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'Human Capital' Touted in Clinton Economic Agenda

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Washington

In his first 18 months in office, President Clinton and a team of top advisers have crafted a domestic agenda that is intended to serve as the human link in the Administration's economic chain.

Interchangeably referred to as the "human capital'' or "lifelong learning'' agenda, the blueprint outlines the third leg of an economic strategy that also aims to reduce the federal deficit and to open more world markets to U.S.-made goods.

The human-capital agenda spans a broad spectrum of proposals and programs, ranging from several education-related initiatives and an expanded Head Start program to a newly unveiled plan for overhauling the welfare system.

The critical role that human capital plays in the President's economic strategy stems from a singular belief that permeates the Administration: The federal government must help prepare workers to adapt to the economic forces at work in the rapidly changing, worldwide economy.

"There is ... a growing connection between the amount and kind of investments that the public sector undertakes and the capacity of the nation to attract worldwide capital,'' Secretary of Labor Robert B. Reich wrote in his 1991 book, The Work of Nations. "Herein lies the new logic of economic capitalism: The skills of a nation's workforce and the quality of its infrastructure are what makes it unique, and uniquely attractive, in the world economy.''

Like Mr. Reich, the President "sees education and the related issues absolutely as a foundation for economic growth and productivity,'' according to Michael Edwards, the manager of Congressional relations for the National Education Association.

Not everyone agrees with the Administration's view of international markets and worldwide competitiveness, however. While it is true that the economy is becoming increasingly global, critics say, a nation's productivity is still determined by the goods and services it sells to its own citizens.

Other critics say that the Administration has produced a hollow agenda and that the money to finance it is just not there.

Nevertheless, Administration officials insist they are taking steps to alter the way the country approaches education and the way the government administers its domestic policy. The goal, they say, is to insure that American workers are the best equipped in the world to take advantage of new national and international markets.

"If this works the way we want,'' William A. Galston, the President's deputy assistant for domestic policy, said in an interview, "the President will have totally redone the lifelong-learning agenda.''

Gaining Momentum

By way of explanation, Mr. Galston suggested that the 103rd Congress be thought of "as a two-stroke engine.''

History will record 1993 as the year the Administration and Congress "took care of the macroeconomic issues,'' he said: reducing the size of the federal deficit, reorganizing federal expenditures, and expanding world markets through the North American Free Trade Agreement and the General Agreement on Tariffs and Trade.

In 1994, he said, the Administration is pushing for reform in four areas that it sees as key components of its human-capital strategy--education and training, health care, welfare, and crime.

On the issue of education, the lifelong-learning agenda got rolling in 1993 when Congress revamped the system that provides loans to postsecondary students, and it gained momentum this spring when the President signed the Goals 2000: Educate America Act, the School-to-Work Opportunities Act, and the Head Start reauthorization bill. It will receive a boost later this year when lawmakers pass a bill to reauthorize the Elementary and Secondary Education Act.

"If you look at the new economy, it's an economy of ceaseless change,'' Mr. Galston said. "Jobs are created. Jobs are destroyed. Companies are created. Companies are destroyed. ... The bottom is dropping out of our economy for people who lack the education and skills to participate.''

"In this new economy, lifelong learning is not just a nice thing. It's a necessity,'' he added.

'The Consensus View'

But the Administration's strategy is not entirely new. Nor is it particularly partisan.

It is a strategy, Mr. Galston said, that builds on "the great national conversation'' that took place during the 1980's and early 90's about the direction of the nation's economy and the employability of its workers.

"This thinking has been evolving for more than a decade,'' said Anthony P. Carnevale, the chairman of the National Commission for Employment Policy, an independent federal agency. "It is the consensus view among both the elites ... and with the American public.''

The national conversation on the nation's workforce spawned an almost endless series of reports and books on subjects ranging from the quality of the nation's schools and the health and welfare of its youngsters to the need for an economy based on high-skills jobs.

Participants included liberals and conservatives, politicians and academics, business leaders and philanthropists, educators and journalists. A number of people now serving in the Administration, including President Clinton and First Lady Hillary Rodham Clinton, were among those taking part.

The conversation produced A Nation at Risk, the 1983 report credited with launching the school-reform movement, and several influential reports by the Committee for Economic Development, including one by a task force in 1985 that counted among its members the current Secretary of Health and Human Services, Donna E. Shalala.

And it led to several reports from the National Center on Education and the Economy, whose board included Mrs. Clinton and Ira Magaziner, the President's senior adviser for policy development. The center's Commission on the Skills of the American Workforce was chaired by Mr. Magaziner and included David J. Barram, the deputy secretary of commerce.

As Governor of Arkansas, Mr. Clinton was in the thick of the conversation. At home, he won legislative approval for an education-reform package and was among the first governors to explore health-care reform and apprenticeships for noncollege-bound teenagers.

On the national scene, Mr. Clinton served as chairman of the National Governors' Association in 1986-87 when it produced a report on economic competitiveness that focused on the role of improved education. A year earlier, Mr. Clinton served as a co-chairman for "Time for Results,'' the N.G.A. document that laid out an education agenda for governors. Mr. Clinton also led the task force on school leadership and management for that report, while Secretary of Education Richard W. Riley led the task force on school readiness.

