I’ve always appreciated Robert Reich’s viewpoints and find him a refreshing voice on several topics – education, business and politics. My favorite quote from Reich is, “The market for talent – the sellers of it, the buyers of it – is the most vital market in the modern economy.” Following are some excerpts from an interview with Robert Reich by Freakonomics co-author Steven Dubner that appeared in today’s NYT. You can read the full interview here.
Q: How accurate is the B.L.S. data and what could or should be done to make it as sound and accurate as possible?
A: The Bureau of Labor Statistics is the crown jewel of data gathering and analysis in the federal government. It needs more money to do its job properly — to upgrade and expand its surveys, for example. (ok, there may be a bit of bias here ;-) my note)
Q: As a fellow Grinnell 2002 graduate I’d like to know: Is a liberal arts education a worthwhile investment? Does it have value in today’s labor market, or is it an outdated concept? Is America’s higher education producing the workforce that will be needed to compete with China and India in the future? What needs to change and why? What does the U.S. do right when it comes to education?
A: The purpose of a liberal arts education isn’t just to make more money (four-year college grads have lifetime earnings that are about twice that of the typical high-school grad without any college) but also to be able to have a fuller life and be a more engaged and responsible citizen. So yes, without a doubt, it’s a worthwhile investment.
As to whether we’re producing the workforce needed to compete with China and India, the answer is yes — at least up until now. U.S. colleges and universities are still the best in the world, and continue to attract students from all over the world. But we can’t be complacent. Public and private universities need more and better funding, and students need more affordable access to them.
Q: What steps, if any, can the U.S. take to consider staying on par with China — in terms of economic growth capital, G.D.P., etc?
A: China is still playing catch-up with the United States and other advanced nations. It’s relatively easy to chalk up fast growth when you’re not the technological leader. All you need to do is follow the leader!
But that’s no reason for complacency on our part. If we want to stay in the lead, we’ve got to invest far more than we now do in basic research and development (green technologies, for example), as well as education (starting with early childhood). And don’t forget infrastructure: our roads, bridges, and pipes are falling apart. All these public investments are at least as important to our future growth as private investment, but we’ve been skimping on them.
Q: Do you believe in redistribution of wealth via taxation?
A: I don’t believe in redistribution of wealth for the sake of redistributing wealth. But I am concerned about how we can afford to pay for what we as a nation need to do — not just recruiting talented teachers to our classrooms and providing better access to health insurance for all our people, but also paying for national defense and homeland security and all the other things this nation needs.
Remember, almost all the economic gains of the last decade have gone to the people at the top. And they pay a relatively small percent of their income compared to what the people at the top used to pay. The marginal income tax on the highest earners was 93 percent under Dwight Eisenhower. It dropped to a little over 70 percent under John F. Kennedy. Now it’s 35 percent. It’s 15 percent if you’re lucky enough to be a private-equity fund manager or anyone else who can shift their income into capital gains.
Q: What incentives can government or society provide to individuals to encourage actions that benefit those individuals and society in the long-term?
A: History suggests that societies become more conscious of their long-term needs after they’ve experienced deep stress — wars, economic depressions, plagues. Perhaps these upheavals give societies broader perspectives on themselves — on where they’ve been and where they may be heading, as well as the ties that bind their members to one another — and thereby encourage them to invest in and make plans for generations as yet unborn.
To take the most recent example from modern American history, the Cold War prompted America to invest in its long-term infrastructure (the National Defense Highway Act), train a whole generation of scientists and engineers (the National Defense Education Act), and rebuild war-torn Japan and Europe.
Q: What do you believe would really happen, if in a growing economy (such as the one we had under President Clinton), we left the rate be, and allowed the economy to grow large enough for say, 99 percent employment?
A: We’d have inflation.
When I took office in 1993, most economists assumed that unemployment couldn’t get below six percent without igniting accelerating inflation. Alan Greenspan understood that globalization, technological change, intensifying domestic competition, and the decline of unions all created a different economy — one in which unemployment could get to four percent, even below four percent, without causing inflation to accelerate. But I don’t think unemployment can fall to one percent without having an inflationary impact.
Q: I’d be interested to know your thoughts on the feminisation of poverty and the male-female wage differential. How much of that is due to career choice?
A: Rough estimate: About 50 percent of the differential has to do with different career choices made by women and men. Twenty-five percent involves greater time women spend on care-taking of children and elderly relatives. The other 25 percent is due to bias and prejudice in the labor market.
Q: Mr. Reich, What does the U.S. have to do in order to raise the value of the dollar against world currencies?
A: Theoretically, the Treasury (along with the finance ministries of other major economic powers) could temporarily raise the value of the dollar by buying dollars.
But this would only work temporarily. The fundamental problem is that the dollar, as our international I.O.U., is now encumbered by so much debt (public and private) that global investors and traders worry about its future value. So they’re diversifying their dollar holdings into yen, euro, and other currencies.
Even more worrying, the dollar is losing its footing as the international reserve currency in which global deals are made. Here again, buyers and sellers (including oil producers) are starting to hedge their bets by diversifying out of dollars. I doubt there will be a run on the dollar — nobody wants that, and, as I said, major finance ministries can prevent it from happening — but I don’t see how the dollar can avoid a gradual decline.
Ok, some good news and some not so good news but its Friday so go kick back, have your beverage of choice to shake off the week and think about innovating for the future!
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