Why did Capitalism go wrong after 1970?

Skullbone
Skullbone

Why did Capitalism go wrong after 1970?

All urls found in this thread:
https://www.jacobinmag.com/2016/05/richard-nixon-ubi-basic-income-welfare/
https://en.wikipedia.org/wiki/Marquette_National_Bank_of_Minneapolis_v._First_of_Omaha_Service_Corp.
https://ismaelhossein-zadeh.com/who-owns-the-fed/
https://fred.stlouisfed.org/graph/?g=931
http://cep.lse.ac.uk/pubs/download/dp1246.pdf
BinaryMan
BinaryMan

@Skullbone
The current income is "good enough" for the common person so business has the upper hand in bargaining wages. Technological advances increase productivity exponentially when compared to income, so people don't even know they are getting cucked hard. Businesses have become better at keeping profits to themselves. Less people employed mean people can't afford stuff so there is increased competition to undercut, making the increase in productivity negligible. Money is being tied up in housing and shares. Richer are recycling the trickle down effect. etc. may be all or one of these, nobody can really put a finger on it.

FastChef
FastChef

@Skullbone
Prove it went wrong?

my families' networth has been steadily growing

Nojokur
Nojokur

@BinaryMan
Most of what you said makes sense, but I would also argue that most of it can be traced back to automation of jobs.

As for the "good enough incomes" argument: it is certainly an explanation for the social apathy about macroeconomics, since they still have enough to feed and house themselves.

Illusionz
Illusionz

@Skullbone
Why did Capitalism go wrong after 1970?
It didn't go wrong for businesses.
Employees get the short end of the stick.
Don't like it?
Flip the roles and start your own business.

girlDog
girlDog

@Illusionz
Don't like it?
Flip the roles and start your own business.

I would love to, but this thread is not about my personal fate that I am relatively content with. It is about the shape of western economies.

likme
likme

@FastChef
10/10 response

terrific anecdote

u sure showed him

:)

hairygrape
hairygrape

@likme
I don't see where it went wrong

Went right for me, he's asking a question but not providing proof of it going wrong

Evilember
Evilember

@hairygrape
Look at the fucking OP pic instead of shitting up the thread, god damn it. You must be Australian.

On topic: yeah that gap is a big problem. It also correlates with the abandonment of the gold standard and institution of the IRS I believe. Not to mention the removal of the distinction between investment and savings banking.

I could be wrong about all of these as I never thoroughly looked into it, plus correlation =/= causation, but it's definitely food for thought.

Ask /pol/ and they will tell you the US and much of the western world was basically handed over to the nwo in the early 70's.

TurtleCat
TurtleCat

@Evilember
I am Australian and I find your racism abhorrent. Are you so jaded because a strong Aussie cobber porked your wife while you were masturbating to big black cuck hentai?

BlogWobbles
BlogWobbles

@Evilember
It also correlates with the abandonment of the gold standard
Honestly, I doubt that has much to do with the gold standard. Since the abandonment of it we still saw many times of low inflation, as we do today, yet middle class incomes still stagnate, or even fall.
My guess at the cause of it would be Raegonomics.
Ask /pol/ and they will tell you the US and much of the western world was basically handed over to the nwo in the early 70's
That is the very reason why I am asking Veeky Forums instead, lel.

LuckyDusty
LuckyDusty

I hate capitalism now

JunkTop
JunkTop

@BlogWobbles
Thatcher pretty much fucked England by bringing in cheap foreign labor. All it did was create a ponzi scheme and boost government profits. It destroyed the median income.

Dreamworx
Dreamworx

@JunkTop
Thatcher brought in foreign labour? Never heard about that. She joined the European Union organization at a time when it was simply a loosely connected economic union.

Boy_vs_Girl
Boy_vs_Girl

@Skullbone
Massive immigration and women in the workforce expanded the supply of available workers, depressing wages. Automation. Also, cheap money with the end of the gold standard.

w8t4u
w8t4u

@Skullbone
Well before then governments in the west had policies in place that aimed at maximizing domestic employment and economic potential but that is what got blamed for the stagflation that broke out in the 70s... after that governments began to aim instead at maximizing the price of real-estate, stocks and financial securities relative to wage levels.

