Ours Was the Shining Future

In the summer of 1940, a young Austrian refugee named René Leonhardt stepped off a ship at Ellis Island, carrying little more than hope and a visa that might expire at any moment. Like millions before him, he believed America offered something extraordinary: the chance to build a life better than the one he was born into. That same year, across the country, workers were organizing unions, executives were rethinking their relationship with employees, and a new economic model was taking shape that would create the most prosperous middle class in human history.

Yet by the early 21st century, René's grandson would witness something his grandfather could never have imagined: an America where children were less likely to earn more than their parents, where economic mobility had stagnated, and where the very idea of the American Dream seemed increasingly hollow. This transformation didn't happen overnight, nor was it inevitable. It was the result of specific choices made by politicians, business leaders, and ordinary citizens over the course of several decades. Understanding how America built the world's most successful middle-class economy and then systematically dismantled it reveals not just where we've been, but where we might go next.

The foundation of America's golden age of prosperity was laid not in boardrooms or government offices, but in the streets of Minneapolis during a bitter winter in 1934. There, truck drivers led by organizers like Carl Skoglund defied both their employers and the established order to demand something revolutionary: the right to organize and bargain collectively. Their victory, supported by a new president named Franklin Roosevelt, marked the beginning of what economists would later call "the Great Compression" - three decades when inequality shrank and living standards soared for ordinary Americans.

This wasn't simply a story of workers versus bosses. What made the period unique was the emergence of what could be called "democratic capitalism" - a system where business leaders, labor unions, and government officials recognized their mutual dependence. Executives like Paul Hoffman, who ran Studebaker, began arguing that high wages weren't just good for workers, they were good for business. "The system which best raises wages will win out," Hoffman declared, understanding that prosperous workers meant prosperous companies. This wasn't altruism; it was enlightened self-interest shaped by the twin crises of the Great Depression and World War II.

The transformation was visible everywhere. George Romney, who would later become governor of Michigan, voluntarily capped his own salary as an auto executive, believing that extreme inequality threatened the social fabric. Labor unions grew from representing 11 percent of workers in 1930 to over 30 percent by the mid-1940s, and their influence extended far beyond their membership. Even non-unionized companies raised wages to compete for workers, creating a rising tide that lifted nearly all boats.

Perhaps most remarkably, this period saw the federal government make unprecedented investments in the future. Under Republican President Dwight Eisenhower, spending on research and development more than doubled as a share of the economy. The interstate highway system, the space program, and the early internet all emerged from this commitment to long-term thinking. The lesson was clear: when government, business, and labor worked together toward common goals, the results could be extraordinary.

The cultural shift was equally profound. Corporate leaders embraced their role as "trustees of the common welfare," accepting higher taxes and stronger unions as the price of social stability. This era established what economists call the "virtuous circle" of democratic capitalism: high wages created consumer demand, which drove business investment, which created good jobs, which supported higher wages. The result was unprecedented prosperity shared across racial and class lines, though significant inequalities persisted.

While civil rights marchers filled the streets and antiwar protesters occupied campuses, a quieter revolution was brewing in the economics departments of elite universities. At the University of Chicago, scholars like Milton Friedman and Aaron Director were developing a new framework for understanding markets, competition, and government regulation. Their ideas would eventually reshape American capitalism as profoundly as any political movement, challenging the New Deal consensus with elegant mathematical models and compelling arguments about the efficiency of free markets.

The Chicago School economists gained credibility as the postwar economic boom began to falter in the 1970s, plagued by inflation, energy crises, and international competition. Robert Bork, a Yale Law professor influenced by Chicago thinking, revolutionized antitrust law by arguing that corporate mergers should be judged solely on their effects on consumer prices, not on their impact on workers or communities. These intellectual innovations offered simple solutions to complex problems during a time of economic uncertainty that made Keynesian economics seem obsolete.

Conservative activists recognized the power of these ideas and invested heavily in think tanks, law schools, and media outlets to spread them. The Heritage Foundation, American Enterprise Institute, and Cato Institute became launching pads for a new generation of policy entrepreneurs. Corporate leaders organized business coalitions to lobby for tax cuts and deregulation, while the Federalist Society trained conservative lawyers to reshape the federal judiciary. This intellectual infrastructure would prove crucial in translating academic theories into practical policies.

