As liberals love to point out, the 30 years after the end of World War II were a time of great – and broadly shared – prosperity in America. But then it all started unraveling, around 1977. Since then, even though the U.S. economy has grown at an impressive clip, only the already rich have really benefited. In a new post, former Labor Secretary Robert Reich asks, “How did we go from [the Great Prosperity] to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?” As Reich explains, in the postwar years America made “a basic bargain” with American workers that went like this: Employers paid workers enough to buy what they produced, and workers’ buying created new jobs. Government pulled the policy levers to achieve nearly full employment; ensured ordinary workers more bargaining power; provided social insurance; and expanded public investment. Since 1977, technology and trade have displaced jobs but, even more important, depressed wages; rather than be out of work, American workers have settled for lower pay. Meanwhile, government has shredded social safety nets, slashed investment in education and other public goods, allowed bargaining rights to erode, and prioritized controlling inflation over creating jobs. Americans have hung in there by working longer hours and borrowing more, and by having more women join the workforce. But these “coping mechanisms,” as Reich calls them, are pretty much played out. “The fundamental economic challenge ahead,” he writes “is to restore the vast American middle class.” But how? Start by heeding a key lesson of the Great Prosperity, he writes – that government has an essential role to play.
• ‘The Truth About the American Economy’ [Robert Reich/robertreich.org]