American Amnesia: How the War on Government Led Us to Forget What Made America Prosper by Paul Pierson and Jacob S. Hacker * Simon & Schuster * 2016 * 455 pages * $28
On the eve of World War I, an average American man could expect to live just 48 years, a woman just under 52 years. A century later, American men today have a life expectancy of 76 years, women nearly 80. In just 100 years, the United States added an extra quarter century to the lives of its citizens. Across the advanced industrialized world, life expectancy rose more in the twentieth century than it had in the millions of years of human evolution combined.
What made this great leap forward possible? Why was the twentieth century different from every century before it? In their new book, American Amnesia, political scientists Jacob S. Hacker and Paul Pierson credit not capitalism or medicine or technology, but another invention: the mixed economy.
Marshaling the latest research by economists, political scientists, sociologists, and historians, they show that it was the combination of effective government intervention and market forces that propelled the United States forward. Capitalism provided the material incentives for economic activity and growth, while government stepped in to fill the gaps and tip the scales toward developments that promoted major steps forward. Government cleaned up water supplies, pasteurized milk, and provided indoor plumbing. It forced children to get vaccinated and funded scientific efforts to mass-produce lifesaving antibiotics. It electrified the country, built a massive highway system, and funded the basic research that would generate our major technological breakthroughs: semiconductors, nuclear power, satellite communications, GPS, radar, microwaves, radio, the Internet, and techniques for making the high-tech materials in our iPhones. It required that everyone get a formal education. And, most famously, government made sure that the poor and elderly were cared for.
For all these improvements in Americans’ wellbeing over the twentieth century, in recent decades, the United States has fallen behind our European counterparts. Health outcomes, graduation rates, and math skills are substantially better now in other rich countries. Our infrastructure, once the envy of the world, now ranks in the teens. Even our incomes have grown more slowly than just about anywhere else in the OECD. The median citizen in every other rich country is wealthier than the median American.
Where we have excelled is in expanding inequality. In 1982, when Forbes first published its list of the 400 wealthiest Americans, only thirteen were billionaires. In 2014, every one of them was a billionaire, an increase that far outpaces inflation. The richest 1 percent of Americans owns more than a third of our country’s wealth. And if you think this inequality is ameliorated by our exceptional rags-to-riches mobility, think again: Upward economy mobility is higher in every other rich country.
According to Hacker and Pierson, we fell behind because we abandoned the mixed economy. We slashed government spending, removed regulations, shrank the federal bureaucracy, and enfeebled government agencies. We allowed corporate interests to spend fortunes campaigning and lobbying to take government out of their business. We forgot that government is necessary for progress. “There is no recipe for prosperity,” Hacker and Pierson tell us, “that doesn’t involve extensive reliance on effective political authority.”
We did all of this, they argue, because we were misled. A new generation of conservatives, influenced by neoclassical economics and the extreme libertarianism of writers like Ayn Rand, slowly convinced us that government was the problem, not the solution. Incrementally and deliberately, they attacked our institutions and eroded our trust in government. They found allies in a new breed of corporate leaders obsessed with shareholder returns and short-term profits. And they poured money into our political system to achieve their policy goals. The result, Hacker and Pierson note, is that, “across nearly every area of domestic government—managing the nation’s finances, regulating the market, protecting the environment, delivering basic services, investing in the future—we see decay and destruction, stalemate and subversion, efforts not just to reduce government’s capacity but also to undermine the legitimacy of… federal law itself.”
That Hacker and Pierson see a concerted war of ideas to undermine government is unsurprising. In their last book, Winner-Take-All Politics, they forcefully argued that organized interests were behind America’s rising economic inequality. Groups like the Chamber of Commerce and Club for Growth had gained political power and stalled the kinds of government interventions that might have stemmed rising inequality. Hacker and Pierson were criticized then for downplaying the fact that public opinion had also shifted decisively against these kinds of government responses, as authors like Larry Bartels and Marty Gilens had shown. American Amnesia is their retort: The same organized interests that won political battles also won over the public.
What can be done about America’s downward drift? Hacker and Pierson mostly suggest rolling back the clock. They want us to put limits on Senate filibusters, grow the federal bureaucracy to make it more effective, mobilize labor in new sectors of the economy, and check the power of money in politics by publicly financing campaigns. They also want progressives to stop giving in to anti-government rhetoric and start defending the mixed economy. Like the Rand enthusiasts of the 1970s and ’80s, they want progressives to play the long game of ideas: “To build a mixed economy for the twenty-first century, a critical mass of citizens—and their leaders—have to believe once again that government can address their most pressing concerns.”
It is difficult to argue with these sensible prescriptions. And Hacker and Pierson are well aware of their ambitiousness. Laudably, they don’t offer a single magic bullet. But whereas they describe their proposals as “not easy,” they seem to me to be somewhere between implausible and pie in the sky. Even if Bernie Sanders becomes President, it’s hard to imagine any of these reforms standing much of a chance.
