Transaction Man: The Rise of the Deal and the Decline of the American Dream
By Nicholas Lemann.
Farrar, Straus and Giroux, 2019.
Hardcover, 306 pages, $28.

Reviewed by Gerard T. Mundy

To capture the gravity of the social problems plaguing the United States, one can use many examples for illustration. One example is when individuals with considerable differences in their backgrounds, politics, and conceptions of first principles agree that America is in a precarious state and that the only way it may avoid total demise is by returning to localized institutions.

A renewed interest on the political right has emerged with regard to focus on localism and the necessity for proper communities. Now, an author from the center-left, Nicholas Lemann, has published Transaction Man: The Rise of the Deal and the Decline of the American Dream. The book focuses similarly on the need for proper communities and local institutions, tapping into arguments and conclusions that mirror many long advocated by traditional conservatives.

Although Lemann and the community-localism writers on the right may come from different perspectives, and may place more stress on particular subjects, many of their arguments and conclusions are generally similar in terms of their recognition of the questionable trajectory on which the country currently rests.

Those who do not yet believe that the United States is in an exceedingly precarious state whose future may be uncertain as a result of insuperable social and economic issues should take notice when authors on different sides of the political spectrum are making similar arguments and coming away with like conclusions and remedies at a time of such elevated polarization.

The Neighborhood of Chicago Lawn

Nicholas Lemann, a staff writer at The New Yorker who also holds an endowed professorship at the Columbia University Graduate School of Journalism, attempts to weave together a narrative explaining macro-economic transitions in the United States and one that shows how these changes were being felt in the changing Chicago Lawn neighborhood of Chicago.

Lemann narrates the many changes that have befallen Chicago Lawn. As Lemann puts it, the neighborhood had been one of “first-time homeowners, intensely tribal and provincial.” Towards the latter part of the century, Chicago Lawn begins to transform demographically from mostly Irish-Italian-Lithuanian Catholic to largely non-Catholic black. Census data show that the neighborhood was 99.99 percent white in 1960; about 52 percent white in 1990; and about 24 percent white in 2000.

When Chicago Lawn native Nick D’Andrea was growing up, his family, writes Lemann, had “lived in an Italian neighborhood, went to church, sent its kids to Catholic schools, and served as foot soldiers in the mighty Chicago Democratic political machine.” D’Andrea would later raise his own family in Chicago Lawn.

“Panicked, or induced to panic by Realtors, many of the whites sold quickly and too cheaply,” writes Lemann. In this demographically changed Chicago Lawn, Lemann reports, the factories, big stores, shops, and restaurants began to close down.

It was not, however, only these demographic changes that shook D’Andrea’s rootedness to place. In 2009, his Chicago Lawn car dealership was forced to close after GM and Chrysler teetered on the brink of bankruptcy, saved only by $50 billion in emergency government money.

The story of Nick D’Andrea is the story of many Americans: Change after change both economic and social have uprooted people in a near constant manner. (The decline of religion in the country, of course, has created a void that cannot be filled by anything earthly. That which is earthly, however, can serve as either good or poor conduits to the higher things.)

Ann Neal, one of the black newcomers who came to Chicago Lawn in 1988, is today the head of her block association. Ann sits on her porch in “an old easy chair,” writes Lemann, “trying to maintain order on her block” amidst murders, shootings, gang activity, and quality of life violations in her community. By chronicling different stories from different perspectives, Lemann seems to be trying to make the point that weak communities mean weak outcomes, and that unstable communities mean unstable people. These issues transcend demographic lines.

The Sufferings of Chicago Lawn

As Lemann reports, Chicago Lawn after World War II was like many other outer-urban neighborhoods in the northeast and Midwest. The people of Chicago Lawn often identified themselves by the blocks they lived on or by their zoned Catholic parish. All in all, as Lemann says: “There wasn’t much need for the neighborhood to have a name anyway, because so many people there never left, so why would you need to explain where you lived?”

As Lemann writes, in Chicago Lawn, “[e]verything you needed was in the neighborhood.” Lemann recounts that the first stop for European immigrants was often a tenement in the city center and buying their first home in a place like Chicago Lawn was the next step after many years of hard work. Lemann reports how Chicago Lawn residents “belonged to church groups and Little League teams, they knew their neighbors, they had block parties.” Lemann then unfortunately moves away from the conservative conception of how instrumental this small urban village’s communal institutions are for the sake of flourishing. Lemann opines: “As much as the culture of Chicago Lawn was intensely provincial and based on personal, family, and ethnic ties, it worked because it was connected to the big organizations that dominated American culture.”

Lemann must be reminded, however, that the community relations did not work because of corporations; the community came first. As Aristotle argues, man is by nature a political animal. Men are, by nature, a part of communities; men are not by nature part of a corporation.