Nixon funnily enough was really the last liberal president, remember he created the EPA and even had a plan for Basic Income before he was convinced to abandon it

https://www.jacobinmag.com/2016/05/richard-nixon-ubi-basic-income-welfare/

@Evilember
On topic: yeah that gap is a big problem. It also correlates with the abandonment of the gold standard and institution of the IRS I believe. Not to mention the removal of the distinction between investment and savings banking.

The US was primarily forced to get off the gold standard to keep on financing the Vietnam war.
Income tax and the IRS was around since 1913 and Glass-Steagall wasn't gotten rid of till 1999.

@BlogWobbles
The gold standard forced the government to keep face to a degree. Once the gold standard was abandoned the Federal Reserve was free to maximize their shareholders (commercial banks) interests. Paul Volcker spiking interest rates is what speed up the financialization of the economy.
Getting rid of usury limits and access to easy consumer credit/credit cards helped maintain prices but lower wages
https://en.wikipedia.org/wiki/Marquette_National_Bank_of_Minneapolis_v._First_of_Omaha_Service_Corp.

StrangeWizard
StrangeWizard

maybe families should add some value investing to their median income to share in the increasing profits of corporations

Booteefool
Booteefool

@Skullbone
Wealth disparity grew unproportionately

MPmaster
MPmaster

@StrangeWizard
Most people who have that kind of disposable income already do. Problem is more than half the country lives paycheck to paycheck

Spamalot
Spamalot

@Skullbone

Why did Capitalism go wrong after 1970?

It didn't it began to get replaced with socialism... we are now experiencing all the problems that arise from not allowing free market capitalism to run.

farquit
farquit

@Booteefool
this

haveahappyday
haveahappyday

@Skullbone
People stopped demanding higher wages for their work and businesses took advantage of it. Its your fault.

cum2soon
cum2soon

@w8t4u
@w8t4u
Once the gold standard was abandoned the Federal Reserve was free to maximize their shareholders (commercial banks) interests
We saw the disastrous results of this politico-economic interweaving during the financial crisis, where government and FED allowed the finance industry to wreak havoc.

So you advocate a return to the gold standard?

iluvmen
iluvmen

@Spamalot
we are now experiencing all the problems that arise from not allowing free market capitalism to run
Depends on the country. For the United States and the United Kingdom, it is the exact opposite, actually.

kizzmybutt
kizzmybutt

Gov't controls.

Evilember
Evilember

@cum2soon
So you advocate a return to the gold standard?
No. Gold is just a commodity, there's noting really magic about it and essentially limiting spending to the amount of gold you have is stupid but monetary policy should be controlled by the "real" economy of production of commodities instead of having monetary policy being controlled by people who are going to profit from pure speculative asset inflation.
This is a good read:
https://ismaelhossein-zadeh.com/who-owns-the-fed/

LuckyDusty
LuckyDusty

nobody ITT knows the real answer

Deregulation and derivatives nigga

Harmless_Venom
Harmless_Venom

it went just as planned. There is a race to the bottom caused by the expansion of the work force ,both nationally and internationally, to devalue labor.
During this period, mass immigration and female entry into the workforce undermined the cachet of one income families. In addition to competing domestically, third worlders compete in their own country as a result of free trade and absent protections. Technology also contribute gains you cannot really dispense to wage-earners.

TechHater
TechHater

@FastChef
just got fucking obliterated by @likme

time to fucking kill yourself you goddamn monogloid

JunkTop
JunkTop

@LuckyDusty
Overlapping concepts already mentioned as possible culprits several times:

@Evilember
financial industry preying on real economy
@BlogWobbles
Reagonomics
@Booteefool
wealth disparity that is traced back to deregulation

Need_TLC
Need_TLC

@Skullbone

Stagflation gave Reagan and Thatcher the opportunity to do widespread Union busting by pinning the blame on Unions. Nevermind that when the world economy recovered it also recovered at the same time in places that didn't gut their Unions.

likme
likme

@Need_TLC
What was the actual reason for the stagflation, then? Afaik it was indeed the wage boom not backed by productivity in the 1970s.

