‘X’ Marks the Spot Where Inequality Took Root: Dig Here

August 5, 2015 | Economic Opportunity Institute

Stan Sorscher, EOI Board Member

Stan Sorscher,
EOI Board Member

In 2002, I heard an economist characterizing this figure as containing a valuable economic insight. He wasn’t sure what the insight was. I have my own answer.

The economist talked of the figure as a sort of treasure map, which would lead us to the insight. “X” marks the spot. Dig here.

The graphic below tells three stories.

First, we see two distinct historic periods since World War II. In the first period, workers shared the gains from productivity. In the later period, a generation of workers gained little, even as productivity continued to rise.

Figure 1: The X marks the spot where something happened.

Figure 1: The ‘X’ marks the spot where something happened in the mid-1970’s. (Click to embiggen)

The second message is the very abrupt transition from the post-war historic period to the current one. Something happened in the mid-70’s to de-couple wages from productivity gains.

The third message is that workers’ wages – accounting for inflation and all the lower prices from cheap imported goods – would be double what they are now, if workers still took their share of gains in productivity.

A second version of the figure is equally provocative.

Figure 2

Figure 2: Follow the money (or the lack of it).

This graphic shows the same distinct historic periods, and the same sharp break around 1975. Each colored line represents the growth in family income, relative to 1975, for different income percentiles. Pre-1975, families at all levels of income benefited proportionately. Post-1975, The top 5% did well, and we know the top 1% did very well. Gains from productivity were redistributed upward to the top income percentiles.

This de-coupling of wages from productivity has drawn a trillion dollars out of the labor share of GDP.

Economics does not explain what happened in the mid-70s.

It was not the oil shock. Not interest rates. Not the Fed, or monetary policy. Not robots, or the decline of the Soviet Union, or globalization, or the internet.

The sharp break in the mid-70’s marks a shift in our country’s values. Our moral, social, political and economic values changed in the mid-70’s.

Let’s go back before World War II to the Great Depression. Speculative unregulated policies ruined the economy. Capitalism was discredited. Powerful and wealthy elites feared the legitimate threat of Communism. The public demanded that government solve our problems.

The Depression and World War II defined that generation’s collective identity. Our national heroes were the millions of workers, soldiers, families and communities who sacrificed. We owed a national debt to those who had saved Democracy and restored prosperity. The New Deal policies reflected that national purpose, honoring a social safety net, increasing bargaining power for workers and bringing public interest into balance with corporate power.

In that period, the prevailing social contract said, “We all do better when we all do better.” My prosperity depends on your well-being. In that period of history, you were my co-worker, neighbor or customer. Opportunity and fairness drove the upward spiral (with some glaring exceptions). Work had dignity. Workers earned a share of the wealth they created. We built Detroit (for instance) by hard work and productivity.

Our popular media father-figures were Walter Cronkite, Chet Huntley, David Brinkley, and others, liberal and conservative, who were devoted to an America of opportunity and fair play.

The sudden change in the mid-70’s was not economic. First it was moral, then social, then political, ….. then economic.

In the mid-70’s, we traded in our post-World War II social contract for a new one, where “greed is good.” In the new moral narrative I can succeed at your expense. I will take a bigger piece of a smaller pie. Our new heroes are billionaires, hedge fund managers, and CEO’s.

In this narrative, they deserve more wealth so they can create more jobs, even as they lay off workers, close factories and invest new capital in low-wage countries. Their values and their interests come first in education, retirement security, and certainly in labor law.

We express these same distorted moral, social and political priorities in our trade policies. As bad as these priorities are for our domestic policies, they are worse if they define the way we manage globalization.

The key to the treasure buried in Figure 1 is power relationships. To understand what happened, ask, “Who has the power to take 93% of all new wealth and how did they get that power? The new moral and social values give legitimacy to policies that favor those at the top of our economy.

We give more bargaining power and influence to the wealthy, who already have plenty of both, while reducing bargaining power for workers. In this new narrative, workers and unions destroyed Detroit (for instance) by not lowering our living standards fast enough.

In the new moral view, anyone making “poor choices” is responsible for his or her own ruin. The unfortunate are seen as unworthy moochers and parasites. We disparage teachers, government workers, the long-term unemployed, and immigrants.

In this era, popular media figures are spiteful and divisive.

Our policies have made all workers feel contingent, at risk, and powerless. Millions of part-time workers must please their employer to get hours. Millions more in the gig economy work without benefits and have no job security at all. Recent college graduates carry so much debt that they cannot invest, take risk on a new career, or rock the boat. Millions of undocumented workers are completely powerless in the labor market, and subject to wage theft. They have negative power in the labor market!

We are creating a new American aristocracy, with less opportunity – less social mobility and weaker social cohesion than any other advanced country. We are falling behind in many measures of well-being.

The dysfunctions of our post-1970 moral, social, political and economic system make it incapable of dealing with climate change or inequality, arguably the two greatest challenges of our time. We are failing our children and the next generations.

X marks the spot. In this case, “X” is our choice of national values. We abandoned traditional American values that built a great and prosperous nation. Our power relationships are sour.

We can start rebuilding our social cohesion when we say all work has dignity. Workers earn a share of the wealth we create. We all do better, when we all do better. My prosperity depends on a prosperous community with opportunity and fairness.

Dig there.

[Original: Huffington Post]

Posted in State Economy


  1. Saris says:

    I think there is also an increase in entitlement, of the average man not really wanting to work together or sacrifice. In a world where everyone plays independently, you will have some big winners who will earn it… And the average man with average competence, and no desire to work hard to win… Won’t win.

    The desire for comfort is and always has been dangerous.

    • “Entitlement” to having a roof over your head and enough to feed your children, perhaps. The “average man” has sacrificed plenty. The real entitlement is among those on top who have sacrificed, and seem willing to sacrifice, nothing. Everyone else is struggling to survive; they would like to be entitled to a living wage, but have no way of getting it.

      I entered college in 1973, and was introduced to Ayn Rand in the mid-1970’s. Full of her ideas, I (like Rand Paul and others today) was convinced that I was one of the elite, and that my superior ability and intellect entitled me to prosper. And that’s exactly how it worked through the early 1980’s. That’s when I started seeing the shift away from a viable middle class to an oligarchy.

      Around the mid-80’s to early 90’s, we went from a well-off, comfortable professional class to steadily compressing everyone below the executive level. In 1978, I made $18K/year and the company President made about 4 times that. The median employee probably made $12K/year, so the CEO made perhaps 6 times the median salary. That’s tenable, although likely the production workers struggled.

      When the average CEO now makes 345 times the income of the average employee, and other executives and sales managers make similar windfalls, that’s no longer tenable. The vast bulk of our productivity is being sucked into a small number of hands and being locked away in passive investments that do not spread the wealth.

      The struggle has moved from the poorest up to the factory workers, then the clerical workers, and on up to middle managers and professionals. Now very few people make a comfortable income.

      To talk about “entitlement” as though hard-working people want something extraordinary when they can’t afford rent or food is appalling. Those things were givens in the 50’s through the 70’s. Now they’re considered luxuries, and the people who ask for them are somehow greedy. We’ve turned American society into the orphanage in Oliver Twist – “Why ask for more when you know what’s in store?” Or to Les Miserables, where hard-working people are reduced to begging for crumbs or burnt loaves of bread because the aristocracy has all the wealth.

      • What I find most interest is your “causal” effect. While “greed” may be one characteristic, you leave out the substantial disruptions in society that occurred at the inflection point: Roe v Wade devalued life, No-fault divorce, encroachments in the labor/management relationship by an intrusive Federal Government, massive increases in State and Federal regulation, massive growth in State and Federal taxation, massive growth in entitlement spending, and massive increases in Federal debt. These are but few.

