alternatives. These days if we want talented women or men in teaching, they do have many, many other alternatives. We didn't have to pay our teachers very much in those days. We had a free ride on the fact that talented women didn't have all those other alternatives. These days if we want talented people to go into teaching, we are going to have to pay them. Unfortunately, as I point out in the book, we're really only paying our teachers these days only 4 percent more, in inflation-adjusted terms, than we paid them in 1970, even though supply and demand has changed considerably. This year the average former West German teacher in the former West German schools is earning $51,000 -- grammar school teacher. We pay our teachers about half that.
LAMB: Why do you think it's the case?
REICH: Well, teaching, again, has not been a terribly high-status profession -- I'm talking about K-12 -- I think in large part because women dominated it. We kind of assumed it was women's work. There was a little sexism implied. It was never the high-status occupation that it has become -- and it has been for many, many years in Europe and also in Japan. That's one of our problems, I think. Instead of putting the teacher on the pedestal, we tend to just pooh-pooh teaching. We tend to assume it's just going to be there, that there will always be teachers. That's not the case.
LAMB: You're a liberal.
REICH: Well, Brian, I'm getting so confused these days. I'm not even sure what "liberal" means any longer. I'm certainly not a protectionist. I'm a free-marketeer.
LAMB: You're not a conservative.
REICH: I'm not a conservative, although I got very worried because the Wall Street Journal, Fortune magazine loved my book, so I must be doing something wrong.
LAMB: Where do you think you started thinking like you think today? At what point in your life do you remember . . .
REICH: There's a theory that people reach political consciousness that stays with them for the rest of their lives when they're about 17, 18 years old, that that's the point at which your basic ideas about American economics and politics get formulated. They may change a little bit after that time, but that's your fundamentals. In college, I went to work for Robert Kennedy as an intern here on the Hill. I didn't work very close to him. I was in charge of the signature machine for the summer. You know, you put in the letters and it says "Robert F. Kennedy." In fact, I used to type letters to my friends, "Dear Mr. Dorkin: Congratulations on having the largest nose in Westchester County. Robert F. Kennedy." He still has it on the wall. But I was close enough that I was struck by Bob Kennedy, what he wanted to do.

One day, I remember, I came out of the signature machine place -- I was getting a little delirious with all those signatures -- and he was coming out of the elevator. Now, I had not met him. There were a lot of other kids working for him at the time. He looked at me and he said, "How are you doing, Bob? It's good to have you here with us." I thought to myself, "He knew my name!" I sailed. I was three feet off the floor. I went back to the signature machine; I was so delighted to do those signatures. But he was an inspiring man and the people around him were very inspiring and I got caught up in that. I suppose you might say that that was the beginning of my genuine political involvement and commitment.
LAMB: How did you get that internship?
REICH: I got the internship because Kennedy's A.A. -- in those days it was Joe Dolan, if I recall -- had interviews with kids in Westchester, Putnam, northern New York state, and I wanted to go down there. I was a college sophomore at the time and I went in to talk to Joe Dolan and obviously I must have said the right thing. I don't know how else he would have selected me, but he selected me.
LAMB: That was what, about 1966, '67, '68?
REICH: It must have been '66. It must have been about 1966. The Vietnam War was just beginning, and I remember the intern who worked for Jacob Javits at the time was Mark Green, who is now consumer affairs director in New York City. Mark and I contrived to get all of the interns working on the Hill to sign an anti-war petition, and it was a very big deal. We had hundreds and hundreds of signatures. We got almost everybody. Bob Kennedy invited me into his office toward the end of the summer, just when the signature drive was really in full force. I had not seen him since he came out of the elevator that day. He said to me, "I understand you're one of the organizers of this anti-war petition." I said, "That's right." He said, "Cease." "What do you mean?" He said, "I'm having enough trouble with Lyndon Johnson right now. I don't need it to get out to the media that my intern is organizing this anti-war petition." So I ceased. Another lesson in American politics.
LAMB: I want to ask you about the three institutions where you went to school. Dartmouth. What impact did that leave on you?
REICH: Dartmouth College has probably the best undergraduate liberal arts education in America. It was clearly that in the 1960s. It clearly is in the 1990s. Very dedicated teachers, small classes. Not a university -- not a lot of graduate programs -- but really a tremendous emphasis on liberal arts. I had some of the best teaching I have ever had anywhere at Dartmouth. I gave me a love for learning. I think I had that from high school days anyway. As I said before, I was fortunate enough to have enormously talented and gifted schoolteachers. But Dartmouth opened my eyes to history, to politics, to economics, to ancient Greece, to literature. It was a very wide-ranging liberal arts education.
LAMB: Yale Law School.
REICH: I went to Yale Law School at a time when people went to Yale Law School not to learn the law, but because that was a center of social activism and thought about changes in the country. Unfortunately, when I got there I realized it really was a law school. In fact, most people graduated Yale Law School and actually went to work for corporate law firms. I didn't want to do that. I enjoyed Yale Law School. I did learn a great deal. One of my teachers there was Bob Bork, and when he became solicitor general here in Washington, he invited me down to be his assistant years later. A lot of people don't realize this. I'm a liberal, but my first job in the Ford administration was as one of Robert Bork's assistants.