For a significant portion of the twentieth century, the six communal institutions—the nuclear family, the extended family, the neighborhood, the church, the voluntary association, and the employment/workplace association—kept men and women slogging through their work. Neighborhoods like the old Chicago Lawn flourished because of their tight-knit communities.

Although Lemann is wrong on this account, he is right that changes in the economy have severely undermined communities like Chicago Lawn. Although the chronicles of struggling Chicago Lawn are the most compelling, the book’s larger focus is an attempt by Lemann to argue that since the New Deal to the present day, the United States has experienced three major periods of economic changes: the Institution, or Organizational Period, the Transaction Period, and the Network Period.

The Organizational Period

Lemann’s attempt to classify the last roughly one hundred years of American economics into three categories is likely one of the few ways to create a readable narrative, though much is going to be left out and the result becomes oversimplification and overcategorization. Regardless of the futile attempt to simplify and categorize, Lemann’s historical narratives are of great interest to both the economics and non-economics attuned reader.

Lemann argues that after World War II, government controls on corporations ushered in the period of “Organization Man” or “Institution Man.” This period, argues Lemann, was characterized by the worker who “dutifully followed orders at the serene, secure big corporation that was his lifetime employer.” Following decades of successive deregulation, Lemann argues that the country transitioned into the “Transaction Man” period, defined by “such fields as trading financial instruments, private equity, venture capital, and hedge funds.” Lemann writes that “Transaction Man is suspicious of politics and of provincial concerns; his perspective is global and based on what he regards as universal principles.”

To narrate the first “Institution Man” economic period, Lemann chooses as his primary character Adolf Berle, one of President Franklin Roosevelt’s primary economic advisers. By harnessing the power of government, Berle sought a “tamed” corporation, says Lemann, not with a view toward eliminating it, but rather toward controlling it. For Berle, says Lemann, the “tamed” corporation would “play the central role in a good society dominated by large, stable institutions that would provide people’s material needs, protect them from economic shocks, and generate cohesion.”

Berle was an architect of Franklin Roosevelt’s economic policy, Lemann explains, having been with Roosevelt since his initial campaign for the presidency. In just the beginning months of the Roosevelt presidency, Lemann notes, reforms that Berle had been pushing for years were made law. Roosevelt would subsequently come to institute “dozens of other new agencies of the federal government that lived on and that told corporations what to do,” Lemann writes. By 1954, Berle was satisfied, writing, as quoted by Lemann, that the country could now be characterized as “a mixed system in which governmental and private property are inextricably mingled.”

Lemann shows support for this system, writing that, having been “successfully pushed into behaving like a social institution,” the corporation became “the American welfare state, at least for its many millions of employees, their families, and to some extent the much wider circle of its small-scale suppliers, service providers, and retail outlets for its products.” Lemann’s assertion here shows a fault line between center-right and center-left community-localism writers. The conservative believes that the six communal institutions must be vibrant in order for men and their communities to flourish. Economics, for the conservative, can never function as the proper social institution for man’s flourishing.

The Transaction Economy

As Lemann explains, support for financial deregulation would first gain steam in the 1960s and 1970s in intellectual circles by thinkers like Milton Friedman. Deregulation would begin in the 1970s, accelerate in the 1980s, and continue through the 1990s. The economy dominated by large corporations that, Lemann argues, provided the average worker with a high quality of life, would be dismantled by a financial system now dominated by high-stakes players buying, taking over, merging, and dismantling companies, all done by traders dealing with topics most people not in these circles would be unable to describe, such as fixed-income trading, junk bonds, hedge funds, and derivatives (Lemann even argues that most traders in these markets do not fully understand what they are trading). Lemann concludes that as the power shifted from corporations to financial markets, the result “was much less reason for employees to stay loyally at one corporation for their entire careers, and much less reason for corporations to have the same loyalty toward their employees. The corporation-dependent American version of the social welfare state was eroding.”

Lemann argues that one of the major pieces of deregulation that the savings and loan industry successfully lobbied Congress for would allow “it to acquire deposits in nontraditional ways, to offer adjustable-rate mortgages, and to make new and riskier kinds of investments—all while retaining federal insurance on their deposits.” In other words, the risky trading was no longer risky for the traders, for they would now have government insurance backing their bets. Lemann argues that two of the most detrimental major deregulation initiatives that capped almost three decades of such activity was the 1999 repeal of the Glass-Steagall Act, which placed restrictions on the banking industry, and the 2000 Commodity Future Modernization Act, which allowed almost no government regulation over derivatives.

