Clocking in at a modest 306 pages, Nicholas Lemann’s “Transaction Man: The Rise of the Deal and the Decline of the American Dream’’ packs considerable drama and detail into the story of how America’s resilient optimism—beginning with the Industrial Revolution, through a world war, global depression and a post-Second World War boom—faltered with deregulation, new financial products and the decline of the corporation.
Lemann finds America’s sunny optimism replaced by anger and fear as computers, information technology and virtual reality erode the paternalistic culture of top-down corporations. With that erosion comes the loss of job security, pensions and health-care coverage.
When the financial system collapsed in 2008 there was an “unexpected disintegration of political consensus, leading to the rise to power of right-wing nativist politicians,” he writes. “It wasn’t long before every item on the optimists’ old checklist, including the most important ones—confidence in the future of capitalism and democracy—had begun to seem misguided.”
It’s a big story with many formidable players and oversized egos, but Lemann wisely balances the saga of Nobel Prize-winning financial economists, academics and politicians with “little people’’ including automobile dealership owners, community activists, machinists, first-time home owners, nurses, beat cops and factory workers. Those folks live in Chicago Lawn, a South Side neighborhood in Chicago which possessed a vitality and productivity that was a microcosm of the country’s dazzling industrial strength.
Lemann, a professor at the Columbia University Graduate School of Journalism and staff writer at The New Yorker, chooses Chicago as the nexus of upheaval in American life because the Midwest, and Chicago especially, subscribed to the American dream: a beneficiary of the once all-powerful automotive industry and its allied businesses; a thriving union city and a place where a potent political machine and the Catholic Church helped immigrants succeed.
But Chicago Lawn’s residents “live a great distance from the country’s centers of power,’’ Lemann writes. He focuses on three major thinkers from three eras whose theories and actions helped protect these residents and then threw their lives into disarray: Adolf Berle, a member of FDR’s brain trust and an architect of the New Deal; Michael Jensen, an economist whose principles and techniques helped enable the rise to power of the financial world; and Reid Hoffman, a co-founder of the online social network LinkedIn.
“Berle wanted to keep economic power concentrated so that it could be better managed by the state. And he wanted the power of the state to be concentrated, too, in Washington,’’ Lemann writes.
Berle’s solutions succeeded as ever larger corporations became “the social bedrock of the country,’’ and they accepted unionization and governmental regulation.
But the ideas of Jensen and his allies, including an embrace of deregulation and a society built around the discipline imposed by markets, helped transfer control of corporations to shareholders, the result being that “the corporation maintained its economic purpose but ceased to function as the heart of the social order.’’ Capital became more fluid and tradable and financial power became more mobile, and “that changed the basic orientation of the country, away from institutions and toward transactions.’’
Transactions such as mergers and acquisitions reduced or closed American powerhouses located in Chicago Lawn such as the American Can Company, Nabisco, Kool-Aid, Sears and Rheem. Lost jobs led to mortgage defaults, abandoned houses and crime.