        To weave in “climate change” into this discussion shows that the writer is simply trying to advance a political agenda with little, if any, regard for the preceding paragraph’s causal realities. Indeed, the “social compact” was destroyed by the Labor Unions and their lackeys in Federal Government. It was a cozy relationship: workers demand higher wages and more restrictive work rules requiring greater wages for less output. In turn for their regulatory imposition of these goals, the Government grew at a phenomenal rate in the same period.

        One must also be cognizant of the fact that the top 10% income earners in the 1970’s paid approximately 52% of all taxes. Today, they pay 84%. In 1974, the working poor were consider so if they earned 20% below the median income. Today the working poor are considered such if they earn 150% of the median. So, when arguing statistics let us at least play with the same set of facts.

        Moreover, the cost of government regulation was estimated to be approximately 1.5% of revenues. Today it is 9% or 6 x’s what it was in the 1970s. Further, government receipts as a share of the economy was 17% vs. 22% today. Both of these phenomena demonstrate a direct correlation between liberal policies, the growth of government as a share of GDP, and the changes in real wages.

        The real question is how do we reverse this trend? While not simple, a good starting point is to withdraw the government from such a deep intrusion into the economy and reduce their share of the overall economy. Second, markets must rethink the wisdom of constant sequential quarterly growth in top-line revenues and earnings. Such attention is shortsighted and ignores the inherent advantage of build long-term shareholder value and a well-educated and compensated workforce.

        • ThatDontAddUp says:

          Duh, If you are taking 93 % of the Money you would be paying most of the taxes…

          • Suzann Fulbright says:

            Actually no, if you are taking 93% of the money you buy the politicians who will make sure you are paying record low tax rates, if any tax at all.

          • Ravi Dattani says:

            exactly. paying more taxes is the symptom, not the cause. anyone who makes the point of the rich paying more taxes needs to understand the basics of math.

          • Lamont Dakota says:

            Those taking 93% of the money _do_ pay a _lot_ of the taxes, but they don’t, by any measure, pay _most_ of the taxes, duh. Do you really believe that the tax laws that apply to ordinary people apply to the rich, duh? At _best_, those taking 7% of the money pay 53% of the taxes, whereas those taking _93%_ of the money pay _only 47%_ of the taxes. The rich do NOT pay 93% of the taxes!

            One billionaire even pointed out publicly that his secretary paid 35% of her income in taxes, whereas he paid only 15% of his income in taxes!

            Apparently, the ThatDontAddUps make up “the 5% that never get the word,” as we say in the Army.

          • jason sheaff says:

            not in Australia’s current taxation format , it seems that these days the systems are set up so that the top 93% don’t pay any tax and receive generous subsidies while everybody else gets shafted and the lower down the food chain you happen to be the more of the burden you are being forced to carry .

          • Debbie Tucker says:

            Well, you would think so, but this is not correct. The greedy rich have made it so they do NOT pay ‘their fair share’, and have not done so for decades! There are whistle blowers amongst the super rich who tell us about this – Nick Hanauer, the group Patriotic Millionaires for Fiscal Strength, writer Stephen King (check out his article, ‘Tax Me For F**** Sake!), and others. The greedy rich are PATHOLOGICALLY greedy and NEVER have enough – and they believe that regular working people paying a higher tax rate than they do is just FINE since they are entitled and ‘special’. So that is a MASSIVE problem that has snowballed for decades.

        • Fred says:

          I could “almost” agree with you William. BUT the ONLY way to shift the “wisdom of constant sequential quarterly growth in to line revenues” is to have an “ultimate authority” to keep it in check. Often business economics is equated to the game of “Monopoly”. The object of the game is to bankrupt the other players. The player who does, wins, But a board game can be put away in the closet without consequences. A population can not be put on a shelf, and the consequences to society are REAL. Vested self interest of the 1%ers will not change unless forced to (if you were a 1%er…. would you passively agree that you had too much and you couldn’t make any more?) A withdrawl of government intervention would merely enable more greed in the market. A case in point is the mortgage and housing crisis. The US financial markets were deregulated and allowed “self monitoring for compliance” (short term gain without responsibility of consequences). In Canada, such deregulation was never passed despite the lobbying of the financial markets. The US system virtually collasped, the Canadian didn’t. And WHO had to come in to provide the bailouts to prevent an entire social collapse??? The Government (ie working taxpayer).

          The biggest problem with the current system is that Government Leaders come from the corporate sector and create policy based upon their own economic frame of reference (the 1%ers). Intervention only occurs in extreme crisis. Had their been an intervention in 1975 that would have imposed limits on “greed”, then the pre 1975 trend would have continued…. or at least leveled off into stability. Yes, the 1%er would not be as well off. But the 1%ers could take a 75% loss right now and still own a better house, better car, and hold financial security for life.

          The 1%ers are playing monopoly with our economy because of the ego gratification they receive, They are completely insulated from the consequences of their actions ( a market crash will not force them to take a minimum wage job or loose their ability to provide food, shelter, clothing. They would merely become less rich.

        • Bbfile says:

          In the 1970’s, the top 10% of the earners controlled a much smaller portion of the wealth. But top tax rates were much much higher than they are today. Today the top 10% controls a much greater portion of the wealth and they pay much less percentage-wise in taxes.

          • Rik says:

            Your confusing gross and net. While the top wage earners had income tax brackets upward of 90%, deductions lowered that tax liability to the mid 30% range. The tax brackets were changed in the 80’s, lowering the rates, but also removing the majority of deductions. The net tax rate of today, is equal to the net tax rate prior to the 80’s.

        • Dan Reed says:

          The Reagon supply side economics, and smaller government was supposed to solve your stated issues. Thirty years of Reagans supply side economics is now history, and where are we? 1.) deregulated corporate monopolies, industry collective oligarchies, and 2.) a rapidly expanding Aristocracy!

        • Ron Santos says:

          Roe vs Wade somehow affects income inequality? Conspiracy Theories and no causality based on any studies. And the top 10% paying 84% of taxes when their share of total income represents a dramatic increase out of the pie! And the cost of regulation should be higher today vs. pre-1970s because that was back when companies could create toxic dumps, water pollution to destroy drinking water and ecosystems, and just walk away with profits. The next big issue of climate change… if we let greed rule the land then all coastal communities will lose half their real estate in the next century, vast sections of the world will become deserts and uninhabitable 125 degree ovens, and agriculture and fishing will be severely impacted. Sure, unbridled greed with the short-sighted goal of maximum owner profits over the next 5 years are just what we need for survival…NOT

          • popesuburban says:

            In that it’s repeatedly been shown that lack of access to education and tools for family planning severely limits women’s economic achievement, yes. So in the opposite direction of where this chucklehead was going with it. Roe v. Wade stood to improve millions of women’s lives, and did, despite the way people insist on trying to chip at it. To take a dim view of that comment is only sensible.

        • Marc Cates says:

          You could learn to interpret a graph. Your rant is symptom of plutocracy not cause. “It was a cozy relationship: workers demand higher wages and more restrictive work rules requiring greater wages for less output.” Is the opposite of what that graph conveys.

        • Lisa Beth says:

          Stop using women and body autonomy in your economic argument. Roe V Wade did not devalue life, it place women on more equitable footing. There is also another recent theory that if women would only have 1/2 a child (one child for every two women) we could end global warming. Same argument. Women are not political or economic pawns. We are human beings and one of those workers. The only place we are lacking is power and wealth.

