David Leonhardt is a Pulitzer Prize-winning writer for the New York Times, where he writes its flagship daily newsletter, “The Morning.”
Below, David shares five key insights from his new book, Ours Was the Shining Future: The Story of the American Dream. Listen to the audio version—read by David himself—in the Next Big Idea App.
1. We are living through the Great American Stagnation.
In 1980, the United States had a typical life expectancy for a high-income country. Today, the U.S. ranks at the very bottom of that list. People in Canada, Japan, Western Europe, and every other rich country in the world live longer than Americans. During these same decades, incomes have grown slowly for most Americans and the net worth of a typical household is lower than it was when the 21st century began.
Pundits and politicians wonder why polls show that Americans are unhappy with the country’s direction and dissatisfied with the economy, even when it’s growing. But this is because economic growth hasn’t translated into rising living standards for most families. The country hasn’t lived through this kind of prolonged stagnation since before World War II.
How has the American economy been hobbled like this?
2. A class divide is at the root of our problems.
If you’re surprised by the statistics in my first idea, you’re probably a college graduate. Incomes, wealth, and life expectancy have risen in recent decades for people with a four-year degree. And for the richest Americans, incomes and wealth have soared.
“An American with a bachelor’s degree can expect to live eight years longer than somebody without one.”
The problem is that our economy has stopped benefiting working-class families. An American with a bachelor’s degree can expect to live eight years longer than somebody without one. Racial inequities have also grown.
3. Political power shapes our economy.
During the middle decades of the 20th century, ordinary Americans built political power through mass movements—especially labor unions. These movements succeeded to a remarkable degree: Incomes and life expectancy rose across the board. Inequality fell. The white-Black wage gap shrank. The United States was still filled with terrible injustices during these decades, but Americans could expect that their lives would improve over time and that their children’s lives would be better than their own.
In the past half-century, the power dynamic changed. The political left, whose most important institution is the Democratic Party, has increasingly come to reflect and represent the views of relatively well-off college graduates and professionals. Republicans remain the party of small government, big business, and laissez-faire capitalism, with party leaders favoring tax cuts for the wealthy, reductions in benefit programs that serve the middle class and poor, and a relatively free hand for businesses to maximize profits at the expense of wages. Republicans claim that these strategies bring prosperity for everyone. The results since 1980 say otherwise.
4. We don’t invest in the future as much as we used to.
Consider that it takes longer to travel across the United States today than it did 60 years ago. A typical cross-country flight lasts about 30 minutes longer than it did in the 1960s because aviation technology has not advanced in ways that speed up the trip; meanwhile, the skies have become so crowded that planes slow down to accommodate traffic. Nearly every other part of a cross-country trip (in airports and on local roads) has also become longer. Only if you are wealthy enough to fly on a private jet can you easily recreate the travel times of past decades.
“Our slowdown in travel speeds reflects a larger decline in investment.”
The speed at which people can get from one place to another is a basic measure of a society’s sophistication. It affects economic productivity and human happiness. Our slowdown in travel speeds reflects a larger decline in investment. On the most basic level, investment is a society’s willingness to devote resources to improving the lives of future generations by sacrificing today. It involves diverting money that might otherwise be spent on consumption and instead spending it on education, scientific research, emerging technology, or transportation. Past investments have been crucial to American prosperity, but the share of resources that we devote to investment has declined markedly in recent decades.
5. The United States can build a stronger economy.
The country has prospered before by building a form of capitalism that works well for most citizens. I use the term democratic capitalism to describe a system in which the government recognizes its crucial role in guiding the economy. The free market does many things well but also tends to lapse into a predictable set of excesses.
Under democratic capitalism, a society respects both the power as well as the weaknesses of the market. The government uses taxes to prevent the formation of an economic aristocracy and to pay for activities that the market neglects. The government regulates businesses to protect consumers and workers. The term “democratic capitalism” is particularly apt because it reflects the symbiotic relationship between democracy and capitalism under the best of circumstances. Democratic governance prevents the excesses of free market capitalism, while the material gains produced by capitalism foster the faith in society on which democracy depends. Democracy strengthens capitalism, and capitalism strengthens democracy.
We’re a long way from having an economy like that, but there are reasons for hope. Most Americans know that the current system isn’t working. They want something different. We can see the evidence all around us. Something different has worked before, and it can work again.
To listen to the audio version read by author David Leonhardt, download the Next Big Idea App today: