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November 25, 1998
Part II - Dr. Robert Reich speech
SocialFunds.com --
It seems to me that these 5 principles are a fair compromise between, on the one hand, American
companies saying to us, with complete justification, we cannot be expected to be held to the same
U.S. standards because that would eliminate any cost advantage - that sort of back door
protectionism. Then on the other hand, people of good intention and good will in the Unites States
saying, ``Our values demand U.S. Standards.`` There is a middle ground. I think that I have
suggested it, we need to talk about it, we need to continue to talk and have a dialog over that
middle ground. What I particularly appreciate about ICCR, about so many of you in this room, is
that you are willing to talk with each other. You are willing to continue to engage in a dialog
about hard issues, such as the issue I just raised. You are willing to listen to one another.
After 4 years of Washington, I can assure you that listening and dialoging and trying to reach some
accommodation and hearing what it is and why it is that the other person is saying what they are -
that is so crucial in our society today.
Leaving Washington, I suffered from staff
deprivation. Let me explain what I mean: you get in the back seat of your car and there is nobody
in the front seat. You find yourself getting lost very easily, very quickly. When I came home,
my first dinner with my family, I had been commuting for years - my two teen age sons, my wife -
they were all together and I did this, I am ashamed to admit it. I actually did it, I had spent
the day at home, kind of going through my things and going through the house and I had written a
little memo and I sat down at dinner and I said to each of them - I gave them assignments - I
delegated things for them to do. Do you know what my wife did with my memo? (laughter) Yes, you
are right, that is what she did with it. My two sons said, ``Dad, you are home now. We are not
your staff, Dad.`` It has been a humbling and wonderful experience.
I have a reputation
for being something of a soothsayer and I am going to make some predictions right now. I want to
warn you, however, that my soothsaying abilities have been grossly exaggerated. They all derive
from a misunderstanding and I will level with you, as I have tonight in other respects. The
misunderstanding is this: In October of 1987, the first week of October of 1987, I was on a
television yelling program. I am often on yelling programs, you know, they all have belligerent
sounding titles like Cross-fire, or Cannonball or Hardball or Firing Line.
You know these
are aggressive babble, babble, babble shows. I was on, now it was the first week of October of
1987 - you economic historians will remember that something happened toward the 3rd week of October
of 1987, but I was there the first week. I was on one of these shows, one of the most intense
yelling shows and I was yelling. There was an economist on the other side and he was yelling. The
point that he was making at this particular moment was that the Reagan, it was then the ``Reagan
bull market`` - knows no bounds, it is just going to go through the ceiling. If you are in the
market, he said, get in deeper, don`t even wait for the end of this program to call your broker.
Right now, get in, get in, while the going is good. It is going to ...
And it came to my
turn and I demurred - I said, ``I am terribly sorry that you are absolutely 100% wrong, you have
got it wrong. You are wrong again. There is going to be a correction. It is going to be a big
one, it is going to be a huge one. The market is going to lose 20% of its value. I can`t tell you
exactly when, but I think it is going to come in the next 2 weeks. No - I did, I did say it.
There is a tape of this program. It is called ``Crossfire`` - one of the most belligerent. I
won`t give you the name of this other fellow, because it would not be fair to him, he is not here
to defend himself - Arthur Laffer. It just slipped out, I couldn`t stop it. And I said, ``No,
not only is it going to be a crash and a big correction -- two weeks, but I would get out of the
market. If you are in, get out. Don`t even wait until the end of this program. Call your broker
now, get out.
In retrospect, I don`t think anybody saw the end of the program one way or
the other. But then, as you remember, some of you who are old enough, you remember that there
was a correction, about 20% of the market. Yes, there was a big drop within 2 weeks and I was
deluged with letters and telephone calls and, in those days, telegrams. There was no E-mail, but
people (there was, but I wasn`t using it), people wanting to know how to sign up - sign up for my
investment letter. I was flattered, but I told the people who wrote and called me and telegraphed
me - I told them that I did not have an investment letter. In retrospect, I think I made a very
poor career choice at that particular point and time.
I will tell you that I - that
prediction that within the 2 weeks the stock market is going to lose 20% of its value - did not
tell them what I am about to tell you. I had been making that precise, same prediction for 4 ½
years, which goes to show that in the economic forecasting business, if you stick to your guns...
Eventually you can have your own investment letter. So my reputation as a soothsayer is unfounded,
but I am going to even make some predictions nonetheless, because I think that we are at a very
special point in time. Not only in terms of globalization, the labor issues that I have touched
on, sweat shop issues that we have worked on together, environmental issues that so many of you are
so deeply involved in and I have been somewhat involved in, certainly in some of our negotiations
with some other countries. We are at a very important point in this process of globalization
because there are forces right now in southeast Asia and in Europe and elsewhere around the world
that are saying effectively, ``No, we don`t want to go down this route.`` Capital is moving too
fast. It is undermining the social contracts in our country. Globalization is not working to the
benefit of the bottom 60% of our people, it is imposing instead an unwarranted burden on the bottom
60%. They are not the beneficiaries of globalization. Incomes and wealth and opportunities are
widening - they are diverging as globalization sets in.
I think it is our obligation -
those of us who believe that there are benefits to be had in a process of globalization - those of
us who believe that there really are important benefits there in terms of economic growth and
opportunity - it is incumbent on us to make sure that those benefits are spread fairly. That the
bottom 60% of our societies do enjoy some of the fruits, or have a fair shot at some of the fruits
of globalization. That the negative outcomes of pollution, of despoliation of air and water, of
carelessness, are minimized. That there are international agreements on which we, as Americans,
American companies, American citizens, as an American government, take the lead - being exemplars.
But also taking the lead in terms of urging our partners, our trading partners, business partners,
subcontractors, to work with us and improve labor conditions, working standards, the environment.
If we do not do this, if we do not exercise this kind of leadership, if the benefits of
globalization are not felt broadly, if there continues to be environmental damage and despoliation,
if people in the bottom 60% in this country and in other countries continue to feel the unwarranted
burden of globalization and not the benefits - then I can guarantee you that isolationism,
jingoism, nativism and the walls that they represent will all increase.
We are at a turning
point. It is not simply a matter of social responsibility. It is a matter of maintaining an
economic system that has great promise where so many people, in terms of alleviating poverty, if it
is organized correctly and properly. There is no such thing as a free market. In nature, there is
not a market. Markets are the consequence of rules. Rules about property and contract and
liability. Rules about bankruptcy, rules about reorganization, rules having to do with how the
system is going to be run. Markets are human creations and we, as human beings, have got to take
charge of what that global market is going to be doing over the next century.
All of you in
ICCR, in companies, investment advisors, fund managers, you are in the vanguard of all of this and
I want to salute what you have done. I want to salute Tim and the ICCR Board of Directors. I want
to urge you to keep the faith. Faith-based institutions are very much a part of the values that we
bring to bear on these issues. Keep the faith and continue what is not going to be easy or quick,
but must be a long term and tenacious, tenacious project to make sure the global economy
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