What’s Wrong with the American Dream

By Mel Harkrader Pine

At the age of 30, I got my first ride on a corporate jet. My companions were the Vice Chairman of the Mobil Corporation Board and our wives. Since we were four passengers on a short flight — New York to Washington — we took a smaller plane, but later I often traveled in the comfort of a souped-up Gulfstream G-3 with an interior like the one pictured above.

On that first trip, in 1977, I rented a suite at the Watergate Hotel and met with both Henry Kissinger and Margaret Thatcher.

Not bad for a kid from F Street and Roosevelt Boulevard in Philadelphia, a neighborhood of immigrants in row houses. Not bad for a kid whose father came alone and destitute to the United States in 1921 at the age of 23.

G-3 Takeoff
A G-3 taking off

Am I an example of the American Dream? Maybe. My parents ran small businesses, as did many of the adults in the ‘hood I grew up in. Those small businesses helped launch me into a career that included limos and Gulfstreams.

But I’m also a product of ideological and spiritual diversity. A formerly Jewish radical socialist in my college-age years in the 1960’s, I worked in Mobil’s corporate public relations department from 1976 until around the time of its merger with Exxon in 1999. My job put me in close contact with the men (yes, always men) at the top. During those years I became both a Unitarian Universalist and a Buddhist. Go figure.

So why is the American Dream failing for so many now? Extreme income inequality, racism and lack of economic mobility, are symptoms, but the cause is deeper, something I witnessed from the inside. Where the American Dream falls short is the plank in the eye of American capitalism. Pundits on the right and left fail to see the plank, blinded by their respective ideologies.

Leftists tend to see business and the owners of businesses as greedy and unprincipled. Rightists tend to glorify success and equate it with size and dominance — the bigger the better. In my (now grown-up) view, some form of capitalism is the best economic system human have so far devised, but back in the 18th Century, Adam Smith, a firm believer in a free-market economy, could not have foreseen global mega-corps and “too big to fail.”

Of course, pure capitalism has never existed and probably never will. Every version of capitalism is influenced by the politics and the prevailing economic forces of its time and place. The U.S. version took a disastrous turn just as the nation was becoming dominant in the 20th Century, so much of the world followed us. We fell victim to economies of scale, and big became best.

Innovators like Bill Gates start and build businesses, which at first grow because of their ideas. But at some point the ideas are no longer enough, and a managerial elite with a corporate philosophy takes over. Growth becomes important to justify high salaries and to increase the value of executives’ stock options.

In an insightful essay in American AffairsMichael Long explains: “The replacement of entrepreneurial capitalism by large-scale modern managerial capitalism took place relatively rapidly in North America and Western Europe around the turn of the 20th Century.” He continues:

The private, public, and nonprofit sectors in modern developed nations do not have separate and distinct elites that can be counted upon to check each other. Instead, the private sector tends to dominate the public sector through campaign finance, and the nonprofit sector through donations. Even in the absence of these methods of elite coordination, the fact that almost all of the personnel of elite institutions of all kinds belong to the managerial-professional class and have similar educations and shared outlooks produces a common mentality, tending toward Orwellian groupthink among corporate executives, investment bankers, elected politicians, civil servants, and nonprofit leaders. Managerial dominance is reinforced by lateral mobility at the top levels of society. Diplomats become investment bankers, investment bankers become ambassadors, generals sit on corporate boards, and corporate executives sit on nonprofit boards….

What I got to see firsthand in my decades at Mobil was how the managerial elite calls the shots. The long-term interests of the company’s owners — its shareholders — give way to the short-term interests of the managers. Their primary interest is in keeping another managerial elite happy: Wall Street analysts. That means quarter-to-quarter growth no matter the cost.

And the size of the mega-corps does tend to drown out the truly small businesses like those of my parents. How’s your locally owned book store doing? Your locally owned grocery? Hardware store? Coffee shop? Dress boutique? Barber? I could go on.