LAMB: What did you learn from him?
REICH: He has -- at least did then; I haven't seen him in years -- he had a wonderful sense of humor. He was great to work for. He and I did not see eye to eye on many of the issues of the day. I had to brief and argue Supreme Court cases taking positions, many of which I did not agree with. I wasn't very good at the job anyway. I really wasn't cut out to be that kind of a lawyer. But I learned about the human side of him, which is something that a lot of people don't know.
LAMB: Did he get a bad deal when he wasn't confirmed by the Senate?
REICH: I think that he got a bad deal in the sense that I think he was treated very roughly. I'm going to say something that's probably not very kind, but I think it needs to be said. I don't think he was temperamentally, or is temperamentally suited. Even though I worked for him, even though I think very highly of him, I don't think I'd like to see him on the high court, so I think the actual decision was probably right. The process -- I think he was badly hurt by it.
LAMB: Were you working for him when he became acting attorney general?
REICH: No, I came after that. I came when he was solicitor general.
LAMB: No, that was after.
REICH: No, wait a minute . . .
LAMB: He had to be solicitor general because that was the third person in a row that . . .
REICH: You're absolutely right. I was not working there when he became attorney general. I was there when he was solicitor general. I went over to the Federal Trade Commission. I worked first under the Republicans, and then under Jimmy Carter I came director of policy planning for the Federal Trade Commission, which actually in terms of the book is a very important step because most of my concerns, most of my insights about the gradual competitiveness problems of America began when I was working at the Federal Trade Commission in the mid-1970s. Nobody was talking very much about American competitiveness in those days, but after going through industry by industry and an awful lot of data about many American industries, it became painfully clear to me that there was indeed a competitiveness problem.
LAMB: What was the impact of Oxford on you and how did you get there? How do you get a Rhodes scholarship?
REICH: I don't know. There's no formula for getting a Rhodes scholarship. They say you have to be a genius and an athlete. I was neither of those, so it was a fluke why I got a Rhodes scholarship. Oxford is another world. I don't know if you've been there, Brian, or anybody watching has been there. It's an idyllic world. It really is a 19th century world. It has absolutely nothing to do with the 20th century. I had been very actively involved in American politics for a few years. Robert Kennedy had been shot. I was very disillusioned with American politics. I needed a break. I was still a kid. I was shaken by all of the stuff that was going on in America. Oxford was a wonderful place to retreat to. I had a marvelous two years. Did a lot of acting and directing.

Met my wife, a British woman. In fact, I met her the first day we were both at Oxford. She was a student coming up to Oxford. We were both there waiting for an audition for a student play. I didn't want to be a typical forward American, an aggressive American asking her her name. So she left, I left, and then I figured that I had blown it because here was a wonderful, intelligent woman and she would probably go off into the atmosphere, doubtful that we would both get parts in the play, and I'd never see here again. So I had an idea -- the best idea that I've ever had before or since. I got my college at Oxford to allow me to direct my own play, and I put up audition signs all over Oxford announcing that there would be auditions for the play, hoping against hope that she would arrive at my auditions. She did, and I cast her as the leading lady, which she's been ever since.
LAMB: What does she do now?
REICH: She's a lawyer. Actually, she teaches law at Northeastern Law School.
LAMB: Do you have kids?
REICH: Two kids, two boys.
LAMB: How old?
REICH: Seven and 10.
LAMB: In the opening of the book here you have a dedication to the memory of Frances Freshman. Who is that?
REICH: Frances Freshman, a great reformer, a great progressive, a person that would never sit still, would organize people, would get on with changing thepublic. She was my grandma -- a great influence.
LAMB: Tell us more about her.
REICH: A woman that had a very hard life. Her first husband died when he was very young and she was very young. She had a couple of kids. In those days you didn't have a lot of the social insurance you have now. She worked very hard at a time when a lot of women didn't go into the work force, but that didn't stop her from doing a lot of civic organizing. There were all kinds of causes she was involved in. When there wasn't an organization that she could get involved in, she created an organization. In fact, I remember she used to have a little house in the community. It was infested by bugs, and she started a civic association to get people to pay money to get rid of the bugs. She had that kind of spirit and that spunk. A tough lady, and I always admired her for it.
LAMB: Where did she live?
REICH: She ended up living here in Washington up on Lanier Place. Many, many years I came down and visited her. Those were my first recollections of Washington, D.C.
LAMB: The name Reich -- and I know we talked just briefly before we went on the air about the pronunciation of it -- do people butcher it all the time?
REICH: Yes, they do. I think a lot of people use the German pronunciation "rike," but my ancestors were Austrian. It's a softer, almost an "S-C-H" -- risch -- sound. I said to you before I answer to anything except "retch." I draw the line at "retch." But there is a lot of butchering.