The breakthrough came with Ronald Reagan's election in 1980, when the former actor and corporate spokesman brought Chicago School theories into the White House. Reagan's firing of air traffic controllers in 1981 signaled a new era of corporate-government cooperation against organized labor. Tax rates for the wealthy plummeted from 70 percent to 28 percent, antitrust enforcement virtually disappeared, and financial markets were deregulated. The administration appointed judges and regulators who shared its faith that markets, not government, should determine economic outcomes.

This revolution succeeded because it combined economic theory with cultural politics in a way that appealed to many working-class voters who felt abandoned by liberal elites. Reagan spoke the language of patriotism and traditional values while promising that tax cuts for the wealthy would eventually benefit everyone through job creation and economic growth. The business community, which had accepted unions as legitimate partners for decades, now saw an opportunity to reclaim power they had shared since the 1930s.

The Reagan revolution coincided with technological and economic changes that would have challenged any political system. The rise of personal computers, the internet, and global communications made it easier for companies to move production to low-wage countries. The collapse of the Soviet Union eliminated the ideological competition that had helped justify high taxes and generous social programs. Financial markets grew more sophisticated and powerful, creating new opportunities for wealth creation but also new forms of instability that would reshape American society in profound ways.

In this environment, the dismantling of democratic capitalism accelerated across multiple fronts. Labor unions, which had represented one in three workers in the 1950s, saw their membership fall to less than one in ten private-sector workers by the 2000s. Corporate executives, who had once voluntarily limited their own compensation, now competed to see who could earn the most. CEO pay, which had been roughly 20 times that of the average worker in the 1960s, rose to more than 300 times average worker pay by the early 2000s.

The Immigration Act of 1965, initially expected to have minimal impact, began producing dramatic demographic changes as family reunification policies brought millions of new Americans from Asia, Latin America, and Africa. While immigrants themselves often achieved remarkable upward mobility, their presence in large numbers created political tensions that conservative politicians skillfully exploited. The economic effects were complex: immigration boosted overall growth while creating wage pressure in industries where workers lacked bargaining power.

Meanwhile, the Democratic Party was undergoing its own transformation. The New Left's emphasis on racial justice, gender equality, and environmental protection attracted educated professionals but alienated many working-class voters who felt their concerns were being ignored. As unions declined and manufacturing jobs moved overseas, the party of Franklin Roosevelt increasingly became the party of college graduates and urban elites. This shift was reinforced by the rise of identity politics, which organized people around categories of race, gender, and sexuality rather than economic class.

The neoliberal consensus reached its peak during Bill Clinton's presidency, when a Democratic president embraced welfare reform, financial deregulation, and free trade agreements. Clinton signed the North American Free Trade Agreement, repealed Depression-era banking regulations, and declared that "the era of big government is over." The North American Free Trade Agreement and China's entry into the World Trade Organization accelerated the deindustrialization of the American Midwest, while Wall Street boomed and inequality soared. By the 2000s, both major political parties had accepted the basic premises of market fundamentalism, even as its social costs became increasingly apparent.

The financial crisis of 2008 shattered the illusion that deregulated markets could govern themselves responsibly. As millions of Americans lost their homes, jobs, and retirement savings, the contradictions of neoliberal capitalism became impossible to ignore. The same financial institutions that had been celebrated as engines of innovation revealed themselves as sources of systemic risk, requiring massive government bailouts to prevent economic collapse. The recovery that followed was the weakest since the Great Depression, with most of the gains going to those who had lost the least.

The crisis exposed deeper problems that had been building for decades. Despite rising productivity and corporate profits, wages for most workers had stagnated since the 1970s. A typical family's income barely rose between 1980 and 2010, even as productivity increased dramatically. Home ownership became more difficult for young families, college costs soared, and job security declined as companies embraced "flexibility" and "lean operations." Life expectancy began declining for Americans without college degrees, a phenomenon unprecedented in modern history.

