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.

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 Affairs, Michael 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