LAMB: After Dartmouth and Yale and Oxford and some of the experiences we talked about in the government, when did you go to the John F. Kennedy School?
REICH: In 1981 I started. I didn't know very much about the Kennedy School. I knew that it taught people who were interested in going into government. It had a pretty good record, a fairly small school. I didn't know whether I wanted to teach in a law school or a business school. I knew I wanted to teach. I had a lot of things I wanted to write, and I had almost an intuition that I would be a good teacher. But I took a chance. I went to the Kennedy School, and I was very, very pleasantly surprised and delighted with what I found. Very dedicated students. People coming there who easily could have gone to business school or law school but are fired up about public service, about public problems, public issues, come there instead. A very committed faculty. People who, again, could easily be in economics departments or in political science departments but are there at the Kennedy school because they are fired up and concerned about public issues.
LAMB: One of the person you acknowledge in the preface is Martin Peretz. Who is he?
REICH: Marty Peretz is the publisher-owner of the New Republic, and Marty is an old friend. I've been a contribution editor on the New Republic for about 10 years now. Written a lot for them. Don't always agree with their positions, particularly on foreign policy, but nevertheless respect the New Republic a great deal.
LAMB: The Atlantic.
REICH: I write also for the Atlantic more and more often. A different kind of magazine. You can write much longer pieces for the Atlantic. Bill Whitworth, Jack Beatty -- I don't know if you know these people. This is sort of the Boston crowd. I don't know if they every get down to Washington, but very talented people.
LAMB: All these outlets and platforms that you have, if you could change the way we are governed right now, give us two or three examples of what you would do if all of a sudden the president said, "Bob, anything you want, I'll do."
REICH: I doubt that George Bush is going to do that somehow, Brian. I've been waiting. My telephone is open and he hasn't called yet.
LAMB: Just in case he does.
REICH: It seems to me -- and this gets back to one of the major themes of the book -- that American corporations have lost their linkage to the American economy. The competitiveness of America no longer depends on the competitiveness of American companies. It depends on the competitiveness of the American work force. We have a situation in which the top 20 percent of American workers by income are on an upward escalator. They're doing very well. They have good suburban schools, good four-year colleges. Like me, they went to law school or they went someplace else. They're doing fine. We don't have to worry about them.
LAMB: Are you calling them the symbolic analysts?
REICH: I call them symbolic analysts in the book because they basically spend their working lives manipulating symbols -- mathematical symbols if they're, say, engineers; verbal symbols, maybe, if they're in journalism; oral, visual symbols. They are symbolic analysts in the sense that they're conceptualizers. They're problem-solvers, and the world is giving them a premium in return for their valuable skills and valuable talents.
LAMB: Are you a symbolic analyst yourself?
REICH: I suppose I am. I'm a writer, I'm a thinker, I deal in symbols. The problem is that 80 percent of the public is not on that upward escalator. Eighty percent of the American public is actually on a downward escalator. If you're a non-supervisory worker, a production worker, most of these people in the American economy right now have an income in real inflation-adjusted terms in 1991 of about what it was in 1958. The reason you have so many two-income families now is not because of all these opportunities for women, but because women have to be in the work force now to make ends meet. A lot of people don't realize how much struggle is going on. American families are getting smaller, fewer kids, not because they don't like kids. You can't afford kids.

Two years ago for the first time since the Second World War the percentage of Americans owning their homes went down. The percentage of Americans renting their homes went up. So you have two escalators, Brian. You have an upward escalator of the top 20 percent. By the way, the top 20 percent brought home last year more money in income than the bottom 80 percent put together, and then you have a downward escalator. So you are on your way to becoming a two-track society. Your question to me, what would I do about it if Bush called me up tomorrow? I'd say, "Look, let's make work force training, education, pre- school_let's make building the American work force the centerpiece of our economic policy." He hasn't done that.
LAMB: One of the other recommendations I remember reading about was a progressive tax.
REICH: The question is, how are we going to pay for all of this. Now, the minute I use the "T" word a lot of people say, "I don't want to listen to you." But if we had a tax that was as progressive as we had in 1978 -- now, in 1978 very few people were screaming that the American income tax was too progressive. If we had a tax that was as progressive as we had it in 1978, last year the top 20 percent of Americans would have paid about $96 billion more in taxes than they in fact paid. You can do an awful lot with education and training and investing in the American work force for $96 billion a year.
LAMB: When you had the progressive tax, though, didn't you have all the tax loopholes?
REICH: This is with tax loopholes figured in. That is, officially you had a tax rate that was much higher than the effective rate in 1978. But even with the effective rate the top 20 percent -- in fact, the top 10 percent -- paid $93 billion more than they actually paid last year. This is not a radical book. People say that I'm way over there on the left. No. A progressive income tax … ala 1978, reducing military expenditures, that's another way of getting some money to rebuild America.
LAMB: When we started off you said that a number of conservative publications like your book.
REICH: They do, and it perplexes me and worries me because if I'm suddenly becoming an author that the Wall Street Journal, Fortune magazine and some neo-conservatives find appetizing -- appealing -- then I must be doing something wrong. I have to go back to my notes.
