Search This Blog

Friday, July 14, 2017

Where Did the Good Times Go?

Who Stole the American Dream? Part II

[Find Part I of my book review here.]

From virtuous circle to vicious, our road did not reverse direction overnight in a180-degree hairpin turn. The direction change for the American public was gradual, a long, slow curve, easy to miss at its beginning. But a beginning there surely had to be, and Hedrick Smith locates the opening salvo in 1971.
History often has hidden beginnings. There is no blinding flash of light in the sky to mark a turning point, no distinctive mushroom cloud signifying an atomic explosion that will forever alter human destiny. Often a watershed is crossed in some gradual and obscure way so that most people do not realize that an unseen shift has moved them into a new era, reshaping their lives, the lives of their generation, and the lives of their children, too. Only decades later do historians, like detectives, sift through the confusing strands of the past and discover a hitherto unknown pregnant beginning.  
One such hidden beginning, with powerful impact on our lives today, occurred in 1971, with “the Powell Memorandum.” 
What were you doing in 1971 when Lewis Powell issued his corporate manifesto? I was the mother of a toddler, living quietly—without television, by choice--in a modest middle-class neighborhood on the west side of Traverse City, Michigan. I tended my first vegetable garden (my toddler son planted beans at random) and a grape arbor, we had neighbors with lots of kids, and I walked two blocks to a little neighborhood grocery store, pulling my son in a wagon or sled or holding his hand as we walked together. I guarantee you, Lewis Powell’s memorandum was not on my radar; potty-training and Scrabble were high bidders for my attention that year.

In Lewis Powell’s view of 1971 America, the business community, albeit thriving, was the victim of government regulation, trade unions, and consumer activism, and he was fed up. Hedrick Smith writes:
Political mutiny [on the part of business] had been brewing for some time. By the early 1970s, the free market fundamentalism of economist Milton Friedman, a Nobel laureate from the University of Chicago, was giving new legitimacy to pro-business laissez-faire economics in academic circles.
But the academic world is one thing, the business world another, and it was Lewis Powell’s rallying cry that energized business leaders, led by the U.S. Chamber of Commerce, to pool resources, raise additional funds, and organize to change the climate for business in Washington, DC. And that was the beginning of the end of bipartisanship in Congress. What we have now began then.

Is it only coincidence that Ayn Rand’s Atlas Shrugged was first published in 1957? For a time Milton Friedman, I happen to recall from my days as a subscriber to Rand’s newsletter, was one of her darlings (bitter breakups were a feature of her life, it seems: she did not tolerate disagreement), and Rand’s fiction and philosophy continue to attract adherents in the 21st century. Her philosophy is consistent and simple: Selfishness is good. Among online sources, I see in one place her characters described as “larger-than-life heroes and villains.” As a former fan and a lifelong reader of fiction, I would say a more accurate reading would be that hers are larger-than-life heroes and smaller-than-life villains.

But let’s move along for now and come back to later to Ayn Rand.

Aside from the national business community and the U.S. Chamber of Commerce, the road for the rest of us takes only a slight bend in 1971, and along the way the scenery doesn’t seem to change much. Americans continue to fly flags, pay taxes, vote, purchase cars and homes, and, when they can, send their kids to college. Throughout the 1970s we are all, that is to say, “going forward,” as today’s ubiquitous phrase has it, which means no more than moving into the future, which means no more than that, as human beings, we cannot escape time. The question isn’t whether or not we will “go forward” but into what kind of country are we going? What future are we preparing, we free people, what kind of society are we choosing (if only by default), for our grandchildren?

In Hedrick Smith’s book, Part II, “Dismantling the Dream,” examines in depth and great detail how America’s labor force was cut off from its natural home in America’s companies. Union-busting, layoffs, and plant closings did not put companies out of business or hurt their bottom lines: plants and jobs simply moved offshore (initially to Mexico, later to Asia), where a much cheaper labor force translated to bigger profits and higher investor returns. Nothing else counted. Nothing else mattered. And that entailed another shift in thinking on the part of American business.

The legal ‘personhood’ of a corporation is one of the great moral questions of our age. My generation was taught that with rights come responsibilities. Cliché, right? Well, within the word ‘responsibility’ is a small, vital core: ‘response’. We are instructed to respond to others. Response is part of the meaning of responsibility.

Read now a statement from Milton Friedman’s book Capitalism and Freedom (1962), quoted in Hedrick Smith’s book:
“Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”
Responsibility to loyal workers? To customers of their products? To a community that provided infrastructure and, very often, tax breaks? Responsibility to the future? “Subversive,” says Friedman, as Ayn Rand applauds. A corporation’s only responsibility is “to make as much money for their stockholders as possible.”

