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Who Stole the American Dream?

Who Stole the American Dream?

4.4 13
by Hedrick Smith

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Pulitzer Prize winner Hedrick Smith’s new book is an extraordinary achievement, an eye-opening account of how, over the past four decades, the American Dream has been dismantled and we became two Americas.
In his bestselling The Russians, Smith took millions of readers inside the Soviet Union. In The Power Game, he took us inside


Pulitzer Prize winner Hedrick Smith’s new book is an extraordinary achievement, an eye-opening account of how, over the past four decades, the American Dream has been dismantled and we became two Americas.
In his bestselling The Russians, Smith took millions of readers inside the Soviet Union. In The Power Game, he took us inside Washington’s corridors of power. Now Smith takes us across America to show how seismic changes, sparked by a sequence of landmark political and economic decisions, have transformed America. As only a veteran reporter can, Smith fits the puzzle together, starting with Lewis Powell’s provocative memo that triggered a political rebellion that dramatically altered the landscape of power from then until today.
This is a book full of surprises and revelations—the accidental beginnings of the 401(k) plan, with disastrous economic consequences for many; the major policy changes that began under Jimmy Carter; how the New Economy disrupted America’s engine of shared prosperity, the “virtuous circle” of growth, and how America lost the title of “Land of Opportunity.” Smith documents the transfer of $6 trillion in middle-class wealth from homeowners to banks even before the housing boom went bust, and how the U.S. policy tilt favoring the rich is stunting America’s economic growth.
This book is essential reading for all of us who want to understand America today, or why average Americans are struggling to keep afloat. Smith reveals how pivotal laws and policies were altered while the public wasn’t looking, how Congress often ignores public opinion, why moderate politicians got shoved to the sidelines, and how Wall Street often wins politically by hiring over 1,400 former government officials as lobbyists.
Smith talks to a wide range of people, telling the stories of Americans high and low. From political leaders such as Bill Clinton, Newt Gingrich, and Martin Luther King, Jr., to CEOs such as Al Dunlap, Bob Galvin, and Andy Grove, to heartland Middle Americans such as airline mechanic Pat O’Neill, software systems manager Kristine Serrano, small businessman John Terboss, and subcontractor Eliseo Guardado, Smith puts a human face on how middle-class America and the American Dream have been undermined.
This magnificent work of history and reportage is filled with the penetrating insights, provocative discoveries, and the great empathy of a master journalist. Finally, Smith offers ideas for restoring America’s great promise and reclaiming the American Dream.

Praise for Who Stole the American Dream?
“[A] sweeping, authoritative examination of the last four decades of the American economic experience.”—The Huffington Post
“Some fine work has been done in explaining the mess we’re in. . . . But no book goes to the headwaters with the precision, detail and accessibility of Smith.”—The Seattle Times
“Sweeping in scope . . . [Smith] posits some steps that could alleviate the problems of the United States.”—USA Today
“Brilliant . . . [a] remarkably comprehensive and coherent analysis of and prescriptions for America’s contemporary economic malaise.”Kirkus Reviews (starred review)
“Smith enlivens his narrative with portraits of the people caught up in events, humanizing complex subjects often rendered sterile in economic analysis. . . . The human face of the story is inseparable from the history.”—Reuters

Editorial Reviews

From the Publisher
“[A] sweeping, authoritative examination of the last four decades of the American economic experience.”—The Huffington Post
“Some fine work has been done in explaining the mess we’re in. . . . But no book goes to the headwaters with the precision, detail and accessibility of Smith.”—The Seattle Times
“Sweeping in scope . . . [Smith] posits some steps that could alleviate the problems of the United States.”—USA Today
“Brilliant . . . [a] remarkably comprehensive and coherent analysis of and prescriptions for America’s contemporary economic malaise.”Kirkus Reviews (starred review)
“Smith enlivens his narrative with portraits of the people caught up in events, humanizing complex subjects often rendered sterile in economic analysis. . . . The human face of the story is inseparable from the history.”—Reuters

