I grew up and spent my early working years in the golden age of capitalism, which was from 1945 to 1976. Almost anybody—as least, any white American man—who was willing to work could get a decent job sufficient to support a family.
Then a lot of things turned bad as once. Worker pay no longer kept pace with productivity, but the pay of CEOs and wealthy investors grew much faster. Manufacturing declined and high finance expanded. Hourly wages declined and debt increased. What went wrong?
He blames America’s current woes on the adoption of what he calls the Better Business Climate model of economic policy.
This model is based on the argument that the key to economic prosperity is economic growth, that economic growth depends on investment, and that investment depends on business profitability, and that the way to increase business profitability is lower taxes, lower social spending and fewer regulations.
We used to call this Reaganomics. Now we call it neoliberalism. Many people thought it was a plausible response to the economic stagnation and high inflation of the late 1970s. I myself thought it was worth a try (more fool I). I wouldn’t have objected to making rich people richer if everybody else had benefitted in the long run.
But this isn’t how things worked out. Instead:
- Wage increases stopped keeping pace with productivity.
- The CEO-worker wage gap took off.
- The financial sector grew at the expense of manufacturing.
- Wall Street profits skyrocketed.
- The income gap between the super-rich and the rest of us widened.
- Corporate debt, consumer debt and government debt rose.
What went wrong?