LAMB: Do you have any sense of why they think it's a book worth reading, worth thinking about?
REICH: Well, I talked to George Gilder the other day. George is a friend even though we see eye to eye on absolutely nothing. He is a neo-conservative. He liked the book, he said, because he thinks I correctly analyzed the global economy -- the way corporations and the global economy are moving. He didn't like my prescriptions. He didn't like my description of the top 20 percent or the bottom 80 percent. But the first half of the book, he said, was the best thing he has ever read on the emerging global economy.
LAMB: Let me pick out a couple of companies that you mention as a way of getting you to talk about structure. Northern Telecom.
REICH: Northern Telecom, a Canadian company that is actually not really a Canadian company. It's making things all over the world. It's investing all over the world. It is becoming a global company.
LAMB: You mentioned that Northern Telecom was a Canadian company with offices and manufacturing facilities in the United States and selling a lot here but also the Japanese are involved in it. How does that all work?
REICH: The Japanese are involved. It's very hard to separate out any longer who is us and who is them. If you want to buy an American-made car today, you have a better chance buying an American-made car if you buy a Honda than if you buy a Pontiac LeMans, most of which is produced outside of the United States. People forget or they don't understand the extent to which globalization has taken over these corporations -- foreigners coming here, we're going there. Chrysler owns a big chunk of Mitsubishi, Ford owns 25 percent of Mazda. Where do you draw the line? The only thing that's left here in the United States is the American work force, regardless who they're working for. I don't care who they're working for. You want to work for Fujitsu, perfectly fine. If you're getting the training you need, if you're adding value to the world economy, Brian, your real income is going to be going up.
LAMB: You didn't mention General Motors. Do they own part of Isuzu?
REICH: General Motors is very close to Isuzu, owns part of Isuzu. Again, General Motors made more money outside the United States last year than inside the United States. These companies are very, very rapidly going global.
LAMB: Why does Lee Iacocca bash the Japanese, then?
REICH: He doesn't want to face Japanese competition. He would like to have a wall around the United States.
LAMB: But he owns part of . . .
REICH: He owns part of Mitsubishi and he uses a lot of parts that are made in Japan. He doesn't want to talk about that. Lee Iacocca, I think, would like the government to restrain Japanese imports even more than they're restrained right now. But, you know, protectionism doesn't get us anywhere. This is where I part company from a lot of my fellow Democrats and liberals. Protectionism is really like trying to put your finger in a dike as the ocean is changing. You're not going to get anywhere; moreover, you are costing Americans a great deal of money. We protected the steel industry in the United States after 1968 with this big steel quota.

What happened to American steel? Steelmakers in the United States after 1968 began investing less in steelmaking technologies than they had before 1968 because the heat was off. In fact, steelmakers began getting out of steel. U.S. Steel became USX, with the "X" being an indelible reminder that the real purpose of that company is now unknown and unknowable. Well, protectionism has a multiplier effect. A lot of companies that depended on steel like auto companies in America and appliance companies suddenly had to pay 40 percent more for the steel they used than their international competitors had to pay for the steel they used. You had this multiplier effect in terms of making appliance manufacturers and auto manufacturers less and less competitive.
LAMB: Page 143: "By 1994 Japanese corporations are expected to be contributing about $1 billion to American charities which will comprise about 8 percent of the total corporate donations in the United States."
REICH: The Japanese are trying to become good corporate citizens in America. American corporations would like to be good corporate citizens abroad. The former chairman of IBM told me that IBM has got to be a good corporate citizen wherever it does business, cannot be seen to be playing favorites. Now, that's an important point -- cannot be seen to be playing favorites. So when it comes to, for example, shutting down factories or laying off workers, IBM cannot give special preference to American workers. Otherwise it runs into political problems around the world wherever it does business. IBM is gradually ceasing to become an American company.
LAMB: How do you feel about these global corporations? Is it good for us or bad for us?
REICH: Well, global capital is not a good nor bad per se, Brian. I think it's part of the emerging world economic order. Capital itself, money is sloshing across borders. We need Japanese money, we need German money, and if they stopped investing in us we'd really be in a pickle. The issue is not where the money comes from, the issue is not whose corporation it is, the issue is not who the shareholders are. The issue, again -- I sound like a broken record, but I want to emphasize this point. The issue is what are the values, the skills that Americans add to the world economy. How much value do we actually add to the world economy, regardless of who we're actually working for. Madonna, Bruce Springsteen -- are they now under control of the Japanese? No! They're making a huge amount of money. Akio Morita is making them more money than Larry Tisch ever made for them.
LAMB: I've got something I want to hold up here and get a picture of it. I want to leave the camera on it for just a moment. At first glance it struck me as being humorous. Why did you do this, and what is it?
