Japan Today



Waking up from the American dream


Hedrick Smith, author of "Who Stole the American Dream?" explains how the land of opportunity became the land of inequality.

How would you define the American Dream?

It was pretty simple to define the American Dream in the ’40s, ’50s, ’60s, and ’70s, because so many people were living it. It was a steady job with steadily rising pay over your lifetime career, health benefits, a lifetime pension from your employer, the opportunity to buy your own home, and the hope that your kids would live a better life.

Is it really a uniquely American concept?

No, I don’t think so at all. I think people in Canada and Germany and England and France and Asia aspire to the same thing. It’s pretty basic.

I think the reason people think of it as the American Dream is that so many people in America achieved it. In the 1950s, when Richard Nixon had his famous “kitchen debate” with then Premier of the Soviet Union Nikita Khrushchev, Nixon said, “We’re the ones who have a truly classless society – you Communists boast about a classless society, but we have it.” So, I think it became embedded in the American political and economic psyche that that’s what should be delivered.

What was Henry Ford’s role in the American Dream?

Ford instituted the $5 day. That doesn’t sound like much today, but at the time he instituted it back in 1914, that was a tremendous pay boost for ordinary workers in the Ford plants that were making Model T cars.

Ford reasoned that this was not only fair, but was also good business: If you pay people well, they can become good consumers, and if they’re good consumers, they can buy Model T cars and everything else.

What Ford was talking about, without articulating the whole theory, was what became known among economists as the “virtuous circle of growth.”

General Motors, Ford, Chrysler, U.S. Steel, General Electric … all kinds of big companies did this. They had contracts with strong unions back in the ’40s, ’50s, and ’60s. They had solid job guarantees, good pay, health benefits, lifetime pensions … the kinds of things that were the bedrock of the American Dream.

When they paid well, their tens of millions of workers went out and spent that money, and all that consumption is what drove the American economy. Corporations responded by expanding their production, hiring more workers, building new plants, and buying new equipment, and that spawned another cycle of growth. This went on for 30 or 40 years.

Now, we’ve dismantled that. This whole drive to cut pay, cut jobs, and downsize offshore has not only hurt the middle class, it has hurt economic growth generally.

Caterpillar - a big manufacturer of farm equipment out in the Midwest – had record profits in 2011, and imposed a wage freeze on its workers. That means the corporate bosses and the Wall Street investors are going to make more money, but the workers are going to take it in the neck. And they’re not going to have the purchasing power to help drive the American economy.

Here we are, 41 months after the bottom of the recession, and we still have high unemployment. Everybody’s blaming Washington and Obama, but the real problem lies in the private sector. The private sector’s been sitting on nearly $2 trillion, spending $500 billion buying back their own stock instead of hiring people, expanding, and paying their workers more.

What are the consequences of that?

The long-term consequences are slow growth, stagnant living standards for the American middle class, and a mediocre economic performance – not just this year, not just next year, but over a long time.

People forget that there have been other periods in American history – not just the Great Depression of the 1930s, but the long depression of the 1880s and 1890s – where this pattern of concentrated wealth, suppressed wages, and slow growth took place. We could live with that kind of situation for 20 or 30 years.

Does the American Dream, such as it were, still exist anywhere other than America?

I think it’s coming to fruition in a bunch of countries. The Germans, for instance, have done an awful lot better for their economy and their middle class than we have in America. German average wages since 1985 have risen five times as fast as in America. In the 2000 decade, Germany ran a $2 trillion trade surplus – shipping out more than it was buying from the world – and the United States ran up a $6 trillion trade deficit. The Germans were pursuing a social contract that protected the German Dream, if you will, much better than we protected the American Dream. And it not only paid off for the middle class, it paid off for the country as a whole.

Do you think the American Dream will ever return to America?

That’s the $64,000 question. A lot of it depends on whether enough average Americans come to understand why they’re in such trouble: that the problems lie in the wedge economics being practiced by a lot of American corporations and the dramatic power shift that’s taking place in the American political system that leaves it dominated by corporate money – Wall Street money.

