Follow the Bouncing Ball Into Next Century

Robert B. Reich, former secretary of Labor, is a professor of social and economic policy at Brandeis University and national editor of the American Prospect, where this essay also appears

As the United States embarks on the next millennium, where’s power moving to? Here’s who’s losing it:

* Giant corporations and their CEOs. They’ve made money in the current expansion, but they’re losing clout. Vast Industrial Age bureaucracies can’t move fast enough. They’re too far away from emerging markets and technologies. All are downsizing, and many CEOs are losing their jobs. Since 1990, heads have rolled at IBM, AT&T;, General Motors, Kodak, Sears and other corporate behemoths. When the economy slows, expect more heads--and downsizings on a monumental scale.

* Labor unions. Even with the tough-minded John Sweeney at the helm of the new AFL-CIO, the percentage of private-sector workers belonging to labor unions continues to drop, now down to 9.7%. Unless unions organize vast numbers of low-wage service workers in hotels, hospitals, retail stores, restaurants and laundries as well as platoons of overworked and underpaid high-tech workers, organized labor is in danger of disappearing.

* The federal government. When Bill Clinton said the “era of big government is over,” he was understating it. Without a Cold War to wage, a national crisis to manage or a public aroused about anything more lofty than the value of 401K plans, the federal government has all but vanished from the public’s mind. So long as right-wing Republicans and a centrist White House remain unwilling to do anything of importance about health care, education, Social Security, Medicare or the scandal of campaign finance, Washington’s irrelevance has solidified into a gelatinous mass of indigestible spin.


* The “military-industrial complex.” Dwight Eisenhower’s farewell warning now seems quaint. Yes, military contractors are still collecting billions, but the money is really supporting the nation’s largest jobs program, and it can’t last. The fanciest high-tech gadgets now come out of commercial firms, not military contractors. Big weapons systems won’t work against global terrorism. The International Monetary Fund has more influence over the fate of the world than American military muscle.

Here’s who’s gaining power:

* Big institutional investors. Forget the day traders. Giant pension funds and mutual funds are by far the major players on Wall Street. About 44% of adult Americans are investing some of their savings in the stock market these days, and almost all of it is moving through these institutions. Fidelity, TIAA-CREF, CalPers and a dozen others are telling global CEOs what to do and toppling those who won’t listen.

* Venture capitalists. Fewer than 100 of them are single-handedly creating the biggest companies of the future. They’re not only bankrolling the “dot.coms” but are also locating a lot of the key talent that’s going into them. This is now the creative heart of American capitalism, where most of the new value is being created. The stock market value of is twice the value of the entire U.S. steel industry.


* The Federal Reserve Board’s Open Market Committee. Alan Greenspan and 11 other people run the American economy. Now that fiscal policy is dead, monetary policy is the only game in town, and the Fed is the only player. They’re largely responsible for the Roaring ‘90s in the U.S., and they’ll be responsible for the Great Crash to come. For the foreseeable future, everything else that happens in Washington is beside the point.

* The “entertainment-telecommunications” complex. Eventually, almost everyone in the U.S. will be working directly or indirectly for MCI-Worldcom, Microsoft, Disney or AT&T.; Only a handful of giant brands will have the scale to offer phone, wireless, data, Internet and a full range of entertainment services. These behemoths will both define American culture and spread it around the world at the speed of an electronic impulse.

These new power centers are far less visible than the old. Big corporations, big labor, big government and the military couldn’t be missed. Reporters covered them in detail. Almost everyone knew the likes of GM’s Charlie Wilson, Walter Reuther, Henry Kissinger and the boys from Bechtel. The public didn’t always know exactly what they were up to, but there was at least some semblance of accountability, if not directly through laws and regulations, then indirectly through countervailing power, as John Kenneth Galbraith once termed it. Big labor, for example, provided a degree of balance with big business.

Yet institutional investors, venture capitalists, the Fed and big entertainment-telecommunications companies all deal in intangibles, and news about them shows up only in the financial pages, if at all. Who runs Fidelity? Who sits on the Fed’s Open Market Committee other than Greenspan? Who’s the CEO of MCI-Worldcom? And what exactly are all these people doing? On the new frontiers of finance and technology, there are few laws or regulations, no oversight and no countervailing power.

Americans’ lives are affected no less by these new power centers than by the old, but they know far less about them. As long as the economy appears to be doing well for most of us, that doesn’t seem to matter very much. Should Wall Street crash, however, or a giant investment house destabilize the world market, or the entire U.S. telecommunications system explode in a Y2K spasm, it would be well to know who was responsible. It might even help keep people on their best behavior if they knew in advance that such scrutiny would come.

There’s also a more general value within a democracy for citizens knowing where power lies and how it’s being exercised. It’s when everything appears to be beyond anyone’s control that all manner of bad things can happen.