MEME 2.02

In this issue:

o Interview with U.S. Secretary of Labor, Robert Reich.

"Ultimately, we have to decide whether we are no more than an economy sharing a common currency in which the primary social glue binding us together is the business transactions we do with one another, or if we are still a society in which we have special obligations to one another as citizens." --Robert Reich, in MEME 2.02.

In the first week of January, AT&T fired approximately 40,000 employees out of a total workforce of approximately 305,000 people. This came several months after AT&T shocked the world by announcing its intention to divide into three separate companies: a telecommunications service company (known as AT&T), an un-named second company based at Bell Labs which will build the hardware behind telephone networks, and a third company specializing in computers, to be named National Cash Register (NCR).

AT&T, one of the oldest, and arguably most successful, corporations in the United States, made this decision for several reasons. One, according to CEO Bob Allen, included making AT&T more competitive in the changing world of communications, a world where simply carrying telephone conversation is replaced by complex layers of "content" -- from multimedia to video-conferencing to unknown digital network applications. Simultaneously, the U.S. Secretary of Labor, Robert Reich, made several pronouncements about the significance of these firings for the US economy at the start of the so-called Information Age. Reich used the term "electronic capitalism" in a New York Times op-ed to describe the changing nature of the world economy and work.

I managed to get the Secretary on the telephone for about a half-hour, and we discussed the implications of AT&T's actions and the changing nature of capitalism in the Information Age. What follows is a transcript of that conversation.

David Bennahum: Mr. Secretary, I want to thank you for taking the time to speak to me today. I read your op-ed piece, and I'm hoping in this conversation to really sink our teeth into the nature of work in an era of electronic capitalism and the degree to which capitalism is changing, in a sense, because of, shall we say, the Information Age or the arrival of an economy based on information. Reading your Op-Ed, you had this phrase "electronic capitalism" and that it's replaced the gentlemanly investment system that we used to have before. So I'm wondering, maybe to begin with, if we can start by looking at what do you mean by "electronic capitalism"?

Robert Reich: A form of capitalism in which investment decisions are made with extraordinary rapidity. Money can be moved at the speed of an electronic impulse. And there are a wide range of alternative places to park money, not only inside the borders of one country, but literally around the globe. Capital has never been as mobile. In fact, it is hard to conceive of how it could be more mobile. People, however, are still rather immobile. In fact, two-wage-earner families are becoming the norm, and two wage-earners have a harder time moving from place to place and getting jobs than one wage-earner. It's also difficult for people to leave friends and family when they depend on friends and family as never before for baby-sitting, support, economic support, and even loneliness. And finally, it's become difficult for people to move because often much of their assets are tied up in their homes, in property values. The rich rely upon stocks and bonds. The middle-class relies upon their own home as their primary savings vehicle. But when the economy turns sour in a particular region because of a massive layoff, housing values begin to deteriorate. It's more difficult to afford to move to a place where jobs are growing and property values are, accordingly, soaring. So we have the paradoxical situation in which electronic capitalism is making financial capital ever more mobile, at precisely the same time as it has become ever more difficult for people to move, change jobs, and change locations. I ought to add one more point about the difficulty of shifting ground. New jobs often require new skills. Unlike the old days in which a machinist in one firm could leave that firm if necessary, and become a machinist in another firm, today the good jobs require skills, and it is not always easy to get new skills for a new job. Often one has to learn those new skills. So mobility from job to job, particularly good-paying jobs -- well, actually all jobs -- is somewhat less than it was in a mass production economy.

DB: Is the core behind all these problems the digitization of our economy, in a sense?

RR: To call it a problem I think makes a conceptual leap. it's a problem to the extent that there is a widening disjuncture between the extraordinary speed at which financial capital is moving and the difficulties that individuals and families have catching up. It means that many people who lose their jobs are left without easy access to a new job. Financial insecurity is rampant because job insecurity is endemic...

DB: Let me ask you this question then. If one of the fundamental powers of our nation used to be, in a sense, that it had some degree of control over its economy, to what degree does this mobile, sort of nomadic capital undermine the ability of nation-states to have a say in governing how their economy functions?

