Wealth For Some

Pulitzer Prize-winning New York Times columnist David Leonhardt explores America’s postwar boom and its economic stagnation after 1980.

The American Dream

The phrase “American Dream” first entered the US vernacular during the Great Depression. The term, coined by historian James Truslow Adams, refers to the notion that the United States offers unique opportunities for everyone to achieve upward mobility and overall improvements in living standards. For many Americans,  after the Depression, the American Dream was a reality. People grew wealthier and lived longer.

Just as the progress of earlier eras created a virtuous cycle, the stagnation of our era is creating a vicious one. David Leonhardt

But the US economy has grown less adept at spreading wealth and health. While 90% of Americans born in 1940 enjoyed higher earnings than their parents, millennials — those born between 1981 and 1996 — only have a 50% chance of outearning their parents. Wealthy nations have seen their citizens’ life expectancies rise well above 80 years of age, but the US average is below that and hasn’t increased since the mid-2010s. Health issues plague working-class Americans without college degrees. This “Great American Stagnation,” which began in the mid-1970s, has accelerated in the 21st century and contributed to political gridlock.

In theory, workers are paid whatever the market determines they’re worth. In reality, employers have the power, and workers can shift that power by joining together in unions. In the 1920s, the United States had few labor unions. That changed, in part, with the launch of the Teamsters in the 1930s.

The movement began in Minneapolis, where truck drivers who delivered coal chafed under unfair working conditions. For example, they weren’t paid for the many hours every day they wasted waiting at coal yards to load their trucks. The drivers’ employment, with its instability and day-to-day wage uncertainty, resembles that of today’s gig economy workers. Drivers had no power to seek higher wages or fair treatment. The trucking organizing effort, led by Carl Skoglund, a Swedish-born political radical, was bloody, with battles between drivers and strike-breakers hired by coal firms.

The Franklin D. Roosevelt administration supported labor unions. On balance,  unions boost wages and are a net good for the economy.

Dwight Eisenhower

In the 1950s, President Eisenhower didn’t unwind the New Deal. He encouraged labor leaders and employers to settle their differences without strikes.

Many executives did not try to grab every last possible dollar during the postwar decades.David Leonhardt

Pay packages for executives were modest in the 1950s. George Romney, the head of carmaker Nash-Kelvinator Corp., asked his board to cap his pay at $225,000. Reflecting the shift in approaches to executive pay in more recent decades, his son, former Senator Mitt Romney, amassed roughly $250 million during his business career.

Eisenhower renewed support for a national roadway system and expanded the budgets of the National Institutes of Health and the National Science Foundation. He used the Cold War to justify the sharp increase in public spending. Eisenhower’s ideas on using federal money to spur the economy helped make the United States the greatest economic success story in world history.

But the economic boom also saw white employers and workers conspiring to keep Black people out of jobs and housing. In 1945, for example, O’Day Short, a Black welder from Mississippi, bought land and began building a house in Fontana, California. After the house was finished, a deputy sheriff and a real estate agent warned Short that he wasn’t welcome and should leave. Two weeks after moving into their new house, the family died in a suspicious fire.

As the United States built the great middle class of the postwar years, the country went to extraordinary lengths to exclude Black citizens.

In 1930, only 1% of Black workers belonged to unions, compared to 10% of white workers. In 1940, the median wage for Black men was about 35% of that earned by white men. By the 1970s, that ratio had topped 60%. Yet by 2020, Black men made just 55% of white men’s median wages.

Mid-20th century American culture split along class, race, and gender lines. In 1963, Betty Friedan’s book The Feminine Mystique became a bestseller, and she co-founded the National Organization for Women. The book and the organization helped break the glass ceiling for middle-class white women — it did not discuss how racism also limited Black women.

In 1962, Silent Spring by conservationist Rachel Carson spurred the environmental movement. Activist Ralph Nader’s auto-safety exposé, 1965’s Unsafe at Any Speed, detailed automakers’ complicity in car-related deaths. To discredit him, General Motors hired private investigators to try to lure Nader into an embarrassing sexual encounter.

From 1962 to 1980, the US murder rate doubled, and the robbery rate rose fourfold.Academics found the cause to be social instability, not poverty, as they had suspected. Discord and mistrust fueled a growing sense of social unraveling.

The Reagan Revolution

Ronald Reagan ushered in lower taxes and less regulation, unleashing a stock market boom. The most affluent Americans have done well since Reagan, but everyone else has experienced economic stagnation.

By many measures, his presidency was indeed a turning point for the economy — in a negative way.
David Leonhardt

From 1945 to 1980, incomes grew across all levels of American society. Since 1980, the bottom 98% of income earners have experienced less growth than during the pre-Reagan era. People are struggling; life expectancies for Americans with bachelor’s degrees now diverge from those of Americans without four-year degrees. The gap widened sharply during the COVID-19 pandemic.

To address the imbalances, Americans must consider potentially sweeping changes to the fundamental governing structures that enfranchise the status quo. 

Change Course

In his detailed analysis, David Leonhardt isn’t deluded by a soaring stock market or burgeoning wealth; instead, he focuses on the waning fortunes of the middle and working classes. Leonhardt deftly unpacks the multilayered social, economic, and political forces that helped transform the American Dream from a goal available to all to a prize accessible only to an already affluent few. He argues that the United States needs to change course by rethinking the politics and policies that enabled this destructive shift. Leonhardt writes with elegance and passion. Anyone interested in American economic cycles and their social effects will gain much from his insights.