        • Santa says:

          Very interesting. From 52% to 84%. Wonder why? DO I REALLY have to explain this to you?

        • T says:

          You are wrong. Watch a different channel.

        • Jake says:

          We’ve been through a “gilded age” before, and what saved the country then was the Progressive. agenda. The unregulated market squeezes wealth to those who already have it in true “robber baron” fashion. The antidote to this kind of dynamic of “trickle up” economics ( and it’s hardly a trickle) is conscientious government intervention..

        • John says:

          William Vaughn, you keep on repeating the same bullshit arguments being presented by the wealthiest 1%, without having a clue as to what is actually going on.

          In spite of all those issues you claim are placing such a hardship on the wealthy, you ignore the actual fact that that the top 1% have thousands of times more money than they had in the 70’s, while the average working man has about the same amount of money.

          If all of the things you claim are causing such a hardship on the wealthy, then they would have less money today, not vastly more money.

          Additionally, your attempt to characterize this as a moral issue, in the first part of your post, is beyond detestable.

          I have no clue why anyone would believe it was necessary to jump to the defense of the wealthiest 1%, who don’t actually need any help, because they are doing fine. If you saw ten adults beating a child, I imagine you would jump in and help the adults.

        • ScienceFTW says:

          Climate change is not a political agenda or a belief, it is a scientific reality.

        • Ormond Otvos says:

          I’m reminded, when I look at William’s Facebook page, of the old adage “It can be very hard to understand something when misunderstanding it is essential to your paycheck.”

          Pharmaceutical company bigwig?


        • Laurella Desborough says:

          You say the top 10 percent are paying 52percent in taxes. I don’t buy it for one minute. Not in any information I have read on taxes. Nope. Much of the changes we see are all part of the effort of the uber wealthy and their “helpers” in Congress who have destabilized the financial sector, allowed for risky loans. allowed for mortgage companies to fraudulently take homes, subsidized major corporations, involved our military in military actions that were not labeled wars but certainly used billions of our tax dollars, off shored basic manufacturing industries, Reagan reduced the ability of unions to properly advocate for the workers, and on and on. You want to withdraw the government from intrustion in the economy? Looks to me like that has already happened. We have NAFTA and looming the TPP. Talk about destroying the US economy, those two will do it just fine. Oh, and did I mention leveraged buy outs? Where one company buys another, takes over all the valuables and sacks the workers, closes the doors and moves on. Very destructive. The problems we face are not caused by the government, they are caused by those who lobby the government to do their bidding for the upper one percent.

        • Philo Janus says:

          > encroachments in the labor/management relationship by an intrusive Federal Government,

          You mean with silly things like “worker safety” or “requiring that workers be paid for every hour worked”? (With the explosion of the “exempt” status I guess you’re glad *that* national nightmare is over!)

          What I really don’t get – you complain about government interference in “labor / management relationship” then you complain about Unions, which are the epitome of labor/management relationships.

          It seems to me like you’ve taken the okeydoke that the robber barons should be left alone to take as much as they can out of the economy that made their wealth possible.

        • chris says:

          “Roe v, Wade devalued life….” Got news for ya, buddy, life was devalued long before that, mainly by the age-old custom of warfare.

        • Christian Jensen says:

          William… while on the surface your many facts and figures try to paint a certain picture, but to anyone with even the slightest knowledge of the what happened in the late 70’s in American politics and economics, your arguments are laughable.

          You say: “…a good starting point is to withdraw the government from such a deep intrusion into the economy…” History shows us that the OPPOSITE is true.

          What happens when we actually DO have strong regulations? Well, just look at the 50 year period between 1931 (Glass-Steagall act – tough regulations) and 1979 (Reagan and the initial assault on government regulations) when we had strict measures governing the financial industry? We had relatively stability and MASSIVE prosperity.

          So what happens when you tear down regulations, or as you call it… “government intrusion into the economy?” You get the same same thing that happened in 1929, naturally. Starting with Reagan’s ‘trickle-down’ economics in 1979, the next 30 years saw wave after wave of DEREGULATION (culminating in the dismantling of Glass-Steagall Act in 1991), followed of course, by wave after wave of financial corruption and economic disaster, namely the 1980’s savings and loans crisis, and the 2008 mortgage industry crash.

          So to summarize: 1) We already have TWICE tried deregulation, and it lead to financial catastrophe BOTH TIMES. 2) Since Reagan, we have experienced massive deregulation… so why are you arguing that we have TOO MANY regulations?

        • Roe vs. Wade simply made lives, for some, more valuable than you’d like. Very, very telling.

        • Rowan says:

          Enter the troll that’s been lapping up neoliberal rhetoric all his life. Correlates with liberal policies? I’d be dying laughing at how far off that is if it weren’t so scary. You seem intelligent and yet you actually believe this? Changes in government spending as a % of GDP are as much due to evolution of the global economy as anything else … and they pale in comparison to the % of GDP that’s filtered up instead of spread across all incomes. The problem is neoliberalism, not liberalism. Trickle down, free market, and other similar right wing nut job theories are shams and it’s obvious. They are the result of this very ‘greed is good’ cultural shift that the author mentions. Leave it to the right wing nuts and the US will be the new Mexico in a few generations. Millionaires and peasants with almost no middle class. Keep believing the hype and sooner or later one of your children or grandchildren will be one of those peasants.

        • kipoca says:

          It’s interesting that you suggest it was government growth that did this when government has been declining in all of the areas you point to as the cause since then. Ronald Reagan happened. The reason those other numbers are higher now (wealthy paying more) is because the middle class is shrinking. Median income has also dropped, which is why poverty is higher now – again, the result of a shrinking middle class.

          Marty Friedman, Al Greenberg, and Ronald Reagan’s entire economic team got what they wanted, and it’s what we have now. Obama is benchmarking himself against Reagan.

        • What a crock. Deregulation is what killed us. Holy crap, dude….

        • I very much doubt that the top 10% of people pay 84% of overall revenue, especially as corporate “contributions” have fallen dramatically from something like 30% to 12% over the last 50 years. Even if the individuals proportion has gone up by 30%, their earnings (if you even consider that they DO earn it) have gone up by 500%.

        • Larry Nance says:

          Dear William,
          This is very insightful to how drastic population growth and climate change will stress our resources more.

          The Horror, in part, is Global Warming, Climate Change.
          It is real and we are the cause.
          It comes down to chemistry, biology and physics. They do not negotiate. They supply the laws that govern the life cycles of the planet.
          Humanity is now a major geologic force and we are changing the chemical composition of the land, sea and air, affecting these life cycles. All life – in both hard and subtle ways – is being forced to change, adapt or die off, including us, that most are not yet conscious of.
          There will be more extreme and weird weather events, almost all of them bad for us.
          The only questions are “How fast?”, “How hard?” and “How soon?” will these changes take place.
          With a president-elect who thinks this is all a hoax, it seems we are poised to continue to do nothing to address this and Climate Change will evolve unabated.
          Everything you care about, everything you hope to achieve and create, everything important to you will become more fragile, harder to do and more difficult to hang on to as the planet warms.
          There will be local and regional differences, of course; weather will still happen. But, our institutions will be taxed and traditional differences and conflicts will be stressed, nudging, or perhaps tipping, us into new social and cultural equilibria. Syria is a perfect example of a region where a new, but well-known, equilibrium has been reached: one of conflict, killing, starvation, mass migration, division, dehumanization, and hatred and fear – in short, War. The Syrian Conflict is a Climate Conflict, precipitated by major drought that caused mass exodus from the countryside to the cities, putting stress on a fragile economic and political system. I need to say that as horrible as the Syrian Conflict is it is still a pretty small scale when you compare it to the fact that 10% of the world’s population lives on coast, and we are too slow wakening up to the fact of sea-level rise. That’s approximately 700 million people and Trillions of dollars of infrastructure and arable land at risk. Again, “How fast?”, “How hard?” and “How soon?” are the questions; however, the migration of that many people and the loss of that much wealth over even 2, 3 or 4 generations would be devastating. It is not a stretch to imagine other equilibria, even less appetizing than the Syrian Conflict, that could arise.
          We need to work against this.
          Our human dignity is at stake because there is already a great deal of warming momentum in the climatic system and it will take time for us to change and reverse this.
          USA’s political system did what it did. What’s done is done and a short cycle of 4-12 years. We need to start thinking in longer cycles of 20-50 years, and …
          We need a Planet-wide development of Consciousness to cope with this changing world and a new way of coping with one another and our environment.
          My gut suggests that a good place to start is by looking up and seeing yourself in the person next to you and act accordingly.”

