It's time for the American Dream 3.0: Walter Russell Mead on why America needs to move from homeownership to new enterprises as the best way to revive the Dream

Ryan Streeter
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Walter Russell Mead is one of today’s most interesting writers. In his latest post at the American Interest, he says we’ve moved beyond the American Dream 2.0. The piece is long but worth reading in its entirety.

Though Mead does not discuss the 2012 presidential race or current debates in Washington, his conclusions have political implications.

In short, our understanding of the American Dream is at a crossroads, and we need candidates who can articulate a new way forward.

Mead walks the reader through history to show that the American Dream 1.0 was the family farm, which was the locus of ownership and productive activity. The American Dream 2.0 was the 20^th century move toward homeownership in which the home became a primary asset and the center of family life. He says,

Both versions of the American Dream had this in common: the farm in the valley and the box in the burbs helped the American people develop the skills and the values necessary for successful republican government.

However, the rise of the homeownership society also gave rise to what he calls the “consumer republic,” in which the American economy’s primary model of growth had to do with feeding Americans’ consumption habits. This model, he notes, is clearly in trouble. Not only did it give rise to a lethal credit bubble, it is an unreliable way to expand the economy going forward.

So, he writes:

The one thing I do know is that change is on its way — more fundamental, more challenging, and also perhaps more exhilarating than many of us are ready for. The health of the American economy is going to require us to move away from the credit card economics of the consumer republic.  The health of American society and democracy require that we move beyond the life of the last eighty years.  We should be looking at new ideals in which domestic partners are enterprise partners, the home is more frequently a place of business, and education moves away from big box buildings and toward forms of community schooling somewhere between home schooling and charter academies.

One way to summarize the kind of change we need.  During the farm era the focus of American domestic policy was to create the most favorable possible environment for millions of ordinary Americans to launch flourishing small businesses.  Rather that focusing on home ownership, American social policy should probably be looking at small business formation as the key to mass middle class prosperity in the next fifty years.

There’s a lot for candidates in 2012 to unpack in what Mead is saying. The 2008 crisis and ensuing recession have made homeownership a troubled enterprise in America as millions of people have watched their primary asset lose its value in ways they never thought possible. Homeownership will remain a central staple of the American Dream, but the time has come to move beyond it as the staple

The homeownership crisis in America and persistent high unemployment have turned the focus of our public debate about the economy toward jobs.

But this, too, in insufficient if we have as our primary model the hope that existing, larger companies will hire more people - something they actually are not very good at doing. What we need, as Mead points out, is a new season in American life in which new enterprises explode onto the scene.

Here’s a little-known fact: new firm formation in America has been essentially flat over the past 20 years. This is the same period of time in which we sowed the seeds of the housing bubble on the back of the “consumer republic” Mead talks about. The main reason the lack of new firms is troubling is because they create a disproportionate amount of jobs.

Candidates in 2012 should talk about reversing this trend. We should all of us participate in a nationwide endeavor to see more new firms come online.

The Kauffman Foundation has been a leader in on this front and offers three main areas of work for policymakers.

1. Focus on creating an environment amenable to high-growth firms. High-growth firms are essentially a sub-set of new firms and do the most good on the job creation front. We should do all we can to make it likely that capital will flow to new firms and new innovations. This has a lot to do with how we tax and regulate not just banks but also the individuals who are becoming an important source of capital for new ventures.
2. Remove the barriers that impede a greater number of high-growth companies from coming online. This primarily has to do with simplifying taxes and lessening the weight of America’s regulatory burdens.
3. Focus our immigration practices on those skilled immigrants who generate new technologies that create jobs, and make the commercialization process easier. Our visas need updating to ensure that we don’t lose highly skilled immigrants after they come and invent here, and our university systems should be more vibrant centers of commercialized innovation than they are.

The new Republican jobs agenda contains some of the necessary ingredients for this kind of an agenda, especially on the second point.

But we need candidates in 2012 who lay out this vision more completely, give it a narrative, and inspire a broad cross-section of people and organizations to join the cause.