The latest article, The American Dream, Downsized, is written by Amy Sullivan, a writer and former editor at TIME and Washington Monthly magazines and was published in the National Journal magazine this past week.
The statistics presented by the author – including those showing the middle class “squeeze,” a smaller proportion of Americans falling within the middle class as compared to poorer or richer segments – are indeed sobering.
But in reading the article, I also got the sense that the premise of the argument – that the economic conditions in the America of 50 years ago represented the “norm” – may be flawed.
What if the conditions today represent the “norm” and the conditions back then are the ones that were “skewed”?
I shared the article with my brother, Nelson Nones. As someone who has lived and worked outside the United States for years (in Europe and Asia), to me his thoughts on world economic matters are always worth hearing because he has the benefit of weighing issues from a global perspective instead of simply a more parochial one (like mine).
Here’s what Nelson shared with me:
I have a very no-nonsense view of what’s happening to the American middle class, and why. The American Dream was “real,” the article says, during the post-World War II prosperity of the 1950s when a “middle-class family bought a house, put a car (or two) in the driveway, and raised children who ran around a safe neighborhood and later went to college with their parents’ support.”
This characterization paints a scene that is peaceful, tranquil, secure and prosperous – but it completely misses a couple salient points:
- The Cold War – The 1950s were also a time of fallout shelters and fighting Communism. It’s easy to forget all that.
- The Communist and Socialist countries – two of which today are part of the “BRIC” countries (Brazil-Russia-India-China). Russia (then the Soviet Union) and China barricaded themselves and their vassal states behind the Iron and Bamboo curtains – and slowly but inexorably starved themselves to death economically. The other two, Brazil and India, barricaded themselves to a degree as well. As an example, they threw out Coca-Cola and forced the locals to drink the disgusting domestic variants Campa-Cola in Brazil and Thums Up in India, just to thumb their noses (no pun intended) at those wicked ex-Colonialists and American capitalists.
- Most of the rest of the world – mired in abject poverty. This article provides a timeline for Singapore, where the annual per capital GDP was just US$400 in 1959 vs. US$7,259 in the United States.
In other words, while income equality and middle class prosperity were peaking in America between 1945 and 1970, the situation at the global level was exactly the opposite.
As we all know, the political and economic barricades fell quickly in late 1980s and early 1990s. The effect is precisely what political economist Adam Smith predicted in The Wealth of Nations (1776):
“If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it from them with some part of the produce of our own industry, employed in a way in which we have some advantage.”
Not coincidentally, Singapore’s per capita GDP today, at US$50,800 (according to the CIA World Factbook) exceeds that of the United States, at US$48,400. Of course Singapore is a small country and it’s just one example – but it’s a telling one.
I would argue that the American Dream, or at least the ideal of it framed in the 1950s, might have been “real” at the time (people, after all, were buying real houses and cars with real money). But it was temporary. And it could never be permanent if you believe Adam Smith.
Consider this: Many of the middle-class breadwinners were union workers. Their rising incomes were directly attributable to collective bargaining agreements that American companies could afford to enter into because they had little or no foreign competition and hence could pass rising costs on to the very consumers who benefited from those agreements.
Today, some of those same companies are bankrupting themselves just to rid themselves of unions and the unfunded pension liabilities they took on board when the good times were rolling. And why is this? Because they have to fight foreign competition just to stay alive. (This CNBC article, published just a few days ago, says it all.)
I would also contend that today’s “scaled back” notions of the American Dream might reflect the more realistic (less idealistic) views of the vast number of immigrants who have come to America since the barricades have fallen – many of whom fall squarely within the article’s definition of “middle class” (which I calculate to be $13,725 – $39,215 per year per capita, using the per-household figures quoted in the article divided by the current average U.S. household size).
For these immigrants, the assurance of being able to “hold on for dear life” is actually a big step up from the mayhem, extortion, hidebound traditions and general hopelessness that often run rampant in the countries or societies they’ve fled.
It astonishes me that this National Journal article hardly mentions any of the above: The word “foreign” can’t be found anywhere in the article … “immigration” appears only once in the context of how Hispanic immigration is exerting a “steady downward pull on income” … and “union” is stated only once in the context of children in the 1950s skipping college and entering the workforce with a “secure, often union-protected job.”
How could the article’s author have missed what is so obvious? I’m quite sure she’s not so ignorant … so she must have an agenda. But if that’s the case, and if I were to believe her agenda-based screed, what would that make me?
Just like author Any Sullivan, my brother Nelson has a strong point of view about the current situation of the American middle class!
As for me, I think the article’s statistics are real. But I also believe that post-war conditions in America were an anomaly borne of special circumstances. For the author to treat them as the “baseline” for evaluating the “fairness” of all that has come since … reveals a serious flaw in the underlying argument.
Besides, what’s “fair” today versus what was “fair” 50 years ago takes on a completely different complexion based on where one lives in the world!
OK, readers: Have at it. What’s your perspective? Please share your thoughts here.