Why an employment crisis now when there's no shortage of capital? Why indeed? Because, according to Pulitzer Prize winner Hendrick Smith, author of the new book Who Stole The American Dream, we forgot. We forget, he says, the lesson that Henry Ford and other historic figures taught us, and that is that well-paid workers generate consumer demand that in turn promotes business expansion and hiring.
Instead we get companies demanding wage freezes, lowering health benefits, cutting their workforce, all while posting record profits.
"Today, we are all paying the price for this shift," writes Smith, a former correspondent and Washington bureau chief for The New York Times, in this September op-ed piece in the Times. "As Ford recognized, if average Americans do not have secure jobs with steady and rising pay, the economy will be sluggish. Since the early 1990s, we have been mired three times in 'jobless recoveries.' It’s time for America’s business elites to step beyond political rhetoric about protecting wealthy 'job creators' and grasp Ford’s insight: Give the middle class a better share of the nation’s economic gains, and the economy will grow faster. Our history shows that."
Give the middle class a better share of the nation’s economic gains, and the economy will grow faster. Our history shows that.
I don't read lots of book reviews, but one that begins with the words employment crisis caught my attention. So I began reading the book by Smith, and doing research on the assertion that the deck is stacked against the middle class after decades of corporate-driven political decisions resulting in changes in regulatory regimes, corporate bankruptcy laws, pension obligations and taxation all favoring business and financial elites, or the 1% as it has become known.
Smith's book begins with a quote from John W. Gardiner, a former Marine Corps Captain who went on to serve as the Secretary of Health, Education, and Welfare under President Lyndon Johnson during the height of the Great Society domestic agenda. During his tenure, the department launched Medicare and expanded the Elementary and Secondary Education Act that redefined the role of the federal government in education.
Gardiner's quote: "We are treading on the edge of a precipice here. Civilizations die of disenchatment. If enough people doubt their society, the whole venture falls apart. We must never let anger, fashionable cynicism or politcal partisanship blur our vision on that point. We must not despair of the Republic."
Good advice then, but it appears positively prescient now, given the fact he wrote that 50 years ago. And Gardiner likely wouldn't be happy with what has happened since, most especially with "the Powell Memorandum," a business manifesto in Smith's words that called for corporate America to become more aggressive in molding politics and law in the U.S. The memo was written in 1971 by an influential corporate attorney and board member Lewis Powell, who was nominated to the U.S. Supreme Court by President Richard Nixon just two months later.
[caption id="attachment_17338" align="alignright" width="193" caption="Author Hedrick Smith"][/caption]
It was that document, according to Smith, that began the long and steady descent that weakened middle America. "It ignited a long period of sweeping transformations both in Washington's policies and in the mind-set and practices of American business leaders - transformations that reversed the politics and policies of the postwar era and the 'virtuous" circle' philosophy that had created the broad prosperity of American's middle class. The newly awakened power of business helped propel America into a New Economy and a New Power Game in politics, which largely determine how we live today...Trillions were added to the wealth of America's super-rich at the expense of the middle class, and the country was left with an unhealthy concentration of political and economic power."
There are plenty of statistics to support that contention. Princeton economist Alan Krueger says in Smith's book the wealth chasm has been "mind boggling," as the top 1% reaped two-thirds of the entire country's economic gains from 2002 - 2007.
According to Nobel Prize-winning economist Joseph Stiglitz, the percentage of income that goes to the top 1% of American earners has doubled since 1980, while the percentage that goes to the top 0.1 percent has tripled.
In addition, the Organization for Economic Cooperation and Development (OCED) recently warned that structural income inequality in the United States threatens the long-term strength of the country.
So we have an economic divide. Smith in his new book takes that further, saying, "Today the gravest challenge and the most corrosive fault line in our society is the gross inequality of income and wealth in America."
What do you think? Has this whole idea of equal opportunity been undermined? Do you think our economy is unfairly tilted in favor of the wealthy and the powerful? Should government take action? Is the picture of a steady job with decent pay and health benefits, rising living standards, your own home, a secure retirement and the hope your children will enjoy a better future truly one for the history books?