This essay by New Yorker writer George Packer does an excellent job of laying out some of the reasons why we are seeing widening economic inequality in America and what this means for our country. In fact, this article is what inspired me to create the American Realities website. I strongly suggest you read it.

By George Packer from Foreign Affairs NOVEMBER/DECEMBER 2011 ISSUE

Iraq was one of those wars where people actually put on pounds. A few years ago, I was eating lunch with another reporter at an American-style greasy spoon in Baghdad’s Green Zone. At a nearby table, a couple of American contractors were finishing off their burgers and fries. They were wearing the contractor’s uniform: khakis, polo shirts, baseball caps, and Department of Defense identity badges in plastic pouches hanging from nylon lanyards around their necks. The man who had served their food might have been the only Iraqi they spoke with all day. The Green Zone was set up to make you feel that Iraq was a hallucination and you were actually in Normal, Illinois. This narcotizing effect seeped into the consciousness of every American who hunkered down and worked and partied behind its blast walls — the soldier and the civilian, the diplomat and the journalist, the important and the obscure. Hardly anyone stayed longer than a year; almost everyone went home with a collection of exaggerated war stories, making an effort to forget that they were leaving behind shoddy, unfinished projects and a country spiraling downward into civil war. As the two contractors got up and ambled out of the restaurant, my friend looked at me and said, “We’re just not that good anymore.”

The Iraq war was a kind of stress test applied to the American body politic. And every major system and organ failed the test: the executive and legislative branches, the military, the intelligence world, the for-profits, the nonprofits, the media. It turned out that we were not in good shape at all — without even realizing it. Americans just hadn’t tried anything this hard in around half a century. It is easy, and completely justified, to blame certain individuals for the Iraq tragedy. But over the years, I’ve become more concerned with failures that went beyond individuals, and beyond Iraq — concerned with the growing arteriosclerosis of American institutions. Iraq was not an exceptional case. It was a vivid symptom of a long-term trend, one that worsens year by year. The same ailments that led to the disastrous occupation were on full display in Washington this past summer, during the debt-ceiling debacle: ideological rigidity bordering on fanaticism, an indifference to facts, an inability to think beyond the short term, the dissolution of national interest into partisan advantage.

Was it ever any different? Is it really true that we’re just not that good anymore? As a thought experiment, compare your life today with that of someone like you in 1978. Think of an educated, reasonably comfortable couple perched somewhere within the vast American middle class of that year. And think how much less pleasant their lives are than yours. The man is wearing a brown and gold polyester print shirt with a flared collar and oversize tortoiseshell glasses; she’s got on a high-waisted, V-neck rayon dress and platform clogs. Their morning coffee is Maxwell House filter drip. They drive an AMC Pacer hatchback, with a nonfunctioning air conditioner and a tape deck that keeps eating their eight-tracks. When she wants to make something a little daring for dinner, she puts together a pasta primavera. They type their letters on an IBM Selectric, the new model with the corrective ribbon. There is only antenna television, and the biggest thing on is Laverne and Shirley. Long-distance phone calls cost a dollar a minute on weekends; air travel is prohibitively expensive. The city they live near is no longer a place where they spend much time: trash on the sidewalks, junkies on the corner, vandalized pay phones, half-deserted subway cars covered in graffiti.

By contemporary standards, life in 1978 was inconvenient, constrained, and ugly. Things were badly made and didn’t work very well. Highly regulated industries, such as telecommunications and airlines, were costly and offered few choices. The industrial landscape was decaying, but the sleek information revolution had not yet emerged to take its place. Life before the Android, the Apple Store, FedEx, HBO, Twitter feeds, Whole Foods, Lipitor, air bags, the Emerging Markets Index Fund, and the pre-K Gifted and Talented Program prep course is not a world to which many of us would willingly return.

The surface of life has greatly improved, at least for educated, reasonably comfortable people — say, the top 20 percent, socioeconomically. Yet the deeper structures, the institutions that underpin a healthy democratic society, have fallen into a state of decadence. We have all the information in the universe at our fingertips, while our most basic problems go unsolved year after year: climate change, income inequality, wage stagnation, national debt, immigration, falling educational achievement, deteriorating infrastructure, declining news standards. All around, we see dazzling technological change, but no progress. Last year, a Wall Street company that few people have ever heard of dug an 800-mile trench under farms, rivers, and mountains between Chicago and New York and laid fiber-optic cable connecting the Chicago Mercantile Exchange and the New York Stock Exchange. This feat of infrastructure building, which cost $300 million, shaves three milliseconds off high-speed, high-volume automated trades — a big competitive advantage. But passenger trains between Chicago and New York run barely faster than they did in 1950, and the country no longer seems capable, at least politically, of building faster ones. Just ask people in Florida, Ohio, and Wisconsin, whose governors recently refused federal money for high-speed rail projects.

We can upgrade our iPhones, but we can’t fix our roads and bridges. We invented broadband, but we can’t extend it to 35 percent of the public. We can get 300 television channels on the iPad, but in the past decade 20 newspapers closed down all their foreign bureaus. We have touch-screen voting machines, but last year just 40 percent of registered voters turned out, and our political system is more polarized, more choked with its own bile, than at any time since the Civil War. There is nothing today like the personal destruction of the McCarthy era or the street fights of the 1960s. But in those periods, institutional forces still existed in politics, business, and the media that could hold the center together. It used to be called the establishment, and it no longer exists. Solving fundamental problems with a can-do practicality — the very thing the world used to associate with America, and that redeemed us from our vulgarity and arrogance — now seems beyond our reach.

Read the rest of this essay at foreignffairs.com.