TreeEater
TreeEater

@Spamalot
This

Thanks liberals

PackManBrainlure
PackManBrainlure

@likme

Nope. Busting unions had jack to do with it. It was supply shock, due mostly to oil iirc.

TechHater
TechHater

@PackManBrainlure
Consider that the oil price shock after Iraq had almost no effect on the economy.

BunnyJinx
BunnyJinx

@Skullbone
We decided to get off gold standard which let us uncontrollably expand our deficit by issuing cheap debt and importing foreign products.

This made wages stagnate while GDP picked up.

Lord_Tryzalot
Lord_Tryzalot

@Skullbone
Here in UK the 70s was when unemployment started to go up. Only briefly around 2002 did rates drop to what they were in 50s/60s then went up again. Unemployment keeps wages low while inflation devalues the currency and obviously less people working reduces median income.

Spamalot
Spamalot

@TechHater

Different economies.

askme
askme

@likme
it wasnt real stagflation.
people were just spoilt by the enormous growth after the rebuild of the world wars.
when in 1970 growth was "only" 4 percent people panicked and accused the socialists. thus opening for deregulation and praising hayeks libertarianism

CouchChiller
CouchChiller

@Spamalot
Taking the bait.

This isn't socialist, it's just fuckin business. Elites figure out that their employees don't understand inflation, raises, taxes, and stock options and as long as there are more employable citizens than there are jobs businesses don't need to compete to retain workers. Business is free to fuck with people because they have no leverage. That's it. Notice: Business is very strongly regulated when it comes to expensive licences that don't mean anything, but poorly regulated when it comes to what businesses can do with profits before they become taxable. It's engineered to make start-ups difficult in established fields, so the unemployed can't crack into the market by starting businesses (upfront costs are simply too great, most people have shitty credit scores and won't be issued reasonable loans), which means competition is low among old & established businesses but intense among new ones, which means they all treat their employees like shit.

This is a combination of misplaced or missing regulations, a lack of teeth in the law's mouth, and a worker surplus. This is not a socialist failure, this is a systematic failure that has happened many times in history. Notice again: The same damn problems happened in "communist" China, in pre-revolutionary France, and in the USA/modern West—wages stagnated, the elite cemented their positions with bullshit legislation, and the majority are fooled into competing with one-another rather than addressing the circumstances that have landed them in comparative poverty. There's a reason that the educated are getting worried: These social and political situations have historically resulted in violent revolution (lots of examples: Every turn of the Mandate of Heaven in China plus the Democratic Republic and the communist revolution, the US leaving the British Empire, India leaving the Empire, Russia booting the Czars out, Russia booting the communists out, the French revolution, etc).

Stark_Naked
Stark_Naked

@Skullbone
In a word: securities

Spamalot
Spamalot

@Skullbone
60s
MLK
It was not capitalism, it was democracy driven by cultural marxism to let minorities involve in politics. As result, politics went left

likme
likme

Households got smaller.
In the past you would have more people in a house, and more people working.
Now with many factors such as more elderly living in aged car, more divorces splitting up parents and more kids going to school/college instead of getting jobs means that there are less people and less people earning money in each household on average.

Read economics books.

Poker_Star
Poker_Star

@likme
*aged care.

Methshot
Methshot

@Skullbone
before the cold war ended, western societies governments had to appeal to the working class, for fear of starting a communist revolution if inequality spread to much.
After the late 70s they had less concern for communism because of widespread propaganda and general anti-communist mentalities among the working population, and even less concern after the dissolution of the Soviet Union. At this point, capitalistic governments took a focus of Efficiency rather than Equity in therms of things like labour laws and government benefits to individuals which always leads to inequality.

Prove me wrong cuckbags

Carnalpleasure
Carnalpleasure

@farquit
this graph gives me kek's

MPmaster
MPmaster

@girlDog
Would love to
Excuses

nice

CouchChiller
CouchChiller

@Skullbone
Feminism.

TechHater
TechHater

@Methshot
You're absolutely right.

