When American Capitalism Meant Equality
Americans used to have a relatively egalitarian view of markets. How did they come to accept extreme inequality as an innate part of their economic system? At the heart of this change is a radical shift in the meaning of American capitalism itself.
American capitalism used to mean economic equality and security. When I mention this in speeches or talks today, this observation prompts laughter, or outright disbelief. But it’s true. Americans used to believe economic equality was foundational to our political system. That America—at least for those considered citizens—carried with it an implicit promise of rough commercial equality. How did this notion change so radically?
In 2008, we faced an earth-shattering financial crisis. More than anything, this crisis structured how Americans consider their economic system. As former Clinton official Reed Hundt recently observed, President Barack Obama and his advisors missed the opportunity the crisis presented to reorder social priorities. Though operating in good faith, these political officials ended up embracing a political economic framework that shifted wealth and power upward, and ultimately created a more chaotic political order. Today, young people have a higher favorability rating for socialism than capitalism.
I was a staffer in Congress during the crisis, and it was incredibly difficult to understand why our political leaders handled the collapse of our financial system in such a destabilizing manner. Did they not understand that massive interventions to prioritize the interests of the powerful would undercut the legitimacy of the political system?
To begin answering this question, I looked at how American leaders handled the financial crisis of rolling bank runs occurring from 1929-1933, which was the last time we dealt with such a profound political challenge. What I noticed were profound ideological differences that played out in the response to the crisis. In short, in the 1930s New Dealers broke up banks and restructured the economy. This time, we didn’t.
My conclusion, after researching how New Dealers thought about the world, versus how the New Democrats surrounding Obama thought about the world, led me to the observation that the meaning of American capitalism changed. We transitioned from a relatively egalitarian New Deal state to today’s unequal and concentrated corporate apparatus. This change was accompanied by a parallel shift in how Americans thought about themselves as economic and political actors.
Let’s start with where we were.