The Washington Post
Long before most reporters and social scientists took note, Smith had established himself as television journalism's foremost expert on the forces eroding the ranks of the middle class. In a series of penetrating Frontline documentaries over more than a decade, he chronicled the rise of a new buccaneer brand of global capitalism that relentlessly undermined the middle-class dream of "a steady job with decent pay and health benefits, rising living standards, a home of your own, secure retirement, and the hope that your children would enjoy a better future." Now in a sober, self-described reporter's book, Smith deepens his analysis using the latest data.
—Frederick R. Lynch
Publishers Weekly
This depressing book details the recent wreckage of the American middle-class dream: the hope for decent comfort and security for oneself and one’s family under fair rules set the same for everyone. Smith, a Pulitzer-winning former New York Times reporter and expert on Russia and the Pentagon Papers, is comprehensive and compelling in his coverage and blame laying. His principle villains are American corporations and politicians, his concerns such realities as the nation’s huge wealth gap and excessive pay for corporate executives, even those who fail. But while the book performs an important service in bringing recent history and well-known problems together, there’s little in it that’s new. In calling for a “populist renaissance,” a domestic Marshall Plan, and more citizens’ involvement, Smith’s on the side of liberal angels. But he doesn’t deal adequately with structural and institutional barriers to reform, instead arguing principally that changes of heart and civic engagement will make things right. Unfortunately, the book is written in blaringly subtitled two-page chapterettes, as if readers won’t stick with Smith long enough to learn what he has to say. But even if patronizing to some readers, the book is a strong, effective liberal indictment of things as they are. Agent: David Black, David Black Literary Agency. (Sept.)
Kirkus Reviews
Remarkably comprehensive and coherent analysis of and prescriptions for America's contemporary economic malaise by Pulitzer Prize–winning journalist Smith (Rethinking America, 1995, etc.). "Over the past three decades," writes the author, "we have become Two Americas." We have arrived at a new Gilded Age, where "gross inequality of income and wealth" have become endemic. Such inequality is not simply the result of "impersonal and irresistible market forces," but of quite deliberate corporate strategies and the public policies that enabled them. Smith sets out on a mission to trace the history of these strategies and policies, which transformed America from a roughly fair society to its current status as a plutocracy. He leaves few stones unturned. CEO culture has moved since the 1970s from a concern for the general well-being of society, including employees, to the single-minded pursuit of personal enrichment and short-term increases in stock prices. During much of the '70s, CEO pay was roughly 40 times a worker's pay; today that number is 367. Whether it be through outsourcing and factory closings, corporate reneging on once-promised contributions to employee health and retirement funds, the deregulation of Wall Street and the financial markets, a tax code which favors overwhelmingly the interests of corporate heads and the superrich--all of which Smith examines in fascinating detail--the American middle class has been left floundering. For its part, government has simply become an enabler and partner of the rich, as the rich have turned wealth into political influence and rigid conservative opposition has created the politics of gridlock. What, then, is to be done? Here, Smith's brilliant analyses turn tepid, as he advocates for "a peaceful political revolution at the grassroots" to realign the priorities of government and the economy but offers only the vaguest of clues as to how this might occur. Not flawless, but one of the best recent analyses of the contemporary woes of American economics and politics.

Product Details

Random House Publishing Group
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5.36(w) x 7.86(h) x 1.31(d)

Read an Excerpt

chapter 1

the business rebellion

the power shift that changed american history

The danger had suddenly escalated. We had to prevent business from being rolled up and put in the trash can by that Congress.

—bryce harlow, business strategist

There has been a significant erosion of the power ​. ​. ​. ​ of those in the working and middle classes. At the same time, there has been a sharp increase in the power of economic elites. ​. ​. ​.

—thomas byrne edsall, The New Politics of Inequality

it is one of those intriguing ironies of history that the immediate provocation for Lewis Powell’s political manifesto to Corporate ­America—his powerful private memorandum of ­1971—came not from a liberal Democrat in the White House, but from Republican Richard Nixon, the very president who was about to name Lewis Powell to the Supreme Court.

