Decades of descent

June 28, 2013, 1:00 PM UTC

FORTUNE — The spare and foreboding short stories of Raymond Carver can be taken as a prologue to George Packer’s latest book, The Unwinding: An Inner History of the New America.

Life in Carver stories, always in the rural northwest, and typically drenched in alcohol, was lonely and often hopeless.

Packer, a New Yorker staff writer, uses a short chapter on Carver to drive home his central thesis that the mechanics of American society, the nexus of government and business that brought so many out of poverty in the years after World War II, are irretrievably broken.

“He seemed to know, in the unintentional way of the fiction writer, that country’s future would be most unnerving in its very ordinariness, in the late-night trip to the supermarket, the yard sale at the end of the line,” Packer writes. “He sensed that beneath the surface of life there was nothing to stand on.”

In The Unwinding, Packer picks up where Carver left off, diagnosing the collapse of a central American idea: hope for the future, or more broadly that hard work and resilience are enough to open the door to the comforts and stability of the middle class.

Packer begins his book in 1978 and works his way forward through the presidential election of 2012, driving his story with deeply reported narratives of four Americans: Peter Thiel, Dean Price, Tammy Thomas, and Jeff Connaughton. He intersperses biographical sketches, sometimes biting, of bold-faced names like Jay-Z, Newt Gingrich, and Oprah. Another important character is the city of Tampa, which Packer uses to examine the housing crisis that drove the economy to the brink of collapse.

MORE: Why I’m betting on a return to normal markets

He attempts to pinpoint when America crested on the hill of prosperity and progress and began its slow drop down the slope of tempered ambition. His conclusion: 1973, or what he calls the “last year of the ‘50s.”

He describes the period from the end of the Paul Volcker recession in 1982 to the housing collapse in 2007 as an extended “Indian summer” in America when key institutions “continued to erode” and the underpinnings of society came apart as factories shut down and working class jobs evaporated. According to Packer, the steady churn of the American economy, a powerhouse that had put a chicken in every pot and car in every driveway, slowly came apart at the seams.

“One way to see the Indian summer was a series of bubbles: the bond bubble, the tech bubble, the stock bubble, the emerging markets bubble, the housing bubble,” Packer writes. “One by one they had all burst, and their bursting showed that they had been temporary solutions to long-term problems, maybe evasions of those problems, distractions. With so many bubbles — so many people chasing such ephemera, all at the same time — it was clear that things were fundamentally not working.”

Along the way, of course, plenty of people made plenty of money in America, as wealth and power were consolidated in fewer and fewer hands. The system worked fine for people like Thiel, a PayPal co-founder turned hedge fund manager and venture capitalist, who amassed a spectacular fortune in the past 15 years.

Packer uses Thiel’s story, which runs throughout the book, to address a central piece of his thesis: that the technology boom, in creating dazzling phones and applications that make life more convenient, hasn’t done a whole lot to boost the fortunes of the average American who remains mired in poverty, particularly when compared to past economic expansions.

“The problem came down to this: Americans, who had invented the modern assembly line, the skyscraper, the airplane, and the integrated circuit, no longer believed in the future,” Packer writes, casting a weary eye at Silicon Valley.

Thiel, a billionaire thanks to the tech boom, coined a term for the systemic loss of American aspiration, calling it the “tech slowdown.” He likes to say that instead of flying cars, we got 140 characters. At one point, Packer describes Thiel taking out his iPhone and declaring: “I don’t consider this to be a technological revolution.”

MORE: Peter Thiel: Twitter will outlast the New York Times

The technology boom has left many Americans behind, including two of Packer’s main characters, Dean Price and Tammy Thomas, neither of whom would seem totally out of place in a story by Carver. The difference is their optimism in the face of constant setbacks.

In Price and Thomas, Packer describes characters who embody American resilience, as they seek to claw their way out of poverty and up the slippery ladder of social class in America. They’re tough and hopeful, able to take a punch and get back up from the floor in the face of crippling adversity. The question is whether it’s enough.

There’s little finality in Packer’s book. We’re left to wonder what becomes of Price, a son of rural North Carolina, who, after several failed attempts at running his own business, seems to have found his footing with a plan to sell biodiesel to school districts. We leave Thomas, a laid-off factory worker turned community organizer from Youngstown, after the 2012 election. She’s back on her feet, but her hometown, with the mills shuttered, is not in good shape.

Connaughton, a Wall Street veteran who goes on to a career as a lobbyist, White House lawyer and top Senate aide, gives Packer a window onto the cynicism and special interests that have taken over politics. Connaughton is finally driven from politics after taking part in the corrosive negotiations behind the watered down Dodd-Frank financial reform bill. He settles in Savannah to write a book on Wall Street’s power over Washington and tries to suppress the itch to get back involved in his former life.

Packer does a masterful job of diagnosing a broken system, but what’s missing is clear analysis of how we got here, and any suggestion of the way out. There’s very little in the way of economic analysis, and more mathematically minded readers will wonder if he could have used some pertinent statistics to bolster his case. Maybe there are no easy answers — no neat and tidy ending for a story this complex. Carver would probably agree.