Enough people need to decide that these conditions are intolerable, and demand that the powers that be in the economy and the political system do something different to help average Americans more, and to have a fair share of the prosperity when America grows.

Is that what the Occupy movement was trying to accomplish?

The Occupy movement articulated the anger and frustration of many Americans. And it did implant, in the national political dialogue, the notion of the 1% and the 99%. Everybody talks about that now and understands it.

What Occupy didn’t do was organize a movement with clear goals, clear leadership, and wide popular support in the same way the civil-rights movement, the environmental movement, and the women’s movement did. It was a start, but it was incomplete.

I believe something’s going to emerge that will take its place and be more effective. There’s so much frustration and anger in the body politic in America today that I will be very surprised if something doesn’t happen.

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Crony capitalism, and endless promises of politicians that they had to pay for with borrowed or printed money killed the American dream.

Same in all societies since the agricultural revolution. Business builds society, government breaks them down.

-7 ( +4 / -9 )

America was built on hardwork, solid community and family values and minimal government interference.

America is collapsing due to a sense of entitlement, the disintegrating family and overbearing government.

-9 ( +7 / -14 )

Never is right. You can particularly, and tragically, see it in black families. Generations of "helpful" government have devastated the African American family as a social unit to the point where the majority of babies are born into households with no father. THe govt has taken the role of father, and the consequences are harsh.

It's not just racial though. Even in countries like Sweden, the welfare state has transformed families to the point where more than half of children are born into fatherless homes. It's just common sense that, when the government subsidizes something, you get more of it.

-6 ( +4 / -8 )

Wow the Libertarians are out in force here this morning. Yes, yes, yes this imaginary nanny state that your Libertarian leaders have conjured up for you as the great political boogey man. When in reality the real problem in America is not big government, but a lack of effective government in controlling the corporations.

If you are wondering where your American Dream has gone, it has been ripped from you by a greedy wealthy class who have concentrated wealth in their pockets at the expense of the entire economy. It is the elimination of jobs at home, the export of jobs to cheap third world states and the greedy fiscal policies driven by the corporate elite that have robbed working people of the opportunity to work hard and build a good life.

Until you stop believing in Ron Paul and the other Libertarian leaders blaming the state and wake up to the fact that it is the GOP and their deregulatory policies that got us here, then nothing will change.

17 ( +20 / -6 )

the American dream!!, you have to be asleep to believe it!!

3 ( +6 / -3 )


No worker gets paid by a poor CEO. If wealthy people have their money under a "mattress" somewhere then its for a good reason. Although with monetary inflation hiding your money is not possible as it is debauched over time. The end result redistributing purchasing power to those close to the FED, Govt and those close to either or both entities leaving the average person with less purchasing power. Also, greedy fiscal policies translates to entitlements that are unsustainable under the false pretense that you can have everything provided for you... that is reckless greed.

-9 ( +1 / -9 )

You guys do realize that the current recession was sparked by a stripping of regulations from wall street investment practices back to what they were before the Great Depression, leading to speculation and crazy trading practices that then reverberated around, destroying tons of lives and ruining the economy of the US.

And I'm not saying that the answer is to tax people into oblivion. Just make it illegal again to do shady trading deals and speculation that ruin the market.

And what would make it even better is if companies had actually chosen to pay decent wages of their own volition, rather than constant raise freezes, downsizing and exporting jobs abroad, maybe the middle class wouldn't have been cored out and we'd still have a robust class of people with not only buying power but also a stable home that could help build for the future rather than tearing down what we already have,

12 ( +11 / -1 )

AiserX. And you don't get paid by a CEO with money either. He sends your job to Singapore. That is until the wage there goes up too much. Then he sends it to India, but that doesn't last either. So Philippines, Bangladesh and other poor countries follow.

By the time he considers bringing that job back to the US or Japan, well, wages here have dropped so far that he can consider restoring those jobs. But that does not mean Joe or Taro working person in the US or Japan can now go back to a middle class life. Because market rate on labor, even educated labor, has been pushed down again and again. Now even the top of the crop need to worry about being able to better the next generation.