Deaths from suicide, drug overdoses, and alcoholism—what economists Anne Case and Angus Deaton called "deaths of despair"—reached epidemic proportions in former industrial communities. The American Dream of upward mobility became increasingly elusive as the chances of children earning more than their parents fell from 90 percent to 50 percent. Marriage rates fell, birth rates declined, and measures of social trust hit historic lows. The social contract that had governed American capitalism since the New Deal - the idea that prosperity should be shared - was quietly abandoned.

These economic failures fueled political upheaval across the ideological spectrum. The Tea Party and Occupy Wall Street movements, despite their different targets, both reflected popular anger at a system that seemed rigged in favor of elites. Voters who felt abandoned by both parties turned to outsiders and extremists. Donald Trump's 2016 victory was, in many ways, the logical culmination of trends that had been building for decades. His appeal to working-class voters who felt betrayed by globalization and cultural change echoed themes that had been emerging since the 1960s.

The COVID-19 pandemic accelerated these trends, revealing the fragility of an economy built on low wages, weak social insurance, and extreme inequality. Essential workers risked their lives for poverty wages while affluent professionals worked safely from home. Tech billionaires saw their wealth increase by hundreds of billions of dollars as the economy shifted even further toward digital platforms and remote work. The contrast between the rhetoric of shared sacrifice and the reality of extreme inequality could hardly have been starker.

The history of American capitalism reveals a fundamental truth: economic systems are not natural phenomena but human creations that can be reformed through collective action and democratic politics. The New Deal generation proved that markets could be harnessed to serve broad social purposes, creating decades of shared prosperity and expanding opportunity. When workers, through unions and democratic politics, had enough influence to demand their fair share of economic growth, the result was the most broadly prosperous society in human history.

The Reagan Revolution demonstrated that ideas have consequences, as conservative intellectuals successfully shifted national policy toward deregulation and tax cuts for the wealthy. When that power was weakened or abandoned, inequality soared and living standards stagnated for most Americans. Today's challenges require a similar combination of intellectual innovation and political organizing, with promising developments including the revival of antitrust enforcement, experiments with sectoral bargaining for workers, and new investments in infrastructure and clean energy.

The key insight from successful reform movements is that they must unite economic populism with inclusive social values, appealing to Americans' desire for both prosperity and dignity. This means addressing legitimate concerns about immigration and cultural change while maintaining commitments to racial and gender equality. The path forward requires rebuilding the institutions of democratic capitalism: strong unions that give workers bargaining power, effective government that can regulate markets and provide public goods, and a political system that responds to the needs of ordinary citizens rather than wealthy donors.

History shows that such transformations are possible when enough people organize for change and when leaders emerge who can articulate a compelling vision of shared prosperity. This might include stronger unions adapted to a service economy, progressive taxation that reflects the reality of extreme wealth concentration, and public investments in education, infrastructure, and research that can create opportunities for future generations. Most importantly, it requires recognizing that economic policy is not a technical exercise best left to experts, but a fundamentally political question about what kind of society we want to live in.

The rise and fall of the American Dream reflects a deeper struggle over the relationship between capitalism and democracy in American life. From the 1930s through the 1960s, democratic institutions successfully constrained market forces to produce broad-based prosperity and expanding opportunity. The subsequent turn toward market fundamentalism, while generating impressive aggregate growth, undermined the social foundations of democratic capitalism by concentrating wealth and power in fewer hands. This historical pattern reveals that when workers had political power through unions and democratic institutions, prosperity was widely shared, but when that power eroded, inequality soared and social cohesion fractured.

This historical pattern offers both warnings and hope for contemporary Americans. The warning is that economic inequality, if left unchecked, can undermine democratic institutions and social cohesion, as we've witnessed in recent political upheavals. The hope is that previous generations successfully reformed capitalism when it failed to serve the common good, and today's Americans can do the same. The key is recognizing that markets are tools that can be shaped by democratic choice, not forces of nature that must be accepted as given. By learning from both the successes and failures of the past, Americans can once again build an economy that works for everyone, requiring the same kind of democratic mobilization that created the American Dream in the first place.