REICH: Well, I did it with a little bit of a twinkle in my eye. These are the kinds of jobs that symbolic analysts often hold. It's very difficult to explain exactly what symbolic analysts do. If you are, again, one of these people with an office in a steel and glass tower in a major American city -- you're a management consultant, you're an engineer, you're a researcher, a strategist, a planner_ you are probably spending most of your days behind a computer or you are in meetings, you're on the telephone. What are you doing? Well, that little chart gives an indication of the kind of jobs you are undertaking.
LAMB: You can be a communications management engineer but a communications applications adviser.
REICH: Yes. Take any title from the first column, add it to any title in the second column and then add it to any title in the third column, and you get a title that probably engages or involves somebody in some sort of symbolic analytic activity. The higher-status symbolic analysts drop the last column or drop the second column. They usually only have two words in their title, like applications planner or development director or management engineer. Well, these are jobs that are difficult to define because they're engaged continuously in ideas, in concepts, in problem-solving -- very different from the old manufacturing or even old service economy we used to have even as late as 10 years ago.
LAMB: Is there going to be in this country a permanent underclass?
REICH: We already have something of a permanent underclass, but we are also evolving a fairly permanent lower class and we're evolving a fairly permanent overclass. We've talked about the underclass for years and years and that is a problem and we have to do things about that problem and we're going to be living with that problem for years and years.
LAMB: Who would be somebody in the underclass? Define that.
REICH: By underclass I mean long-term poverty. Basically, long-term poverty.
LAMB: How many people in our country are in long-term poverty?
REICH: We know that one out of every five children right now is hungry. As we sit here, Brian, one of every five American children is at this moment hungry, is going to go to bed tonight without a meal. Now, for an advanced industrial nation that prides itself on our standard of living, that is outrageous.
LAMB: If someone listening to this has a hungry child, is there some place for that person to go get food for that child?
REICH: Sometimes there is. Some cities do have shelters, do have voluntary soup kitchens. There are some points of light. There are not thousands of points of light. You know, George Bush says that there's all this volunteerism going on. It's not nearly that much. In fact, the top 20 percent, you look at their charitable giving and you find that, at least since the 1986 tax revisions, the top 20 percent have cut way back on their charitable giving. There are fewer tax advantages in that much charitable giving. In fact, if you're at the top, chances are you're contributing a smaller portion of your income than if you're at the middle or bottom of the income scale.
LAMB: What's available, again. Let's say that there's a mother and a father listening and they want to know, is there enough government resource available, like food stamps, welfare.
REICH: Apart from the soup kitchens food stamps are being cut back. In fact, during the 1980s they were cut back about 15 percent. It's a federal-state program. Many states simply cannot afford it. So, there are food stamps but not nearly as much as there were before. If you have a poor kid who comes from a poor family and wants to get some pre-school education -- maybe the family needs some day care and would like to give the kid a little advantage -- the Headstart program, a classic Great Society program that works. One program that we know works. Study after study after study shows that if you take poor kids, put them into Headstart, they're going to have higher incomes and more productive lives, eventually, out there. We're not funding it. Only half of the kids that are eligible for Headstart have it accessible to them.
LAMB: George Bush is president. He's sitting there looking at these figures. One in five children, you say, is hungry.
REICH: Do you think he's watching this program, Brian? I hope so. I can't get to him. He doesn't answer my phone calls.
LAMB: Well, let's say that he is and he's hearing the statistic that one in five children go to bed hungry or whatever you want to use. He looks over at this column and sees that we just spent $70 billion, $80 billion dollars on the war in the Gulf. How do we do that intellectually? Why wouldn't we want to just say, "Well, we'll take $25 billion over here and spend it on those folks that are hungry?" Why don't we do that as a society?
REICH: Well, first of all there is no domestic policy that I can find in the Bush administration. It's like what Gertrude Stein said about Oakland, California: "There's no there there." George Bush is a wonderful secretary of state. He's one of the most effective secretaries of state we've ever had. I think his foreign policy, I may have some differences with it, but he's very effective. There's no doubt about what happened in the Persian Gulf. He was effective. But when it comes to putting our energies into rebuilding this nation -- I'm not just talking about the underclass. I'm talking about the middle class, the lower middle class, the working class -- all of these people on the downward escalator. We're also talking about infrastructure -- potholes, bridges. We haven't built a new airport in this country since 1974. Every other factor of production is mobile. If we want to build the economy, we've got to pay attention to human capital and infrastructure, but it's not happening. The federal government is getting out of the business.
LAMB: Go back to the hungry thing. You have Tom Foley and George Mitchell watching this, and they're sitting there thinking about the figures. Why wouldn't they get together, pass a bill to spend the money on hungry children?
REICH: Because they would probably say the new budget deficit agreement with the White House makes it almost impossible for us to increase domestic discretionary spending without taking the money out from other programs for the disadvantaged, and we don't want to do that. We have put ourselves in a straight jacket, Brian. There is absolutely no way under the new agreements that we can spend more money in ways that we need to spend it. Now, the next question will be, well, why don't we change the agreement? Why don't we have an entirely different budget structure? Yes, I think we should. I think Democrats ought to be saying, "Look, going into the debt to the rest of the world is not such a bad thing if we are spending that indebtedness on investments in our future. If we're spending it on education, training, infrastructure, if we're building up our capacity to be more productive in the future, that's good debt. That's not a bad debt. In the 19th century, we as a nation were much more indebted as a percentage of gross national product to foreigners than we are today, but in those days we invested in canals, railroads, bridges, factories. We are not investing. That's the problem -- not debt. It's the lack of public and private investment.