      • tweberfree says:

        Thank you for speaking what is painfully obvious to those of us at the lower end of the pay scale. You just never know when you’re going to end up there. (I speak from experience.)

      • Lynda Bush says:

        I completely agree.

      • shodospring says:

        Thank you for saying this so well.

      • Trizz says:

        Well said.

      • Santa says:

        Bravo! We share a similar history. Human beings, by nature, are self-centered. We’re constantly looking for validation and often personal wealth becomes that validation. Until we have a reversal of fortune and wake up from our ego trip. I once had a comfortable 6 figure salary. Now I earn about $25k a year. My wife about the same. $50k sounds like a comfortable income, but with 3 kids, a mortgage, cars to get to work, child care and everything else that comes with the package, we still can’t pay our bills. I’m in my 2nd HAMP-style modification. The 3rd and final test period payment is due 9/1 and I don’t have it. That means foreclosure as I’m almost $25k in arrears. My house is falling apart from lack of needed repairs and my car is on its last legs, with a 45 mile each way commute to the only job I could find, outside of my customary industry of 35 years. I’m not stupid or lazy and I’ve proven that with my past success. Yet, no one gives me the time of day anymore. Why? Hmmmm….

      • ellen says:

        I agree entirely.

      • mjw1970 says:

        Interesting how you can recognize the problem but not see that the attitudes propagated by Ayn Rand and her ilk are the problem.

      • Julie says:

        Well said. Our middle class is rapidly evaporating while asshats like Trump and co. Are stealing from the working people.

      • WAB says:

        You hit it right on the head !

      • Val Serrie says:

        Brilliantly said, and very true. Ayn Rand poisoned the water for us all.

      • ashley hunter says:

        Thank you!!!^

      • Ed Falis says:

        Great expansion of the real story, firesmithCorey Cole.

    • Lynn Wilder says:

      Entitlement is a rich mans word…


      That’s just a convenient excuse from a privileged person who probably never worked in a factory for minimum wage in their life. The demographic you described were able to work and live because they weren’t yet being exploited. I was born in 1950 in a blue collar family in NYC – the embargoes happened in the mid 1970s and Reagan brought the change in values into government via regulation and a war on unions. I lived during these times – before the media was purchased by corporations that only offered one narrative with everything related to their narrative tailored to support their manufactured belief system centered around consumerism and legalized gambling in the “markets.”

      Please don’t patronize us with cheap shots at the characters of people you never knew – I knew them – they were hard working, honest and played by the rules. All of a sudden – a different demographic stopped playing by the rules of a US stable society and started operating like organized crime lords.

    • The fallacy of your “who earn it” by hard work, negates the fact that often, a person works very hard providing the labor/service that makes someone else rich. It isn’t competence and hard work, but rather greed, selfishness, and willingness to “use” others as collateral that make some rich at the expense of others. Do you not think the workers in the ” slave labor camps” and ” sweat factories” work hard? Do you not think those workers in the Triangle Shirtwaist Fire worked hard? What about all of those immigrants who laid the railroads from coast to coast? Teachers who work 65-70 hour weeks?

    • nonib56 says:

      The average competent human hasn’t lost desire, they’ve lost hope of ever digging out of the hole.

    • Santa says:

      Social Darwinism?

    • Jake says:

      I am suspicious of such ex cathedra pronouncements/generalizations about “the average man.” Rather than conclusions drawn from data, you seem to start with conclusions drawn from … what? Ideology? Talk radio? No critical thinking, just general conviction based on … Who knows?

    • That’s a right-wing talking point that is as old as capitalism itself. Dig deeper and think for yourself. People didn’t suddenly become lazy in the late seventies! Wake up! Quit letting the elites do your thinking for you.

    • John says:

      Saris, it’s like you didn’t even read the article. If you did read it, you have such a biased belief system that it defies reason, and evidence.

      If the average worker had no desire to work hard, and there was an increase in entitlement, as you claim, then productivity would be on the decrease, but it’s not.

      People aren’t poor because they are too lazy to get ahead. That is just the lie that your corporate masters tell you, so they can continue to exploit you and rob your soul.

      The mega wealthy are not job creators, providing you with a way to earn a living out of the kindness of their hearts. Consumers create jobs, and when the wealthy fail to pay a living wage to the majority of the workers, there aren’t enough consumers earning enough money to create those jobs.

      College graduates are not working minimum wage jobs because they are lazy. Until a large number of Americans can get rid of the idiotic idea that poor people are poor because they deserve to be, it will keep getting worse.

      Personally I am not holding out much hope, because the one resource we have an over abundance of in this country, are judgmental people who believe they are superior to the poor.

      It’s just a damn shame that the people who are earning middle class wages, believe they are being given something for their hard work, instead of recognizing they deserve a lot more, and would have a lot more, if the system wasn’t rigged.

      It’s not the poor people who are taking your prosperity. I checked. They don’t have a damn thing.

    • Jack Shelley says:

      Increase the tax for the people at the top, isn’t that what happened in 1975? The gigantic tax code that no one talks about got bigger and bigger. There are so many laws authored by lobbiests regarding tax code it would make the average joe puke!!!

    • jason sheaff says:

      so you are saying that a CEO works at the rate of 2000 of his workers ? great analogy , I have found that the ones who knew how to ”play the game ”and rort the system were and still are the real winners and the rest of the poor saps were left behind because they have a conscience and integrity.

    • civiletti says:

      How do you square that opinion with the continued increase of productivity?

    • Nico says:

      Though it is full of generalizations, the key presentation could be seen as the redefining of “entitlement.”

      He’s arguing that we used to see everyone as entitled to economic growth which they were a part of creating. [I don’t think the author is correct about his “golden era,” but that doesn’t change the basic analysis of the graph — that around 1975 wages were decoupled from productivity gains.]

      Why is the average person — who works a full week of work as we define it — not entitled to the fruits of his labor? That person doesn’t have to just “get by.” If we all put our labor into our joint economy, we should all bear the fruit of that — even if that means we all get “luxuries” and comfort. What is wrong with comfort? And what is this “winning” you speak of? Who wants to win when another hard-working person loses? Why would you want that and why would you want an economy that encourages that?

      The author also implies that one can not really “work independently” — unless you’re trapping your own food, our labor and risk are all interconnected.

    • Tom says:

      I remember that time period. I was young, but my dad worked for a steel mill. The mid 1970’s were when Japanese steel became cheaper than American steel, and Japanese cars started flooding the US market. It was the very first time that America had significant foreign competition. And of course it was also the time of the oil embargo and the first time that gas prices AND interest rates started skyrocketing. It was indeed the end of the post WWII prosperity period.

