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'America the Possible': How We Can Reclaim the American Dream and a Just Society

In his new book, James Gustave Speth explains how America is not broke, the money is just in the wrong places.

The following excerpt is from James Gustave Speth's new book, American the Possible: Manifesto for a New Economy (Yale University Press, 2012).

This book began by examining the intolerable levels of social decline now afflicting America. Poverty, financial insecurity, and economic inequality have all reclaimed highs not seen for many decades, plunging America to the bottom among our peer countries and spawning a host of pathological social consequences. Central to building a new political economy is the transformation of American society from this sad state to one that is truly fair and equitable, where all people have the opportunity and the means to realize their potential, where substantial equality is prized and sought with affirmative action, and where caring for one another with compassion and generosity are hallmarks.

When James Truslow Adams coined the phrase “the American dream” in his 1933 book The Epic of America, he used it to refer not to getting rich or even especially to a secure, middle-class lifestyle, though that was part of it, but primarily to something finer: “It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” That American Dream is well worth carrying with us into the future.

It is a measure of the political strength of the growth ideology that some of the most passionate advocates of greater fairness in American society have adopted the argument that we need more equality in order to promote more growth. A 2011 report from the Center for American Progress makes the case, albeit tentatively, that inequality is bad for sustained economic growth. Robert Reich in his 2010 book Aftershock explains his view that America won’t have a sustained economic recovery unless a much larger share of income is directed back to the middle class: “Unless America’s middle class receives a fair share, it cannot consume nearly what the nation is capable of producing. . . . The inevitable result is slower economic growth and an economy increasingly susceptible to great booms and terrible busts.” These views, of course, upend the traditional understanding--that inequality facilitates and spurs on growth.

At least one line of argument suggests that a more egalitarian society would eventually deemphasize economic growth. Much of the consumer impulse that drives GDP growth depends on what economists call positional goods--the drive to acquire things largely because others have them. Robert Frank explains what that means in an unequal society: Positional “arms races,” he notes, “are well illustrated by the familiar metaphor in which everyone stands up to get a better view, yet no one sees any better than before. It is the same with many forms of consumption. . . . Although there is scant evidence that middle-income families in America resent the spending of top earners, they are nonetheless affected by it in tangible ways. Additional spending by the rich shifts the frame of reference that defines what the near rich consider necessary or desirable, so they too spend more. In turn, this shifts the frame of reference for those just below the near rich, and so on, all the way down the income ladder.” It seems likely that in a far more equal society, the impulse to consume positional goods would decline, thus creating a tendency for growth to slow.

As far as the argument that those who grow rich in America have earned it and deserve to keep it, this claim is hollow in the extreme. Today’s high productivity and economic growth stem largely from the accretion of scientific and technological knowledge, most of which is inherited from the past, as Gar Alperovitz and Lew Daly point out in their remarkable book Unjust Deserts. In other words, the greater portion of income and wealth today “comes to us through no effort of our own.” As Nobel economist Herbert Simon observed, if “we are very generous with ourselves, I suppose we might claim we ‘earned’ as much as one fifth of [our income].”

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