And guess what? All those government regulations that are supposed to protect us from the evils of capitalism? While giant corporations can afford teams of lobbyists and lawyers to deal with the regulatory mishmash, small businesses struggle, like this family-owned apple farm in New York State that operates under more than 5,000 rules. So government and its regulatory agencies become accomplices to the competitive advantage of the big over the small.

Here’s Mona Charen writing in Ricochet:

Our kludgeocracy works to the benefit of the politically connected (who can lobby for special tax breaks), big companies (who can bear the costs of regulation better than smaller competitors), and grantees of hundreds of government programs who become active constituencies for their particular slice of the pie.

Writing in Business Insider and relying on a study by the Federal Reserve Bank of St. Louis, Pedro Nicolaci da Costa finds that “the chances of achieving the American Dream are nearly twice as high in Canada as they are in the U.S.”

I don’t know exactly how to fix American capitalism. Recent scandals like those at Wells Fargo and Volkswagen demonstrate that we can’t rely on Adam Smith’s free market to police the crooks in three-piece suits. But businesses like Indian Ladder Farms, the apple growers operating under 5,000 regulations, are not a threat to life in the United States. They are the hope for the American Dream

Copyright 2017 © Mel Harkrader Pine

17 comments

  1. This is definitely NOT my area of expertise. So I’ll just throw out a thought: Kodak was once one of those big corporations. The whole city of Rochester was built around Kodak… where is Kodak today? Gone the way of the big railroads of the turn of the century. Ford Motor Company was so big and powerful, it’s well-being was equated with that of the country (not to mention Detroit). Now? Not so much.

    Budweiser may still be doing fine…but so are the innumerable Mom-and-Pop breweries springing up all over Portland, Maine.

    One of the problems with the crony capitalism practiced with enthusiasm by both political parties is that they make it worth a politician’s while to rig the system in ways that benefit big, existing companies. Environmental regulations—far more numerous, complex and unweildy than required to protect the health of Americans and the environment—aren’t that big a deal for Exxon-Mobil; they have rafts of lawyers to guide them through, and rafts of lobbyists to fiddle the process. A new “Mom and Pop” oil company isn’t going to have that kind of firepower.

    This happens at surprisingly low levels too: landscaping firms press for “safety” regulations that set age limits and require licenses (with fees) for mowing lawns. Well, guess whose out of a low-skilled summer job? Your local teenager and maybe your local ex-con too.

    There are regulations requiring expensive education and licensing for people who want to braid hair. That’s right—braid hair, not even wielding a sharp pair of scissors near a client’s ear or eye. Guess who is happy about those regulations?

    The original (and still the best) argument for minimum wage laws was to eliminate the competition that was, at the time, provided by black workers willing to do contracting and other skilled labor for less. There are audio tapes of president Kennedy meeting with the head of the AFL-CIO about the problem “the negroes” posed to white workers.

    Hence the conservative enthusiasm for cutting red tape and getting rid of as much government oversight as possible. it’s not because they don’t care about safety or the poor or whatever. It’s because they don’t trust the government, made as it is of fallible cupidity-prone human beings.

    Like

  2. In other words—agree! With caveats, namely that capitalism is so much more natural to human beings, they’ll somehow figure out a way to go ’round the system when there is demand and a supply to meet it. Hence the black market in…sigh…drugs.

    Liked by 1 person

  3. I agree with you, Kate. In regard to Kodak and Ford, though, the point isn’t that one company or another thrives. It’s that after the George Eastman’s and the Henry Ford’s get their companies launched and successful, inevitably a class of managerial elites takes over. I guarantee that some of the top people in those companies as they declined became top people in other companies and continued to reap huge rewards. Very few in the top echelons of the managerial class actually suffer personally for their failures.

