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The American Experiment Hijacked: How Our Economy Was Redesigned for the Few
In 1971, a confidential memo landed on the desk of the U.S. Chamber of Commerce. Written by future Supreme Court Justice Lewis Powell, it warned that American business faced an "existential threat" from academia, media, and government. This wasn't just another corporate complaint-it was a battle plan that would fundamentally transform America. Within months, wealthy heirs like Richard Mellon Scaife and Charles Koch began methodically funding a network of think tanks, legal organizations, and media outlets designed to shift economic power dramatically toward business and the wealthy. As Kurt Andersen reveals in "Evil Geniuses," this wasn't a conspiracy theory but a well-documented campaign that succeeded beyond its architects' wildest dreams. The book has become required reading among policymakers, with Nobel Prize-winning economist Joseph Stiglitz calling it "the most important explanation of how we got to this dangerous place." Even Bill Gates included it on his recommended reading list, noting how it illuminates "why America has become such an unequal society and what we can do about it."
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America's Golden Age: The Era of Shared Prosperity
For most of the twentieth century, America operated under an economic system that, while imperfect, worked remarkably well for most citizens. From the 1940s through the 1970s, the country experienced what economists now call "the Great Compression"-a period when income inequality decreased dramatically and prosperity was broadly shared. Productivity, GDP per person, and median household income all doubled during this thirty-year stretch, with the average family income rising from $27,000 to nearly $55,000 (in today's dollars). The social safety net established during the New Deal allowed the economy to evolve rapidly with technological change, shifting workers from agriculture (40% in 1900, 3% by 1970) to manufacturing and eventually services, while providing unemployment insurance and Social Security to cushion economic transitions.
This economic arrangement wasn't accidental. It resulted from carefully constructed "countervailing power" that citizens built into the system-strong labor unions that represented over 35% of private sector workers, robust financial regulations like Glass-Steagall, vigorous antitrust enforcement that broke up monopolies, progressive taxation with top marginal rates over 70%, and social insurance programs like Medicare and Medicaid. These checks and balances didn't represent anti-capitalism but rather made capitalism more fair, less harsh, and politically sustainable. Even business norms changed dramatically: by 1965, CEOs earned only 20 times their average employees' pay (compared to 300+ times today), while company-provided health insurance grew from covering just 5% of Americans in 1939 to 60% by the mid-1950s. Companies like GM, IBM, and AT&T offered stable long-term employment with regular raises, pensions, and opportunities for advancement.
A virtuous cycle emerged as Americans established an economic equilibrium that felt fair and sustainable. Workers' productivity gains were matched by wage increases, creating a robust middle class that could afford homes, cars, and college education for their children. For a thirty-year-old in 1970, the chance of having a higher standard of living than one's parents was an astonishing 92%. The American Dream seemed achievable for most: a high school graduate could reasonably expect to own a home, support a family on one income, and retire comfortably. The system appeared to be working well for both labor and capital, and the progress achieved seemed irreversible. As Andersen writes, "From my parents' youth through my own in the 1970s, American economic life became fairer and more secure," with poverty rates falling from 22% to 11% and the middle class expanding to include 61% of Americans.
But then something changed. Around 1980, this progress began to reverse in ways that would fundamentally reshape American society, as new economic ideologies and policy choices started dismantling the institutions and norms that had created this unprecedented era of shared prosperity.
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The 1970s: When Everything Changed
The 1970s marked a profound turning point in American history-a decade when multiple forces converged to create the conditions for economic transformation. The dizzying social changes of the 1960s had left many Americans disoriented and exhausted, creating what author Alvin Toffler called "Future Shock"-the "shattering stress and disorientation that we induce in individuals by submitting them to too much change in too short a time."
This cultural exhaustion triggered a widespread nostalgia boom. Films like "American Graffiti" and "Grease," TV shows like "Happy Days," and musicians like Bruce Springsteen all trafficked in nostalgia for the 1950s and early '60s. Robert Brustein, dean of Yale's School of Drama, observed in 1975 that "a nation which always looked forward is now in the process of looking backward," connecting this nostalgia to "a deep American discontent with the present time."
