by Alison Bass

Former Secretary of Labor Robert Reich: E-Business is Too Much of a Good Thing

Jan 15, 20019 mins
BPM Systems

Robert Reich used to live to work. As President Clinton’s secretary of labor and a key member of his first-term Cabinet, Reich frequently (and gladly) put in 18-hour days. But one morning when he went to kiss his youngest son goodbye, it suddenly dawned on him how much of life he was missing. Like so many other high-flying achievers today, Reich no longer had time for anything that didn’t have to do with work.

That epiphany not only prompted a complete career change on Reich’s part—he left Washington in January 1997 and became a professor of economic and social policy at Brandeis University in Waltham, Mass.—but it started him thinking about how many other people were in the same boat. And that led him to a larger truth: The dizzying pace of economic change is not only compromising the quality of our lives, but it also may be hurting us as a society. If left unchecked, it could spawn a backlash against the very pillars of economic growth: globalization and free trade. That realization inspired Reich’s latest book, The Future of Success, published in January 2001 by Alfred A. Knopf.

One drizzly afternoon last fall, Reich sat in the parlor of his sprawling but understated home near Harvard Square in Cambridge, Mass., and talked about the price he and many other Americans are paying for their affluence as well as what we, collectively and as individuals, can do to make our lives more sane.

CIO: We know all about the fruits of the economic boom: the fabulous deals, the good salaries, the wonderful perks, especially if you’re a coveted IT professional. But what do you see as the downside of the new economy?

Reich: In the new economy, there is more choice than ever for consumers, and it’s never been easier to switch products and brands. But that means that all the producers and sellers have to hustle harder to keep every consumer and attract new ones. But who are the sellers and producers? It turns out they are us too. We are the ones who have to hustle harder to do it better, faster, cheaper than our competitors. Competition is more intense than ever, and people are feeling that in their daily lives. Data shows that most Americans are putting in many more hours than before, and that’s especially true of people who are at managerial and professional levels. The great irony is that the more money you earn, the more pressure you are under and the more frenzied your lives are.

Is the bogeyman here corporate America?

Many people take it out on corporations. But in truth, companies are simply responding to this new competitive environment in which they have to continually innovate toward cheaper and better products and services—and do it faster than anyone else or they are going to be out of business. The new economy is also pushing companies to reduce all routine costs, including the cost of routine labor. So if you can do the same thing more cheaply by relying on a subcontractor or a robot or a foreign company, then you’ll do so. But at the same time that companies are competing ever more fiercely to get “talent”—the new creative workers of the economy—and paying more and more for them, they’re reducing the cost of routine labor. You don’t have to be a rocket scientist to see that inequality will follow.

So what do we do about all this, given that it might be impossible to slow down the economic juggernaut?

First of all, people have to make hard choices—as individuals, about what they are willing to give up in order to slow down their lives. But they must understand that the challenge of slowing down is more formidable today than it was years ago. And there is more to it than individual choice. We have some very large social decisions to make about the kind of culture we want to come out of this new economy. To give you one example, in the old industrial economy, we came up with something called unemployment insurance to tide people over during dips in the business cycle. But now, the greatest threat to income security is not periodic recession and layoffs. It’s sudden changes in the economy that may cause people to be laid off for good or make their skills obsolete. So what we need instead of unemployment insurance is earning insurance that would tide somebody over for a couple of months. The insurance would offer half of the difference between the old higher salary and the new lower salary that the person might receive at another job, to give them a chance to change their skills, locations, even livelihoods.

What’s something else we can do to buffer people against the whiplash of economic change?

Often these days, entire communities are buffeted by economic change. They lose major employers, the tax base starts eroding, imports take away their major businesses. We need a form of what might be called “community insurance.” We don’t want to stop capital from moving rapidly around the globe; that would shoot us all in the foot. But if we’re going to avoid a backlash against globalization and the free movement of capital, we’ve got to make sure that communities don’t bear the full brunt of sudden change. To pay for such insurance, we could enact a very, very tiny transaction fee on the movement of capital—maybe one-half or even one-tenth of 1 percent. That would go directly into an insurance fund that would be available for communities that lost 15 percent of their economic base in a given year for such things as retraining, reallocating, infrastructure, or attracting and incubating new businesses.

Also, many families are spending a lot of money on child care because both parents work. It’s high time we understood that child care is, in effect, a cost of doing business. Businesses should be encouraged—perhaps required—to offer parents flexible time to do their work and paid leave to care for a young child or an elderly relative in need. Any parent who decides to remain at home with a child under the age of 3 should be eligible for financial support equal to half the nation’s median income. Such support could come in the form of refundable tax credits.

You can find a long list of examples in my book. The point is to find ways to ease the transition of people through changes that are the hallmark of the new economy so that they can lead more humane lives. You see, that’s the real issue here. As consumers and investors, we’ve got it made. But the truth is we’re not just consumers and investors; we are also working people. We have families, relationships and connections to loved ones. We have friends. These other roles deserve and require at least as much attention as our role as workers. We’ve got to organize ourselves so that the new economy works for us. We don’t have to be slaves to technological trends.

That all sounds great. But given how overworked many Americans are, how will we as a nation have the will to effect these kind of changes?

Oh, I’m very optimistic about our capacity for change. And I’ve lived half my life in the public sector. You would think I would be more cynical. But I have only to look at the history of this country to see how resilient we are—look at the early days of industrialization, for example. Americans in the late 1800s and the beginning of the 20th century faced a huge challenge, of a newly industrialized economy that featured factory work. And suddenly, we had to deal with issues like child labor, sweatshops, worker safety and the lack of social insurance when a breadwinner suddenly died, because we were no longer in communities that could take care of us. The gap between the rich and the poor was widening; we had very large numbers of new immigrants. The parallels between that era and this one are very striking. For example, 100 years ago people muttered that it would be impossible to get this country to change its ways; politics was in the hands of special interests, people were very cynical about government. And yet somehow, we got on with what needed to be done. We passed laws barring child labor, providing safe workplaces, creating social insurance. We cleaned up our tenements, and we created an educational system that extended from kindergarten through 12th grade. We did a huge number of things to adapt ourselves to the industrial order, and we can do the same thing again.

And what happens if we don’t?

Frankly, I don’t see us going in the same direction we’re going without some sort of upheaval. For example, there’s already a backlash brewing against globalization. We saw just the tip of that iceberg in Seattle last year. According to polls, a majority of Americans say they think free trade is bad for America. If we don’t respond to people’s concerns, we could have a backlash in which many of the fruits of economic dynamism are lost to us. The Luddites may rise up and try to stop technological change. Don’t assume they can’t. Periodically in history we’ve had fundamentalist uprisings in which civilization has been shoved backward in time. So it’s in the interests of corporations and people at the top to ease the transitions of workers into this new economy. I think once people understand why we are in the predicament we are in—and that’s why I’ve written this book—they’ll do something about it. When Americans understand the nature of a problem, we tend to roll up our sleeves and get on with whatever has to be done.