    Like

  4. Oh! Well, that’s probably true. Heck, it’s true of the top people in so many areas— I think of all the reporters who have been repeatedly exposed as (at best) sloppy and mendacious yet are nonetheless still working. The old failures (Dan Rather, for instance) are still making somber pronouncements about the state of the world as if they are, or ever were, really serious intellectuals. And…people continue to treat them and presumably pay them that way.

    I read somewhere that, back before the 1960s and the rise of the regulatory state, the federal government was a lot less corrupt simply because there really wasn’t all that much for the politicians to sell. Most of the venial stuff went on at the state level. Which was—arguably—better because folks who were fed up with the corruption of Mississippi could at least leave, and go to a less corrupt state. (This, now that I think of it, is what got my late husband and me up to Maine!)

    Now that I think of it, might the Volkswagon scandal have at least one feature in common with the Gosnell case in that a business that claims to be working on behalf of a cause that the elites hold dear is less likely to be subjected to strenuous and skeptical oversight? “Oh, great! Low Emissions! save the planet. Go VW!” While the Gosnell trial exposed decades of criminally lax or absent inspection by the Pennsylvania department of health, at least some of which was due to a systemic reluctance to expose not Gosnell himself, but abortion as cause and practice to scrutiny.

    Liked by 1 person

  5. Again—not my area of expertise! But I toyed with the idea that the regulatory agencies could be given page or word allowances for their regulations. “You can only impose 20 pages worth of rules on industry X…” and yes, that’s 12 point font, and double-spaced. That way, they’d have to decide what was really necessary and important, and what could probably be more or less safely left to either common sense or the market to sort out?

    Liked by 1 person

  6. I guess the other thing I’d throw in here for laughs is simply that even if the rich are getting richer, the poor seem only to be getting poorer in comparison, rather than poorer absolutely. I say this, because internationally, starvation-level poverty has been reduced by 80% (and not by “Living Simply So That Others May Simply Live,” though some third world country probably got a taste of the bumper-sticker-manufacturing action), but also because when my first husband and I were first married, we were poor. That is, our income (his, as a State Trooper) put us officially under the poverty line. Sadly, I didn’t realize that we qualified for food stamps and whatnot, so we just toughed it out. What this meant was that I literally counted pennies, we did not have even the electronic devices available then and, by the way, there was no Wal-Mart and thus no cheap source of such staples as underpants or kids’ socks. Yes, one could buy them at the “Mom & Pop” boutiques, but these were geared toward tourists and were expensive. The cheap underpants available now are, of course, being stitched overseas…hence that dramatic drop in real, desperate poverty mentioned above.

    My grown, young-adult children complain of their poverty, but they have wide-screen televisions, I-phones, better, bigger apartments, new shoes, and have been known to eat in restaurants, something Drew and I never, ever did. (No, not even McDonalds’.) So in absolute terms, they are far richer than we were. This is also true, by the way, of poor people living on welfare; when you count all the government benefits available—which, weirdly, the statistics don’t— welfare provides a pretty good living, which explains why low-income people can spend $3 for every $2 of “income” they receive or earn.

    All of which, by the way, are good things. I don’t begrudge them any of it: I’m in favor of less starvation and a higher standard of living for everyone. It’s just funny that we don’t seem to realize that this is what, in fact, is being accomplished.

    Liked by 1 person

  7. Ah, yes. the poor are in many ways better off than they used to be.And we all should be more satisfied with what we have (Buddhism 101). But what’s hard for people to grok is the wide and growing disparity between most of us and the very rich. Seeing that growing gap as a problem is not just a matter of greed and envy. With all due respect to a certain extremely wealthy friend we both have, I wonder whether it’s moral for individuals and families to accumulate so much wealth that they can take their descendants out of the capitalistic rat race for generation after generation.

    We evolved as a species of hunter-gatherers. The most skilled of us could give our offspring a better start. But we didn’t then have money and the ability to amass fortunes. It seems corrosive to me when money is used not just for our generation and the next one, but to found dynasties. That doesn’t mean that I blame the current beneficiaries of those fortunes, but I question the mechanics that enable that level of wealth.