      Obviously after that, things were never the same. Companies still had to turn enormous profits, but now those companies had to get their share of profits off the backs of the very people who were actually doing the work and making the most significant contributions.

    • Bill Roberts says:

      What’s so strange, is that I can’t even assume you’re one of the well off, since even those that are most afflicted by this curse are exactly those that continue to perpetuate it by voting for politicians who give us oligarchic policies.

      Everyone should look to the Scandinavians for a view into what’s possible in a modern society.

    • WASP Calvinist values of predestination came to the fore – God gives success to those chosen for paradise while failure to prosper = damnation – but as a Calvinist theologian told me, the American model shifted away from community & generosity, e.g., mainline Protestantism, to evangelical greed, so-called prosperity gospel, more for each individual is better. This shift coincides with the managerial revolution & a dominion of bean counter MBAs over loyalty to the collective well being of firm, supply chain & consumers

    • Let’s not forget the obvious US pulled out of the great War Machine Vietnam in 75. Huge interest rates during Carter administration left us floundering to pay 18% mortgages decreasing average American net worth substantially.

    • Brian says:

      Well, Saris, it’s obvious that you’ve embraced the post 1975 values hook, line, and sinker. But I have to agree with the article’s author, those values are divisive, predatory, and un-American. But you are correct that the desire for comfort is and always has been dangerous, but you left off the conditionals that make it even more poignant: the desire for comfort is and always has been dangerous, especially when it overrides the best human attributes, namely, compassion, fairness, and charity. And this more complete statement of fact shows exactly where your philosophy, as stated, falls apart. You and the wealthiest in this country, have no standing to judge who has or doesn’t have the “desire to work hard to win.” And when the game is played on such an unlevel playing field, you cannot look at the game scores and claim that the losers just didn’t want it bad enough.

      The chart reveals the true redistribution of wealth that this country suffers under. It is not that taxes steal the money from those who earned it and give it away to the unworthy. If that were the case, the numbers in the chart would look very very different. Instead, it is the case of the unworthy stealing the wealth from those who work to earn it before it ever gets to their paychecks.

      The capitalist is a very important player at the start of a business venture, and should be rewarded fairly at that point. But once the equipment and other necessities of production are in place, the role of the capitalist is diminished, and the roles of those who make the production happen should predominate. The capitalist is still entitled to some return on his investment, but that investment adds nothing new to the production of goods or services, it is simply money made from having money, and therefore should be taxed at a rate higher than the salaries of the workers, who after all, are putting daily sweat and labor and ingenuity into their roles. Without the workers, once the mechanisms of production are in place, no goods and services can be produced. As productivity rises, so should worker’s wages–they, after all, are the driving force behind the gains.

      That wealth increase, siphoned off by management and capitalists, is being taken completely out of the American economy, shunted to tax havens, investment in other countries, and to stuff the pockets of crooked politicians to buy legislation that the industries write themselves. It is not giving away money to the poor that ruins an economy. Rather, it is giving it away to the rich, who hoard it and create dynasties. Dynasties lead to oligarchy, and no society that allows oligarchy to dominate it survives for more than a century before revolution takes it down. This is simple historical fact.

    • Harry McGrath says:

      That’s maybe 10% the case and probably about 90% pure malarkey. It if it gives you comfort, beleive whatever makes you happy.

    • Damon Hines says:

      Idiot… the uncoupling of social responsibility and benefit from the rights and responsibility of the corporation to maximize profits at the expense of any other concern is the disease inflicting humanity now, and until it is corrected

    • Stuart says:

      The average man sacrifices plenty that he or she shouldn’t have to. Namely, a quality K-16 education for his children and health coverage. Those things are far more valuable to society than another hundred yachts or lambos.

    • The big “winners” by and large inherited their lot in life. Most Americans are born, live, and die in the same 1/5th of economic status. That has nothing at all to do with earning it or competence. It has to do with connections.

    • Scott says:

      Saris, did you read the article. Your statement is the embodiment of the problem.

      “In the new moral view, anyone making “poor choices” is responsible for his or her own ruin. The unfortunate are seen as unworthy moochers and parasites. We disparage teachers, government workers, the long-term unemployed, and immigrants.”

    • That comment flies in the face of the data presented. The data being discussed is the increase in productivity. If people are being more productive then, obviously, they are working harder and smarter. They are doing more work not less.

    • permoccupy says:

      You completely failed to understand what you read, Saris.

  2. Edwin Spiessens says:

    Hear, hear!
    And there is no doubt that this is a ticking time bomb.

  3. mike says:

    Went off sound money gold standard in 73 due to overprinting to fund American adventurism in Korea and Vietnam. The rest is history.

    • John says:

      FDR took us off the Gold Standard on June 5th 1933. Wage and price controls were implemented in the timeframe you are referencing. Workers could not get a raise but capitalists could still take as much profit as the market would bear. It lasted a couple of years.

    • John Hightower says:

      I was positing the same response!

    • alsanbalaur says:

      The gold standard was abandoned LONG before 1973. As others posted, FDR did that in 1933 as part of the New Deal to relieve the Great Depression.
      The “Greed is Good” Economic shift in the 70’s has ensured that we will continue to have a bubble and burst economic cycle,with each bubble forcing more and more people into lower wage brackets, while ensuring the 1% gain a greater control over the remaining “piece of the pie”.As long as people keep blaming the powerless disenfranchised for the problem, instead of the actual cause, this will continue to get worse. In the end, there is only one solution, and it sure as hell won’t be at the ballot box.

  4. Gradivus says:

    That was when Nixon switched us to fiat currency, so our money was no longer backed by gold and silver.

    • Gradivus says:

      Dollar wages continued to rise with productivity as before, but the value of those dollar wages stayed the same because of inflation due to fiat currency.

    • Wrong. Check out Modern Monetary Theory. Stephanie Kelton of UMKC debunks that notion.

    • Exactly. Infinite credit became available to bail out the wealthy when crashes came along. Our financial system facilitated the kind of morale decline the author talks about. Market crashes are good for wealth redistribution so long the wealthy are not bailed out. We were all too clever by half and now face system collapse that will be the mother of all wealth redistributions.

    • kipoca says:

      No. Fiat currency is partially a driver of the post-WW2 economic boom. It allowed for the economy to grow as quickly as production instead of deflationary pressures of growing only as quickly as gold could be mined.

  5. david clark says:

    Lot of handwaving about values here. Leaves a lotto bedesired. Specifically what policies and events?

    • End of the labor shortage due to computerization and women entering the workforce in massive numbers. Failure of business class to reward increased productivity, and widespread acceptance of ideas like that put forth by Saris above.

  6. Alex Adams says:

    This still has no conclusion of your question. What combimation caused it? A president? Invention of super PACs? An event? A trade agreement? Give specifics…

  7. Ron Brown says:

    Good analysis, but why keep it local to the US.
    This is a global problem, and as much true here in Australia as in the US.
    Something’s going to give one day, and it won’t be pretty.

    • alsanbalaur says:

      Like Kennedy said “Those who make peaceful revolution impossible, make violent revolution inevitable.” But this time, that revolution may well be global. Most of the world has been being robbed by the 1%, but now more and more of the world is AWARE of it.
      Our economic model is untenable, and globalization is making that worse. People bitch about “fiat money” not realizing that most economies have bee fiat money based for better than a century. It is not whether there is a “gold standard” or “silver standard” or a credit standard behind the money unless one realizes that the true basis of value is in the work that drives the wealth. The worker creates the wealth, but is getting an increasingly smaller portion of it for their labors.
      As long as the 1% hold 90% of the wealth and 100% of the authority, then the bottom 95% will continue down the path to poverty. Then who will buy the goods and services that the profit of the 1% depends upon?