Obviously, no single person bears sole responsibility for dismantling the American dream, but Ayn Rand and her acolytes and followers, Milton Friedman among them, certainly did their part, and Rand’s providing a justifying philosophy, within American literature, cannot be underestimated. It is a seductive message for adolescents to hear--You don’t owe anything to anyone; there is no such thing as ‘duty’--and I fell under its spell myself in my late teens and early twenties, as “Who is John Galt?” appeared on university blackboards between classes. What a siren song!

As a writer of novels, Ayn Rand had no interest in literary realism; romanticism served her philosophical purposes much better. I find it interesting, however, that her handsome, iconoclastic, willful and gifted protagonists share an important trait with homo economicus, the abstract individual of classical economics, a rational actor pursuing always his own interests.

In classic economic theory, from Adam Smith onward, individual pursuit of self-interest, if unhampered by government interference, somehow results in everyone being better off. Rand made classic economic theory the bedrock of her moral philosophy. Selfishness, she argued, is the primary human virtue. And so her protagonists are of heroic stature, their enemies little, scurrying vermin who preach altruism only to cover their own incompetence.

How does the Smith/Rand model work out in practice in a global economy? What kind of world do we create when we grant legal protections of ‘personhood’ to corporations and then hold them to only a single responsibility, that of making as much money as possible for stockholders? Poor Ms. Rand! She envisioned men and women driven by inner standards of excellence. She did not anticipate a CEO culture funding its own golden parachutes with a flood of ever-cheaper goods manufactured overseas.

Not all Americans lost their jobs, of course, and some who lost jobs found new ones. But not all jobs are equal. Companies began dropping health insurance for employees, and employers found huge savings in shifting the remaining American workforce from company pensions to 401K plans, a shift that is a story in itself. Businesses claimed pensions were costing them too much.
But digging into the records, Wall Street Journal reporter Ellen Schultz found that wasn’t really true. In fact, pension plans were moneymakers [my emphasis] for many a big company. In the bull market of the 1990s, America’s blue ribbon companies did so well investing their employee pension funds that many built up huge surpluses, above their obligations to employees, without contributing a cent of company cash for a decade or more [again, my emphasis added]. ... 
What’s more, some of America’s largest corporations were able to shift pension fund gains indirectly to their profit lines and, Schultz reported, a few legally took advantage of loose and poorly enforced accounting rules to siphon off money from their employee pension funds to finance portions of their corporate downsizing, restructuring, and mergers and acquisitions [my emphasis again].

Debt, bankruptcy, “easy” credit—the 1990s were rife with bright red danger flags, but in the excitement of the “dotcom bubble,” who wanted to be a naysayer? Wasn’t the reinvention of self within the reach of every American? Couldn’t anyone with brains get rich? Wasn’t poverty simply a result of failure to work hard and/or take risks?

Well, that’s enough for today. Our brains, like that frog in the pot of water on the stove, are beginning to simmer dangerously, aren’t they? We need to cool down and come back to this story another day.

Thanks to everyone who managed to read my entire post today! Comments, questions, corrections, and objections are all welcome.


BB-Idaho said...

I've been pondering how the American Dream turned into the American
nightmare and worse, how facts became 'fake media-fake news' to many in the electorate. It is tempting to blame under-education, lack of critical thinking and gullibility for voting booth choices. Certainly
'Citizens United' has enabled huge $$$ and influence to skew the political landscape as well. Forgive me for concluding that the hero of the American workingman, President Reagan, was a key figure in the
beginning of the destruction of the middle class, the sanctification
of big biz and big wealth and the excoriation of the helpless; but as a former Eisenhower Republican turned moderate progressive, that is my belief. We note-
“Should any political party attempt to abolish social security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes that you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid.” -President Eisenhower
Yet, somehow the 'neglibible number of the stupid' have managed to
grasp the reins of power; IMO using quasi-totalitarian tactics familiar to those who recall the rise of Nazis in the 1930s (or
read Sinclair Lewis's 1935 'It Can't Happen Here' or seen the movie
'A Face In The Crowd'. We see the isolation and/or denigration of
groups of fellow citizens and ponder the words of Martin Niemoller's
"First they came for..."; and observe that most of those involved
are pursuing favored goals, unaware of the quasi-totalitarian effect.
It seems likely that the current political mess will simply implode
due to incompetence, but that is no reason not to strongly take a stand to make sure it does implode..the sooner the better. Golly,
did I just do a rant?

P. J. Grath said...

Yep, that was a rant. We all slip into them once in a while. One of the fascinating things to me in Hedrick Smith's book was his situating the "beginning" so far prior to Reagan. In a way, Reagan can be seen as useful in promoting an agenda that was already well established, albeit perhaps still under wraps.