RR: Well, considerably. Not only the nation-states have less capacity because economic policy increasingly is determined by bond traders and investment capital moving around the world, but communities have even less capacity to determine their own fates. The entire communities are susceptible to sudden loss of jobs, or a decision by a major business to leave. Communities, states and nations are all being played off against other communities, states and nations in a giant bidding war which is undermining local tax bases at the same time as it penalizes the smaller businesses that have less bargaining leverage, because they can't get the same tax benefits. Now, what's the answer here? Surely not to immobilize financial capital. I think it would be a mistake to believe that the only solution lies in imposing draconian controls on the movement of capital. Part of the solution may be making it easier for people to gain mobility. In fact, that's one of the goals that we have set for ourselves, creating a reemployment system that is modeled on a very different premise than the old unemployment insurance system, which assumed that one would get one's job back again after a downturn, when the company was rehiring. The term "layoff" is a misnomer. It comes from a time in our history in which most job loss was temporary, people were "laid off" until they were back on the payrolls. But these days, 70 percent of the people who lose their jobs lose them permanently. A better term would be probably "castoff." Perhaps in addition to easing the transition from job to job, giving people better opportunities to get new skills, setting up a new digitized information system so that people can know what jobs are available and what skills underlie those jobs... By the way, that's all now being created, and we're moving on that as fast as we can. But besides that, we perhaps also need to create incentives for companies to upgrade employee skills, to bring workers on as partners in terms of profit-sharing and gain sharing, and if they are going to lay off people, do so in a way in which the company assumes more of the cost of retraining them and finding them new jobs paying comparable salaries.

DB: Can I ask you a question, though, about... As someone who grew up with computers, as part of that first generation of people to sort of get them as kids in the Seventies, for me it's something I'm very comfortable with. I sort of understand the machine. I sort of grew up with it, so there's no real barrier for me. I know that I'm very fortunate in that way. And I do, because of that knowledge and being with the machine, have this feeling (and I think it might be true) that they are enabling companies to be more efficient in the way they process information and organize themselves. So is it actually possible that the people being pushed out simply really won't be able to find work because literally we've made the work "more efficient" so there's simply not the need for human power that there used to be?

RR: I don't believe that. I believe, and my belief is based upon travels all around the country where I've seen technology creating new demands for new skills we hadn't even heard of years ago... The garage mechanics, for example, who understand the electronics underneath the hoods of new cars and can diagnose and repair those electronics, are earning $50,000 and $60,000. They are not garage mechanics in the traditional sense of the word. Cashiers who can use computers to control inventories become inventory managers and are much more valuable than the cashiers of old. Truck drivers, those who have computers in their cabs and time deliveries for precisely when the customers need them and also understand how to repair and install the machinery are more than truck drivers -- they really are technicians.

DB: I can see that happening. But the counter-argument is made that, you know, there used to be a clerk and an inventory manager; now there is a clerk who does the inventory management. They get paid the same amount the clerk used to get paid, and one job has disappeared.

RR: What we know from the economy is that of the 8 million jobs created over the past three years, most of them paid better than the median wage. In fact, the most rapidly growing job categories are knowledge-intensive; I've called them "symbolic analysts." Why are they growing so quickly? Why are they paying so well? Because technology is generating all sorts of new possibilities. There's not a fixed number of jobs to be parceled out of which technology might be replacing one portion. Rather, technology generates its own new jobs. And although the routine jobs are being replaced very rapidly, higher-skilled jobs which utilize the technology for problem-solving are being created at an even more rapid clip. The problem is that many people don't have the right skills. We were a mass production economy in the 1950's. Our middle class was created through mass production industries. in fact, high volume mass production, stable mass production generated the sorts of jobs that were the doorways into the post-War middle class. But the new middle class is based on a completely different premise. Instead of high-volume, standardized, stable mass production, it is based upon the paradigm of continuous technological change. The only people who are thriving in this new economy are people who are becoming more valuable because they are utilizing the technology to generate greater and greater value and output. Professionals, top managers, technicians of all types are actually riding the wave of technology. The top 20 percent of income-earners in this country are doing exceedingly well. The top 5 percent are doing superbly well. The problem is that median wages are stagnating. They've been stagnating for 15 years. Even though the economy has grown, 97 percent of the growth in family income over the past fifteen years has gone to the top 20 percent of households -- I should say household income. And half of that has gone to the top 5 percent. There's not a shortage of jobs. I mean, if you look at the employment picture, you'll see that (although I don't have December's figures) through November we had 15 straight months of unemployment lower than 6 percent, which many people said could not be achieved without igniting inflation. There's no inflation. There's no inflation in sight. The problem is that of the 115 million existing jobs, those already existing in 1993, they have split between a relatively few paying better and better, and a much larger number paying worse and worse. Technology and globalization have conspired to shift demand in favor of people with skills, the right education, and (I'll also add in) the right connections, and against people without these attributes.

DB: What do you mean by "right connections"?

RR: In the new... I mean, electronic capitalism places a great premium on being at the right place in the right time, with the right skills. One of the great benefits of going to an elite college (and by the way, this has always been a great benefit; it's probably more of a benefit now than ever before) is meeting people who are plugged in to the new economy, or more likely, whose parents and relatives are plugged in. It's those job connections. You know, my Uncle, my Father, my Mother, my Aunt, my Friend's Friend is in this industry, is doing that. Experience counts for so much, the first few jobs count for so much, that web of connections often in a university setting often is vitally important. There are also the connections that come from working in a dynamic sector of the economy. If you are deeply involved right now in the Internet in terms of products being generated on the Internet, chances are you're rubbing elbows in cyberspace with people who are doing some fascinating things. You have a greater likelihood of knowing what you need to learn over the next six months in order to get closer to the cutting edge.

