Who is the villain?

Paul Seabright

  • The Future of Success by Robert Reich
    Vintage, 289 pp, £8.99, April 2002, ISBN 0 09 942906 3

Of the many fantasies provoked by the spread of the Internet, few are creepier than the vision of a world in which every relationship can be dissolved at the click of a mouse. Yet the click might also seem liberating, empowering even, to the person doing the clicking. Robert Reich’s book is about the consequences, for our work and our lives, of the so-called new economy and – more subtly – the habits of mind and values encouraged by its supporting technologies.

Reich is an economist who has held office in three US Administrations, most recently as Secretary of Labor under Bill Clinton, and is now running for Governor of Massachusetts. He is a political intellectual in the most fluent American style, who has built himself a useful and largely deserved image as spokesman for a confident but humane vision of American capitalism. Since 11 September, his has also been a voice of moderation and common sense in the American media. He is an internationalist with a keen interest in European affairs – following events in Britain, for example, closely enough to be an adviser to Tony Blair, though not quite closely enough to have had second thoughts about the wisdom of letting this fact be trumpeted in the publicity material for his book. He writes fast-moving, even breathless prose: chapter headings like ‘The Age of the Terrific Deal’, ‘Of Geeks and Shrinks’, ‘Desperately Seeking Stickiness’, two that begin ‘A Cautionary Note on . . .’, all prepare the reader for a thesis comfortably packaged in bite-sized pieces, whose surprises are advertised sufficiently in advance to pose no real terrors. The spin of the book, and its free movement between research and anecdote, are not entirely to my taste, but it presents a good account of the challenges posed by the so-called new economy in the United States. That last geographical qualification is important, for it’s less accurate as a picture of Europe. Reich’s breezy confidence that where America leads the rest of the world will eventually follow may be – fortunately in some respects – misplaced.

‘Technology is speeding and broadening access to terrific deals,’ Reich believes.

Buyers and investors can switch to something better with ever increasing ease. In order to survive in this new era of fierce competition, sellers have to innovate continuously and do so faster than their rivals. The best way is through small entrepreneurial groups linked to trusted brands. At their core are talented geeks and shrinks, in ever greater demand. The enterprise must also continuously cut costs, pushing down wages of routine workers, and flattening all hierarchies into fast-changing contractual networks.

‘Geeks’ and ‘shrinks’ are Reich’s terms for innovators and marketers respectively, cultivators of things and cultivators of people.

The new economy, Reich believes, encourages a division between the talented few and the routine many; it also results in greater insecurity for everyone, leading them to work harder, promote themselves more relentlessly in their professional capacity, neglect their families, and under-invest time and emotional commitment in their communities, which will in any case be increasingly shaped by ‘sorting’ – the tendency of like to associate with like – which reinforces inequality and social stratification.

The market economy, it could be said, renders the citizen lord of the marketplace in his role as consumer, but its browbeaten serf in his role as worker. And since these different roles can hardly be kept in quarantine from one another, the scope even for lordship of the marketplace will shrink: an individual will be able to enjoy only the most fleeting sense of autonomy and power at the moment of the mouse-click, before insecurity at work intrudes on his consciousness and deprives him of any innocence in the enjoyment of his triumph.

It’s worth going through Reich’s argument in some detail, because at each stage he risks exaggerating the novelty of the new economy, perhaps leading us to overlook the respects in which it is genuinely new. First, he argues that the new economy is radically different from the age of mass production, which was able to achieve extraordinary reductions in production costs, bringing what had previously been luxury items to the ordinary citizen, but at the price of standardisation. Not only did Henry Ford announce that ‘any customer can have a car painted any colour he wants so long as it’s black,’ but his very success led to a fundamental consolidation of the industry. (Already, in 1913, Ford produced nearly half the industry’s output, with 299 other firms producing the other half; within a few years most of those other firms had disappeared.) Nowadays, information technology makes it possible to produce items to order, to highly individualised specifications, without losing economies of scale. It also makes it possible to supply customers at any distance. This not only creates far greater choice for the buyer, but makes any one seller’s dominance of a particular market temporary at best, since others can set up in competition at far lower scales of production than were once required.

