Part 2: What Really Happened to the American Dream
https://robertreich.substack.com/p/what ... e-american
In this article, Reich lays out why the American Dream has become unattainable for so many Americans. By the American Dream, he means the notion that a worker can earn enough to buy a house and a car or two and raise a family. Here is what changed as seen from 40,000 feet:
FOR THREE DECADES after World War II, America created the largest middle class the world had ever seen. During those years, the earnings of the typical American worker doubled, just as the size of the American economy doubled.
Over the last 40 years, by contrast, the size of the economy has more than doubled again, but the earnings of the typical American have barely budged (adjusted for inflation).
Then, the CEOs of large corporations earned an average of about 20 times the pay of their typical worker. Now, they rake in over 300 times.
In the 1950s and 1960s, the richest 1 percent of Americans took home 9 to 10 percent of total income. Today they take home more than 40 percent.
Then, the economy generated hope. Hard work paid off. The living standards of most people improved through their working lives. Their children enjoyed better lives than they had. Most felt that the rules of the economic game were basically fair.
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Today, confidence in the economic system has sharply declined. Its apparent arbitrariness and unfairness have undermined the public’s faith in it. Cynicism abounds. Equal opportunity is no longer high on the nation’s agenda.
To the contrary, our economic and political system now seems rigged.
That’s because it is.
THE THREAT TO CAPITALISM is no longer communism or fascism but a steady undermining of the trust modern societies must depend on.
When most people stop believing they and their children have a fair chance to make it, the tacit social contract begins to unravel. And a nation becomes susceptible to demagogues such as Donald Trump.
Reich describes the typical economic arguments between Rs and Ds over the last several decades: (1) free markets v. government regulation and (2) redistribution of income and wealth. But, according to Reich, these typical arguments function as a diversion that keeps people from understanding how the market itself has been altered in the U.S. over past decades. This leads to one of his key points: the rules that govern a free market do not spring from the forehead of Zeus or any other God. The free market depends on a set of rules that allow it to function, and there are many, many different rule sets that could be adopted to set up a free market. The rules we use are a choice -- and wealthy elite have fundamentally altered the rules in a way that effectively shut out the poor and middle class from the gains the economy made as a whole since around 1980.
MARKETS DEPEND for their very existence on rules governing property (what can be owned), monopoly (what degree of market power is permissible), contracts (what can be exchanged and under what terms), bankruptcy (what happens when purchasers can’t pay up), labor unions (how much power should workers have), and how all of this is enforced.
Such rules do not exist in nature. They must be decided upon, one way or another, by human beings.
These rules have been altered over the past four decades as large corporations, Wall Street, and wealthy individuals have gained increasing influence over the political institutions responsible for them.
Simultaneously, centers of countervailing power that between the 1930s and 1980s enabled America’s middle and lower-middle classes to exert their own influence — labor unions, small businesses, family farms, and political parties anchored at the local and state levels — have withered.
The consequence has been a market organized by those with great wealth for the purpose of further increasing their wealth.
This has resulted in ever-larger upward distributions inside the market, from the middle class and poor to a minority at the top. Because these distributions occur inside the market, they have largely escaped notice.
Not only is the market rigged, so is the government. The same wealthy folks that restructured the market to work for them also control the government. Thus, the debate between free market and government is futile because it doesn't address the roots of the problem.
Reich's proposed solution is the organization of a countervailing power composed of citizens that has the ability to restructure the market and take control of the government away from the wealthy that use is to rig the market in their favor.
Why doesn't that happen? Because the people that have an economic interest in coming together to make the necessary changes are set at each other's throats by political division. Ajax's non-stop attacks on everything Democratic benefits his real enemies -- the ones who have cheated him and his children out of their fair share of the wealth generated by the American economy. And it works the other way, too. The poor and working class are so set at each others' throats that the wealthy are able to continue siphoning the share of economic gains that otherwise would go to the poor and working class. Class warfare has been occurring over the last 40 years, but it's one way: warfare by a tiny minority against the vast majority of Americans.
The underlying issue is not the size of government. It’s whom the government is for.
The remedy is for the vast majority to regain influence over how the market is organized. This will require a new countervailing power — allying the economic interests of the majority who have not shared the economy’s gains.
The battle pitting the “free market” against government is needlessly and perversely preventing such an alliance from forming.
The biggest political divide in America in years to come will be between, on the one side, the complex of CEOs of large corporations, top executives and traders at Wall Street banks, private equity and hedge-fund managers, and other moneyed interests who have fixed the economic and political game to their liking. And on the other side, the vast majority who have been left behind.
Some of the people who have been left behind are susceptible to the lies and bigotry of neofascists like Trump.
But the answer is not to give up on democracy.
To the contrary, the only way to reverse course is for the vast majority who now lack influence over the rules of the game to become organized and unified, in order to reestablish the countervailing power that was the key to widespread prosperity five decades ago.
Reich lists examples from the past that illustrate what he is advocating:
In the 1830s, the Jacksonians targeted the special privileges of elites so the market system would better serve ordinary citizens.
In the late 19th and early 20th centuries, progressives enacted antitrust laws to break up the giant trusts, created independent commissions to regulate monopolies, and banned corporate political contributions.
In the 1930s, New Dealers limited the political power of large corporations and Wall Street while enlarging the countervailing power of labor unions, small businesses, and small investors.
The challenge is not just economic but political. Economics and politics cannot be separated.
And he gives this advice to the Democratic party:
It’s time for the Democratic Party and its leaders to give full-bodied voice to the forces — labor unions, small businesses, worker cooperatives, worker-owned businesses, family farmers, nonprofits, bottom-up politics, and all of us who are still committed to the common good — that together can countervail the overwhelming power of the big monied interests.
To be continued...