Powell’s intention was to spark a ­full-­scale political rebellion by America’s corporate ­leaders—what one writer called “the Revolt of the ­Bosses”—to change the political and policy mainstream in Washington and to put the nation on a new track, a track more favorable to business. And he succeeded, probably far beyond his expectations.

In his memo, Powell never mentioned Nixon or his administration by name. But writing in 1971 on the heels of Nixon’s new regulatory initiatives and his new tax law that was hard on business and the wealthy, Powell warned the corporate community that ­anti- business sentiment in Washington had reached a dangerous new high, and it was threatening to “fatally weaken or destroy” America’s free enterprise system. Business was being victimized, he said, by government regulations, consumer activism, and politically powerful trade unions. The political influence of the business community had become so weak, Powell contended, that the business executive had become “truly the ‘forgotten man.’ ​”

In a tone of exasperation, he chided America’s corporate leaders for bowing to mainstream ­middle-­of-­the-­road policies and for adopting a strategy of “appeasement, ineptitude and ignoring the problem.” The time has come, he insisted, for Corporate America to adopt “a more aggressive attitude” and to change Washington’s policies through “confrontation politics.”

Political mutiny 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. William Buckley’s National Review and Irving Kristol’s Public Interest were challenging the ­long-­accepted governmental activism of the welfare state, as it was then called. The “movement conservatism” spawned by the 1964 presidential candidacy of Senator Barry Goldwater, with its ardent ­anti-­union, ­anti-­government ideology, had growing appeal in Sun Belt business circles.

But it was Powell’s rallying cry and corporate manifesto, infused into the political bloodstream of the business community by the U.S. Chamber of Commerce, that generated broad tremors of change in Corporate America and set off a seismic transformation of our political system. Forty years later, we still feel the aftershocks.

The Powell Blueprint

Powell was like a commanding general gearing up an army for battle. “Business must learn the lesson ​. ​. ​. ​that political power is necessary,” he asserted; “that such power must be assidously [sic] cultivated; and that when necessary, it must be used aggressively and with ­determination—without embarrassment and without the reluctance which has been so characteristic of American business.”

Powell provided a blueprint, a ­long-­term game plan that would leverage the enormous advantages of corporate money and organized business power to do battle with their critics, with the U.S. Chamber of Commerce in the lead. “Strength lies in organization,” he advised, “in careful ­long-­range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”

And in the clinch, business should not hesitate to take the gloves off. “There should not be the slightest hesitation to press vigorously in all political arenas ​. ​. ​. ​,” Powell urged. “Nor should there be reluctance to penalize politically those who oppose it.”

The Problem: Nixon’s Action Agenda

The timing of Powell’s 1971 memo, in the midst of a Republican administration, might have seemed strange. Richard Nixon, a ­self-­styled conservative who had won the White House in 1968 with business support, was a great admirer of the captains of American industry. He considered himself “extremely ­pro-­business.” In a private session with top auto industry leaders in April 1971, Nixon excoriated consumer advocates and environmentalists in language that Lewis Powell would have heartily applauded. Nixon derided them as “a group of people that ­aren’t ­really one damn bit interested in safety or clean air. What they’re interested in is destroying the system [sic]. They’re enemies of the system.” By “the system,” Nixon meant free ­enterprise—the very system that Powell sought to defend.

But Nixon was a political pragmatist who reflected the politics of his time. He took a different line in public and in legislation from what he conveyed in his private talks with business leaders. On policy, he zigzagged. On the one hand, he enacted measures to support business and he watered down bills pushed by liberal Democrats. On the other hand, he launched his own array of regulatory initiatives in response to grassroots pressures from the powerful consumer and environmental movements. So that however much his private diatribes against the political Left appealed to business leaders, Nixon’s action ­agenda—what he actually ­did—deeply rankled them.