What exactly is changing here? Among other things, information technology standardises firms’ procedures, enabling knowledge of them to be transmitted from one individual to another without the apprenticeship of the craft tradition. This is not a new phenomenon – it’s a pretty good description of what made the Roman Army so much more powerful than its predecessors and rivals; and the growth of the corporation in the late 19th century depended on exploiting just such standardisation. Two features of the process are new today, however. First, we have learned to standardise higher orders of flexibility – not just those required to fasten the nut to the bolt Chaplin-style, but those required to stop the entire production line and retool it for a different model of car, an operation that can now be carried out very much faster than before. Second, this standardisation of procedures is much more likely to be recorded in reproducible, often digital form – which means that knowledge can be easily transmitted between companies and not just within them, leading to more unstable and uncontrolled forms of competition between those who have access to similar knowledge. To learn the Roman Army’s procedures you had to be a Roman soldier, whereas to copy a rival firm’s accounting system you just have to buy (or pirate) its software. (Blueprints and chemical formulae have performed a similar function for many decades, as systems of patents and licences have attempted to recognise.)

Digitisation is making the boundaries of the corporation more porous to valuable information. We should not exaggerate the novelty of this: a famous example is the way in which the profits from the invention of air-conditioning accrued not to the manufacturers of the equipment but to the owners of real estate in places, such as Florida, that badly needed it, land being scarcer than know-how for this valuable but relatively low-tech invention. Nor should we exaggerate its extent: many everyday procedures will not be mastered by information technology any time soon – cleaning a hotel room or weeding a flowerbed, to name but two. Information technology still cannot tell you how to value a rough diamond, or whether that fish smells really fresh, or whether you’re going to look good in that dress. And many corporate cultures have intangible qualities that are extremely resistant to imitation (though hope springs eternal, as shelf after dreary shelf of business books in airports attest). But even if the change embodied in the new economy is one of degree rather than kind, Reich is right that it is important.

The second main stage of the argument is set out in chapters called ‘The Obsolescence of Loyalty’ and ‘The End of Employment as We Knew It’, whose titles say it all. ‘What’s in store for you and your children?’ Reich asks.

You won’t be an utterly free agent selling your individual services in the open market to the highest bidder, nor will you be an ‘organisation’ man or woman. Instead, you’re likely to become a member of an entrepreneurial group whose profits vary yearly or even monthly . . . or part of a professional-services firm . . . or you’ll work for a talent agency or a temp firm . . . Regardless of your precise relationship to the people who buy your services, the organisation that stands between you and them is thinning out.

He acknowledges that this is not so much new as a return ‘to an earlier stage in economic history in which people contracted to do specific tasks’, after an intervening period characterised by steady jobs in large-scale industrial production. He doesn’t mention the important role of government jobs in creating an expectation of steady employment during the 20th century – an odd omission for someone who has held so many of them, and an important one, since government employment is unlikely to return to 19th-century levels and characteristics, even under George W.

There’s also a danger of exaggerating how steady industrial jobs were. True, if you started young working for one of the Big Three auto firms you probably did have a job for life – but what if you were unlucky enough to start out working for one of the 297 others that were still in business in 1913? The familiarity and longevity of names like Ford and Siemens can lead us to overlook the fact that the average industrial corporation has always had a significantly shorter life than the average employee, and that even in comparatively stable economic conditions there has always been considerable turbulence, with firms growing, shrinking, entering and leaving their major markets in large numbers. Recent research tracing the fortunes of individual industrial plants has begun to reveal not just how unstable employment and market shares were well before any talk of the new economy began, but also how much of the process of industrial change took place not through individual firms getting better at what they did, so much as by unsuccessful firms being replaced by others. The process has always owed more to Darwin and less to Lamarck than the image of ‘employment as we knew it’ suggests.

Again, the fact that Reich’s picture of the process is oversimplified does not make it inaccurate, though it does suggest that the increased insecurity widely felt in American society owes at least as much to the perception of change as transmitted – and perhaps magnified – by the media, as to its measurable extent. And it is very likely that this perceived insecurity has been an important cause of the trend towards longer working hours that has been well documented in the United States over the last couple of decades. The trend is a complex one to analyse, for several reasons. One is that the increase in paid work is being compensated to a significant, though not easily measured, extent by a reduction in the quantity and tedium of unpaid work (principally in the home). Another is that working longer hours may be the result of factors other than insecurity about one’s own employment or stability of earnings. Another cause may be the push towards emulation provoked by the growing inequality in American society, as well as the fawning attention increasingly lavished by the media on celebrities and the very rich. Difficult though it is to monitor such changes, it is even harder to find clear evidence of a resulting deterioration in people’s family or community lives, though that doesn’t stop Reich (and others) from trying; nor does it mean that they are mistaken in their conclusion.

