Cents and Sensibility : THE WORK OF NATIONS; Preparing Ourselves for 21st Century Capitalism <i> By Robert B. Reich (Alfred A. Knopf: $24; 319 pp.)</i>

There are two kinds of people who think about economics. The most common and least interesting are called economists; these are the folks who regularly publish unreadable articles in obscure magazines, and who issue periodic forecasts, usually wrong, about what the economy is getting ready to do.

The second, more interesting kind of economic thinkers are called “political economists.” These people are generally less interested in the abstract, mathematical “laws” of economics and in the construction of intricate computer models that fail to predict economic behavior. They study the relationship of economic and historical factors as these affect society. From Adam Smith to Karl Marx to John Maynard Keynes to Milton Friedman, the people who do most to shape our thinking about the world have been political economists.

Robert Reich is in this tradition, and over the last decade he has made a name for himself as one of the country’s most innovative and interesting political economists. This means he is an important man: Every serious public-policy debate of the ‘80s that touched on economics was shaped in part by his contributions.

Reich’s ambitious new book, “The Work of Nations,” shows him reaching for the stars. Like great political economists before him, Reich is asking the big questions about what is happening in our world and how we can make things better. Very few readers will agree with everything Reich says in this tightly argued and provocative book, but even fewer will walk away without learning to think about the world in a new and clearer way.

Economists think of their discipline as a science, like physics. New discoveries can change the way we think, but the laws of economics, like those of the physical world, don’t change once they are known. Political economists take a different tack. They see the economy as something that people do, as an activity capable of development and change over time. Yesterday’s law is today’s fallacy.

The best political economists have the keenest antennae for basic changes in the world. They see the big changes quicker, and interpret them more profoundly, than anybody else. Adam Smith understood the rise of the enterprise economy. Karl Marx analyzed the growth of social classes and the birth of large corporations. Walter Bagehot grasped the role of the central bank in a modern economy; John Maynard Keynes showed that capital and labor could compromise productively rather than fighting to the death.

Reich’s central point in “The Work of Nations” is as sweeping as any of these. The national economy, he says, is dead. Kaput. Finito. Forget all this talk about national competitiveness. Forget the idea that there is something called the “American national economy” and that your standard of living will rise or fall as the result of what happens to it.

The national economy, says Reich, used to be something real. In the 1950s, large corporations, mostly owned by Americans, employing mostly Americans and mostly selling goods produced and designed by Americans to other Americans, dominated the national economy. These corporations were equipped for the mass production and mass distribution of basic consumer and industrial goods. “What’s good for the country is good for General Motors, and vice versa” used to be true. A good year for the American economy meant that General Motors would sell more cars. A year in which GM sold a large number of cars would be a year when more Americans would be employed.

All that is behind us now. Today’s corporations are part of a “global web.” Goods are designed in one country, produced in a second at facilities financed in a third, and sold in a fourth. Reich is not the first person to see this or say it, but Adam Smith wasn’t the first person to notice the rise of entrepreneurial capitalism. What makes Reich’s work interesting, as it did Smith’s, is how he interprets the new facts-- and what he says we should do about them.

Reich makes the compelling point that the decline in the importance of the national economy affects different people in different ways. Production workers in the United States must compete with workers abroad, often in low-wage countries with high rates of unemployment and lax regulations. These people have lost out in the great change. Their incomes are falling and their opportunities shrinking.

Another group of workers (Reich calls them “providers of in-person services”) is in the middle. Because these people--janitors, nurses, fast-food sellers-- provide services in person, they do not face the direct threat of foreign competition for their jobs. On the other hand, they face competition from automation--from cash machines, self-service gas pumps and so on--and from former production workers thrown into the job market by foreign competition.

Reich argues that no matter what happens to “the American economy,” incomes for these categories of workers--about 55% of the work force--will continue to decline. A rising tide of GNP won’t float these leaky boats.

A third group--about 20% of the work force--is in better shape. These people--Reich calls them “symbolic analysts”--have good jobs that pay well. They do not experience the work discipline of routine production workers and providers of services, and they thrive on the changeover to a global economy. These lucky folks are not the “information workers” that other, less incisive commentators have pointed to in the past. As Reich points out, a great many “information workers” inhabit electronic sweatshops; data inputters, he notes, are paid and treated more like textile workers than computer designers.

Symbolic analysts are hard to describe. In fact, says Reich, if you have trouble describing your job to your children, you are probably a symbolic analyst. Symbolic analysts define problems and design solutions to them. They have unconventional career paths; they perceive themselves as part of a network rather than climbing a hierarchical ladder. They have titles like “Financial Systems Designer” and they spend lots of time on the phone.

They also make plenty of money --except for poor drudges like book reviewers. Reich argues very plausibly that the polarization of American incomes in the ‘80s--with the rich and poor each getting more so--was due to the rise of the symbolic analyst and the decline of the other two groups.

If the national economy is disappearing under our feet--if the rising tide no longer lifts all the boats--what should we do? Here Reich’s analysis becomes very subtle and interesting. The old industrial policy and economic-nationalist arguments--for protectionism and subsidies, etc.--don’t convince him. Increasing the profits of American corporations might have made sense in the ‘50s as an economic objective for government policy, he says, but those corporations are now multinational entities.

The best form of national industrial policy, thinks Reich, is investment in people. Rather than target specific industries as potential winners, the government should concentrate on producing citizens who are well enough educated to participate in the world economy as symbolic analysts. Although Reich sees a continuing role for government in promoting certain types of investment and, of course, in developing and maintaining the infrastructure, he thinks the principle role that government can and should play in the economy is equipping its citizens with the intellectual tools they need for success.

This idea cuts across the usual divide between liberal and conservative, protectionist and free-trader. It deserves the wide and respectful attention it has begun to attract. If you want to hear the political debates of the future today, read this book.

And keep your eyes on Robert Reich. He is an extraordinarily ambitious and gifted thinker who is only beginning to show us what he can do.

BOOKMARK

For an excerpt from “The Work of Nations,” see the Opinion section, Page 2.