DB: Does that tend to increase or accelerate the process of division between the top strata and the rest?

RR: Absolutely. Because the people who are in the middle of the income distribution, or below, are that much less likely to have that elite education or to be rubbing elbows in cyberspace. You mentioned a moment ago that you were a product of...

DB: Yeah, I'm one of those lucky people. I went to Harvard and work on cyberspace.

RR: But what I want to emphasize is, it's less generational than it is socio-economic. There are many people now who are middle-aged and who have become computer-literate, perhaps not computer nerds but computer-literate, because they have the tools to learn. But young people today who are 5, 6, 7, 8 years old, young teenagers today who are in homes without computers, who have no idea how to use them, what to do with them, how they can be tools for learning, those young people are at a serious disadvantage, even if they didn't face all the other barriers that they now face.

DB: The image of the Information Age that we used to have in the Fifties and Sixties was one of prosperity, and then in the Seventies and Eighties was one of prosperity mixed with technological wizardry, and that we'd have these high-scale jobs that at least would give us really high pay. But it was a very optimistic vision, I would say.

RR: Well, it's a vision that has come true for a segment of our population. But electronic capitalism also enables the most successful to secede from the rest of society. It is now possible for top level managers, professionals and technicians to communicate directly with their counterparts around the world to generate new products and services for other counterparts around the world without depending economically upon the productivity of lower-wage and less-skilled people.

DB: And in a sense, because of that, the moral link to the community has been severed, right?

RR: Exactly.

DB: I mean, you're no longer a part of a community, so you have no...

RR: Exactly. The word "community" right now is a very appealing...connotes very appealing images. But in reality, very few people live in socioeconomically diverse townships. In fact, we are, as a nation, segregating by income to a much larger extent than every before. Zip Code marketing has become the rage because marketers know that where we live has a lot to do with what we can afford to buy. And remember that the local tax base is still the major revenue source for schools, libraries, infrastructure, and many social services. It's not surprising, therefore, that we're seeing a wider and wider divergence between the public services available to those living in very wealthy suburbs and exurbs and people who are in working-class and poor towns.

DB: I was at AT&T, and what they're trying to build now is a whole framework for electronic commerce internationally and locally, where goods and services and jobs really know absolutely no borders, neither in this country nor outside of them. Does this process accelerate, then?

RR: Yes, it does. During the next few years, this country is going to be forced to so some very hard thinking about what it means to be a nation, and also what it means to be a community. The budget battle that's going on right now in Washington is just a small piece of that larger public discussion. Ultimately, we have to decide whether we are no more than an economy sharing a common currency in which the primary social glue binding us together is the business transactions we do with one another, or if we are still a society in which we have special obligations to one another as citizens.

DB: That's a pretty profound decision we have to make.

RR: Well, we'll make it one way or another, whether we know it and we make it consciously or if we don't know it and we make it implicitly.

DB: If you had one question to pose to Bob Allen, the CEO of AT&T right now, if you could be in a room with him, what would you ask him?

RR: Well, it's the same question I ask a number of CEO's these days, particularly from very profitable companies which are cutting back on their workers. What's the purpose of a corporation? Is it merely to maximize shareholder returns, or does a corporation also have special obligations to its employees and the communities in which they live? If it's only to maximize shareholder returns, then the burden of proof falls upon CEO's to show how meeting that goal is likely to improve the standard of living of all people in our society. To some extent, obviously, it does.

DB: Right. But at what cost?

RR: Yes, at what cost? Remember, corporations are creatures of law. They don't exist in Nature. We have decided to organize them in a certain way. It could be that in this era of electronic capitalism, we have to think creatively about a slightly different form of organization, which maximizes shareholder returns but also living standards for a much broader segment of our society.

DB: And that's the role of government and us as a community, to decide what...

RR: Well, ultimately, it's a social choice. Again, because corporations don't exist in a state of Nature, we need to make that choice consciously.

DB: Do you think the 30,000 folks who got laid off yesterday are going to be able to find satisfying, meaningful work?

RR: Some of them will. The Telecommunications sector of the economy is going to be growing very rapidly. Those who have the right combinations of education, skills and connections will do very well. But middle and lower level white collar supervisors and also blue and pink collar workers who don't have the right skills or who...well, maybe just who don't have the right skills, may find it far more difficult.

At this point we were cut off by Reich's press secratary because Reich had another appointment.

Meme 2.02 and its contents copyright 1996 by David S. Bennahum. First spawned by Into The Matrix at http://www.reach.com/matrix. Pass me along all you want, just include this signature file at the end.

Direct comments, bugs and so on to me at davidsol@panix.com.