But the good times had only just begun. Adjusted for inflation, a man working full-time and making the median income would see his earnings grow 65 percent between 1947 and 1980. His family was spending that money, too, meaning that businesses prospered and corporations’ profits swelled. Small businesses flourished. Our country was rich beyond the wildest dreams of earlier generations.
By 1960, only two decades after the end of the Great Depression, it was clear that America had produced the equivalent of an economic miracle: we had built the greatest middle class on earth. The skies were sunny, and our future looked bright.
THE FORGOTTEN RICH MAN
But resentments run deep—often really, really deep. Corporate executives and millionaires had gotten richer and richer, but for some of them, Roosevelt’s work to rein in the big banks and break up giant corporations still rankled. It seems that the divine right of kings had translated in the New World into a Divine Right of CEOs. The idea that a democratically elected government could and would curtail their corporate rights was perceived as a threat—and they didn’t like threats. Sure, they were already rich, but that’s the mouth-watering, heart-pumping thing about being rich—it’s better to be even richer. There’s no limit to how rich the rich can be. Besides, any kind of government regulation signaled interference with their deeply held notions of right, wrong, and the undeniable privileges that belonged to them as masters of powerful corporations.
In 1971, the U.S. Chamber of Commerce enlisted a corporate lawyer named Lewis Powell to write a secret memo. As soon as Powell finished his thirty-three-page paper, the chamber, a national organization representing the interests of many of America’s largest corporations, quietly began passing it from one power broker to another. For the CEO crowd, the memo was electrifying. Powell had held nothing back. He forcefully argued that the entire free-enterprise system was under attack—and he called on the super rich to counterattack with all their might.
Powell was an unlikely firebrand. He was mild-mannered, gentlemanly, and unfailingly polite. Many people remarked on his deeply ingrained civility. He was intensely proud of his Virginia roots, which were noticeable in his soft drawl, and he idolized Robert E. Lee. Tall and thin, Powell wore thick glasses and old-fashioned suits. Yet despite all his courtly manners, when it came to defending his corporate clients, he was a take-no-prisoners, shoot-them-all kind of guy.
Powell served on the board of directors for more than a dozen of America’s biggest corporations, and his dedication to advancing the interests of corporate America was legendary. His work for tobacco company Philip Morris included signing off on the company’s annual reports touting the health benefits of cigarettes, and he railed against the press for failing to give adequate credence to the industry’s claims about tobacco safety. He was close personal friends with the top lawyer for General Motors, and when newspaper articles about cars with dangerous designs and product defects began appearing, Powell viewed those stories—and the reporters who wrote them—with alarm. He fervently believed that such challenges undermined people’s confidence in corporate America and put our country right on the slippery slope to socialism.
Many of those who received Powell’s memo shared his view that America’s system of free enterprise was at risk, but it was his call to action that really galvanized his CEO readership. His advice was visionary: Fight back! Reshape Americans’ views about business, government, politics, and law. Fund conservative think tanks. Influence young people by reasserting business interests on college campuses. Pay professors to publish pro-business work. Using example after example, Powell made it clear that he wanted to return America to the pro-corporate, largely unregulated government that, in his view, had served this country so well before the Great Depression.
The beginning of the typewritten Powell Memo, which changed how giant corporations wage political war.
In the darkest days of the Depression, Roosevelt had offered hope to “the forgotten man at the bottom of the economic pyramid.” Without a hint of irony, Powell now spoke tenderly to America’s millionaires: “One does not exaggerate to say that, in terms of political influence with respect to the course of legislation and government action, the American business executive is truly the ‘forgotten man.’”
Rich guys just can’t catch a break.
THE PLAN: TAKE OVER GOVERNMENT
Two months after Powell sent his memo to the Chamber of Commerce, President Nixon nominated him for the Supreme Court. The paper remained secret until after Powell was confirmed. But his idea had already spurred the millionaires and CEOs who’d read the memo to stop complaining and start acting. The rich and powerful enthusiastically took up his call to arms and began to use their considerable wealth to alter America’s political landscape.
Their efforts began to pay off almost immediately. Just over nine years after Powell’s memo began to circulate, and with considerable support from a “Business Advisory Panel” of corporate CEOs, Ronald Reagan was elected president.
Reagan swept into office under the banner of free-market economics, and he was cheered on with many boisterous calls for “liberty” and “freedom.” Reagan’s approach was unmistakably aimed at helping giant businesses and their top executives, but its advocates promised working people that all those benefits going to big corporations would “trickle down” to them as well. The economic plan was as simple—and as sweeping—as the plan Franklin Roosevelt had put in place nearly half a century earlier during the Great Depression. But Reagan’s plan turned Roosevelt’s on its head.
Step one was to fire the cops—not the cops on Main Street, but the cops on Wall Street. An increasingly subservient Congress had already begun doing more of the bidding of big financial institutions, but following Reagan’s election, those banks were given far more leeway. Antitrust enforcement that had kept some corporate goliaths in check now slowed way down.
A smiling President Richard Nixon shakes hands with new Supreme Court Justice Lewis Powell, while Supreme Court Justice William Rehnquist looks on.
The Reagan administration proudly embraced the idea of “deregulation,” as if financial and corporate regulations were the biggest problems faced by Americans—rather than the wrongs those regulations were designed to prevent. From Reagan’s perspective, it was far more important to protect a corporate giant from the government than it was to protect a customer, investor, or small competitor from the actions of a corporate giant. Regulation became the new enemy. Forget exploding gas tanks, cancer-causing chemicals in the water supply, or drugs that caused birth defects—regulation was proclaimed to be the real danger in America. From the 1980s onward, “deregulation” became a sacred tenet of all conservatives, a mantra that can be translated to mean: let corporate America do more of whatever corporate America wants to do.
Trickle-down economics ushered in a new approach to the economy. Instead of using the tools of government to help level the playing field for all Americans, government should let those at the top call the shots and, in the words of Ronald Reagan, rely on the “magic of the marketplace” to create “spectacular broad-based economic progress.”
Ooh, magic marketplaces. No need for rules or regulators—just put your faith in giant corporations.