Who Stole the American Dream? Read Free Page A

the primary causes of America’s problems today, then we would see the same yawning income inequalities and middle-class losses in other advanced countries. But we don’t.
A Comparison—and a Fork in the Road
    Germany took a different fork in the road in the 1980s and it has fared far better than America in the global marketplace. While the United States piled upmultitrillion-dollar trade deficits in the 2000s, Germany had large export surpluses. In the midst of Western Europe’s economic turmoil, Germany is a bastion of strength. Its economy grew faster than the U.S. economy from 1995 to 2010, with the gains more widely shared. Since 1985, the hourlypay of middle-class workers in Germany has risen five times as fast as in the United States, with the result that the German middle class is now paid better on average than Americans.
    German leaders worked hard to keep their high-wage, high-skilled jobs at home. While U.S. multinational corporations aggressivelymoved production offshore, Germany, too, lost some of its production workforce, but it retained a larger share of its manufacturing base at home than America did.Today, 21 percent of Germans work in production; in the United States, it’s 9 percent.
    The difference is not in technology but in our government policies and our corporate strategies. Germany has maintained strong trade unions and a strong social contract between business and labor, even reducing unemployment during the Great Recession, while America’s jobless rate shot up.
America Chose a Different Fork
    America chose a different path, driven by the pro-business power shift in politics and a new corporate mind-set, both of which lie at the root of the economic rift in America today. The New Economy laissez-faire philosophy of the past three decades promised that deregulation, lower taxes, and free trade would lift all boats. It argued that sharply reduced taxes for the rich would generate the capital for America’s economic growth. Its disciples asserted that the free market would spread the wealth.
    But that is not what has happened. Themiddle class was left behind—the 150 million people whose family incomes range from nearly $30,000 to $100,000 a year—as well as 90 million more low-income Americans living in poverty or just above. Even the 60 million upper-middle-class Americans and the nation’s wealthiest 5 percent have been falling steadily further behind America’s financial elite, the super-rich 1 percent.
    The New Economy mind-set marked a sharp break with the corporate philosophy of the postwar era. Then, the mantra of business leaders was to share the wealth—to distribute to their employees a sizable share of the profits from growth and from gains in productivity. Since the 1970s, business leaders have largely abandoned that share-the-wealth ethic. With some exceptions, CEOs have practiced “wedge economics”—splitting apart the pay of rank-and-file employeesfrom company revenues and profits. In fact, according to the Census Bureau, the pay of a typical male worker was lower in 2010 than in 1978, adjusted for inflation. Three decades ofgetting nowhere or slipping backward.
    Such a dichotomy has developed in America’s New Economy that last April, while more than twenty-five million Americans were unemployed, were working part-time against their will, or had dropped out of the labor force and the economy was still struggling to recover,
The Wall Street Journal
ran a front-page story trumpeting that major U.S. companies “have emerged from the deepest recession since World War IImore productive, more profitable, flush with cash and less burdened by debt” than in 2007, before the U.S. economy collapsed. Many of the 1.1 million jobs added by American multinationals since 2007 and much of the $1.2 trillion cash added to their corporate treasuries came from overseas. At home, the
Journal
noted, “the performance hasn’t translated into significant gains in U.S. employment.”
    The