As for the stagnant working class, I think this is a sign that in a fully developed economy the average person is "worth" only so much as an economic engine and thus there is little prospect for real increase in standard of living.
Then how do you explain the rise in living standards and decrease in poverty and inequality that occurred from the end of WWII to the 1970s - the "Thirty Glorious Years"?
My own view is that the working class (in the US) has been systematically paid less than they are worth for the last 25 years.
Productivity is still rising (slowly between the mid 70s and mid 90s, faster since), so the value of the average person's labor is still rising. Why shouldn't living standards rise right along with it?
Because the institutional structure of the economy has changed (again, more in the US than elsewhere). The institutions that used to make growth with a fair distribution of the gains possible have been kneecapped: union busting, cuts in social programs, the discrediting of Keynesian economics and so on.
Keynes used to talk about the "euthanasia of the rentier class." Well, they ain't going down without a fight.
I really reject the idea that there is some kind of "iron law of economics" behind stagnating living standards. It's not really an economic issue. It's a political one.
Milton Friedman's entire career was based on a deeper understanding of something that was simply common sense to Keynes: That money was not neutral and did matter. (Keynes wrote A Tract on Monetary Reform decades before Friedman's Monetary History of the US.) Friedman, by the way, got the story wrong on the Depression, in my opinion. It wasn't the Fed's action that caused the Depression. It was its inaction.
Supply-Side economics was not invented by Mundell and Laffer, nor was it first carried out by Reagan. It was invented by Solow and Tobin, and Kennedy put it into action in the early '60s. And, unlike Reagan's tax cuts (which were completely. fucking. useless.), Kennedy's really did help to bring an economic boom -- the largest in pre-Clinton US history -- because marginal rates were so damned high. (I'm sorry. I'm as liberal as the next guy, but 70%+ of income is just too much taxation.)
I'll give my hypothesis in a new diary, shortly. I agree with some of rdf's point, but not all of it. It's much more complex, in my opinion. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
Looking forward to reading your diary.
(Of course, you can point out that the relative academic support for global climate change has failed to persuade various parts on the right, but overall I do think that the concept of global climate change is making more headway than the idea that the Reagan years may not have been all perfect...)
I too am looking forward to your diary.
The re-industrialization of Europe and Japan following the destruction of WW II. The demographic increase during the 1950's and 1960's with increased consumer demand (and consumers!) that encouraged employment while not increasing wage rate competition - the "Baby Boom." Falling commodity prices, cheap energy, pent-up demand for consumer goods following the Depression, infrastructure investment by goverments and local authorities, relatively stable currencies, dramatic increase in an technically educated labour force, lowered transportation cost, the upside benefits of mass production, the Marshall Plan, transfer of the results of military R&D to civilian products (microcomputer is only the best known), the forming of the EEC, rise of synthetic and cheaper materials in industrial production (e.g., plastics,) and the shedding of unprofitable political colonies for economic domination.
To name a few things going on at the time.
I don't think any one of this was 'The Reason' but all of these influencing all the others all the time and with some of the bills (e.g., burning oil for energy leading to the rise of Greenhouse Gases) were foisted off to a later date.