Communism exemplified by USSR was the free market alternative to Capitalism exemplified by USA. Now that Capitalism has no competition why should it treat the sheeple well? I wonder how many idiots were cheering when USSR fell down, and thousands of Eastern European mathematicians, engineers, doctors and physicists switched boats and put pressure on wages. Drop in the bucket, but still. Globalization is what really killed it - millions of Pajeets for whom minimum wage is not a bad deal.

Methshot
Methshot

@Evilember
After reading a bit more into central banking, the gold standard and the subprime mortgage crisis: I do not believe there was a big conspiracy going on, where, as you put it
Once the gold standard was abandoned the Federal Reserve was free to maximize their shareholders (commercial banks) interests.
What I believe is that there is indeed a twisted connection between FED and commercial banks, but that is due to the ideology of deregulation and simple incompetence/corruption. I do not believe the purpose of central bank money printing to be solely to serve the financial industry.

The cheap money flow from the FED made the real estate disaster possible, but it also could have been put into productive use in the real economy. We have zero key interest in Europe as well, and it does lead to inflated real estate prices, but it also serves the real economy, that would otherwise collapse due to weak consumer demand.

So I deem the cheap money to be absolutely necessary here, against deflanionary pressure in the Eurozone. The same applies to the rest of the world: low key interest may serve commercial banks well, but it also has other vital functions, that legitimize it.

PackManBrainlure
PackManBrainlure

@Skullbone
robots

Skullbone
Skullbone

@CouchChiller
Also an interesting post, because in perfect market economy theory, it is often underestimated how high the upfront costs and risks entering, for example, the automotive industry are. I never heard about new automobile manufacturers that are relevant in Europe for quite a while. It is also next to impossible to threaten Microsoft or Google.

viagrandad
viagrandad

@Evilember
It also correlates with the ... institution of the IRS
The IRS was founded on July 1, 1862.

kys.

Please?

Methshot
Methshot

The 1968 election happened and the US was never the same again. The end.

TurtleCat
TurtleCat

@TechHater
@Methshot
western societies governments had to appeal to the working class
That is also true. Market economies are about competition. So it is ironical that market economiy as an ideology itself lost its sole competitor, and now has a monopoly to spread its message.

Not defending Communism, though. Its goos that this fallacy had been reduced to few obscure countries.

RumChicken
RumChicken

@Skullbone
what happened in August 1971?

VisualMaster
VisualMaster

@Evilember
gold standard no good
fed also no good

that's why the Euro is based on the idea of Freegold and marks its gold reserves to market

FastChef
FastChef

The increase in productivity is the result of capital(computers) not labor. It follows that the return on this capital goes to capitalists not labor.

kizzmybutt
kizzmybutt

@FastChef
A computer is completely unproductive by itself. You need software developers. And they do get good salaries, but these developer jobs often replace or automate existing jobs.

SniperWish
SniperWish

@kizzmybutt

Yes, but over time TECHNOLOGY increases. So the capital that the workers (or the labor) operate gets far superior and produces more per-unit of labour. Its not the workers who are doing more, its the increased amount of capital AND the better technology that makes the capital smaller/more powerful/more automated etc.

Stark_Naked
Stark_Naked

@farquit
GDP
GDP plz respond
plz

Soft_member
Soft_member

@Skullbone
Everyone stopped using the american school of economics around that time didn't they?

Sharpcharm
Sharpcharm

@Soft_member
Lel. And what would that "American school of economics" be?

Carnalpleasure
Carnalpleasure

@Illusionz
As if most people running business aren't stressed cucks too.

Illusionz
Illusionz

@Boy_vs_Girl
This desu
Emphasis on immigration. Cheap labor influx due to mass immigration from non-european countries starting in 1967. The split in the OP's pic happens very shortly after

Evilember
Evilember

@Sharpcharm
Look it up retard

RavySnake
RavySnake

@Sharpcharm
Actually I'll save you the effort.
The American School, also known as the "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy from the 1860s to the 1970s, waxing and waning in actual degrees and details of implementation. Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas.