In 1989, Mr. Clinton spearheaded the writing of the six original national education goals.

A New Commitment

By the time he assumed the Presidency, then, Mr. Clinton had already developed a human-capital agenda and "was under absolutely no doubt, no confusion, no hesitation'' about it, Mr. Galston said.

What mattered was to convince Congress of its necessity and to implement it.

Mr. Clinton, keeping a campaign promise, created the National Economic Council as a domestic counterpart to the National Security Council. The council was charged with coordinating economic policy out of the White House.

Robert E. Rubin, a Wall Street investor, was put in charge. He chose Gene Sperling, who spearheaded economic issues during the campaign, and W. Bowman Cutter, a former consultant with Coopers & Lybrand, as deputies.

While Mr. Sperling took charge of the deficit-reduction package, Mr. Cutter convened some of the highest-ranking agency officials to discuss the state of the nation's workforce. They included Undersecretary of Education Marshall S. Smith; Leslie Loble, the acting assistant labor secretary for policy; Douglas Ross, the assistant labor secretary for employment and training; Larry Katz, the Labor Department's chief economist; Mr. Barram of the Commerce Department; Louis C. Finch, the principal deputy assistant secretary for manpower and readiness at the Defense Department; and Peter Edelman, counselor to Ms. Shalala.

According to participants, those meetings resulted in a commitment to a human-capital strategy coordinated out of the White House but permeating the agencies.

"I happen to believe, as a matter of logic and analytics, that human capital is really best thought of as an economic issue,'' Mr. Cutter said. "In business, the only enduring resource is people.''

After seven months of discussing workforce-policy issues, the task force produced a document that President Clinton used as the "country paper'' at the G-7 jobs summit in Detroit earlier this year. The paper has not been made public, but Mr. Cutter said the group reached three critical conclusions: that the changing economy necessitates a workforce with greater technical skills; that technology needs to be applied to education and training functions; and that government programs need to be re-evaluated and concentrated on the lowest end of the workforce.

"If we don't bring that sector into job networks and training networks and education networks, it won't be a rising tide that lifts all boats,'' he said. "It will be a rising tide, but it won't lift that boat.''

The group is now engaged in a second round of talks that is examining the "next generation'' of education, training, human-capital, and economic-policy issues.

A 'Simplistic' Idea?

However, critics of the Administration's human-capital strategy, even those who agree with it, say it suffers from too much naÃivetÀe.

"What sounds like a futuristic, forward-looking, intellectual basis for economic strategy is basically a set of deeply misleading, simplistic ideas,'' said Paul Krugman, an economics professor at the Massachusetts Institute of Technology who specializes in international trade and finance. "Most professionals on international trade feel the Administration has bought into a 'Gee whiz, by golly, there's a global economy out there' view of the world that sounds smart but doesn't hold up.''

While not disputing the value of providing education and training to workers to help improve their skills, Mr. Krugman argues that the Administration's rhetoric on the issue has been misleading.

A country's economic productivity is, by and large, determined by its consumption of goods produced by its workers, he said, not by goods consumed by other countries.

Sue Berryman, an education specialist with the World Bank, said the Administration has "overpromised'' on its human-capital agenda and suggested that the Administration's preparation for a high-wage, high-skills economy is a matter of wishful thinking.

Retraining much of the current workforce, she said, is easier said than done; meanwhile, numerous young people do not have the skills or attitudes to become highly skilled workers.

Moreover, she said, investing in a human-capital agenda--a strategy with which she agrees--does not guarantee people jobs. Financially strapped employers will do anything to keep their companies afloat, she said, including firing highly skilled workers.

"It's a strategy of positioning people to do battle in the labor market,'' Ms. Berryman said. "That's the best we can do for them.''

Elusive Funding

That, however, is precisely what Administration officials say they are trying to do--set up a system that allows workers to move freely throughout the workforce, especially when they are forced to.

"What we're really trying to do is educate people to be creators of jobs,'' Mr. Barram of the Commerce Department said.

Other critics note, however, that money to pay for the projects remains elusive.

Max Zwicky, an economist with the Economic Policy Institute in Washington, faults the Administration for forging a deficit-reduction deal that left few federal dollars to support its human-capital agenda.

"Rhetorically, human-capital development is one of their favorite topics, and it's also central to their idea of economic development,'' Mr. Zwicky said. "But they've boxed themselves into a corner.''

In his new book, The Agenda, the investigative reporter Bob Woodward details an internal struggle in the Administration between officials who advocated deficit reduction and those who pressed for spending on education and training. The spenders lost.

Administration officials concede that financing the initiatives will be difficult, but say they will continue to fight for funds.

Apart from money, Mr. Cutter said, the Clinton Administration recognizes that it has a responsibility to follow through on its agenda.

"I think there's broad skepticism that government can't do anything at all, and I think that puts a burden, especially on Democrats, to be cold-blooded on making programs work,'' he said. "We absolutely have to hold government programs accountable for delivering.''

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