In fact, one could add other dangers to Reich’s list of the consequences of the greater insecurity of employment. One stems from the fact that the traditional job for life provided not just security but structure, an ordered progression through an individual’s life. In fact, over the course of history, structure has been of negligible importance in the world of work. For the vast majority of mankind work has been about survival, and structure has come, if at all, from other sources, for the most part feudal or religious. But the level of education demanded by the flexible economy also leads people to aspire to structure and progression in their lives, though it rarely provides them with the intellectual and emotional resources required to generate these things for themselves. So it is likely that the flexible economy is denying to the less fortunate something whose lack it is also teaching them to feel more keenly. Insecurity, in this psychological sense, may matter more in the new economy than it did in traditional societies, though levels of stress and mental illness among the rural poor in developing countries are high enough to show that this shouldn’t be taken for granted. Perhaps the right way to express it is this: workplace insecurity, of the kind associated with the new economy, no longer threatens starvation in the industrialised world, but the welfare state has found it much harder to remove the more insidious threats posed by that insecurity – loss of a framework for living and the foundations of self-respect, which other social institutions are less able to compensate for than once they were.

A second danger has to do with an old problem concerning power. Following an unpleasant if understandable logic, bullies gravitate towards the insecure. To the pains of natural insecurity, therefore, are added those of exposure to workplace tyrants. When the terrors of losing one’s job are only just greater than the terrors of keeping it, the stage is set for people to suffer the worst kinds of stress.

Suppose we accept that Reich’s diagnosis is broadly accurate. What can we do about it? At this point his prescriptions become frustratingly imprecise. Partly this is because he is honest about the causes of the social changes he describes. The villain is not technology, nor foreign competition, nor capitalism – at least, not in any simple sense, for by doing without technology or foreign competition or capitalism we would lose much more than the ills of the new economy. So who is the villain?

To the extent that there’s an enemy, we’ve seen it, and it’s us. Most of us want the new economy’s terrific deals. All of us are consumers, and an expanding number are investors . . . the culprit isn’t out there – not in the global corporations, greedy executives, insensitive elites, immigrants, or poor minorities. It’s in here, in our own appetites, in what we want to buy, in the great deals we want to get.

Yet, he says, these appetites are not hard-wired: we express them, at least in part, because they are encouraged by those around us. It’s possible to make social choices that none of us would make on our own: no one would pay income tax unless assured that others would do so as well. Perhaps, therefore, we can make more humane choices about our aspirations, about the degree of mutual assurance we extend to those in our society who lose out in the new economy, about the right ingredients for what he calls the ‘new social balance’.

The list of proposals, once Reich sets it out, is more than a little anti-climactic: ‘cushion people against sudden economic shocks’, ‘widen the circle of prosperity’, ‘give caring attention to those who need it most’, ‘reverse the sorting mechanism’ – all components of Beveridgean welfare-statism of a kind very familiar to a European reader. This is not to disparage the proposals themselves, merely to say that they look like suspiciously dated prescriptions for what Reich has been urging us to think of as a fundamentally new ailment. It may be that they go as far as an American economist can go without being accused of Stalinism, but they lead this European economist at least to wish that Reich had devoted more attention to what the range of social choices might be. For instance, in 1998 the French Government passed a law imposing a 35-hour working week on all but small firms, and part of its rationale was a very Reichian one – that people who work longer than 35 hours often do so only because it has become a social norm, and that the purpose of legislation is to alter social norms. Whether this rationale will work in practice is another matter (I confess some scepticism), but the change is still too recent for us to tell: anyone who claims to know whether the impact of the 35-hour week on French society has been positive or negative overall is either bluffing or confused.

It’s also worth pointing out that the changes Reich attributes to the new economy in America have not all appeared in Europe. Working hours in America have, on average, risen over the last two decades; in Europe, and again on average, they have fallen. It’s not enough to say that Europe will follow where America has led, especially when you reflect that the new economy has been spreading in Europe, albeit at a slower pace in many sectors than in America (though at a faster pace in others, such as mobile phones). It seems that social norms concerning working hours are already different in Europe, for reasons we don’t fully understand, but which we need to understand if Reich’s diagnosis of the consequences of technological change is accurate.

It may be that much of the difficulty of coming to terms with the new economy is that it confronts us with predicaments that appear radically new (such as the so-called ‘death of distance’), simultaneously with others that are as old as mankind. Ever since Helen of Troy contemplated an alternative to life with Menelaus, we have known that the dissolution of relationships can pit pain and freedom irreconcilably against each other, sometimes with momentous consequences for third parties. We are no closer to a resolution of this drama than we ever were, even though the theatre has changed out of all recognition.