It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century.[2][3][4][5][6][7] Closely related to mercantilism, it can be seen as contrary to classical economics. It consisted of these three core policies:

protecting industry through selective high tariffs (especially 1861–1932) and through subsidies (especially 1932–70)
government investments in infrastructure creating targeted internal improvements (especially in transportation)
a national bank with policies that promote the growth of productive enterprises rather than speculation.

RumChicken
RumChicken

the increase in productive efficiency isn't really a product of human effort, at least not every individual's human effort

as in, replacing warehouses full of filing cabinets with a server.

taking, processing, and tendering orders through a computer system rather than calling in or faxing documents

maintaining a robotic assembly line rather than pushing trolleys through a factory

do you deserve a pay increase because you can run an excel macro and do more than you would have in 1965? is that a function of your effort or of general advances in technology?

yes, companies make more, but are your wages a representation of the value of your labor or a flat percentage of the profits of an organization?

BinaryMan
BinaryMan

@RumChicken
yes, companies make more, but are your wages a representation of the value of your labor or a flat percentage of the profits of an organization?
Since the company is making more I'd argue that even if you base wages on the value of your labor, since your labor is making them more money the value of your labor has increased in kind.

JunkTop
JunkTop

@Skullbone
More distractions for the populace allows government and corporates to be more corrupt without backlash.

New_Cliche
New_Cliche

@Skullbone
Rich people got congress to artifically shift buying power to the 1% with the intention of creating a psuedo-market where they could control both selling and buying, basically allowing them to print money (in theory).

Problem is that capitalism requires a significant amount of people spending money on goods and services from the capitalist class (the 1%). With buying power out of hands of the masses, the middle class was obliterated. By the time this happened (recession), the 1% had already amassed enough wealth to coast over the entire thing and live on interest alone.

In other words, trickle down economics is bullshit. Trickle up is the way to go.

Dreamworx
Dreamworx

OP-s graph is shitty only designed to mislead.

https://fred.stlouisfed.org/graph/?g=931

Nude_Bikergirl
Nude_Bikergirl

It's been pretty obvious for a long time now regarding America's standing in the world economy. China became an economic and industrial giant, Mexico was dealing with peso crisis, oil was becoming a stronger natural resource that we weren't digging for.

So in turn we did free trade agreements with Mexico and Canada. We poured money into Mexico for the peso crisis. We could not protect our industries from China, and we couldn't stop OPEC from abusing the oil shortages.

So in short America attempted Globalization and Free Trade in a world where other countries and U.S companies got smarter and basically told America to fuck off.

Also automation has been a growing problem for job creation for over 20-30 years now, so that doesn't help.

cum2soon
cum2soon

Keynesians.

Nojokur
Nojokur

@Skullbone
gold standard ended in 1972.

there's your answer

Raving_Cute
Raving_Cute

@Skullbone
It didn't. It went wrong in Murica because that's when you reached hubbard's peak.

It went wrong for everyone else in 2007.

Harmless_Venom
Harmless_Venom

@girlDog
REKT

And I get the storefront captcha all the fucking time and they all look Romanian.

BunnyJinx
BunnyJinx

The current trends in economics will lead to permanent economic stagnation.

As automation and globalization has driven economic polarization in the west, they will grow an enormous pool of surplus workers who will never be able to gain more than odd jobs. So even if the economy recovered, there will be far more people available for labour, but the base line unemployment will remain ever higher.

The neo-liberals forgot the bonds which adam smith spoke of, the intangible bonds which keep a community together. They believe their theory more than what they observe, and it is no surprise that their economic theory is a joke.

Another factor is that the emerging barrier to entry of many businesses due to complete market saturation. Technological change is closing and out-competing local businesses in almost every aspect because of the comparative advantage of economics of scale and internet businesses.

But this limits opportunity, leaves a large pool of no-stake citizens and requires an enormous police state to keep in order.

It will destabilise our society with every economic crisis, require more extreme measures to control, for less economic growth and more debt.

Ignoramus
Ignoramus

@LuckyDusty

Somebody gets it.