Meanwhile, the economic landscape grew increasingly turbulent. Unlike the Great Depression that triggered the New Deal, no economic catastrophe prompted Americans to make a sharp right turn in the 1970s. However, two unfamiliar economic conditions-persistent high inflation and skyrocketing oil and gas prices-made citizens more willing to accept economic changes. Inflation rose from under 4% to over 12% between 1973-1975, reaching nearly 15% by 1980. Middle-class Americans saw their purchasing power stagnate while inflation pushed them into higher tax brackets, making them receptive to the Republican Party's emerging promise of lower taxes.
The business community, feeling besieged by new regulations and public distrust, began organizing with unprecedented coordination. In late 1971, as the Powell Memo circulated through America's executive suites, the CEOs of General Electric and Alcoa conceived a powerful new alliance of exclusively large corporations. After meetings with Nixon's Treasury Secretary and the Federal Reserve chairman, they formed the Business Roundtable in 1973. Unlike previous business organizations, the Roundtable included only CEOs of America's largest corporations and required their personal participation in lobbying elected officials.
By 1978, the tide had clearly turned. Public opinion had shifted dramatically-58% of Americans now believed "the Government has gone too far in regulating business," up from 42% during the 1960s. Despite Democrats holding the presidency and overwhelming congressional majorities, 101 Democrats voted against creating a consumer protection agency due to Business Roundtable lobbying. The Democratic Congress also passed a huge reduction in capital gains taxes, signaling a definitive turn toward ensuring the rich got richer faster.
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The Reagan Revolution: A Paradigm Shift
Ronald Reagan emerged as the perfect figure to exploit this moment of cultural and economic anxiety. Unlike earlier conservatives who emphasized disgust with the new, Reagan served up delicious portions of the beautiful past. He was a living artifact of Hollywood's golden age-familiar, charismatic, and avuncular like a TV dad, putting a fun coating on right-wing ideas with quips like "The nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'"
Reagan's 1980 victory wasn't the overwhelming mandate for economic restructuring that conservatives claimed. With barely 51% of the vote against a moderate Democrat and liberal third-party candidate, and with Democrats maintaining control of the House throughout the 1980s, the economic right could only remake the economy to the extent Democrats allowed it. Yet allow it they did, as many Democrats cowered and disavowed their New Deal past, confusing Reagan's personal appeal with broad support for pro-business policies.
The decade's transformative power came not through flashy policy announcements but through countless technical, obscure changes to regulations and tax codes that occurred quietly, often with bipartisan support. Even more insidious was what political scientists call "drift"-the deliberate failure to update policies in response to changing economic realities, allowing money and power to flow increasingly toward businesses and the wealthy.
The pivotal moment for labor came in 1981 when Reagan fired all 13,000 striking air traffic controllers and banned them from federal employment forever. This dramatic event revived the long-dormant "Mackay Doctrine" allowing companies to permanently replace striking workers. In subsequent years, corporations across America followed this playbook. By the late 1980s, over a third of companies where workers struck threatened replacement, and half followed through. The deterrent effect was extreme-strikes virtually disappeared, and union membership plummeted from 25% in the mid-1970s to just 6% of private-sector workers today.
The tax system was transformed to benefit the wealthy: the top income tax rate was slashed from 70% to 28%, while capital gains taxes were cut in half. Corporate income tax as a fraction of the U.S. economy was cut by more than half during the 1980s and has remained at that reduced level ever since. These changes didn't happen overnight but compounded over time, creating massive shifts that would define American life for decades to come.
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The Legal Revolution That Changed Everything
The 99 percent of Americans who weren't lawyers or judges in the 1980s had no clue that the law itself had become an important front in the war to remake the U.S. political economy. This transformation wasn't happening through legislative battles or presidential elections, but through a carefully orchestrated reshaping of legal theory and practice. To make fundamental and permanent change, the economic right needed to colonize the legal community and reframe the law itself in ways that would endure across political administrations.
