What Is the Real American Dream?

In our nostalgia for the postwar era, we ignore some things that weren’t so good.
November 2015
(Wikimedia Commons/ Evert F. Baumgardner)
By Aaron M. Renn  |  Columnist
Senior Fellow at the Manhattan Institute

‘How we see the present depends a lot on how we see the past.” This observation from Dane Stangler, the nonprofit Kauffman Foundation’s vice president for research and policy, was one of his summary points at a recent discussion on how to boost declining rates of entrepreneurship in America and, more broadly, the engine of broad-based socioeconomic mobility and job creation.

The key question, as Stangler suggests, is this: What is the baseline we should be comparing today to? Many people look back with nostalgia at a golden postwar era from 1945 to 1965, when the modern American middle class was built, and suggest that those kinds of economic conditions are what we should be trying to reproduce.

But how should we really look at that period? Is it a model of what a modern and just society should produce? Or is it an anomaly, or even undesirable in some ways?

In the aftermath of World War II, Europe’s and Japan’s industrial bases were destroyed. Most of the rest of the world was underdeveloped. The Cold War divided the developed world into rival blocs that had little to do with one another. International trade was already difficult due to complex regulations and high tariffs that varied from country to country, as well as limited transportation and logistics capabilities. Just making an international telephone call was very expensive.

The result was that the United States -- with a huge domestic market, the world’s most advanced economy and a status as the last man standing after the war -- was set to enjoy a period in which it ruled the economic roost without effective competition.

Today, Europe and Japan are fully modernized economies. Much of the former Third World has dramatically developed its economic status. The end of the Cold War meant a new global trade regime of simpler rules and lower tariffs. Containerization, overnight air freight and information technology have made international logistics a snap. Even international telephone calls are now basically free. This has produced a very distinct competitive landscape for the United States. It’s a different world. And many people bemoan that difference. Some see the strong unions and high tax rates of that era as key to equitable distribution. Others miss the sexual mores and family law regime that produced mostly stable nuclear families.

Yet there are plenty of things to hate about that bygone era, such as the lack of real environmental protection laws and regulations, a massive investment in automobile infrastructure and suburbanization, and highly restricted immigration. And of course things weren’t so good if you were black and living in a world of legally enforced segregation. It isn’t possible to simply cherry-pick out a few things we like, transplant them to today’s very different environment and believe they’ll produce similar results.

There are many distinct embedded notions of goodness in that vision of the 1950s, ranging from high economic growth and rising living standards, to upward social mobility and a more equal distribution of income, to perceived high levels of social cohesion and functioning politics. One of these, income equality, has taken on a particularly outsized role in the debate today. But thinking back to the 1950s, is income equality really the most important feature of the era? Generally speaking, the defining kinds of equality of that time -- the stifling conformity of cookie-cutter subdivisions and men in gray flannel suits -- are not things I hear people clamoring to bring back.

I would suggest that what really resonates from that era is the idea of the American Dream and related optimism about the future -- that you could have a home of your own and afford to take a real vacation, along with having a sense of security about the future and reason to hope that your children would be able to have a better life than you did.

Today’s version of that dream need not look exactly like that of the 1950s. In our modern, pluralistic society, some may prefer an apartment in the city and a cool bicycle over a car with tailfins parked in front of a suburban Cape Cod home. But these are American Dreams nevertheless.

This means that while income inequality is not unimportant and shouldn’t be ignored, the focus instead should be on growth and opportunity. How do we make the total pie bigger? How do we give everyone a fair chance at grabbing increasingly bigger slices of it over their lives? How can we help people achieve their version of the American Dream?

There will be debates over the best way to accomplish this, but growth and opportunity should be the key focus areas. President Obama recently took a step in this direction by shining a light on the growing role of occupational licensing in restricting opportunity. More policy ideas like this would be steps in the right direction. Even raising the bottom rung on the ladder will be of limited value if there are no higher rungs for America’s aspiring middle class to step up to.