  8. Peak domestic oil? Break from the Gold Standard? Relationship with China ? All about the same time frame. All seem more likely than some evil plot to just make you poorer. The post ww2 period was unique in history, and the world keeps changing. Surely, you can’t suggest bombing the rest of the world so they can’t compete with you as a moral economic position just because the post ww2 was so great for workers?

  9. Just Some Dude says:

    What I find interesting is that if you look at the timelines of futurists of the era (most notably, Buckminster Fuller and Alvin Tofler) the automation and computerization that was largely responsible for the increase in productivity was going to be the catalyst for a new epoch in human development. It was going to be the driving force behind a world where, to paraphrase Fuller, using current resources to their maximum potential we could allow everyone to live the life of a millionaire.

    It seems to me that this shift in belief systems that you describe was something willfully imposed on society by a ruling elite who somehow saw the value of their own prosperity endangered by the prospect of universal prosperity.

  10. Whiteaker Roger says:

    Two words. IRA and Human Resources. Well, OK, that’s three words.

    When the IRA was introduced in 1974, it was designed to, “provide a tax-advantaged retirement plan to employees of businesses that could not provide a pension plan.” However, as corporations quickly realized, IRAs, even with modest company contributions, were way cheaper than company pension plans. By the year 2000, virtually all businesses had eliminated their company pension plans for IRAs.

    The other sea change was the movement from Personnel Management to Human Resource Management which also began in the mid-70’s. No longer were workers a valued and trusted member of the corporate team. Rather, they were a resource to be procured and discarded as the profits and losses of the company dictated. This trend was exacerbated by stock market speculation where analysts dictate which companies are “good” investments and which aren’t.

    • R. Allen says:

      Thank you for mentioning these two aspects of the situation, especially the human resources part. My take on what caused the break is that it was a backlash by the powerful against the changes of the 60s and 70s. The middle class had gotten wealthy enough that their children were able to go to college and come up with all sorts of ideas that challenged the power structure and the status quo on many fronts. The remedy was to ensure that there would be no more middle class, no labor unions to build it, no more security for anyone but the top. I’d be interested in seeing an additional factor tracked on this graph: labor union membership.

  11. The key paragraph in the article:
    “The key to the treasure buried in Figure 1 is power relationships. To understand what happened, ask, “Who has the power to take 93% of all new wealth and how did they get that power? The new moral and social values give legitimacy to policies that favor those at the top of our economy.”

    We would all like to see a blueprint and an agency or coordinator that did this. It seems too complicated to have happened without a managing force. The Powell Memo [Wikipedia has a nice summary] was timely. It gave corporate executives a coherent moral basis for dropping any residual social obligation to workers or public policy. In that sense, the Powell Memo broke the spell of the post-war period. The Powell Memo said, “Go ahead. You know what you want. Do it.”

    Power for workers and social interests comes from social movements. The labor movement of the 30’s, civil rights and peace movements in the 60’s, environmental protections and women’s rights in the 70’s were all about power relationships – the power to say, “We want this for our constituents.” Since the mid-70’s social movements have been on the defensive, and corporate interests have driven our cultural values.

    • Captain Obvious says:

      I read your article asking myself ‘where’s mention of the Powell Memo?’ It signaled the counterattack on average people and democracy, which took place in the same time frame that new, leveling forces had entered politics: women, minorities, environmentalists, and the working class started to tame the wealthy, business, and the military via well-deserved hostility. Reeling from the shock of modernity, those who held the most power in the US had the options of changing their traditional practice of nationhood or doubling down on failure. It’s not the first time in history ruler(s) have chosen to throw a tantrum.

      The various symptoms described in these comments miss the disease: those that own and rule in the US would rather destroy it on their own terms than evolve. Faced with the long-term impacts of what’s been a return to medieval barbarism, the responses have thus far been inadequate. At this point it’s a valid question if the will can be found to re-establish civic sanity. Re-asserting it will not be pretty and indeed the various Homeland Security (sic) efforts weren’t really directed at foreign actors but threats to America’s new and improved ancien regime, mad Puritan overlords in a nation/world coming apart at the seams.

      A sound first step would be describing the problem in those stark terms, something at which tepid liberal politics consistently fails.

  12. Tim Gatewood says:

    I think Nixon taking us off the gold standard opened the floodgates for the financial firms to create money from thin air, which gave them the funds to lobby Congress and begin to undo the restrictions placed on them at the end of the Great Depression, The shift from pensions to 401(k)s and IRAs followed after the shift to fiat money unbacked by gold. The growth of the MBA degree was part of this, as well, as it sold the lie that all companies could be run the same way and cutting costs was a good way to boost the profit of the business. Somewhere in there, schools with MBA programs started teaching the doctrine that maximizing returns to investors was the be-all and end-all of a business; before that, other values were also taught (such as the long-term viability of the company and the necessity for it to be a good contributor to the communities in which it operated).

    All of these factors could well have been orchestrated by a group of wealthy men, only those men would mostly be dead by now, as we are talking about changes that would have been in the works since at least the 1960s and how many of the uber-rich from that decade are still alive today?

  13. A log scale helps show that wages were lagging productivity gains by a lot from 1960 onward. https://research.stlouisfed.org/fred2/graph/?graph_id=249872

  14. Paul Racko says:

    Stan, you use the word “we” and “our” a lot in this piece, but I need clarification of what exactly you mean by those terms. Do you mean individuals each on their own accord decided to implement these harmful economic policies, or do you mean by “we” and “our” that the government (economic policy) implemented these policies? There is a big distinction there, and I think it deserves clarification if anyone expects to get to the bottom of the problem.

    You also ask “Who has the power to take 93% of all new wealth and how did they get that power?” Well, I think the answer is obvious but you never spell it out clearly. The state is the only entity to have such a power and regularly uses this power to grant special artificial privilege and confiscate wealth, but this finer point is neglected in your analysis. Is your claim that this is the case, or is your claim that business has arrogated these powers to themselves somehow with no actual legislative capacity of their own to do so?

    • Paul – It would be a combination of business and the government, caused by business effectively buying the government through donations and networking.
      While businesses cannot change laws directly, they constantly do so through lobbying. The money they give to a politician or party to for example lower taxes in their industry, ends up being far less than the gain they make from the changed laws

    • kipoca says:

      I thought it was pretty obviously “we” and “our” as in society.

      The government did not plunder that new wealth. If what you claim is true, the government would have been taxing (confiscate, as you put it) all of the wealth and then distributing it to the wealthy. It’s patently obvious the powers of taxation did not move new wealth to the rich. It was the abrogation of that power, cutting taxes, which allowed the wealthy to hoard new wealth. The government didn’t force companies to shift their wages from production to executive.

  15. Ron Glandt says:

    Sociologically and demographically the US was changing quickly as a result of ‘the pill’, War Baby Generation exerting their voice of different values, women’s rights influencing many aspects of society by becoming employed in large numbers, the beginnings of the break-up of families – indelibly changing children’s performance levels, the cost of wars diminishing domestic advancements.

  16. IndyThreeWheel says:

    I really wanted to use this article but I can’t because it has one glaring inaccuracy. An inaccuracy that can derail the Democrats. The article says “Let’s go back before World War II to the Great Depression. Speculative unregulated policies ruined the economy. Capitalism was discredited.” This is wrong – dead wrong. Laissez Faire Capitalism was discredited.

    You want to say Capitalism was discredited then that means no jobs but government jobs in a command and control economy. You see, all economies have some Capitalism except complete Communistic command and control economies and there aren’t any of those left except for North Korea. Even Cuba has some Capitalism. “Socialist Europe” as the Republicans call it is mostly Capitalistic because most of the people work for private enterprise.