Just over a year after Michael Horowitz's influential 1980 memo advising the embryonic right-wing legal movement on strategy, law students at Yale, Harvard, and Chicago founded the Federalist Society with Antonin Scalia as faculty adviser. The organization's founding marked a watershed moment in American legal history. Funded by right-wing billionaires' foundations like Scaife, Olin, Bradley, and the Kochs, it created a national network of like-minded future lawyers and judges. Within years, it had expanded to two thousand members across seventy law school chapters, with alumni strategically embedded throughout government, judiciary, and private practice. Future Supreme Court justices Brett Kavanaugh and Neil Gorsuch joined as students, exemplifying how the Society would become a pipeline for conservative legal talent.
The rightward swerve of legal thought in the 1980s rested on two ideological pillars that would reshape American jurisprudence for decades to come. Originalism became the dominant constitutional approach, claiming the Constitution should be interpreted exactly as Americans in 1789 or the 1860s understood it. Like the Friedman Doctrine in economics, originalism took a reasonable idea (considering original meanings) and transformed it into a crude self-justifying meme serving right-wing interests. This approach conveniently ignored how the Founders themselves disagreed on constitutional interpretation and how society had evolved over two centuries.
Robert Bork, despite his failed Supreme Court nomination in 1987, had profound influence on American law that extended far beyond his controversial confirmation hearings. His greatest impact came through antitrust law, where his 1978 book "The Antitrust Paradox" radically reinterpreted a century of law to focus solely on "consumer welfare" measured by prices. This brilliant but deceptive reframing was quickly adopted by the Supreme Court under Chief Justice Rehnquist, effectively neutering antitrust enforcement. Bork's interpretation ignored broader concerns about market concentration, worker rights, and democratic values that had historically informed antitrust policy.
Both originalism and the "Law and Economics" movement served the same goal-remaking society to resemble a pre-1960s vision of America where big business operated with minimal constraints. The movement's success was evident in the dramatic decline of antitrust cases, the weakening of labor protections, and the rise of corporate power. As Judge Richard Posner, a leading figure in the Law and Economics movement, later laughed at a private gathering, new labor laws were mere "annoyances" since they'd helped enable "the near collapse of the labor movement." This candid admission revealed how effectively the legal revolution had achieved its aims of fundamentally restructuring American economic life through the courts rather than through democratic processes.
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How Wall Street Ate America
Financialization-Wall Street's takeover of the American economy-emerged as the economy shifted from production to financial scheming. Before the 1970s, finance was a dull service industry characterized by sobriety and restraint. By 1972, it seemed so sedate that a doctoral dissertation noted fewer novels were being written about high finance because "the excesses and exuberances which made the headlines in an earlier day are now largely prevented from occurring." What wasn't yet apparent was that "starting in 1970, prudence gave way to pure greed."
Wall Street's culture transformed alongside broader American culture in the late 1960s. Investment banks converted from prudent partnerships to public corporations with a "bonus culture" where employees took huge risks with other people's money. Risk management became "a farce" as traders focused exclusively on maximizing annual profits and bonuses, often by convincing others to assume unwanted risks through increasingly complex financial derivatives.
The most obvious way to make executives obsess over stock prices was paying them in shares instead of cash. Until the late 1960s, only about 20% of executives received modest stock options. This practice accelerated when accounting rules allowed companies to exclude stock options as expenses, and further when 1993 IRS changes made cash salaries over $1 million non-deductible while stock options remained fully deductible. By the late 1990s, stock constituted half of executive compensation, eventually reaching two-thirds.
What's revealing isn't just the shift to stock-based pay but the explosive growth in total compensation. From the 1940s through the 1970s, top executive pay grew modestly from $1.4 million to $1.8 million. Then it skyrocketed to $13 million by the early 2000s and $30 million in the 2010s. The ratio between CEO and average worker pay, which had remained between 30:1 and 60:1 for decades, quadrupled to 219:1 by 2003, eventually approaching 300:1.
