Profile: Small guy, big deal: Robert Reich: Can this man get the West to work again? David Usborne on an economist with charisma

THIS WAS one moment of nostalgia that was not staged for the cameras. It was just the three of them: two former Rhodes Scholars from America and the porter who used to watch over them. They climbed the stairs of the Oxford college and found the room in which the two students and assorted other pals used to gather to drink tea, perhaps smoke marijuana (but not inhale) and, above all, swap half-baked theories on how to save the world.

One was Bill Clinton, President of the United States, in Oxford last week to receive his honorary degree; the other was Robert Reich, his Secretary of Labor, who confided later that 'the room was set up just as it used to be' and that it was like travelling back in time. A quarter of a century on, Reich, at 47, still meets his friend almost daily to debate policy and politics. But the cosy dinginess of the digs at University College have given way to the sumptuous surroundings of the Oval Office and the discussions are no longer idle intellectual jousting.

Mr Reich is attempting the first comprehensive rearrangement of American employment policies since Roosevelt's New Deal six decades ago. His analysis is a sombre one: that even as the US economy comes out of recession only a fraction of the workforce - perhaps the top 15 per cent of college-educated professionals - can expect to see their fortunes improve. The gap between them and the poorest, least-educated Americans will widen. Those in between - the Great American Middle Class which includes skilled workers - face slow decline. Reich calls them 'the anxious class'.

What has changed, he believes, is the onset of new technology and, above all, the breaking down of national borders in the new global economy. Jobs that were once done in Pittsburgh or Philadelphia can now be performed, for a fraction of the cost, in Asia or Latin America. The thesis is outlined in his book The Work of Nations, published in 1991. 'All Americans,' he wrote, 'used to be in roughly the same economic boat . . . We are now in different boats, one sinking rapidly, one sinking more slowly, and the third rising steadily.' After previous recessions, most of the lost jobs reappeared as the economy recovered. Not this time, Reich argues.

In his solutions, Reich departs dramatically from the old Democratic and European socialist instincts. He firmly rejects government protection for those sectors and jobs under threat; on the contrary, he welcomes free trade. Governments, he says, must spend not on subsidies for dying industries and not even on unemployment benefits, but on investment - in road, rail, telecommunications and, above all, on people. Make Americans better skilled and more adaptable, Reich argues. The future lies not with routine producers or even the personal service industries, but with what Reich calls 'symbolic analysts, who identify, solve and broker new problems'.

This teaching became the kernel of the Clinton campaign in 1992 and of the President's claim to being a 'New Democrat', distinct from the 'tax-and-spend' and protectionist Democrats of the past. Beyond American shores, and not least in the British Labour Party, Reich is increasingly being hailed as the spiritual leader and principal salesman of an emerging consensus on how to tackle the unemployment that has grown in Western nations for 20 years. His ideas were woven through the jobs report released by the Paris-based Organisation for Economic Co-operation and Development last week. As one White House insider puts it, 'he is big on one thing we desperately believe in: new ideas'.

THE author of seven books on economic and trade theory and economics adviser to three successive Democratic presidential candidates - Mondale in 1984, Dukakis in 1988 and Clinton in 1992 - Reich was until recently probably more famous in America than the President he now serves. He was raised in South Salem, New York, where his parents had a dress shop. He first began to attract attention as a student leader and anti-war activist at Dartmouth University, New Hampshire, in the mid-Sixties. There, he met a fellow star studying at nearby Wellesley College named Hillary Rodham. Then, in September 1968, Reich was one of 32 Rhodes Scholars sailing across the Atlantic to Oxford. Not a good sailor, he was suffering in his cabin with seasickness one evening when another American brought him crackers and home-made chicken soup. The medicine worked and his saviour, of course, was Bill Clinton, now US President. After Oxford, the two were later together at Yale University Law School.