The Bipartisan Consensus: Hallmark of the 1950s to the ­Mid-­1970s

In today’s bitterly partisan political climate, people often forget that one hallmark of the 1950s through the ­mid-­1970s was the bipartisan consensus. Republicans as well as Democrats favored stronger regulation of business and industry to protect consumers and workers from the excesses of American capitalism. Often the impetus came from Congress, reacting to demands from the burgeoning consumer movement.

The Nixon administration was swept along by the popular tide. Even more than Democrat Lyndon Johnson, Nixon presided over major expansions of federal regulatory powers, creating several new regulatory agencies and commissions. The most ­high-­profile was the Environmental Protection Agency (EPA), with its laws on clean air, clean water, safe drinking water, and control of pesticides and other toxic substances. Nixon created other agencies as well, such as the Occupational Safety and Health Administration (OSHA), charged with ensuring safety in the workplace; the Consumer Product Safety Commission; the National Highway Traffic Safety Administration; and the Mining Enforcement and Safety Administration. In addition, Nixon expanded the powers of the Federal Trade Commission and launched an important initiative to protect worker pensions, the Employee Retirement Income Security Act, ultimately enacted under Gerald Ford after Nixon had resigned in 1974.

William Ruckelshaus, a Justice Department lawyer with an impeccable Republican pedigree who was tapped by Nixon as the first administrator of the EPA, confided that Nixon’s motivation on environmental policy was purely political. He did not want to be outflanked by ­pro-­environment Democrats, especially Senator Edmund Muskie of Maine, a strong contender for the Democratic presidential nomination in 1972. “He ­didn’t know much about the environment, and frankly he ­wasn’t very curious about it,” Ruckelshaus told me. “He never asked me the whole time I was at EPA: ‘Is the air ­really dirty? Is something wrong with the water? What are we worried about here?’ He would warn me, ‘You’ve got to be worried about ­that’—Ehpa, he called it. He was the one person in the country that called it Ehpa. The ­E-­P-­A, he’d call it Ehpa, and he said, ‘Those people over there, now don’t get captured by that bureaucracy.’ ​”

Nixon was pushed along by popular pressure. Facing reelection in 1972 and expecting that his opponent would be the ­pro-­environment senator Ed Muskie, Nixon felt he had to respond to the public’s demands. In his memoirs, Nixon later claimed credit for enactment of the Clean Water Act, but in fact he vetoed that legislation. Muskie had been eliminated in the Democratic primaries, and once Nixon saw that he could easily beat the Democratic nominee, Senator George McGovern, he no longer worried about the environmental vote. He felt free to veto the Clean Water Act. After the election, Congress with its strong bipartisan majority on green issues passed the bill over his veto and then armed Ruckelshaus with a raft of new laws imposing strict pollution limits and specifying penalties for violators.

As a firm believer in law enforcement, Ruckelshaus felt he had to go after some ­high-­profile ­polluters—cities infamous for dumping waste into the air and local rivers, or industrial giants indifferently fouling the skies and the waters. He felt he had to show polluters as well as the public that the EPA took the new laws seriously. Ruckelshaus took strong action. He banned DDT. He imposed a tight deadline for reducing auto emissions. He sued cities like Atlanta, Cleveland, and Detroit, and he took companies like Dow Chemical and U.S. Steel to court. His tough approach made enemies, especially in Corporate America.

“Most of the people running big American manufacturing facilities in those days believed this was all a fad,” he recalled. “They figured all they had to do was sort of hunker down until public opinion subsided, public concern subsided, and it would go away.” When Ruckelshaus made clear that he was going to enforce the new environmental laws, corporate leaders got angry. “I was the epicenter of hell,” Ruckelshaus recalled with a laugh. “I remember going up to see Ed Gott, who was the CEO of U.S. Steel, and he told me, ‘You know, we don’t like your agency, and we don’t like you.’ And I said, ‘Well, okay, get in line, a lot of people don’t like me. But you’ve got to comply with these laws. We can discuss timelines of compliance, but not whether or not you’re going to comply. And if ­that’s your attitude, then we are probably going to get in a fight over it.’ In the end, we sued U.S. Steel and they came into compliance.”

