The American Dream or the American Nightmare – a Matter of Relative Perspective

This past week was the 10th anniversary of the bankruptcy of Lehman Brothers, the 158-year-old investment banking firm. It never made it to year 159. Its demise was the first domino that fell in the downward slope of the U.S. GDP curve characterized as The Great Recession.  BBC Radio recently produced and aired a Peabody Award winning feature presentation about this profound circumstance; one that is both instructive and sad. The former providing lessons to be learned. Those that ignore the lessons of history are reconciled to repeat the same mistakes. The latter, viewed in post-script, reflecting the financial carnage that was a by-product of reckless financial engineering and decision-making by both businesses and consumers.

Here are a couple of links to this award winning radio drama The Day That Lehman Died: https://listening-books.overdrive.com/media/530484 or https://archive.org/details/DayThatLehmanDied

The term American Dream came up in conversation this week during a small party for a group of adult tennis players who are part of a local area USTA league team. Two of the players, one originally from Turkey, the other from Yugoslavia, each now naturalized U.S. citizens spent part of this past summer in their respective birth countries. Individually, they talked about their own American Dream and how difficult it has been lately to achieve it. While acknowledging the fortunate quality of life each has attained since coming to America, they both expressed a tangible ‘not-what-I-thought-it would-be’ assessment of life in the United States.

There’s a refrain I’ve often heard during times of economic uncertainty. It goes ‘When your neighbor is unemployed it’s a recession. When you’re unemployed it’s a depression.” True enough. However, we are currently riding what is being characterized as the longest equity bull market in modern history. Yet, for the two tennis players, both of whom are well-educated and by most measures affluent, and for a diverse set of many other workers, professional and otherwise, with whom this writer has conversed, the interpretation of what the American Dream means has changed.

I was struck by the recent cover of Time magazine. It speaks to some of the many challenges faced by workers in a labor force where, as of this writing, (1)there are more jobs available in the U.S. than there are qualified employees to fill them.

The photo is reminiscent of a dream sequence where one is running, or more accurately one is going through the motion of running, but in the dreamscape there’s no forward motion no matter how fast the legs are moving.

For those in the Baby Boom generation the notion of the American Dream had its genesis in the post-World War II years. The inherent prosperity during the decade of the 1950’s was largely inclusive. The G.I. bill allowed many returning veterans to get an education. Family creation (procreation) was abundant and so was the opportunity to better one’s self with respect to your parent’s economic circumstances, many of whom were immigrants with not a lot of formal education and a limited skill set. Too, these individuals also navigated through the Depression era of the 1930’s.

I’ve written in earlier blog posts (see #3 and #2 www.CafeCarpe.net) about a financial pivot that occurred in the 1960’s that began a cycle of economic dislocation. (2)The roots of this bifurcation may be found in the establishment of K Street lobbying of federal lawmakers and the attendant campaign financing that paved the way for special interest influence.

The photo is reminiscent of a dream sequence where one is running, or more accurately one is going through the motion of running, but in the dreamscape there’s no forward motion no matter how fast the legs are moving.

For those in the Baby Boom generation the notion of the American Dream had its genesis in the post-World War II years. The inherent prosperity during the decade of the 1950’s was largely inclusive. The G.I. bill allowed many returning veterans to get an education. Family creation (procreation) was abundant and so was the opportunity to better one’s self with respect to your parent’s economic circumstances, many of whom were immigrants with not a lot of formal education and a limited skill set. Too, these individuals also navigated through the Depression era of the 1930’s.

I’ve written in earlier blog posts (see #3 and #2 www.CafeCarpe.net) about a financial pivot that occurred in the 1960’s that began a cycle of economic dislocation. (2)The roots of this bifurcation may be found in the establishment of K Street lobbying of federal lawmakers and the attendant campaign financing that paved the way for special interest influence.

Remember from your high school psychology Maslow’s Hierachy of Needs? It looks like this.