LAMB: Let me go back to the hungry kids. If there are really one in five hungry kids, how come there aren't more outraged politicians across the spectrum? We don't hear them. We don't hear people making lots of speeches about it. Why wouldn't this be an emergency?
REICH: I think it is an emergency. Some of them are talking about it. Remember, half of Americans don't vote and the half that doesn't vote are the people who are at the lowest point on that escalator. That is, there is a direct correlation between political activism and how much money you have. The top 20 percent is very active politically. They vote and they also make a lot of campaign contributions and they finance PACs and they do a lot of things. Half of Americans do not vote. A lot of politicians these days -- why should they listen to people that don't vote? It's a callous and cynical thing to say. I'd hope that our politicians would listen even to people that don't vote, and to some extent they do, but if there's no political activism, if there's no participation by the bottom half, then they're not going to be listened to.
LAMB: How would you take care of those kids that are hungry, specifically?
REICH: With regard to one out of every five kids, there's no great secret about how to handle hunger. I mean, by golly, we do have a food stamp program. We do have ways of dealing with hunger quite directly. We have famine relief programs all over the world. It is an emergency. I'll give you another frightening statistic -- infant mortality. In this country we trail 18 other nations in our level of infant mortality. We have the 19th level of infant mortality. Eighteen other nations are better than we are, have a lower level of infant mortality. We have in some of our central cities levels of infant mortality like the Third World. Brian, the top 20 percent, what's happening -- and it's happening gradually; I don't mean to indict the top 20 percent -- but what's happening is the top 20 percent are, in effect, seceding from the rest of the country, many of them living in nice suburbs with their own school systems, surrounding themselves with security guards, good parks and recreation, private health clubs. They are not connected in ways that they were before. We are segregating by income as a nation more than we've ever segregated before. Zip code marketing is all the rage. Why? Because marketers now know that the best way of finding affluent people is to target certain communities. Those are good schools. The kids have all the breaks. The bottom 80 percent are on a different track. The political issue over the next 10 or even 20 years is how can we get the top 20 percent to make investments in the future productivity of the bottom 80?
LAMB: You teach kids, young people. You talk, lecture, write. Let's say a young student comes up to you standing in the train station over here and says, "Professor Reich, my I.Q. is fairly high. My parents don't have anything. I don't know how to get ahead." What would you tell a young person, 16, 17 years old? How can they get ready for school and then a professional life?
REICH: I'd probably say, "Look, if you were very poor -- I mean really very, very poor and your family is very, very poor -- and you did very well in high school, chances are you can get a scholarship to college. If you were middle class, lower middle class, working class, you didn't do great in high school, you're going to have trouble getting into college. College costs have increased in inflation-adjusted terms about 26 percent over the 1980s. The federal government has pulled the plug on college grants and college loans and college aid. What are you going to do? I would say to that kid, "If you can't get a loan and you can't finance college, at least get the technical training that you need to set you on a channel for lifelong learning in some trade, in some technical area of competence." Unfortunately, I would say to the kid, "We don't have an apprenticeship program like they have in the former West Germany. We don't have a public-private partnership to make sure that you can get skills designed to put you in touch with particular jobs. But by all means do whatever you can to get those skills, and when you get a job make sure it's the kind of job that's going to build your skills, not just a job that's going to be automated over the next 10 years."
LAMB: This book you have, "The Work of Nations: Preparing Ourselves for 21st Century Capitalism", what line of work would you go into if you were a young person today to get ready for the 21st century?
REICH: If I were a young person today, I would try to get, along the lines we were talking before, the best education in the building blocks of symbolic analytic thinking -- problem solving, problem identifying. A good liberal arts education. There's no substitute -- no substitute -- for a good liberal arts education if you can go there, if you can afford it, because that does build a foundation stone for lifelong learning. Also, communications skills are very important -- not just the analytic skills, not just being good with a computer or with a pencil and paper. You need to communicate. You're going to be making presentations. You're going to be cooperating with other people. You're going to be working in teams. Learn how to work in teams. A lot of the American educational system is now premised on individual performance, but that's not the working life you're going to lead in the future. You have to work with people.
LAMB: Harvard has a $5 billion endowment, the largest in the world or at least the largest in the United States. Do you think it's doing enough as a university for the people that aren't so well off?
REICH: No, I don't. I don't think any university is doing enough. I'm a trustee at another university. I think that there are all kinds of things that American higher education ought to be doing, could be doing, working with the American business community. In fact, American business is not doing enough, Brian. Every time I go to a conference on American competitiveness -- and there are many; in fact, the conference industry on American competitiveness is one of the most competitive industries in America -- there is a chief executive officer who says, "By golly, I care about the American school systems. We are engaging in a partnership with American schools. We are funding computers and we are doing this and that." Baloney.

