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‘Who Stole the American Dream?’: Hedrick Smith to discuss middle-class troubles

Hedrick Smith won the Pulitzer Prize for international reporting for his stories about Russia in the early 1970s, when he was the Moscow bureau chief for the New York Times. After he returned to the U.S., he described his many encounters with ordinary Russians in their homes, at restaurants and factories and on trains, in “The Russians.” His book was translated into 16 languages.

Now Smith has turned the tables. “I’m covering America as a foreign correspondent would cover it,” he said, discussing his latest book in a telephone interview. “I could have called it ‘The Americans.’ ”

But he didn’t, because that wouldn’t have reflected the book’s edgy tone. Its title — “Who Stole the American Dream?” published in the fall of 2012 — summarizes the way the book weaves economic and political developments in the U.S. since the 1960s into an unsettling narrative.

 It’s Smith’s take on how and why the country’s once-ascendant middle class has been slammed by a witches’ brew: losses of millions of good manufacturing jobs, stagnant wages, soaring costs of a college education, the replacement of good pensions with less helpful 401(k) benefits, falling home ownership, political dysfunction and a litany other woes. All the while, the fortunes of the large corporations and wealthy individuals at the top of the economic pyramid kept on growing.

Who was the culprit?

 Largely, those well-heeled corporations and individuals and an armada of hired guns — lobbyists, politicians and others — who do their bidding.

 Smith will lay out his reportage to Twin Cities audiences next month during several speaking engagements. Among them, Smith will speak at Plymouth Congregational Church, 1900 Nicollet Ave., Minneapolis, at 7 p.m. on April 10. The meeting is free and open to the public.

His visit is part of an extended road trip across America that has featured more than 75 addresses, campus visits and town hall meetings since “Dream” came out.

“Don’t call it a book tour,” he counsels. Instead, Smith’s journey seems more like that of a man on a mission, to piece together a story that draws on more than half a century of work reaching back to his days as a 1950s cub reporter at the Greenville (S.C.) News, supplemented by fresh portraits of people who have not fared well, packed with the data and sources to back up his premises and presented in a play-by-play time line.

Smith views “Dream,” his eighth book, as “absolutely” his most significant achievement. He was at The Times for 26 years, covering the civil rights movement and the Vietnam War, working on the Pulitzer-winning Pentagon Papers team and serving as the paper’s Washington bureau chief and chief diplomatic correspondent.

In 1988, he left the paper and moved on to create 26 prime-time television documentaries and mini-series for PBS. By far his largest audience tuned in to his “Frontline” investigation on how the global supply chain built by Wal-Mart became a model for the outsourcing of millions of American manufacturing jobs.

Key marker: Marquette Bank decision

He describes as a little-known game-changer the unanimous U.S. Supreme Court decision in 1978 that went against Minneapolis-based Marquette National Bank. That ruling paved the way for banks to charge hefty interest rates on credit cards they issued to millions of consumers, he notes, quoting University of Illinois bankruptcy professor Robert Lawless.

Hedrick Smith
Hedrick Smith

“It’s the court decision that has had the most effect on people’s lives, that no one has ever heard of,” Lawless said. “It effectively deregulated credit card interest rates. Banks hail that as the ‘democratization’ of credit. Their attitude was we can now charge 30 percent to people who would not qualify for a loan before, because they were too high a risk. For banks, these vulnerable borrowers are the most lucrative borrowers.”

Smith said he began his work on “Dream” more or less accepting the view of many economists, academicians and business leaders that globalization, changing technology and market forces have led to the rising inequities. Thus, they often argue that the growing disparities are now baked into a more globalized economy. Smith agrees that those factors have led to more disparity but argues that shifts in public policy have also been a major factor.

He points to Germany, which has significantly less economic disparity than the U.S. but has avoided the trade deficits that have long prevailed in the U.S. and still employs 21 percent of its work force in manufacturing vs. just 9 percent in the U.S. He cites Costco as an example of a company that has maintained health coverage for most of its workers, kept wages steady and avoided large layoffs and yet remained competitive with low-cost rival Wal-Mart.

Puncturing Texas boosterism

In the interview, he also questioned the claims, made frequently by Texas boosters and now resonating widely in the media, that the state is prospering largely because of its low taxes and minimal business regulation. “What they don’t take into account is how the Texas economy is driven by oil and gas,” like in Russia, he said. “There’s a lot of smoke being blown.”

Smith begins his story with the successes of movements advocating for civil rights, consumers, the environment, women’s rights, trade unions and peace from the late 1950s into the early 1970s. He describes as highly influential a confidential memorandum titled “Attack on the Free Enterprise System,” written in 1971 by Lewis Powell for the U.S. Chamber of Commerce.