The moment companies were able to repackage "investments" and then sell them is the moment the American dream died.

w8t4u
w8t4u

@Skullbone

1. Too much suction of corporate dick.

Everything you americans do is sucking corporate dick. You had your government give out loans to niggers, that banks didn't want to give, creating a housing bubble, which was good for real estate business. Even the banks jumped in to speculate with those loans through Mortgage backed bonds, which the government artificially stimulated through Fannie Mae and low interest rates. Corporations don't have to pay taxes that much, because they can lobby to pass the laws, which practically exempt them from taxes. You bail out shitty banks if they crash. You turn interest rates even lower, to artificially turn the stock/bond yields down, as to artificially pump up their price. The obamacare which you dumb libtards passed is a giant hand job to health insurance companies ( you even can get fined for not buying it). What you get is an inefficient economy, where all the shitty companies can afford to be shit, because if they are big enough, they can just lobby for beneficial (for them) laws. There was this billionaire, that has the government buy all his sugar that he produces at a higher price. Elon Musk got the government to partially finance his toy car industry with tax exemptions and free carbon credits.

2. Cheap labor

Of course after the 1970-ies, what has happened is that China has allowed foreign companies to use their slave labor, which has been successful at getting jobs out of the US, forcing the US wages down. You even opened the borders for mexicans to work below minimum wage, so that can't be good for wages as well.

3.College

Due to your government granting student loans to everyone and your parents peddling you college education all of your life, your private colleges have been successful at pumping up tuition costs. Now the businesses have hordes of desperate, yet educated people they can fuck over.

girlDog
girlDog

@BunnyJinx
Sounds kinda dystopian, but I really see this one coming already in formerly industrial areas. What is often forgotten is that simple white collar jobs can also soon be automated.

CouchChiller
CouchChiller

There are a number of reasons that things generally went awry from the 1970s onward.

Oil crises
There were two oil crises in the 1970s, meaning that oil became a lot more expensive. The first was in 1973 when OPEC proclaimed an embargo. There was another in 1979 following the Iranian Revolution. We generally use oil to power things, from cars to factories. If the price of oil rises sharply, it becomes a lot more expensive to do just about anything. The result for businesses is that they cannot produce as many things. We also saw inflation because the general price level rises as the cost of inputs rises as well. (An oil crisis is an aggregate supply shock--a leftward shift in the short-run aggregate supply curve. You can model this with Econ 101 knowledge).

The Nixon Shock
As other anons have pointed out, the United States ended the gold standard. To be fair, it was already coming to an end in the late sixties, but it became official in 1971. The US was facing inflationary pressure on the dollar as a result of things like the Marshall Plan and Vietnam War expenditures. In 1971, Nixon announced a series of economic measures he was taking in order to fix the problem. There were wage freezes and other stuff, but the most significant was the end of the gold standard. By ending the gold standard, Nixon effectively killed the Bretton Woods agreement, which was a system for international financial regulation devised near the end of the Second World War. Bretton Woods called for a system of fixed exchange rates (e.g. US$1 would always be the same X amount of a foreign currency) with an eye towards capital mobility and financial stability. Killing the fixed exchange rates meant that currencies could float against each other (US$1 would buy differing amounts of foreign currencies, depending on market forces) and ushered in an amount of uncertainty in international finance.

cont'd ...

Lord_Tryzalot
Lord_Tryzalot

@CouchChiller
cont'd

Weakening labour unions and stagflation
During the post-War era, labour unions were both popular and strong; they enjoyed the upper hand in most contract negotiations. As can be seen in the graph in the OP, wages and productivity marched hand in hand until about the 1970s. With the oil crises and other economic shocks occurring, owners of capital began to have the upper hand. We can frame labour negotiations leading up to the 1970s as a battle between inflation and jobs. Owners of capital would want to keep a lid on inflation, even at the expense of jobs; wage-labourers would want to priorities jobs over inflation. It was generally seen that higher inflation meant higher employment, and lower inflation meant lower employment. However, the 1970s saw "stagflation" which was a combination of high inflation *and* low employment. Capital here gained the upper hand because inflation started going out of control (especially since governments could only use aggregate demand measures to deal with recessions, à la Keynes). Volcker raised interest rates to beat down inflation, and labour unions lost several key battles both in contract negotiations and in PR.