American corporations are pulling out more money from local school districts than they ever put in. They are playing school district off against school district. They're saying, essentially, to any town where they do business, "Look, if you don't give us a tax abatement, we're going to go to the next town. They will give us a tax cut." As a result, a lot of towns don't have the money they need to finance a decent elementary school, a decent high school. In 1960, 44 percent of local property taxes, much of which financed schools, came from American corporations. In 1991 we're down to 16 percent. So all of these corporate CEOs that are talking a good game about American education are pulling money out of American education.
LAMB: What would you do, then, if you were running one of those corporations? Would you say, "I'd rather pay more tax"?
REICH: No, I would work with other business leaders. I'd say, "Look, we have an obligation -- a social obligation, we have an economic obligation. We are Americans, after all. Let's all get together. We're not going to have this war between the states and war between the cities for tax abatements. We're going to have a national truce. We're not going to threaten local towns. We're not going to try to get the best deal we can. We are going to say to the local tax jurisdictions, 'You have a responsibility and we're going to help you fulfill that responsibility to provide the best education possible for those kids.'"
LAMB: What do you think of this deficit? Is it something to worry about? If you were in charge, again, would you get rid of it?
REICH: I don't think the deficit per se is something to worry about. Again, the issue is what we do with the borrowings, not whether we borrow. We have not been investing those borrowings, public sector or private sector. I have no patience with people who say, "We've got to simply reduce the deficit for the sake of reducing the deficit." What difference does that make? Any business person knows that you borrow money for the sake of investing in the future of your business. Those are wise borrowings because then you can pay those debts off when you get bigger. A national economy works in exactly the same way. It doesn't matter that we're borrowing money if we were investing those monies that we borrowed from abroad in education, training, infrastructure, factories. But we're not.
LAMB: Who's got the power in economics in this town, in your opinion? What jobs really pull the levers?
REICH: Well, basically in this town right now there's only one game and that is the Federal Reserve Board. It's Alan Greenspan and his crew over there, primarily because there is no longer a fiscal policy to speak of. Again, we've hamstrung ourselves. We've created this new budget agreement. You can't do anything with fiscal policy. We can't try to get out of this recession by stimulating public expenditures because, basically, we're hamstrung. So it all belongs with the Federal Reserve and that's too much responsibility for the Federal Reserve Board.

Alan Greenspan is trying to stimulate the economy -- it's like pushing on a wet noodle. There's not enough demand in the system. American corporations are laden with debt. American consumers are laden with debt. The spending is not coming forth. Exports -- we can't rely on exports. Europe is in a recession. East Asia is going into a recession. I think this recession, by the way, is going to last much longer than a lot of people now claim. But getting back to your question, economic policy -- no, it's not here in Washington. It's in the Federal Reserve Board. It's not in the executive branch, it's not in Congress.
LAMB: If somebody said, "We're going to make you chairman of the Federal Reserve," would that be an exciting position to be in?
REICH: Not for me. I don't find it very thrilling to look at figures about the money supply. Some people do. If you're into macro-economics, if you want to maintain steady growth -- and I think that the money supply is important for steady growth -- then that would be a very good job. But I'm looking at the structure of the American economy, Brian. I'm looking beyond the current recession. Even when we get out of the current recession, the structural problems that I've been talking about -- that two-tiered economy that we're creating with the top 20 percent but most Americans on a downward tilt -- that to me is much more important over the long term.
LAMB: Do you think that given your view of how this town operates that it will ever change and that the four-fifths that are going down will ever start back up?
REICH: If I didn't think there were a possibility for change, I wouldn't write my book, so I wouldn't be here today. Obviously, deep in my heart I'm a cockeyed optimist. Why am I optimistic? Everybody says to me, "You know, I've read your book. I don't see why you're optimistic. The top 20 percent are linking up with the global economy, doing better and better, putting themselves in these economic enclaves separate from the rest of society. And if they have all the money and they're not willing to invest in the rest of America why, Robert Reich, are you so optimistic?"

Well, what I say back to them is this: Ultimately -- I'm a student of American history, not only of American economics and politics -- if you look back at American history, this country has an extraordinary ability and willingness to roll up its sleeves and get on with what has to be done when they understand the nature of the problem. The First World War, the Depression, the Second World War, we do it. We ultimately do it. There's a feeling of affinity not only when we fight foreign wars -- you know, all the yellow ribbons, all the good feeling, all the self-confidence -- I think we can turn that toward rebuilding America with the right kind of leadership. After the Second World War, remember, we rebuilt Europe, we rebuilt Japan. Why can't we rebuild America?
LAMB: Do you sit in Boston and say, "If we could only get 'X' elected, this thing would change"?