    That’s probably where I differ most from your conservative and libertarian friends (although I share many of their views). I think that capitalism left largely unfettered works well for small and medium businesses. The checks and balances in the capitalist system, as we practice it, are not working for the largest corporations and the wealthiest families.

    Like

  8. Then perhaps what is needed is less regulation, which is part of the agenda of President Trump.
    Less regulation favors smaller businesses. More regulation favors larger businesses, who can more easily absorb the costs of additional bureaucratic burdens. This is just a general rule, and doesn’t begin to address the many ways in which some laws and regulations are devised to choose winners and losers rather than allow market forces to work.

    Liked by 2 people

    1. Yes. Less regulation, in general, makes a more level playing fiend. Where I have reservations about that it in the financial sector. There is too much freedom for very large financial institutions to gamble with other people’s money and then cry “too big to fail.”

      Like

      1. It depends. For example, the tax reform of 1986 tweaked the rules for savings and loans, and only three years later we had savings & loans scandals. The fix for that included tweaks for credit unions, and those tweaks seem to have worked out well. So, the devil is in the details.
        When Bill Clinton was elected in 1992, banking committee chair Barney Frank started threatening bankers about not making mortgages more easily available for low-income families. Under threat of new regulations, the bankers started dropping their requirements for mortgage loans. That trend continued all through the Clinton Administration. During the Bush Administration, bankers would laugh about all those sketchy mortgages while they pocketed the profits. Then we had the crash of 2008. That was not a regulation; it was bankers responding to the threat of new regulations, and they were extremely successful in awarding lots of mortgages to low income families who could not afford them.
        Perhaps we were better off using the rules that the bankers wrote for themselves. We saw the pendulum lurch the other way under Dodd-Frank. It won’t be too long before we see the new unintended consequences of that change to the regulations.

        Liked by 1 person

  9. As you say, MJ, the devil is in the details. My main issue about the world of finance is what I’d call “naked derivatives” — instruments that allow pure speculation. Derivatives that were invented to help companies hedge are used as purely speculative instruments. So AIG could use paper backed up by no assets to “insure” the collateral mortgage obligations made up of those sub-par mortgages you make reference to, which were also given top ranks by rating companies that knew better.

    I’m not saying that all regulation on the finance industry is good. But more smart regulation is needed, and neither party is proposing really effective regulation.

    Liked by 2 people

  10. Yes, I agree. Neither party seems to be working on making regulations effective. With both parties consumed by garden-variety political squabbles, I think it is a good thing for Trump to simply focus on ending current regulations wherever he can.

    Liked by 2 people

  11. Back to Chaplain Kate’s examples from several comments ago:
    The railroads declined because we spent a ton of government money on highways, and because Americans hate waiting, so wanted truck delivery in preference to rail. This was a combination of market forces and government action, but you have to admit that the government action was definitely the will of the people, who wanted their highways and ignored conservatives who said if we want robust federal roads we should pass a Transportation Amendment to the Constitution.
    In contrast, the Kodak story is pretty much entirely a market story, in which an industry giant suffered greatly because they were very slow to adapt to a new technology that was a direct threat to their core business.

    Liked by 1 person

  12. It strikes me that hunting and fishing laws vary considerably from state to state and, in Maine, are changed and adjusted surprisingly often. Not being a hunter or fisherman, I didn’t know this before, and find it bewildering even now, but the reason is that the biological facts on the ground are known to vary. When the deer herd declines, state wildlife biologists inform lawmakers who ratchet down the number of doe permits (or whatever) accordingly. In Maine, it is illegal to “drive” or bait deer. In other states, with larger (indeed, problematic) deer populations, both are legal.

    Might it be possible that at least some environmental or workplace safety regulations could and should flex depending on local factors?

    Liked by 1 person

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s