The Broken Contract: Inequality and American Decline

At the same time, the country’s elites were playing a role that today is almost unrecognizable. They actually saw themselves as custodians of national institutions and interests. The heads of banks, corporations, universities, law firms, foundations, and media companies were neither more nor less venal, meretricious, and greedy than their counter – parts today. But they rose to the top in a culture that put a brake on these traits and certainly did not glorify them. Organizations such as the Council on Foreign Relations, the Committee for Economic Development, and the Ford Foundation did not act on behalf of a single, highly privileged point of view-that of the rich. Rather, they rose above the country’s conflicting interests and tried to unite them into an overarching idea of the national interest. Business leaders who had fought the New Deal as vehemently as the U.S. Chamber of Commerce is now fighting health-care and financial reform later came to accept Social Security and labor unions, did not stand in the way of Medicare, and supported other pieces of Lyndon Johnson’s Great Society. They saw this legislation as contributing to the social peace that ensured a productive economy. In 1964, Johnson created the National Commission on Technology, Automation, and Economic Progress to study the effects of these coming changes on the work force. The commission included two labor leaders, two corporate leaders, the civil rights activist Whitney Young, and the sociologist Daniel Bell. Two years later, they came out with their recommendations: a guaranteed annual income and a massive job-training program. This is how elites once behaved: as if they had actual responsibilities.

Of course, the consensus of the postwar years contained plenty of injustice. If you were black or female, it made very little room for you. It could be stifling and conformist, authoritarian and intrusive. Yet those years also offered the means of redressing the very wrongs they contained: for example, strong government, enlightened business, and activist labor were important bulwarks of the civil rights movement. Nostalgia is a useless emotion. Like any era, the postwar years had their costs. But from where we stand in 2011, they look pretty good.

the rise of organized money

Two things happened to this social arrangement. The first was the 1960s. The story is familiar: youth rebellion and revolution, a ferocious backlash now known as the culture wars, and a permanent change in American manners and morals. Far more than political utopia, the legacy of the 1960s was personal liberation. Some conservatives argue that the social revolution of the 1960s and 1970s prepared the way for the economic revolution of the 1980s, that Abbie Hoffman and Ronald Reagan were both about freedom. But Woodstock was not enough to blow apart the middle-class democracy that had benefited tens of millions of Americans. The Nixon and Ford presidencies actually extended it. In his 2001 book, The Paradox of American Democracy, John Judis notes that in the three decades between 1933 and 1966, the federal government created 11 regulatory agencies to protect consumers, workers, and investors. In the five years between 1970 and 1975, it established another 12, including the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Consumer Product Safety Commission. Richard Nixon was a closet liberal, and today he would be to the left of Senator Olympia Snowe, the moderate Republican.

The second thing that happened was the economic slowdown of the 1970s, brought on by “stagflation” and the oil shock. It eroded Americans’ paychecks and what was left of their confidence in the federal government after Vietnam, Watergate, and the disorder of the 1960s. It also alarmed the country’s business leaders, and they turned their alarm into action. They became convinced that capitalism itself was under attack by the likes of Rachel Carson and Ralph Nader, and they organized themselves into lobbying groups and think tanks that quickly became familiar and powerful players in U.S. politics: the Business Roundtable, the Heritage Foundation, and others. Their budgets and influence soon rivaled those of the older, consensus-minded groups, such as the Brookings Institution. By the mid-1970s, chief executives had stopped believing that they had an obligation to act as disinterested stewards of the national economy. They became a special interest; the interest they represented was their own. The neoconservative writer Irving Kristol played a key role in focusing executives’ minds on this narrower and more urgent agenda. He told them, “Corporate philanthropy should not be, and cannot be, disinterested.”

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