You are swallowing corporate and elite defined propaganda if you think small government is going to help you one bit. The elite just want government out of the way so they can run wholesale over you and all the other working people to drive your wages down, your standard of living down and your rights down. It is this very loss of government oversight over business and banking that got us here in the first place.

Wake up already, Libertarianism is a political fantacy given to ignorant working people to blind them to the reality that big business and the elite are robbing them blind.

14 ( +13 / -1 )

Interesting how VRWC manages to point only at Blacks (I'm Caucasian, by the way) having had their family units destroyed by our government. Gee, I wonder if any of that happened to other ethnic group in the U.S.? Then goes on to point out that it's not "just racial". This was truly offensive VRWC. The thinly veiled racism is not lost on us.

If your vote is for Romney because he's not Black, I am afraid that you will be quite surprised if elected. He undoubtedly will (at the urging of his peers) continue the war of the wealthy on the 99%. Bankrupting the government while lining their pockets has only really hurt you and I and our peers. Keeping us involved in discussing/arguing side issues and there's always "keep 'em afraid" (radical Islamic Fundamentalists, Blacks, Hispanics, Asians - insert happens to be their current flavor of fear).

Most of us living abroad see firsthand that the radicals are few but loud and the media likes loud. It sells. There are lots of issues for us to disagree on but ethnicity should not be part of the discussion. It doesn't add substance and there is too much room for conjecture. I don't like having the parasites either but if my taxes help one honest person to survive or succeed while supporting one hundred parasites, I consider it money well spent. And I don't care what color skin or other physical features DNA caused that person and me to have different appearances. I hope that support net is there for me if it's ever needed. I've worked for more than 40 years with 23 in the military, so I figure that if I did need that support that it would not be denied to me.

Deny hate.

9 ( +7 / -1 )

OK, I'll add to my original post. It's an uneducated, economically illiterate voting class that believes the lies that are spewed forth by power grabbing politicians.

What? I can get something without working for it? It's my RIGHT? OK, boss, give it to me! And Damn the people who have more money than me! It's THEIR fault I'm poor!

We need more government to make things right! More government means more free stuff for me, which happens to be my RIGHT! GIMME GIMME GIMME!

Punish the rich! Give money to the poor! I'm sure that will encourage them to get off their duff and work for minimum wage!

-11 ( +1 / -10 )

There comes a time for every nation to stop climbing. History repeating it self really. The next super power is china. As wages slowly increase overtime, like the article says, this will just increase consumer spending etc. Plus they will still be the cheapest places for manufacturing after this all takes place.

America probably wont ever be back to where it was 12 years ago. Well, probably not in my lifetime any way.

I also believe articles like this have been dragged out for too long now. More so the ones about "America is no longer top dog" ... that dog was toppled a while ago I feel.

-3 ( +1 / -4 )

@Slifko, Thank you for your kind words. Actually, come to think of it, the same HAS happened to other groups. Think of native Americans. Their current situation can be blamed on the overprotective hand of government interfering in their lives and keeping them from realizing their full potential. By contrast, the immigrant groups that have managed to keep free of such entanglements (Asians, Indians) are doing fantastically well.

I wouldn't suggest voting for either candidate because of their race. The policies matter. And, if continued, the Democratic policies will see just what you mentioned- one honest person supporting 100 parasites.

-2 ( +2 / -3 )

If the American dream is dead, and America in decline, then why are millions and millions of Koreans, Chinese, Vietnamese and other Asians -- whose own countries are quickly growing a middle class -- still so keen to go and live there?

The day that America can't get enough immigrants is the day I'll believe that America is no longer the land of opportunity. Same goes for the other globally wildly popular Anglo-Saxon societies of Canada, Australia, NZ and UK.