Powell was then a corporate attorney about to be nominated by President Nixon to be a Supreme Court justice. He charged that corporate leaders had responded to their critics in movements led by liberals with “appeasement, ineptitude and ignoring the problem.” Powell called for an aggressive response, complete with think tanks, speakers, “rebalancing of faculties,” close monitoring of the media, paid ads, political and judicial activism and lobbying. Business leaders followed this roadmap and, in Smith’s telling, it ultimately worked in spades for them.

Smith said he “found much more fundamental trouble” than he had expected. A scandal-ridden Wall Street falling off a cliff. The loss of $6 trillion in home equity, with Americans’ share of the value of their homes plunging from 69.2 percent in 1985 to 38.4 percent in 2011. Freight trains taking longer to inch through traffic bottlenecks in Chicago than to get from that city to Los Angeles. Business and trade interests outspending labor by nearly 60 to 1 from 1998 to 2010. Tax levels as a percentage of the nation’s economy at their lowest levels since 1950.

Questioning media’s role

While his “Dream” book didn’t discuss the performance of U.S. media outlets in reporting on the rising inequality, Smith is a critic. “Our media coverage of the American economy is so superficial. If you read the popular press, you would think the country is way more polarized than it is.”

But even with better coverage — given that Smith’s diagnosis is so, well, awful — how could we possibly reach accord on a series of moves to roll back the inequities and “reclaim the dream,” as he puts it, of the middle class?

Smith readily concedes it won’t be easy. He offers a 10-point plan, generally familiar territory. Key elements: revitalize an aging transportation system; invest more in research; embrace industrial policy to spur a manufacturing renaissance; overhaul the tax system; pressure China to trade more fairly; cut defense spending; strengthen safety nets in the housing market and for Social Security and Medicare; rebuild the political center; mobilize the middle class.

Some conservative critics dismiss much of this agenda. And while reviews of “Dream”  were mostly thumbs up, a Bloomberg reviewer noted that “nowhere does Smith offer a critique of a consumerist society that has spiraled out of control.”

 Smith says the biggest challenge is motivating and engaging everyday citizens. “Average Americans feel powerless,” he said. “The missing ingredient is ordinary peoples’ confidence that they can change things.

“I learned a lot and unlearned a lot. What I find is intense interest” and great concern that the U.S. political system is not working. “I’m finding that in all kinds of audiences.”

He harks back to the civil rights movement, which began with strategizing, goal-setting and small demonstrations long before it ripened into the 1963 March on Washington. Then, an estimated 250,000 Americans gathered to hear Martin Luther King Jr. deliver his memorable “I Have a Dream” speech. Ten months later, Congress passed the Civil Rights Act.

“We have to rebuild the middle class, and rebuild the middle in the political arena. We’ve done that in the past. The track record is there.”

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Comments (16)

  1. Submitted by John Appelen on 03/25/2014 - 12:59 pm.

    Ignore Consumers?

    “Key elements: revitalize an aging transportation system; invest more in research; embrace industrial policy to spur a manufacturing renaissance; overhaul the tax system; pressure China to trade more fairly; cut defense spending; strengthen safety nets in the housing market and for Social Security and Medicare; rebuild the political center; mobilize the middle class.”

    I am still not sure how this is supposed to work… If American consumers are still resistant to buying American products, who exactly will these manufacturers produce product for? Especially since it looks like his plan will increase the cost of doing business in America…

    • Submitted by Bob Shepard on 03/25/2014 - 04:42 pm.

      a good start would be

      to view “Inequality for All”, done by Robert Reich and found on Netflix. Building the middle class is really building the “job creators”, as the middle class is the consumer engine that perpetuate Reich’s “virtuous circle”.

    • Submitted by Tom Lynch on 03/25/2014 - 04:47 pm.

      I can see

      we can’t count on your help in fighting the plutocracy that runs our country.

      • Submitted by John Appelen on 03/25/2014 - 11:33 pm.

        Probably Not

        At least not until the American consumers show some kind of effort to buy more high content American goods. Blaming big business for the decline of the American middle class from one’s Subaru, VW, Hyundai, etc seems hypocritical to me.

  2. Submitted by Jon Kingstad on 03/25/2014 - 09:03 pm.

    The American Dream stolen

    I’m puzzled by the Bloomberg remark quoted in the article. Does the reviewer mean that Smith offers no critique of the “consumerist society” or that he has not offered a critique of a consumerist society that is spiraled out of control? Or does the reviewer mean to suggest that a consumerist society is OK as long as it’s not “spiraled out of control”?

    Anyway, it sounds like Smith has offered a critique but probably not a critique that the Bloomberg reviewer wanted to hear or could understand.

