A House Of Cards

I INFLUENTIAL PEOPLE got between the royal blue covers of Robert B. Reich's long-awaited The Next American Frontier before those covers ever materialized. In fact, the galleys to the book were one of the hottest items in Washington, D.C. this spring as policy makers and politicians scrambled to read Dr. Reich's prescription for the ailing U.S. economy. Now the general public has finally gotten its crack at an enlightening work which urges a dramatic change of direction for the role of U.S. business, labor and government towards more advanced industries and a more flexible labor system.

Reich's analysis of America's industrial problems is biting, and his suggestions for changes are imaginative. But as with many public policy theories, the main question is: Will it play on the Potomac? And although Walter Mondale calls The Next American Frontier "one of the most important works of the decade," his buddies in organized labor are not altogether thrilled with Reich's high-tech heaven. A public policy theorist wants his plans implemented, but Reich does not leave enough room for natural compromise. While he might think that America needs "a new consensus" to address these problems, such a consensus has not emerged. Without it, the country is unlikely to swallow Reich's prescription whole.

Reich begins the book with a detailed description of the evolution of business management in the U.S. His general point is that while America's industrial development has been spectacular in the last hundred years at the tail end of the first American frontier, we better change our act because we have come to another one. U.S. development, he argues, was spearheaded by adventurous entrepreneurs who put all their eggs in high-volume, standardized production with little help from the government and little concern for workers. These plants, headed by professional managers, contributed to a prosperity "unparalleled in history."

Meanwhile, other countries--most notably Japan and Western Europe--began, with U.S. postwar aid, to build up their industrial bases and become economic rivals. Strengthening this development governments have supported industry and more labor productivity and cooperation. Our allies have not only caught up to us, they can now forge ahead with a more productive industrial setup. The other new actor on the world economic stage is the Third World, which has a major industrial force developed from a passive market.

Reich argues that those countries have become much more suited than the United States for this sort of high volume, standardized industry (read: organized labor's turf). They have access to lower priced labor and in some cases more natural resources. Therefore, if market forces act as market forces are wont to do, the U.S. will be priced out. Soon, the scenario goes, U.S. imports will increase and production jobs will dwindle mortally devastating an already weakened economy.

But Reich says this will never happen. A depressed economy, he predicts, will force politicians to take stopgap measures to halt the erosion. In fact, politicians have already started on this road, instituting barriers to trade such as higher tariffs and measures like the domestic content bill. If the U.S. does not begin to work out a coherent industrial and trade policy, Reich envisions, the country will head down the projectionist path to world economic ruin.

REICH WOULD LIKE to make the nation realize that industry and international trade are in enough disarray to warrant national priority. He asks government, in consultation with management and labor to establish a coherent strategy for the future. Of course, this new role would be carried out by the type of students that Reich teaches and the Kennedy School turns out yearly--the public policy professional.

Reich argues that the way the U.S. can carve a niche for itself is if it takes advantage of what he calls the "only resource that will remain uniquely American: Americans themselves." Reich envisions an adaptation that would switch U.S. industries from high-volume standardized ones to more advanced specialized products. Instead of producing standard steel, Americans can produce high grade steel: instead of automobiles, more advanced auto parts. This would also include a larger emphasis on high technology industries such as the semiconductors and robotics which are found up Massachusetts Route 128.

For labor, Reich urges a similar sacrifice--to look beyond the short term and more to high tech. He argues that the union leaders must realize that clutching to tariffs and hard-line positions may pay off for a time but not once those smokestack industries begin to lose international competition.

Reich is counting on business, with government prompting it, to open up and give workers more flexibility in the workplace, job security, and increased say in how companies are run. In addition to making business more cooperative, Reich wants to give it much of the social service responsibility the government held thus far. This seems to put too much of a new responsibility in the hands of managers who are going to resist even the slightest change in the workplace, but it might be a good way to integrate relief and job training.

THE GOVERNMENT, in Reich's vision, will have the major role in making his scenario happen. First, it must forge a national consensus that will allow such sweeping changes in the American economy. Reich calls for federal and state governments to begin directing the changes, strategically giving benefits to businesses only if they agree to pursue this master plan. The federal government could arrange for companies to train unemployed workers in return for vouchers, change the tax code to give benefits to companies which retrain the employees, could establish regional banks to give low interest loans to industries which agree to restructure themselves, and finally could create a public White House board which could monitor how industries were doing in becoming competitive.

Most of Reich's suggestions are rooted in reality, and he is scrupulous about offering contingency plans. But throughout the book the reader is left with the feeling that the vision's cornerstone--that national consensus--will never come to pass. Without a mandate to clear the board and start afresh, that evil word in the world of economic policy, politics, will rear its nasty partisan head. With a theory that depends so much on cooperation and compromise, one side holding back could make the whole structure disintegrate. And while the Democrats can praise Reich's book and use some of his ideas for the 1984 platform, it is going to be hard for them to push labor into abandoning their hold on the smokestacks and going into unfamiliar and largely non-union high tech waters. The problems are there and Reich clearly elucidates them. But whether his calls are loud enough to get people moving is the real question.