Weekly Briefing

A book worth reading and an author worth listening to

Hedrick Smith’s “Who Stole the American Dream?”

The right and left do not agree on much in modern America. But, here’s one thing on which they generally do agree: The United States is clearly going through a very difficult period in its history.

What once was an overwhelmingly middle class society – a society in which citizen groups and broad social movements felt empowered, entitled and even duty-bound to effect change for their own good and the country’s as a whole – has changed into something very different.

While a segment of the middle class hangs on for dear life, it is clearly no longer appropriate to describe the United States as a middle class society. We have, in fact, begun to resemble a plutocracy – a society in which a narrow and remarkably wealthy set of elites dominates and in which the vast majority of citizens no longer feels empowered (much less entitled or duty-bound) to drive decision-making.

So, how did America get into this fix? How, in the span of just a generation or two, did our flawed but still confident and generally optimistic and advancing middle class country become transformed into the divided, cynical and pessimistic one we now experience? Was it one seminal event or decision, a series of mistakes or just something gradual and unavoidable?

A man with some answers

Hedrick Smith thinks he knows what happened. The Pulitzer Prize-winning journalist, former Washington Bureau chief for the New York Times and author of several best-selling books including The Russians and The Power Game: How Washington Works (he was also a co-author of The Pentagon Papers) has written a new and extremely powerful book entitled Who Stole the American Dream? (Note: Smith will discuss his book and his prescriptions for our country next Tuesday in downtown Raleigh at an NC Policy Watch Crucial Conversation luncheonclick here for more information).

In it, he makes a compelling case that it was a sequence of political and economic decisions – some intentional and greed-driven and some unintentional and simply misguided – that have put us on our current path. Using his formidable skills as a reporter, Smith examines the “New Economy” that has emerged in the modern America of the late 20th and early 21st Centuries and the damaging political power shift that has accompanied it.

Some of the phenomena he examines are familiar. The book begins with an interesting new reiteration of the story of the “business rebellion” of the early 1970’s and Lewis Powell’s infamous manifesto in which he called, in effect, on the corporate bosses of America to reclaim their supposedly rightful place of primacy. It may come as a surprise to the reader, however, to learn that Powell’s memorandum was actually provoked in many ways by the increasingly liberal stands taken by the then-inhabitant of the White House, Richard Nixon.

Smith’s examination of the many ways in which our societal shift was ushered in will also ring a recognizable bell for most readers. From the massive outsourcing of productive jobs to low-cost overseas locations to the rise of unabashedly predatory, downsizing CEO’s to the housing bubble and the subprime mortgage scams of recent years, he paints a sobering but utterly believable and recognizable portrait.

Many of his most interesting stories, however, are less familiar. There is a chapter, for instance on what he describes as “the pivotal congress” of a period that seems now seems obscure for most Americans – the years 1977-’78. It was during these years, Smith notes – not the Reagan years of the following decade – in which the newly resurgent business class prophesied in Powell’s memo really began to assert itself.

“In 1978,” he explains, “the corporate political machine went on the offensive and achieved a legislative agenda that would have profound and far-reaching impact.”

From the passage of a new corporate bankruptcy law that gave much more power to corporate management to the inclusion in an omnibus tax bill of a new kind of retirement account called the “401(k)” to huge new cuts in corporate and capital gains taxes, Smith says, this year whetted the appetite of the business community and set the stage for scores of policy and philosophical changes that would alter the country in a fundamental way.

The invention of the 401(k) retirement account is a particularly interesting story. As Smith explains,

“When the 401(k) was born, no one dreamed – or intended – that it would become the mainstay of the retirement system for the American middle class. It was enacted as an executive perk.”

The law, he explains, was actually passed as a favor to a moderate Republican congressman whose district was home to some corporate CEO’s looking for a way to shelter some deferred compensation. By the 1980’s however, ideologues within the Reagan administration’s Treasury Department were aggressively advancing a plan that seized upon the obscure new provision and gradually transformed it into a substitute for traditional pension plans. Today, according to an expert interviewed by Smith, the 401(k) is a “monster out of control” and, quite clearly, a symbol for the transformation of what was once a common good economy into the dog-eat-dog, survival-of-the-fittest world we inhabit today.

What now?

Having documented in great and utterly believable detail how America got into the mess in which it finds itself as an increasingly divided and dispirited country of haves and have nots, Smith devotes the last third of his book to a consideration of what the heck we can do about it and what stands in our way. The obstacles he lists are formidable and daunting: the political gridlock in Washington and the iron grip of the filibuster, the disappearance of a political middle, and the rise of the radical, anti-government right and, of course, the crushing expense of wars in Iraq and Afghanistan.

In the end, however, these roadblocks do not dissuade him from presenting a list of optimistic prescriptions for what ails us that he calls “Ten Steps to Reclaim the Dream.”

In this section of the book, Smith lays out a list of compelling policy recommendations – reinvesting in domestic infrastructure, advancing science and innovation, rebuilding the manufacturing sector, making the tax code fairer, to name a few – that are pretty much right out of the centrist playbook whose demise he so effectively laments.

What stands in the way of such an agenda of course, however, is the political reality he also so effectively documents. His recipe for overcoming it – building, empowering and unleashing an army of volunteers and activists to retake their country – may strike some as wishful thinking, but Smith anticipates this and cites some recent examples from around the world in which people’s movements have arisen with amazing speed to overcome seemingly insuperable odds.

Let’s hope his optimism is well-founded. Regardless of what Americans actually do about the current situation, however, there can be no doubt they will be much better positioned to take productive action if they know how they got where they are. In this regard, there are few things they can do that would be more helpful than to read and listen to the words of this important American.

(Image: http://hedricksmith.com/)