Reich had a talent for amateur dramatics; he directed and appeared in a college production of the Sixties musical The Fantasticks. 'Most of us were in awe of being there in the land of the mother tongue and there was Reich daring to direct the college production,' remembers Thomas Williamson, another Rhodes Scholar who now serves as Labor Solicitor under Reich. 'He was, still is, an extraordinary person.' While working on the musical, Reich met a 17-year- old British student, Clare Dalton, whom he subsequently married and with whom he has two young sons, Adam and Sam. Considered well to the left of her husband, Clare upsets the more conservative of Reich's academic and political foes. Last year she won a sex-discrimination lawsuit against Harvard University which had failed to give her full tenure.

Reich's first job in federal government was as assistant to the Solicitor-General, Robert Bork, in the Republican administration of Gerald Ford. (Much later, Bork was rejected as a Reagan nominee for the Supreme Court because of his extreme conservative views.) Reich then directed policy at the Federal Trade Commission first under Ford and then Carter. When he moved to the Kennedy School of Government at Harvard, he launched a career not just as lecturer, but also as TV pundit, lunchtime speaker and Democratic political consultant. By 1992, he was earning more than dollars 500,000 a year, most of it from public appearances.

Reich never got full tenure at Harvard and remained a mere lecturer. Ostensibly, he does not qualify because he has no economics doctorate. His enemies go further, accusing him of being a fraud, masquerading as an economist when strictly he is a lawyer. 'He is a charlatan,' said one economist. 'The only numbers in his books are the page numbers.' But sympathisers dismiss this as the arrogance of economists, who do not like 'amateurs' trampling on their patch.

In the New Republic magazine, a critic accused Reich of being 'notoriously sloppy with facts'. He added: 'Reich will skilfully and subtly outline a problem, and then content himself with a laundry list of gimmicks when it comes to the solution.' Another commentator observes: 'As an academic, he is undoubtedly shallow; as a politician he is unusually deep.'

Even his fiercest detractors concede that Reich is hard to dislike and is uncommonly talented as a speaker, manager and conciliator. His stature has spawned a whole repertoire of self-deprecating shortist jokes (because of a childhood spinal disease he is barely 4ft 11in). His opening line when at a public podium, usually on a wooden box so he can see over the top to his audience, goes something like: 'I was long on Clinton's shortlist for this position' or 'I was six foot two until I started this job'. On returning recently from the White House to his office in the Labor Department in the shadow of Congress, he confided to a colleague his latest frustrations in seeking federal money. 'Bob, they're just trying to cut you down to size,' the official said. Reich replied: 'Well, there is not much left of me is there?'

But the battle for funds in the White House is no laughing matter. Conservatives in the administration speedily convinced the President that investment plans would have to be sacrificed to the need to cut the deficit. The arguments are vividly detailed in Bob Woodward's book, The Agenda, published in America last week. It includes a scene in the Oval Office when the President is first told of the extent to which the investments have been emasculated: 'He erupted again, his voice severe and loud', Woodward writes. ' 'I don't have a goddam budget until 1996. None of the investments, none of the things I campaigned on'. ' After a similar explosion by the President at a later meeting, Woodward relates: 'Labor Secretary Robert Reich . . . could see that the President felt betrayed. He sensed a sheepishness in the room.'

But a year after those scenes, limited resources are beginning to flow in Reich's direction. 'We're under way,' he insists, pointing out that in the 1995 federal budget, the Labor Department is the only government agency promised additional funds. Moreover, most of the key elements of his programme are beginning to fall into place. They include the Re-employment Act, shifting money from unemployment benefit to retraining and job-search assistance for the unemployed; the 'School-to-Work' programme offering vocational training for young people who do not go to college; and tax credits to boost the earnings of those in very low-paid jobs.

In spite of his theatrical interests, public remonstrations are not Reich's style. It is an open secret, though, that he remains angered by the degree to which Clinton has been persuaded to sacrifice his investment priorities for deficit cutting. But at least reform has begun. And through his evangelising alone the most influential US Secretary of Labor for 60 years may well prompt a rethink across the industrialised world about how national governments can better serve their workers.

Robert Chote, Business page 8

(Photograph omitted)