-3 ( +2 / -5 )

I don't know, I am a positive person who worked hard to build a business and it worked out for me. Attitude is part of it and that is one thing the Republican Party has, a positive attitude, even if it's misplaced. This is why they are able to convince poor people to support low taxes for the rich, just in case they will be among them someday. It beats giving up on life like some of the comments here...if I'd done that I wouldn't have gotten anywhere,

-6 ( +1 / -6 )

The dream isn't available to everyone. I am lucky that I lived in a community with very good education available to working class families. Lucky that my parents priotized family and gave us the foundation we needed in love, support and encouragement. I was lucky to get work and breaks on education thanks to my father's work.

But the kids in the neighborhood I grew up in were not as lucky. They were just as smart, tried as hard, but had disadvantages. Parent's who were not as educated or skilled as mine, so money was more limited for them. Some had other issues that made life at home harder.

It is naive to think that all Americans are born with the same options, same access to the dream. For many people there are substantial barriers. That is where society comes into the picture to help. And help why? Because it benefits society. Having those kids have access to education and support means they grow up to benefit society.

The problem with this idiotic ideology proposed by the Libertarians is that is negates the role that society should play in taking care of social problems. Yes some people really do need and deserve our help. And they are the majority of those who get it. Sure a small portion cheat, but then again the rich end of the scale does too.

You cannot have a tiny government that works in 2012 or in the coming decades. Quite the opposite is required to assure the well being of our society. It is foolish and naive to believe otherwise and inhumane to consider implementing the negligent ideas of the Libertarians.

4 ( +4 / -1 )

You cannot have a tiny government that works in 2012 or in the coming decades. Quite the opposite is required to assure the well being of our society. It is foolish and naive to believe otherwise and inhumane to consider implementing the negligent ideas of the Libertarians.

I think the next phase is "peer to peer" governing. It would work like a social network and it will be a more direct democracy. Neither the left or the right are right or effective. It's time for a third way, and that is peer to peer.

0 ( +1 / -1 )

Stopped dreaming a longtime ago.....

1 ( +2 / -1 )

I will never stop dreaming the "American Dream". I will never stop trying to better myself. I will never stop trying to keep people employed with me and my Management Construction Company. I will never stop, I will acheive all that I can...and if I lose it all, I will start again, and again, and again. This should not be called the "American Dream" but the "Human Dream". We the people should make every effort to prosper ourselves, with out doing harm to other's. I'm not going to sit around and cry about the economy, I am going to get up, go out, and do something...

5 ( +3 / -1 )

I like your attitude T-Mack

3 ( +3 / -0 )

@Peter Payne Yeah but arent you the guy that sells porn and snacks? You didnt build it, you just resell what someone else makes. Obama would have a field day with that

0 ( +0 / -0 )

The writer of this article explained exactly what happened in America. During the war, women were employed in factories for war production. After the second world war, American business realized that they could create frivolous greed in the people due to the two worker family. They started making inferior products that needed replacement often and due to the two worker family started giving out cheap credit to fuel the scheme. People all fell into the "enjoy it while you pay for it" ploy and replaced perfectly good cars in favor of the newest model. This thinking expanded in all areas. With the influx of foreign poor into the country, they started work on dismantling the unions. These workers, even at low paying jobs, were much better off in America than in their home countries and didn't see the need to belong to unions, and neither did the new American born workers. Then corrupt Congresses of both parties said alright to sending jobs overseas for cheap taxes and labor. Both major parties are corrupt. The Republicans LOVE big Govt. It is big Govt. that excuses them from paying taxes and passes laws favoring only them.

2 ( +3 / -1 )

That’s the $64,000 question.

More like the $32,000 question, with no health insurance.

1 ( +2 / -1 )

@peterpayne: what kind of business are u talking about and how many jobs have you created for people not related to you?

0 ( +1 / -1 )

@ T-mack, That's a positive attitude, naive, but positive.

-2 ( +0 / -2 )

DentShop seem's to know what it's like when employee's depend on you.

At least upvote me

0 ( +1 / -1 )

I did, I do more than post, I vote...

0 ( +1 / -1 )

Everybody should, once in their lives, work for themselves in order to understand what it is like to truly rely on ones self.

Your kinda preaching to the converted here.

0 ( +1 / -1 )

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