    The highest standard of living comes with Regulated, Civilized Capitalism with plenty of social programs that provide a social safety net, infrastructure, education and protections for the environment and the workforce. That is what the Democratic Party has always stood for. But lately, many on the far left end of the Democratic Party have confused Laissez Faire Capitalism (no government involvement whatsoever as in Ayn Rand) with regulated, civilized capitalism – the type of capitalism we had from FDR to Carter. Unless we stop the far left members of the Democratic from point blank trashing all forms of Capitalism, the Democratic Party is doomed.

    • Jim says:

      I think you give far too much credit to the Far Left with regard to its influence on the nation and the Democratic Party in particular. Bernie Sanders, who has been vilified as a (gasp!) socialist, is not anti-capitalism. He has become the de facto leader of the Left, but the Far Left is suspicious of him. The Far Left has always been a less influential fringe group than the Far Right. It’s simply easier to be reactionary than it is to be progressive.

      The Democratic Party has allowed itself to be nudged rightward for so long that it very much resembles the moderate Republicanism of forty years ago. It has been corrupted by Big Money to the degree that it puts up little or no resistance to the very successful Republican initiatives to “re-frame the debate”. Think of the distortion and demonization of the following words: “liberal”, “progressive”, and “politically correct”. The result has been that Sanders is perceived as being way out in left field, even though his policies and values are consistent with those held by such mainstream leaders as TR, FDR, and RFK. If the Democratic Party is doomed, it is due to the corrupting influence of $$$$$ and a wimpy response to divisive GOP tactics, not because of any clout wielded by the Far Left.

  17. tropicpine says:

    The intermodal shipping container was standardized by ISO in 1970. This standardization preceded a significant drop in the cost to ship manufactured goods intercontinentally.

  18. Changing moral “values” only follow and adapt to changing physical/economic realities. Work lost value because workers lost value in a world in which “human resources” is a commodity traded in by transnational corporations. The change in the moral “value” of work followed the change in the economic value of work and decline in the value of human life itself. The result is what one would expect – the decline in labor unions, the massive increase in bargaining power for those at the top of the corporatist global economy to roll back the gains made in the Progressive Movement, New Deal and Great Society, the accelerated degradation of the environment as a decline in human power opened the door to transnational coroporations and international financiers started shifting their costs of production onto future generations (at a hefty markup). The owners of the world economy just move their business to a place or places where humans were never valuable enough to have accomplished any of those protections from global corporate activity either for the environment or for human life itself. The key culprit is overpopulation – the explosion of human populations where antibiotics, vaccines, industrialized food production and other products of western medicine and industrialization were rolled out to non-industrialized societies. So why 1975? Pretty obvious, really: https://history.state.gov/milestones/1969-1976/rapprochement-china

    The “value” we place on work has been adjusted to reflect the actual, tangible and declining economic value of human life itself. Non-human “persons” are doing just fine . . . but only because they measure their success in short term profit. In the long term, our technology (including debt and corporations) is in the same soup pot in which we are all being slowly cooked.

    • David Brown says:

      Brendan, wish I’d seen this earlier (today = August 24, 2016). It is astonishing and disheartening that discussion of Earth’s human population vanished about, what, 15 years ago? 20 years ago? Today one NEVER hears any mention of the population problem and it’s direct link to the climate crisis we face and the worldwide geopolitical crisis that worsens with each new human inhabitant added to our little Earth. Here in the temperate, economically prosperous and not so overpopulated Pacific Northwest (outside of Seattle) there seems to be little reason for alarm. But being a fairly well educated populous here there is much talk about the need for reforms. E.g., more efficient utilization of carbon based fuels, more electric vehicles, more production of renewable electricity and using less in general. But there is NEVER any call for a campaign as strong and as focused as anti-cigarette smoking was for an even more important cause: that of anti-population growth. Every human NOT born to this planet adds that ever so tiny amount of wiggle room that we so desperately need to make it through the disaster we humans have created on our Earth. ZPG and NPG (Negative Population Growth) have faded into obscurity. Why? And can we reinvigorate those organizations? We really need to.

  19. Dale Wight says:

    Why doesn’t this mention what economists with whom I talked in the early 1980s discussed openly: the 1970s is when the Women’s Movement followed the racial-equality battles of the 1960s and housewives hung-up their aprons to enter the paid workforce. They already consumed goods and services so a proportional amount of jobs weren’t created when they started competing for jobs. This flattened wages as more people competed for jobs. This graph shows that productivity gains offset the downward pressure on wages from more people coming to look for jobs than how many jobs were created.

    Part of that movement, which continues, is the demand for equal pay for equal work. This broke the contract this article cites
    “In that period, the prevailing social contract said, ‘We all do better when we all do better.’ My prosperity depends on your well-being. In that period of history, you were my co-worker, neighbor or customer.”

    This included the idea of a “living wage” by which bread winners for families were paid more for the same work than were people who supported only themselves. Few women supported families when this concept was implemented so women and single men typically received one wage and married men received the “living wage” specifically as an extension of the contract that this article notes. The idea was that unpaid (not non-working) mothers, and children, were compensated/cared-for through the “living wage” that came into their homes.

    But when average pay for the same work was compared, men — many of whom received “living wages” — were paid more. This fueled the demand for equal pay. Everyone wasn’t going to receive the “living wage” so the resulting equalization reduced over time the gap by subsidizing increased wages for the new women in the work force by reducing the living-wage supplement. The high inflation of the 1970s masked much of this because all wages went up each year.

    A jaded look at this would be that the capitalists who run the economy realized that they could effectively reduce wages so they would obtain the labor of two people who now would have to work to pay for the families that had been supported by the wages of only a husband. Now, it would be financially difficult for many families to revert to the single-income model.

    One economist, Don Hilty at Chrysler while I worked there in the 1980s, explained to me that even as unemployment (measured by how many people looked for work) fluctuated, the % of adult population working increased every year and that was driven by the surge of women coming into the workforce.

    Why is all of this ignored in this article?

    • Stephen R. LaDue says:

      In addition to these social factors affecting the economy, it cannot be left out that wage and price controls were instituted by the Nixon Administration back then to try to contain the growth of inflation. In Addition to the many other valid points raised here this should certainly be in the mix.

    • Women entering the workforce in the 60s had to because either the husband died or divorced her & left her with the children. I know because I was there. What do you suggest, that the women & children move onto the streets or the woman get some sort of job so what was left of the family could at least eat.

  20. AJ Barnes says:

    Dear Stan… better study up on your history, buddy. The Great Depression was the fault of BAD GOVERNMENT POLICIES. Read some Milton Friedman. Learn from the best. They quadrupled the tax rate and cut the money supply in half in 1929 which, according to Friedman, caused a massive shortage of money to fuel businesses. Without capital from banks, or savings, what would have been a ‘garden variety recession’ (as it was in the rest of the world) turned into a Great Depression. Love it when people instantly blame business for stupid government policy. And it wasn’t the government that got us out of the depressions either, despite what the Great Socialist FDR tells you… businesses fueled by wartime spending did. So, take some time and read a real economist. Blessings….

    • Jeff says:

      Yeah, “wartime spending” BY THE GOVERNMENT. There’s nothing special about war spending that makes it more effective, though. (For all that, the bad policies you decry were implemented by Republicans.)

      In any event, it’s not like everything was in the doldrums until then, or else how could FDR have won a second term (in a landslide, no less), much less a *third* term?