Financialisation
The growth of finance started around this time. Uncertainty in currency markets opened the door for such things as derivatives and currency arbitrage. We start to see firms move increasingly towards financial markets and additionally, government officials and academics support this turn.

cont'd ...

idontknow
idontknow

@Lord_Tryzalot
cont'd

Weakening threat of a communist uprising
Keynes legitimately feared the replacement of capitalism with an alternate system, and sought to create a kind capitalism that looked after the less fortunate. (He wrote to Hayek that he was in complete agreement with The Road to Serfdom). However, as the years went by, the prospect of actually replacing capitalism with socialism began to wane. Before, there was a strong incentive to ensure the working classes were well looked after. Later on, this incentive weakened and economic actors became primarily concerned with themselves, often to the detriment of others.

Thatcher, Reagan, and the neoliberal era
These two busted unions and changed the way we think about economics, for better or worse. Rather than Keynes and his theories, Thatcher and Reagan turned more towards the Austrian School of economics, with Thatcher going so far as to cite Hayek's Road to Serfdom as an influence on her thinking. Reagan benefitted from Arthur Laffer's argument about taxes and government revenue. This represents a radical change in economic thinking and ushered in the era of what we call neoliberalism. I will let others argue about the merits of this paradigm; I simply point out its beginnings. Neoliberalism's tenets have since gained both academic and professional backing from prominent economists and bankers. I would argue that neoliberalism has become "common sense" since the 1970s, although the 2008 financial crisis has put a bit of a damper on that.

Now, this isn't to say that capitalism has "gone wrong". I see neoliberalism as a natural outgrowth of capitalism. As time goes by, perhaps we will see more contradictions emerge!

TechHater
TechHater

@idontknow
A few addenda because I was writing stream-of-consciousness:

IMF, IBRD, World Bank
These institutions were created by Bretton Woods and changed their roles once Bretton Woods died. The IMF should be introduced with trigger warnings all over the Global South. :^)

Peacetime
The post-War era was coming to an end. Almost thirty years after the end of the Second World War, all the benefits from a recovery from war began to slow down. There are no longer as many things to rebuild, and so economic growth can't rise as quickly as it did before.

WebTool
WebTool

@Skullbone
Your chart doesn't take into account inflation and other forms of compensation like pensions and dental plans.

http://cep.lse.ac.uk/pubs/download/dp1246.pdf

Lunatick
Lunatick

@WebTool
Your image is of data from the UK. The OP is about the US. Pic here is the chart you were looking for.

And the paper does point out that there is net decoupling in the US on the order of 13%, although it concedes that this is tiny compared to the gross decoupling of 63%.

Lastly, the OP's question isn't just about median wage growth, it's about the structure of the entire economy following the 1970s, of which wage growth is one issue.

girlDog
girlDog

@WebTool
Oh, and the OP chart does in fact take inflation into account. "Real median family income" means "Median family income adjusted for inflation".

TreeEater
TreeEater

@Boy_vs_Girl
Women were mostly in the workforce by 1975.

It has actually declined since the 2000 peak.

AwesomeTucker
AwesomeTucker

The labor market was flooded by women and immigrants during the '70s, greatly reducing the traditional need of businesses to use savings acquired from productivity gains to raise salaries to attract and keep workers.

JunkTop
JunkTop

@farquit
Makes you think

Spazyfool
Spazyfool

@likme
You do realize all households income is still accounted for in this number, right?

Evil_kitten
Evil_kitten

@Dreamworx
?

haveahappyday
haveahappyday

@Raving_Cute
It went wrong for everyone else in 2007.@Dreamworx

cum2soon
cum2soon

@WebTool
Reading comprehension

askme
askme

@AwesomeTucker
Women were flooding it 1940-1975 as well

SniperWish
SniperWish

@farquit
Why on earth did they expect it to rebound? We have run out of impoverished workers to exploit. Everywhere left is too unstable.

Lord_Tryzalot
Lord_Tryzalot

@FastChef

a sample size of more than 1 is preferred for most economic studies

Sir_Gallonhead
Sir_Gallonhead

@WebTool
I was just about to dig up that PDF.
You are doing Gods work man.

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