How a Little-known Document Changed the Course of the U. S. Economy
In the Fall of 2021, I posted to Fifty Year Perspective a series of graphs describing a 40-year trend of growing income disparity in the U. S., resulting in rising incomes for a small portion of households, and nearly flat income for others.
Changing patterns of wealth – Starting in the early 1970s, several measures of wealth and income documented this trend.
The share of national income going to the top one percent of earners grew from 11 percent to 20 percent between 1972 and 2014.
The ratio of CEO-to-worker compensation went from 22-to-1 in 1972 to 278-to-1 in 2018
In the same time span, worker productivity increased by 176 percent while hourly compensation increased by 29 percent (adjusted for inflation).
Union membership decreased during this time by more than half.
The top federal income tax rate dropped from 70 percent to 37 percent.
When I recorded these trends in 2021, I considered them to be related, but separate, events contributing to the despair of middle- and working-class families. A book published August 5, 2025, by former secretary of labor Robert Reich changed my mind. The book is titled Coming Up Short: A Memoir of My America.
Reich describes perceived threats to free enterprise – In Reich’s book he reported that in 1971 the U.S. Chamber of Commerce asked attorney Lewis Powell to report on political activities which some prominent Republicans regarded as threats to free enterprise. The report was titled “Attack on American Free Enterprise System” but came to be known as The Powell Memorandum. Powell’s memo charged that consumer, labor and environmental groups were attacking the American economic system. He urged businesses to engage in a well-funded joint political effort through national organizations to finance political campaigns for members of Congress who would back their cause.
Text from the Powell Memorandum:
“The assault on the [American] enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.
“The sources are varied and diffused. They include, not unexpectedly, the Communists, New Leftists and other revolutionaries who would destroy the entire system, both political and economic. These extremists of the left are far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history. But they remain a small minority, and are not yet the principal cause for concern.
“The most disquieting voices joining the chorus of criticism, come from perfectly respectable elements of society: from the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences, and from politicians. In most of these groups the movement against the system is participated in only by minorities. Yet, these often are the most articulate, the most vocal, the most prolific in their writing and speaking.
“Moreover, much of the media – for varying motives and in varying degrees – either voluntarily accords unique publicity to these ‘attackers,’ or at least allows then to exploit the media for their purposes. This is especially true of television, which now plays such a predominant role in shaping the thinking, attitudes and emotions of our people.
“One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
“The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The Boards of Trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.
“Most of the media, including the national TV systems, are owned and theoretically controlled by corporations which depend upon profits, and the enterprise system to survive.”
Immediate effect – The impact of the memorandum was realized almost immediately. What Reich has labeled the corporate-political complex was created involving tens of thousands of lobbyists, lawyers and political activists. Political Action Committees (PACs) numbered less than 300 in 1976, but there were over 1,200 four years later. PACs increased their expenditure on congressional races nearly fivefold between the late 1970s and late 1980s, twice the rate of increase in spending by labor union PACs. The Heritage Foundation, a new business activist movement founded in 1973, was inspired by the Powell Memorandum. The Federalist Society was founded in 1982 by conservative law students at Harvard, Yale, and the University of Chicago. Reich adds these actions taken pursuant to the Powell Memorandum:
By the 1990s … corporations employed some 61,000 people to lobby for them, including registered lobbyists and lawyers. That came to more than a hundred lobbyists for each member of Congress.
By the 2016 campaign cycle, corporations and Wall Street contributed $34 for every $1 donated by labor unions and all the public interest organizations combined.
Laws attacking monopolies were defanged.
Laws protecting workers’ rights to unionize were diluted.
Laws discouraging hostile takeovers were neutered.
Reich labels what has happened since the Powell Memorandum as the largest system of “legalized bribery” in history.
Powell’s work as a Supreme Court Justice – Lewis Powell went on to be appointed by President Nixon to the U. S. Supreme Court in 1972, retiring in 1987. He was considered a swing vote on the court. He voted with the majority in Roe v. Wade in 1973 upholding the constitutional right to abortion. In 1982, he voted with the majority finding a Texas law forbidding illegal immigrant children from public education was unconstitutional. He voted with the court’s majority in Buckley v. Valeo, the 1976 ruling which equated money in the form of campaign expenditures with political speech. That decision was expanded upon in the 2010 case Citizens United v. Federal Election Commission.
Linking the memorandum and post-1970s economic trends – Thus, it becomes clear that those trends in income distribution, CEO pay, worker productivity, union membership, and federal income tax rates are not independent, spontaneous outcomes of a free economy, but the results of a now 50-plus-year effort to prioritize corporate profits over a more equitable distribution of economic growth.
Can the impact of court cases be reversed? – Reversing Citizens United and Buckley v. Valeo decisions may not be a reasonable expectation. That would require either a constitutional amendment or action by the Supreme Court. The nonpartisan Brennan Center for Justice has stated that “at a minimum, it is critical to ensure that all large campaign donors are disclosed.” Reducing the influence of money in politics is favored by Americans of all races, age groups and political affiliation. To date, fourteen states have enacted some form of public financing of elections, in which small private contributions are matched using public funds.