Here Lemann waxes nostalgic for the strong corporations of yesteryear. He does not love the institutional corporation, but he appreciates how workers were provided with some sense of dignity and security under this system. As a result, it is almost as though Lemann presents a dichotomy: Take the globalist transaction financial services economy and the rest of the contemporary economy or the corporation-based economy. This choice is a false one. The corporate behemoth economy that Lemann prefers might have given the people in Chicago Lawn some stability, but it did not exist in a bubble. The Great Recession, insatiable, widespread greed, and loss of loyalty were all outgrowths of this economy. For corporations, profits are the main considerations; they do not, by nature, have loyalty to people or places. With increased profit always being the goal, corporations must constantly seek untapped markets. By virtue of their nature, corporations must grow to survive; they must constantly seek business in new places. The corporation is of no neighborhood.

The Network Society

Lemann labels the current period that of “Network Man.” For Lemann, this “network” society is no better than the financial one that preceded it: “Silicon Valley is a zone of no pensions, no unions, and no de facto guarantees of lifetime job security.” In this new scenario, Lemann writes, “Your network, not any one employer, would hold the key to your future.” This short topic, contained in one chapter, seems to be a rush by Lemann to categorize into an additional third period whatever may be the present time (showing a larger weakness in his categorization).

Despite the weaknesses here, Lemann is right on two major points: First, that the new Internet-based economy has little in the way of job security and that workers by consequence have little care for the companies for which they work. Second, that there is a major similarity between the corporate period of the early twentieth century and the current Internet period: a mere handful of companies dominate the market. As Lemann observes, Americans have come to view these companies with “resentment and suspicion, as it has become clear that the social and economic benefits of the new system belong mostly to the companies themselves and not the users of their products.”

Affecting the Neighborhood

The takeovers, mergers, and esoteric trading of the Transaction period, writes Lemann, would begin to affect the average man in Chicago Lawn by taking away jobs and also in terms of housing. The demographic changes occurring in Chicago Park created a boon for realtors and mortgage lenders, and the new homeowners were perfect targets for unscrupulous money men lending subprime mortgages to those who could not afford them. The new economic reality meant that people were no longer dealing with a local lender face-to-face, but rather with a distant company that packaged and traded these mortgages in markets unknown to the non-financial world. As Lemann puts it, Chicago Lawn had been left behind by both government and the contemporary economy.

Local activists like Catholic priest Father Tony Pizzo would, on their own, have to do what was possible to salvage a deteriorating Chicago Lawn, “for in the new American political economy,” writes Lemann, “nobody else seemed to have that responsibility—or even to realize that there were places all over the country where the official narrative about the success of the new order felt like science fiction.”

Abandoned homes brought greater blight and troubles to the neighborhood. Father Pizzo did what he could: start after-school programs, create relationships with the police, and begin neighborhood safety patrols. When Father Pizzo found a weeping girl inside of an abandoned house, he learned that she had been raped. He thought to go directly to the owner of the house, Deutsche Bank, but he would learn that there was no local bank to which he could go, for their office was in Germany. Father Pizzo would ultimately get the local police to board up the house and then a nonprofit went to court to take the home and make it into a program headquarters. This story illustrates that in the global economy, there exist few proper relationships, and even fewer local relationships. This scenario, however, will never change the fact that things are always going to be completed most efficiently at the local level by community members who are part of the community themselves.

As Lemann writes: “whatever happened was going to have to happen in the neighborhood, lender by lender, block by block, house by house.” Father Pizzo and a community group founded by several Catholic parishes back in 1988 when the neighborhood was first changing demographically, would come to negotiate six hundred modifications of mortgages in the neighborhood following the Great Recession.

Strengthening Local Institutions

Lemann is right when he argues that “the country keeps reacting to troubles produced by the deterioration of its institutional life by embracing further deterioration.” He asserts that the country persists in “thinking about solutions that would continue to weaken [‘the core institutions of American life’], to the point that it would become nearly impossible for them to regain our trust.” These arguments must not receive cursory glance, for it is the communal institutions that form society.

The way forward, argues Lemann, is to empower “the groups [people] belong to and the institutions they can see and touch: the schools that educate their children, their local governments, the places where they pray, their trade associations, their ethnic organizations, their political movements. Those are their means of protecting themselves, of improving their condition, of addressing their needs …”

Strengthening groups and communities is where traditional conservatives and reasonable leftists like Lemann can find considerable agreement as well as forge a real path forward in the interest of the common good.

For a smart, but not overly scholarly, broad overview of some of the major changes in the United States economy over the last century, Transaction Man is a good choice. For those more interested in the social effects of these economic changes, readers will follow closely Lemann’s stories from Chicago Lawn. His transitions between these two stories are often rough, but most readers will be able to discern what Lemann is trying to show by these abrupt narrative shifts. Lemann’s three periods may be overgeneralized, and he may be unduly generous to spotlighting the positive effects of government-“tamed” corporations, but toward understanding this American time period, his work is an important one that serves as companion reading to community-localism writers on the right.  

Gerard T. Mundy is a writer and teaches political philosophy and political theory at a private college in New York City.