    Smith’s title says it all: he doesn’t ask “whether” the American Dream was stolen; he asked “who stole it”? If he’s suggesting that the banks and financial industries stole it, which it sounds like he is, then he’s “on the money” right there.

    • Submitted by John Appelen on 03/25/2014 - 11:28 pm.

      Forced Debt?

      Did someone force consumers to take out all that high priced debt? Drive those newer cars, make those Starbucks runs, buy that bigger home, install that bigger TV, etc.

      I always wonder why there are so MANY banks? And people that carry a balance on their credit cards?

      • Submitted by Jon Kingstad on 03/26/2014 - 09:07 am.

        So many banks?

        That’s easy: The title of Professor Bill Black’s book “The Best Way to Rob a Bank is to Own One” says it all. Banking is a lawful but not legitimate enterprise in this country. Remember the “golden rule”: who owns the gold makes the rules. When you say so many banks, are you thinking of all the buildings that are branches of US Bank, TCF, JP Morgan, etc. These are chains, something which used to be illegal in this country too.

        Nobody “forces” anyone to take out high priced debt by holding them at gunpoint. But unless you are going to live under bridges or a tent or a homeless shelter, you have to have credit and a credit rating to rent an apartment, to buy a car, to own a home, have a telephone or cell phone or computer. To make almost any purchase. Obviously, many people manage this and do it well. But that’s not the point. Unless you pay off your credit card balance every month, you are paying a loan shark rate of interest. This is legalized theft. For many people, living on a minimum wage or less, from paycheck to paycheck, paying off their balance every month is not an option. And the game is rigged, as with the adjustable rate mortgages that offer a “teaser” low rate that operates like the classic bait and switch converting to a higher LIBOR indexed rate after a few years. A LIBOR rate that is fixed by the banks by the way.

        • Submitted by John Appelen on 03/26/2014 - 01:55 pm.

          Why Not?

          “Obviously, many people manage this and do it well. But that’s not the point.”

          “paying off their balance every month is not an option”

          One can develop a credit rating with very little principal / interest. However it seems difficult for modern Americans to delay gratification until they have the cash. I remember how bad I wanted to replace my college clunker when I graduated and got a job. It took a lot of will power to keep driving it until I could pay cash for a newer one. However after decades of this type of behavior it paid off great !!!

          By they way, I was talking about the dozens of local and regional banks…

  3. Submitted by Greg Kapphahn on 03/26/2014 - 08:50 am.

    Taking Advantage of the Realities of Human Nature

    Clearly SOME of us have risen above the nature of us humans to be short-sighted, and very bad a predicting the results of our actions, especially when we’re stressed, which is, of course, a useful epidemic all by itself, here in early 21st. Century America.


    It’s too bad those same people have very likely had the ability to experience or express empathy and compassion for those who demonstrate standard human weaknesses beaten out of them (literally or figuratively) by those who raised them.

    The reality is, the financial system, and those who sought to drive consumers to purchase far more than they would ever need or could honestly afford were given carte blanche to tune in on and take advantage of their fellow citizen’s most common weaknesses,…

    while their media (which is decidedly NOT “liberal,” being a wholly-owned subsidiary of the 1%) pointed regular folks toward “big government” as their enemy,…

    to distract them from who it was the benefited MOST from “big government” and make sure they never, ever, considered that the wealth that made the 1%ers into 1%ers had come out of those regular people’s own pockets,…

    Of course, those same 1%ers have most recently worked mightily (including even Keri Miller’s “Daily Circuit” program on MPR, for heaven’s sake) to foment enmity between the retiring baby boomers and the millennial generation so that they can reduce or wipe out Social Security (on which they make hardly any profit),…

    in order to drive ALL of America’s workers into investing their retirement funds into the Wall Street Casino where those same 1%ers can siphon off a big chunk of what SHOULD have gone to those investing with them into those 1%ers own pockets (which they’ve been doing with 401Ks, 403Bs, etc., ever since their inception,…

    costing the average citizen about $165,000 of their investment savings in the process (over what an old school, defined-benefit pension operated by their employer would have provided).

    The only folks who still have defined-benefit pensions tend to be public employees, teachers, civil service workers, etc., which, of course, those same 1%ers are trying desperately to wipe out, as well, by working mightily to inflame hatred toward those “pampered” workers,…

    who are still getting at least little bit more of what EVERYONE ELSE should have been getting if the 1%ers hadn’t stolen the American Dream right out of our pockets and out from under us all.