Perhaps most surprising for Nixon, given his philosophical sympathies for business interests, was his proposal for a tax bill that hit ­high-­end taxpayers and helped ­low-­wage workers. Moving to bring budgets more into balance, Nixon called in 1969 for repeal of the business investment tax credit granted by Democrat John F. Kennedy, thus raising corporate taxes by nearly $3 billion. His package also included an increase in the capital gains tax rate; restrictions on the use of tax shelters by the wealthy; and a new ­“low-­income allowance” that removed two million of the working poor from the tax rolls. As Ed Dale wrote in The New Republic, the Nixon tax package was “far and away the most ­‘anti-­rich’ tax reform proposal ever [sic] proposed by a Republican President in the 56 years of the existence of the income tax.”

Business Mobilizes

In this political climate, Lewis Powell’s corporate manifesto hit a responsive chord. Business sprang to life politically. After having kept government at arm’s length, the business community massively expanded its physical presence in the nation’s capital. In a few short years, more than 2,000 companies set up Washington offices. The number leapt from 175 in 1971 to 2,445 a decade later. Previously, business politicking had been fragmented, each company operating on its own. Now, business made a concerted effort to organize a broad coalition. Corporations founded new think tanks like the Heritage Foundation and the Cato Institute and vastly stepped up funding for the previously modest American Enterprise Institute, to generate policy analysis from a business perspective.

The chief executives of some of America’s blue ribbon ­corporations—Irving Shapiro of DuPont, Reginald Jones of General Electric, Thomas Murphy of General Motors, and Walter Wriston of ­Citibank—banded together to form the Business Roundtable to leverage the personal clout of the nation’s most powerful CEOs in ­face-­to-­face meetings with congressional leaders.

As the core of a new management movement in politics, the Roundtable recruited 180 CEOs from the corporate ­elite—CEOs with the stature to call anyone in Washington and get their call answered. “If you don’t know your senators on a ­first-­name basis, you are not doing an adequate job for your stockholders,” GM’s Tom Murphy told them bluntly.

The Roundtable quickly became, and remains today, the main political arm of big business in Washington, with a large, professional, ­full-­time staff. Initially, what united these powerful CEOs was a resolve to curb the power of labor unions, but they quickly expanded their agenda to cover the full spectrum of economic policy issues, not only labor law, but taxes, antitrust regulation, banking, and employment.

Small business, too, became a major political player. From 1970 to 1979, the National Federation of Independent Business, the major trade group for small business, leapt from 300 members to 600,000. To connect with this sprawling network, the organization had 600 ­full-­time employees at its California headquarters and a Washington office of 20.

The National Association of Manufacturers moved its national headquarters to Washington and mobilized its business network nationwide. The U.S. Chamber of Commerce, which had been slumbering politically, woke up. Its membership doubled to 80,000 companies in 1974, its budget tripled, and by 1980 it employed 45 ­full-­time lobbyists. Trade associations mushroomed, representing nearly every sector of the U.S. economy. By 1978, nearly 2,000 different trade associations were operating in Washington, with a combined staff of 50,000 employees. Amply funded by their business members, the national organizations and trade groups hired an army of ­professionals—9,000 lobbyists and 8,000 public relations specialists—to work the corridors of power.

In fact, by the late 1970s, business interests had mustered such a huge force that they outnumbered Congress 130 to 1: They had 130 lobbyists and advocates for each of the 535 members of Congress.

With all that corporate muscle, business shifted the political balance of power in Washington, and that caused a huge swing of the policy pendulum in favor of the corporate ­elite—at the expense of the middle class.

A parallel transformation was coming in economics with the onset in the 1980s of the New Economy and a business ­mind-­set focused on corporate downsizing, offshoring production, and rewriting the social contract that had been an important foundation of ­middle-­class prosperity in the long postwar period.

