The Forces That Are Killing the American Dream
The Rise of the Deal and the Decline of the American Dream
By Nicholas Lemann
When the writer William H. Whyte coined the term “Organization Man” in his 1956 book of the same name, he did not mean it as a compliment. The book described the stultifying conformity of life in Park Forest, Ill., a newly built suburb south of Chicago. Many residents worked for large corporations and in their spare time joined one of the village’s multiplying community groups. All of this regimented behavior, Whyte warned, was draining the United States of its individualism and independent spirit.
The Organization Man “must fight the Organization,” he urged. His book — along with such studies as David’s Reisman’s “The Lonely Crowd” — created a lasting image of post-World War II life, while other important critiques, like Betty Friedan’s “The Feminine Mystique,” focused on the people who had been left out. But Whyte and his fellow individualists also overlooked something vital about the various institutions of midcentury America: They had lifted the living standards of tens of millions of citizens.
The corporations that employed people in Park Forest and elsewhere consistently gave their workers healthy annual raises. They did so in part because of pressure from another institution: organized labor. A third institution — the Democratic Party — solved local problems through its big-city machines and kept national inequality in check with regulation and 90-percent top marginal tax rates. (The Republican Party, for its part, largely accepted the situation.) Organized religion, especially the Roman Catholic Church and various Protestant churches, gave many Americans the sense that they belonged both to a small community and a larger world.
When 21st-century Americans lament the deterioration of civil society and the atomization of our national purpose, we are in many ways mourning the loss of the best parts of the culture that Whyte disdained. He worried about Park Forest’s 66 adult organizations swallowing up civic energy. We worry about people who have resorted to — as Robert Putnam, a modern-day social observer, put it — bowling alone.
Nicholas Lemann’s “Transaction Man” is intended as a sequel to Whyte’s book. It is a story about a battle of ideas between the people who built postwar American culture and their critics, like Whyte. “Who won this contest of visions — the side that valued a structured, organization-based society or the side that saw it as profoundly unhealthy?” Lemann asks. “The anti-Organization Man view won, without question.” He continues: “Its victory was so thorough, and so consequential, that today the representative figure of our age is an almost completely opposite character, whom we can call Transaction Man. Transaction Man (who may be a woman, of course) often works in a job that is literally transactional, in such fields as trading financial instruments, private equity, venture capital and hedge funds.” Organization Man aspired to join a large corporation and become a pillar of his community. Transaction Man or Woman aspires to be a disrupter and global citizen.
Lemann, a New Yorker staff writer and former dean of the Columbia Journalism School, has a skill for making grand stories about American life feel human. He did it in two earlier books, “The Promised Land,” his 1991 account of the great black migration, and “The Big Test,” about the SAT and meritocracy, which was published in 1999. Anyone who read those books when they appeared would have been better prepared for some of the political and cultural debates that followed. I suspect the same will be true of “Transaction Man,” given the present focus on economic inequality and corporate America’s role in creating it.
Lemann tells his story through a handful of characters, including an adviser to Franklin D. Roosevelt, a University of Chicago economist, the top executives of Morgan Stanley and a General Motors car dealer on the South Side of Chicago. The first, chronologically, is the Roosevelt adviser, Adolf Berle, an intellectual architect of the Organization Man economy. Berle recognized that American corporations were becoming gigantic, and he believed the only force that could constrain them — and harness their power for the good — was the federal government. As a Columbia University professor, he argued that the government should not break up companies (as some liberals, notably Louis Brandeis, favored) and certainly should not take them over (as the Bolsheviks were doing in Moscow). Instead, Washington should take a distinctly American approach, regulating companies to ensure they were acting in citizens’ interest. After being invited to dinner in Albany with then-Governor Roosevelt during his 1932 campaign, Berle helped design the New Deal.
The post-New Deal prosperity helped create thousands of thriving communities, like Chicago Lawn, a neighborhood on the city’s South Side not far from Park Forest. Chicago Lawn, as Lemann writes, was “cut in on the deal.” Large employers, the Catholic Church, the Chicago Democratic machine and the federal government all contributed to building a middle class. The archetypal business was a General Motors dealership, in which the owner knew the neighborhood, sold cars, arranged loans and, with assistance from a special G.M. program, received help in handing down the business to the next generation. It was like a different kind of legacy admissions.
Of course, not far from Chicago Lawn were African-American neighborhoods that were decidedly not cut in on the deal. This exclusion was the great shame of the Organization Man decades. It played a role in unraveling the system, as liberals turned their focus away from the questions about corporate power that had occupied Berle and focused, understandably, on fairness.
The biggest threat to the old ways, however, didn’t come from liberals. It came from Wall Street. One of the pleasures of this book is its accessible, succinct history of modern finance. The investors of the 1950s and ’60s were largely passive. By the late ’70s, they were becoming restless. Theorists like Michael Jensen, the economist whose twisting life story is a subplot here, were arguing that corporations were not sufficiently focused on their own profits. These theorists made some legitimate points: American business had become slow-moving and vulnerable to Japanese and European competitors. But the solution offered by Jensen, Milton Friedman and others was extreme.
In the service of maximizing shareholder value, investors and their allies dismantled the corporate and government edifices that had done so much good — high wages, company research labs, rigorous regulation and redistributive taxation. Institutions were out. Transactions were in. Wall Street grew so powerful that it was even able to survive a 21st-century financial crisis, with generous help from American taxpayers.
The four decades of the Transaction Man economy have not been good for most Americans. Wage growth has been slow, and life expectancy has stagnated. The public mood is sour. Lemann ends his book by pointing out that institutions are an inevitable part of society. The question is what kinds of institutions we will have.
Today, we have powerful, self-interested corporations that benefit relatively few people — and that dominate the many other weakened institutions. The answer, Lemann argues, must involve rebuilding some of those other institutions and creating new ones. This is democratic pluralism, in which interest groups compete to shape society. “It’s impossible to change things without interest groups,” he writes. “In a pluralist system, the way to fight unacceptable views is to outorganize the people promoting them.”
Interest groups may sound unpleasant, much as the organization did to William Whyte and his fellow critics. But anyone who abandons the notion of interest groups or big organizations cedes the field of politics to those who understand the unmatched power of institutions.
David Leonhardt is an Op-Ed columnist for The Times who won a Pulitzer Prize for columns on the financial crisis.
The Rise of the Deal and the Decline of the American Dream
By Nicholas Lemann
306 pp. Farrar, Straus & Giroux. $28.
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