    Human Nature is human nature. If we don’t manage to make our government take action to protect our fellow citizens from being taken advantage of by the 1%ers who are playing on the most common quirks and foibles so many of us share, those 1%ers will not only steal the tattered remains of the American Dream from us, but they’ll then destroy the nation from whose populace they stole their own outrageous and unjustifiable wealth,…

    because the 1%ers are have their own classic set of human dysfunctions; dysfunctions which cause them never to be able to experience the satisfaction of having “enough”,…

    and to misread the “problems” of our nation while demanding, by virtue of the power their money gives them, “solutions” that can do NOTHING but create more and more of exactly what they already detest in their fellow humans.

    Given sufficient power, the 1%ers will create a nation that they, themselves can’t stand to live in (or, along with the rest of us, even be able to survive in),…

    but another of their dysfunctions will cause them to universally claim (and believe) that the inevitably destructive results of accomplishing what they demanded be accomplished is everyone ELSE’S fault.

    • Submitted by John Appelen on 03/26/2014 - 11:08 am.

      Shared Responsibility

      I have no problem admitting that some of the wealthy behave poorly, therefore that group contributed to our problems.

      Can you acknowledge that us participants caused the other 50% of our current problem?
      And hold 50% of the possible fix in their personal choices?

      • Submitted by Greg Kapphahn on 03/26/2014 - 02:11 pm.


        And please STOP trying to blame those who have been victimized for the results of what other people have been allowed to do to them. It’s the economic equivalent of saying women get raped because of how they’re dressed, and therefore deserve it.

        Because it is the nature of us humans that many of us share the dysfunctions which have allowed the 1%ers (who share their own set of dysfunctions) to so thoroughly rip us off; dysfunctions that make it highly unlikely, if not impossible, for us to make other choices than those which have so commonly been made (and regretted).

        You can wish that the average person would be less, stressed, more careful, and make better choices, just as you can wish that all people would be compassionate, loving, helpful, sensitive, and committed in their interactions with others, especially those less fortunate then themselves,….

        but it’s NOT going to happen.

        That’s why it’s necessary, for the overall well being of society, to limit the ability of those who would take advantage of the very predictable quirks and foibles of their fellow citizens, to do so.

        If and when a society does not do so, that society inevitably will destroy itself at the behest of those who have claimed by virtue of the wealth they have unjustly extracted from their fellow citizens, the right to run everything.

        • Submitted by Tom Lynch on 03/26/2014 - 03:39 pm.

          Great answer

          Mr. Appleton’s repeated defense of the plutocrats and blame-shifting to ordinary Americans is one reason nothing has been done to control their greed the past 30 years. He sees the plutocrats mostly being of the same political persuasion as he is. Thus he needs to defend them against the “other” side. Pure tribalism. Multiply this by millions of other Apples, not only not being helped by our plutocrats but being hurt by them but still voting for them, and you can see where our problems lie.

          • Submitted by John Appelen on 03/26/2014 - 06:28 pm.

            Different or Same

            A business sends jobs overseas to reduce costs, stay competitive and increase margins.

            A consumer buys a Subaru to reduce costs, improve quality and increase “joy”.

            Both cost American jobs, harm unions, are freely made amongst alternatives, etc. If the business does not do this, they will likely lose market share and may go bankrupt. If the consumer does not do this, they would be driving a Chevy…

            Are they the same or different? Rationale?

        • Submitted by John Appelen on 03/26/2014 - 04:09 pm.

          Nanny State?

          So how far do you want to take this? The state prevents me:

          – From investing in a business because it may go bankrupt?
          – From buying stock because it may decrease in value?
          – From getting a loan because banks won’t take risks?
          – From getting an adjustable rate loan because the loan may go up?
          – From getting a credit card?
          – Buying a new device until I sign a release?
          – Other?

          If you place all the risk on the businesses for the poor choices of a few of their customers, they will need to charge everyone more to cover that extra risk. Instead of today where people who don’t pay their bills pay higher rates. Or those who make bad spending decisions typically lose their money, not ours…

  4. Submitted by beryl john-knudson on 03/28/2014 - 07:36 am.

    Was the dream stolen?…no we just don’t recognize it…

    How can we know who stole the American Dream if we cannot agree on what is the dream we lost?

    It is as if everyman has a different dream that another too often fails to recognize as diverse dream paths pursue some type of future security for ourselves, our group, our tribe alone which we call Middle Class but who are the middle class?
    Who deserves, in a wealthy nation;who doesn’t in a society with the dream limited to me and mine?

    Who gets the most toys wins by whatever means and if Democracy is still in the toy box what does it really look like anymore in a society that accepts and separates the ‘Dream’ that we can no longer define in a”democracy’ we have bastardized in our pursuits to be top of the heap…if the dream has disappeared no one stole it. it just faded away and we no longer recognize it?

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