In 1982, the SEC quietly eliminated New Deal-era restrictions that had essentially banned companies from buying back their own shares. The largest U.S. companies went from spending 4% of profits on buybacks in the early 1980s to 30% by decade's end, then around 50% in the '90s. By 2007, the 400 biggest companies spent 89% of profits buying their own stock. During the last decade, U.S. airlines spent 96% of available cash on buybacks while their executives personally sold $1.6 billion of shares. Buybacks now cost around $1 trillion annually-three times what businesses spend on research and development.
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The Great Uncoupling: When Workers Lost Their Share
For centuries, technological advances had increased worker productivity, growing the economy and allowing more people to prosper. From the late 1800s onward, American productivity typically increased by 2% or more annually, with the benefits broadly shared. During the three decades after World War II, U.S. productivity doubled, the economy doubled, and the average American's share doubled in tandem.
Then from the late 1970s through the 1980s came a profound change: productivity and economic growth continued rising, nearly doubling since the 1970s, but for the first time, most Americans' incomes essentially flatlined for forty years. Only the top fifth continued seeing their incomes rise as before. Around 1980, the Great Uncoupling of the rich from the rest began.
This historic redistribution wasn't just about salary increases going to a small group. The share of national income going to all employees rather than shareholders and business owners dropped from around 60-40 in favor of workers to approaching 50-50-amounting to nearly $1 trillion annually, or about $5,000 per worker. Meanwhile, households in the top 1% gained an extra $700,000 yearly, creating the largest upward redistribution of wealth in history.
Beyond breaking strikes, employers in the '80s developed subtler ways to suppress wages. Outsourcing blue-collar service work to private contractors became widespread, especially among public and nonprofit institutions like universities. Harvard, which had employed thousands of unionized guards, janitors and food service workers, began outsourcing these jobs to contractors paying lower wages to non-union workers. This seemingly arcane practice of replacing staff with contract workers has had enormous impact. According to a 2018 study by economists from major universities, fully one-third of America's increased income inequality over the past forty years stems from this single dehumanizing labor practice.
The American economy since 1980 has been transformed into a high-stakes game of musical chairs-a particularly sadistic version where some players are disabled or don't understand the rules, and only winners receive rewards. This economic restructuring deliberately increased anxiety, uncertainty, and inequality as features rather than bugs of the system. Even profitable corporations began mass layoffs simply to please stock market professionals. IBM abandoned its promise of permanent employment, eliminating 41% of its workforce in five years.
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The Culture of Stasis: How America Stopped Innovating
The turn of the millennium brought a striking paradox-unprecedented technological advancement coupled with profound cultural stagnation. Like a modern Rip van Winkle awakening after a two-decade slumber, Americans in the 1990s would have been startled not just by new gadgetry but by how America had somehow regressed-to an era eerily resembling the early 1900s. This regression manifested in multiple ways: severely weakened labor unions, near-religious idolization of big business, ostentatiously flaunted wealth, historically low tax rates on the wealthy, and a Washington political system awash in corporate money and influence peddling.
By the 1990s, nostalgia and cultural recycling had evolved into a full-fledged industry. Hollywood aggressively mined its past, transforming beloved TV shows like "The Brady Bunch," "Mission Impossible," and "Star Trek" into blockbuster films. Broadway became dominated by revivals of classic musicals and jukebox shows built around existing song catalogs, from "Mamma Mia!" to "Jersey Boys." Hip-hop artists explicitly sampled and referenced earlier music, with artists like Puff Daddy building entire hits around samples from previous decades. Even science fiction, traditionally focused on imagining the future, spawned "steampunk," a subgenre setting futuristic stories in Victorian-era aesthetics. This nostalgia industry expanded far beyond entertainment-automobile manufacturers produced retro-styled vehicles like the PT Cruiser and New Beetle, while retail chains like Restoration Hardware and Pottery Barn built empires selling carefully aged reproductions of antique furniture and decor.