American Amnesia is at its best when it debunks the historical narratives spun by the anti-government right. Hacker and Pierson set the record straight about how countries prosper (historically, through intensive government intervention), the intentions of the Founding Fathers (they were hardly free marketers), and the virtues of the Gilded Age and its economic elites (its monopoly capitalism was unsustainable at best, and there’s a reason they’re called robber barons).
All of that might have been even more convincing had Hacker and Pierson taken on some of the more serious counterarguments. Sure, government was involved in spurring improvements in health and technological innovation. But how do we know these advances wouldn’t have happened anyway? In some cases, the effect of government intervention is simply unimpeachable. Over the objections of the car industry, the federal government started requiring seatbelts in 1966 and airbags in 1991; traffic fatalities per mile driven have dropped 80 percent since. But in other cases, critics may question government’s effectiveness. Was it government regulation on tobacco that reduced smoking? Historians and social scientists have come up with creative ways to think through the logic of counterfactuals—how many traffic fatalities would we have seen had the government not required seatbelts? In fact, some of the research Hacker and Pierson cite grapples with these kinds of counterfactuals directly. Had they conveyed some of those logics, they could have built an even stronger case that government was crucial to American prosperity.
Even if critics accept the enormous gains from government intervention, they might still question whether government hasn’t also created a lot of inefficiencies and cronyism in the process. Surely not every study the government funded led to major innovations like computers and GPS. And how much government largess got directed toward the friends and relatives of bureaucrats and politicians instead of the most qualified recipients? DARPA, the Defense Department’s research arm whose predecessor developed a precursor to the Internet, awarded lucrative contracts to a company founded by its director’s father. Beyond the dogma-laden bluster of right-wing pundits and Tea Partiers, more thoughtful conservatives like Ross Douthat often point to these kinds of cases to argue against government. Hacker and Pierson argue that rooting out this kind of cronyism requires oversight; in other words, more government. It might have been more convincing to show that these negative externalities were far outweighed by the positive.
Beyond setting the record straight, American Amnesia also offers an argument about why we’ve fallen behind and what to do about it. For my taste, the authors’ diagnosis focuses too much on the realm of ideas—Rand’s uber-libertarianism and organized efforts to spread the anti-government gospel—and too little on structural ways that the country, and the world, changed. Globalization and financialization fundamentally changed the way businesses run and compete. And the American economy changed, away from a basis in manufacturing and toward services like insurance, finance, advertising, and health care. That original 1982 Forbes 400 list included only a small number of wealthy individuals who made their money in finance. Three decades later, finance had become the most common way the wealthiest Americans made their money. Because financial markets prioritize short-term investment gains, corporate executives today care much more about protecting their markets from government regulation than their predecessors did a half-century ago.
The challenge for arguments about ideas is that so many of them are out there at the same time. For every Randian touting a free-market utopia there is usually a Sanders trumpeting socialism. After all, the idea of a libertarian free market wasn’t new in the 1970s. For Hacker and Pierson, what was new was the organized political effort to spread this particular idea. But the idea that smaller government is better gained traction even in government-friendly Europe, without these organized interests. Even there, inequality has been rising and governments have been intervening less and less.
Hacker and Pierson also leave out some important institutional changes in American democracy. The Republican Party has moved to the right, as the authors vividly show, but both parties have also become more ideologically coherent. In the heyday of the mixed economy, both parties were much more heterogeneous, in part because of the relatively conservative Southern Democrats. One reason that changed is that the parties began to select candidates through open primary elections rather than closed party conventions. That meant that incumbents had to appeal to party purists or risk primary challenges. Another reason is gerrymandering, an institutional change whose ramifications Hacker and Pierson play down. But the more both parties became coherent and distinct, the harder it became to find common ground.
All of which raises a depressing possibility: What if the historical moment in which it was possible to strike the balance between market forces and government intervention was, as Jefferson Cowie has characterized it, a “great exception,” not the rule? Between the late nineteenth century and the 1970s, American politics was characterized by an unusual combination of heterogeneous political parties, increasing federal authority, and mobilized civil society. Spurred by wars and other international threats, the federal government built highways and funded research. Presidents could push major proposals like Social Security and Medicare through Congress with bipartisan votes. From labor to civil rights to the environment, organized interest groups pressed for government action. All of that made the mixed economy possible.
But our institutions are actually designed to generate the opposite. Our federal system makes it difficult for the federal government to intervene on a wide variety of issues. Our presidential system divides legislative authority between Congress and the White House, making gridlock likely. Our party system and electoral institutions give politicians little incentive to compromise.
Other countries with similar political institutions have always suffered these ills. The stalemate over President Obama’s efforts to replace the late Antonin Scalia was presaged months ago by the new Argentine president’s attempt to appoint two Supreme Court judges while the opposition-led Congress was in recess. We don’t typically like to compare ourselves to our neighbors to the south, who modeled their political systems on ours. But U.S. exceptionalism may have been a historical anomaly.
American Amnesia makes a compelling case that the mixed economy was responsible for much of the prosperity we achieved over the course of the twentieth century. Unfortunately, the age of the mixed economy may be over.