REICH: Well, I've been involved in a number of presidential campaigns, all of them unsuccessful. In fact, if I were a presidential candidate, I'd avoid me like the plague because, obviously, I do something wrong. There are some very attractive candidates out there for the Democrats. Many of them have not yet put up their hand and said, "I'd like to be a candidate." Everybody's scared off now with those popularity ratings that George Bush has. The Democrats have not displayed a great deal of intestinal fortitude of late, and maybe I can't blame them when you have a president with 90 percent popularity. But there are terrific people out there.
LAMB: Who's the best economic thinker, in your opinion?
REICH: Among politicians?
LAMB: Yes.
REICH: Among my favorites is a guy named Bill Clinton, the governor of Arkansas. He's a dear and old friend. We were at Oxford together. I've looked at what he's done in Arkansas with Arkansas education. He's done exactly the right thing with very limited resources. He's the kind of talented guy I think we need right at the top who can provide the right kind of leadership.
LAMB: Anybody else?
REICH: I like Al Gore. I think he's also extraordinarily talented. He's level- headed. He's been saying many of the same things, not in as much detail -- or maybe I should say he's been influenced by me, maybe? Hopefully? I'm very impressed with him as well. I've worked for a number of years with other Democrats on the Hill. There are other governors around who are very impressive. Another senator that I like very much -- I don't know him very well but I like what he's done so far -- is Bob Kerrey. I think he could be a very attractive candidate for a number of reasons.
LAMB: Would you advise an Al Gore or a Bob Kerrey or a Bill Clinton to jump in the race for 1992?
REICH: I would, I would. And I would for the simple reason that even if you don't have a prayer's chance of winning, at least in 1992 you can help set the national agenda for 1996. You can establish credibility for yourself, you make a respectable showing, but also you alert the American public to what you stand for, and so by the time 1996 rolls around even if you don't do very well in '92, you already have the beginnings of a movement. It's all about education. I go back to my role as a educator. I think politics is very much about education, too. The American population is, I think, very confused about economics and about politics. They don't know what's happening. The Japanese are coming here, they're concerned about that, they're losing their jobs -- a lot of economic insecurity. Well, the obligation of people like me -- college professors -- but also the obligation of people in politics is to help educate the public, alert them to reality, not to pull the wool over their eyes. Not to simply say, "Don't worry, be happy," but to alert them to reality.
LAMB: How much do you teach?
REICH: I teach a lot.
LAMB: How many hours a week?
REICH: Let's see. In the fall I teach two big courses. One course has about 120 students -- remember these are graduate students -- another course has, last fall, about 60 or 70 students. This spring I have it easy. I have a little seminar because I knew the book was coming out and I wanted the intimate contact that you get in a seminar and I wanted to talk about many of the themes in this book. I don't mind teaching big classes. I like big classes. I don't like lecturing. I never lecture. I try to make the class into an arena of discussion. I try to provoke dissent in the class. Sometimes there's simulations. They take different roles of different characters in politics and economics. I want the classroom to be alive, exciting.
LAMB: Is there any way to characterize today's students in your classes?
REICH: Remember, my students at the John F. Kennedy School of Government are a self-selected group. These are people who could have gone to law school or business school but went to the Kennedy School at Harvard because they're committed to public service, so this is not a representative cross-sample of America's students. I'm very fortunate. Now, I have in the past taught in a law school. In fact, I've taught a few courses at Harvard Law School. I've taught at American University Law School here in Washington. A lot of students in law school obviously are very career oriented. That's why they're there. They want to make a lot of money. A business school is exactly the same way. One concern I have is that so many bright American kids want to go into law and investment banking -- the pie-slicing professions instead of the pie-enlarging professions. That is a problem for the country. It continues to be a problem.
LAMB: What's the most popular lecture that you give in any one year?
REICH: Well, again, I don't give lectures.
LAMB: Ever?
REICH: I try not to give lectures in the classrooms. Why give a lecture? A lecture is a medieval institution. If you have lecture notes, why not just Xerox the notes and give them to students?
LAMB: What's the most engaging topic, then? What hour is it that you walk out of and say, "Again, that was fun"?
REICH: I'll tell you, Brian, I love my classes. I love teaching. In fact, the exception is when I walk out of a classroom saying, "I didn't have fun, I don't think anything happened in that classroom." I teach classes on political economy, I teach courses on management in the public sector, on leadership in the public sector. A lot of them are case classes; that is, that we examine a particular case of somebody trying to grapple with a political-economic or leadership issue. If I can get those students excited, upset -- intellectual provocation. It's what I do in this book. I'm an intellectual provocateur. That's my role.
LAMB: Any way to define the politics of your students today?
REICH: No. A lot of people look at Harvard, and they immediately assume liberal. But, no, that's utterly simplistic. I have a lot of people who most people would say are extreme right-wingers. A lot of international students who fall not quite on the American political spectrum at all. I think these old ideological compartments are meaning less and less, frankly. But the common denominator of my students is a commitment to make the world better, make public policy better, make public service mean something.
LAMB: Out of time. This is what the book looks like, "The Work of Nations by Robert Reich," professor at the John F. Kennedy School at Harvard. Thank you for being with us.
REICH: Thank you, Brian.
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