But the first bend in the path of American history came in the late ­1970s—while the Democrats were firmly in control of Congress and the White House.

Meet the Author

Hedrick Smith is a bestselling author, Pulitzer Prize–winning reporter, and Emmy Award–winning producer. His books The Russians and The Power Game were critically acclaimed bestsellers and are widely used in college courses today. As a reporter at The New York Times, Smith shared a Pulitzer for the Pentagon Papers series and won a Pulitzer for his international reporting from Russia in 1971–1974. Smith’s prime-time specials for PBS have won several awards for examining systemic problems in modern America and offering insightful, prescriptive solutions.

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Who Stole the American Dream? 4.5 out of 5 based on 0 ratings. 13 reviews.
Anonymous More than 1 year ago
I'm a Vietnam Vet, and everything that this book tells us is based on our history since then. We were told that we were in Vietnam to stem the tide of the Red Menace, now they Red Menace controls our Middle Class. We all prospered with the Middle Class doing well from the 50's to the 70's, in the times of Goverment Controlled Bank, Business, and Enviromental Regulations. Then the American Business model changed, and bought their way into the Dreams and Lives of every citizen. As the Bought and Paid for by business Political Party states QUOTE "Are you Better Off Now", than in 1960? They continue to scare American's into believing that No Government, No Regulations, and No Taxes are a way to go, while dividing the Country into the QUOTE "You’re either with us or Against Us" mentality. Well while you are shopping at Wal-Mart for that next piece of Foreign Made stuff that you do not really need, and will break tomorrow anyway, READ THIS BOOK, and keep Your Mind Open!
BG_Avid_Reader More than 1 year ago
Who Stole the American Dream provides an insight into the problems with the corporate world and Congress, They are only concerned about their rich friends and have thrown the ordinary American under the bus. He explain the painful journey of most Americans as the poor get pooer and the middle class is disappearing and the gulf between the poor and the rich is getting wider and wider. It seems that the rich have convinced a certain part of the 47% to accept inequality as a way of life. Banks charge exorbitant feed and interest designed to keep the poor poor and the minimum wage is a laugh. The wealthy of this country are willing to tip their waiter at a higher rate that they are willing to pay the workers that make them rich. If we continue on the path that the hate radio, FOX TV, the rich, and our Congress is taking us, we will lose this democracy that we so dearly cherish.
pm42 More than 1 year ago
Read this eye opening historical account. This book makes clear how the economy has come to be in the unhealthy position that we find today.
Anonymous More than 1 year ago
I regarded myself as a good Republican voter until I finished this book. Now I am not so sure. Although this book seems a bit to the liberal side it will truely make you think. It sure opened my eyes. I recommend it to anyone who feels their side is always right. We need more compromise in life and government.
Anonymous More than 1 year ago
Barbara, OSU Comp Student, Spring 2013 Hedrick Smith’s political nonfiction book highlighted the trade deficit, congressional gridlock, and out sourcing of jobs to spur reader political activism in hopes of decreasing the gap between the wealthiest one percent and the other ninety nine percent of Americans. Gaining the knowledge behind these major economic issues pushed me to become more speculative about who is controlling policies that affect working Americans, but at times the numerous topics addressed became overwhelming depressing, to the point that the situation and inequalities appeared far too corrupt to be fixed. Overall this book held a passionate interesting tone of voice, and is a worthwhile read for those interested in major economic issues.
Anonymous More than 1 year ago
Smith's book will not only open your eyes to a need for economic change in America, but shows the path that needs to be taken. If only every American middleclass, underclass person who has suffered from America's economic repression joined the grassroot movement to take our country back from the 1%, we could become the "land of the free, governed by the people, for the people" again. One of the best books I have read in years.
DickK More than 1 year ago
An extensive review of all the shenanigans pols, financial gurus, ceos, etc. ply upon our economy to get their way and steal the wealth of the nation.
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What do want.
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