Bottoms up, but not in a cocktail hour sense, the pyramid represents food, shelter, companionship, feeling good about attaining the previous two and finally personal fulfillment. Let’s take a look at how the costs of just food and shelter have changed.

Interestingly, in spite of the fluctuation in commodity prices the cost of food has gone down as a percent of income. The volatility is balanced over time by more efficient food production and distribution methods. (3)This characterization in no way addresses food quality, consumer health, the effect of climate change, globalization and other factors that may result in higher prices moving forward. How about shelter?

(4)Clearly, the cost of housing has increased dramatically. Adjusted for inflation the increase is over 70%.

In terms of social belonging as expressed in the pyramid one may assign having children as a central component to this aspect.  It’s instructive to look at the how the cost of raising a child has changed over the years.

(5)Regions in the U.S. may vary. However, societal changes have taken place since the decade of the 60’s. Then, there were more stay-at-home parents, usually Moms. Today, a dual income is often the norm to make ends meet to balance a household budget. You’ll note that included in these pie charts are three very significant cost factors – child care, healthcare and education.

(6)Consider that fully 78% of full time workers live paycheck-to-paycheck. Too, 10% of households earning more than $100K annually can’t make ends meet. It’s unlikely those in either scenario would consider themselves impoverished. In fact, the poverty level hasn’t changed much since the 1960’s.

(7)However, the poverty rate percent change is more relevant when measured against an increasing employment rate of a growing workforce over several decades; essentially while the poverty rate changes in a narrow range it represents a change as a percentage of a growing number. Note the workforce decline, though, following the recession of 2008-2009 and subsequent economic recovery stabilization.

(8)The significance of all this data are found in the lack of growth in worker’s real wages relative to the growth in GDP and compensation of an increasingly narrow sector of private sector senior executives.

It is not my intention to assert that a skilled full time salaried or hourly worker should be compensated similarly to that of an organization’s leadership. However, an organization’s leadership, particularly when the supply of skilled jobs exceeds the employment demand, should adjust compensation to reflect the costs associated with an employee’s ability to attain the basic foundations of one’s quality of life as expressed in Maslow’s pyramid.

This writer is a capitalist and entrepreneur at heart, the result of some success by most measures, but also a good deal of empathy. However, the inability of a population to attain a sought-after quality of life has historically sown the seeds of discontentment and in some cases, revolution. France, 1789-1799; Russia, 1917 . . . history has an interesting way of repeating itself. This is a salient thought as one views the graph below.

(9)The American Dream has been characterized as dead. Depending on how it’s defined it may be or at least on life support. For some The American Dream is a nightmare. It’s a matter of perspective. Einstein was right. Relativity is a function of one’s vantage point.

I hope you enjoy this appropriate musical interlude while reading this blog post:  https://www.youtube.com/watch?v=9bAoq7k3tZ0

(1) CNBC – https://www.cnbc.com/2018/06/05/there-are-more-jobs-than-people-out-of-work.html

(2) The Great Deformation – The Corruption of Capitalism in America, David Stockman, 2013

(3) Global Policy Forum – https://www.globalpolicy.org/social-and-economic-policy/world-hunger/hunger-and-the-globalized-system-of-trade-and-food-production-/48869-the-true-cost-of-cheap-food.html

(4) CNBC – https://www.cnbc.com/2018/04/17/how-much-more-expensive-life-is-today-than-it-was-in-1960.html

(5) The Motley Fool – https://www.fool.com/investing/general/2014/08/23/does-it-really-cost-250000-to-raise-a-child.aspx

(6) CNBC – https://www.cnbc.com/2017/08/24/most-americans-live-paycheck-to-paycheck.html

(7) Bill Mitchell – Modern Monetary Theory – https://bilbo.economicoutlook.net/blog/?p=37300

(8) Reality Base – https://www.realitybase.org/journal/2009/3/10/the-american-dream-died-in-february-1973.html

(9) Ibid.