The visual stagnation became particularly apparent when examining historical photographs. Looking at images from 1985 in 2007, cultural critic Kurt Andersen noticed something unprecedented-people from twenty-two years earlier didn't look notably dated. Their clothing, hairstyles, and general appearance could easily pass for contemporary fashion. This marked a profound departure from previous eras, when comparing images across similar time spans revealed dramatic stylistic evolution. Photos from 1965 looked unmistakably different from 1985, as did 1945 from 1965-each twenty-year jump backward showed distinct fashions, automobiles, architecture, and design aesthetics.
Beyond simple recycling, our culture entered what could be called the Been There Done That Mashup Age-an era of endless recombination and reference, where familiar cultural elements are endlessly remixed while truly novel forms become increasingly rare. This cultural stagnation emerged as a response to the massive disruptions of the 1980s-the emergence of a brutal winners-take-all economy, the digital revolution, tectonic geopolitical shifts following the Cold War, and accelerating immigration patterns created unavoidable change that deeply disoriented many Americans. In response, we collectively retreated into reassuringly familiar cultural forms as a form of social self-medication.
This cultural stasis created a feedback loop with political and economic stagnation-as music, fashion, and design remained frozen in amber for decades, it normalized other forms of stagnation like wage immobility and wealth inequality. The phrase "It is what it is" emerged as an unofficial national motto, reflecting how cultural repetition had conditioned Americans to expect and accept perpetual sameness. This acceptance of stasis became self-reinforcing, as each passing year of cultural recycling made genuine innovation seem increasingly foreign and threatening.
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America at a Crossroads: Finding a Way Forward
We stand at what Andy Grove called a "strategic inflection point"-a moment when fundamentals change so profoundly that an organization must either transform or decline. Our last national inflection point emerged from the social changes of the 1960s and economic shifts of the 1970s, when business interests redirected America's course to serve themselves almost exclusively.
The rise of machines and artificial intelligence presents both an existential threat and potential opportunity for American society. Between 15-30% of current U.S. jobs may disappear within 10-20 years, with executives at major corporations expecting machines to perform 42% of all work by 2022, up from 29% in 2018. Even traditionally human domains like communication and decision-making are becoming increasingly automated.
Unlike the Great Depression that triggered the New Deal, no economic catastrophe prompted Americans to make a sharp right turn in the 1970s. Similarly, we don't need to wait for catastrophe to make a sharp left turn now. The pandemic has made our current inflection point unmistakable. The market-fundamentalist axioms adopted around 1980-that market value is the only value, that democracy should stay out of economics, that government is useless-must be undone.
Americans are more economically progressive than conventional wisdom suggests. When shown unlabeled charts of wealth distribution in America versus Sweden and asked where they'd prefer to live if randomly assigned a position, 92% chose Sweden. Public opinion has shifted significantly since the 1990s. In 1995, Americans blamed poverty on poor people's lack of effort by two to one. By 2018, 55% attributed poverty to "circumstances beyond control," and 57% said inequality "needs to be fixed."
Multiple 2019 polls found Americans want more regulation of Wall Street by three to one, believe corporations pay too little in taxes, and nearly two-thirds-including many Republicans-support wealth taxes on the extremely rich. Research shows higher inequality in rich countries actually slows economic growth-by a fifth since the 1980s according to the OECD.
In a hypothetical America with perfect economic equality, every household would have a net worth of $800,000 and an annual income of $140,000. This isn't advocating for absolute equality, but illustrates how rich America truly is-in this imaginary scenario, everyone would be upper middle class by today's standards. The question is whether we'll continue to allow a system where a few win enormously while most struggle, or build something that works better for everyone.
As Andersen concludes, the question isn't whether America will change-change is inevitable. The question is whether we'll use this moment of disruption to address chronic economic insecurity and racial injustice, or retreat into comfortable stasis. As Walter Lippmann wrote during an earlier pivotal moment, our task is "not to lay aside the dream, but to make it plausible"-to transform hopeful visions into possibilities.