      No–things were pretty much back to normal by the end of ’38. Not boom times, but fairly OK. The Dow Jones average would have to wait until after the war was over to reach its ’29 peak again, AIUI.

    • Erin says:

      Milton Friedman! Look what happened in Chile. Friedman never took the human factor into his calculations. Trickle down was the creation of the UofC economics department. How well has that worked out. Ugh!

  21. Sy Schwartz says:

    A return to American idealism requires that the polity confront the details of legislation engineered by elitist. corporate toadies that created today’s conditions. See Hedrick Smith, WHO STOLE THE AMERICAN DREAM. It’s all there, very nicely spelled out. The people were betrayed by their own Congress and it is taking too damn long for this understanding to take hold in the body politic. Some one with a bully pulpit — Bernie?– needs to use it to draw attention to the details and results of specific legislation. Also, Smith shows just how we were propagandized into abandoning our altruism.

  22. paradocs2 says:

    Reading Picketty (“Capitalism in the 21st Century”), he would teach us in the period 1970 -1980 the rebound (and unusually high) national rate of economic growth which was a rebound from the devastation and destruction of the Great Depression and World War II came to an end and the world returned toward its usual state of inequality and plutocracy as the rate of return on capital exceeded the rate of national economic growth, empowering the very rich, who then overwhelmed justice in social policy. He and his Berkeley colleague Saez would also inform you that your second graph is inadequate as they have shown that the greatest growth in income has accrued to the top 0.01%

  23. Chas. says:

    I remember this time clearly. In the 60s, we had just advanced from the Wright brothers to the moon landings. We had a utopia like Star Trek to look forward to. Nobody questioned that the best way to move our civilization forward was to help everyone -rising tide lifts all boats. Then the OPEC oil embargo hit. Lines at gas stations. People suddenly realized that some things were just finite. Something another person had was something you didn’t. It was suddenly a zero-sum game. Interest rates went to 13%. Ever since then, greed has dominated. Those with the most power acquired the most stuff. Education funding dropped massively -why pay for someone ELSE’s kids? I’m not sure a civilization can recover from this. Few examples show doing so in history.

    • Jeff says:

      “People suddenly realized that some things were just finite.”

      You forgot the rest:

      “And we panicked. Lots of this was due to the media itself.

      And then there was someone there to take advantage of our panic. And we let him take over. And he made us feel good for a moment. So we trusted him. And we figured that however things were, those stupid hippies on the other side would just make things worse than otherwise. It’s taking us a long time to unlearn that lesson, and we’re just now seeing the fallout from it.”

  24. Erik Hare says:

    I agree that this is clearly related to the Baby Boom / women entering the workforce, driving down wages by supply and demand. As Baby Boomers retire we should see the workforce participation rate finally go back down to 60% or so, where it was before 1968.

  25. Jimmy Z says:

    The 1970’s was also the dawn of computers in the service industries and robots in manufacturing. Up to the 1970’s, answering the phone, taking a message, typing a letter, welding two pieces of sheet metal together or painting a vehicle on an assembly line was a compensated skill, and decently paid. Those “middle class” jobs, along with many others, have either been computerized or off-shored, or both

  26. fairleft says:

    Your perspective is ahistorical. The changed appears to have happened at the conclusion of the 74-75 oil shock. The economy began to recover but productivity was suddenly delinked from wages. This had nothing to do with a values change, there was no values change between between 1974 and 1976. It looks like a conscious decision was made by corporate leaders, who perhaps sensed that long-term decline of unions and a relatively high unemployment rate had weakened worker power sufficiently.

  27. tonymarq says:

    I see this as only a part of a much bigger and simpler picture that will continue to divest humanity for years to come. The mid 70″s supported two growing events, technologies and globalization, the latter doing irreparable harm to the American workforce, while the former continues to chip away at what’s left of the labor intensive workforce. I do recall the 70’s well, and I do recall it was a period of heavy pollution and the terms like “acid rain” was scaring the hell out of the people in this country. To combat this, we started outsourcing these polluting activities to Asia. However, what we did not expect was the repercussions of opening two new doors that would significantly affect our future position as the industrial leader of the world. 1) they not only took in and fixed some of the manufacturing processes and made it their own, but 2) they had a staggering workforce of over half-billion people who can do the jobs for pennies on a dollar. Today, with the advent of automation, new technologies, inclusion of other growing and developing countries and continents (i.e. India, S. America & Africa), I can easily see that things for this country will only to grow worst. I hear the arguments against isolationism but unless we take specific actions to protect our selves from this growing global workforce things will never be as they once were.

  28. Guy says:

    One thing you are obviously missing here, which had a huge impact on this, is the suppression of upward growth of personal incomes by doubling the workforce, by the inclusion of women. While I agree this was a necessary change, it had a very negative affect on the worker’s ability to make higher wages as there was a huge change of supply and demand in the labor market.

    Could you elaborate on this some?

    • Guy says:

      Keeping in mind of course, these factors are laggards, as was the shift of women into the work force to fill in newly created jobs.

      • kipoca says:

        Indeed, poor women were always in the work force. The working class never had a single bread winner. And when the middle class collapsed, you had more double-income family corollary.

    • kipoca says:

      Women didn’t double the labor force. The percentage of women in the work force did double, but that was between 1948 and 2000 on a continuous upward course.

      The number of workers grew because of population growth.

  29. Mike Lince says:

    The change in America’s moral compass led us on a direct path to the election of Ronald Reagan in 1980. Most of us had no idea what supply-side economics meant. It has taken us decades to comprehend the fallacies of ‘trickle-down’ economics, which conservatives like Paul Ryan still advocate in deference to their corporate masters.

  30. Heavypen says:

    A follow up to Fairleft – who appears to have started comments on the right foot.

    With all due respect to the author, the analysis is off the mark (pun intended).

    Social change doesn’t happen quickly. In fact, it NEVER happens quickly. Social change that affects baseline behavior is generational. Therefore, looking for causality for the decoupling of productivity v earnings is a bit like hearing hoofbeats and thinking “Zebras.”

    The decoupling is so dramatic – so sudden – that you have to look to monetary policy. A lot of people have. They call it the “Nixon shock.” However, I had a professor who called it the “Battle of Bretton” – the day that Germany and the rest of Europe decided to engage in a currency war with the U.S.

    With surprising legislative nimbleness, Nixon and Congress delivered tools to the US Fed to fight back. The measures were effective – the USD still is the dominant currency. But I agree that the cost has been greatest on American workers.

    I’ve since attended economic lectures (with clients) where this episode in currency policy history is often mention as the true point of demarcation for accelerated wealth inequality. In public, they’re careful to not name names, but privately – after a few beers – many of these dudes say that bankers – in Germany – started it.

  31. sweattshop says:

    Should say, “In this era, ‘populist’ media figures are spiteful and divisive.”
    Ok, this article has merit. Now how to explain it plain language to a nation with minimal education.

  32. Alan says:

    I have often reflected on a phrase that became popular in the 70’s: “Enlightened Self-Interest”. Most people are real good at the second part but very few have any interest in the first.

  33. The rationale for the seemingly greedy corporate behavior whose effects began to appear in 1975 was provided by Milton Friedman in 1969 with his call for a stock-holder based economy. From then on, business schools across the country proclaimed a company’s proper mission to be maximized financial return to the shareholder.
    Anyone who had previously worked for a major company that valued broader relationships with community, customers, and employees saw Friedman’s pronouncement as trouble down the road. They were right.

  34. Mark Combs says:

    Maybe someone mentioned it above, but one major technology shift that was occurring right then was the freeing of (extremely expensive, therefore tightly controlled) IT computing resources from centralized control due to the introduction first of relatively inexpensive departmental computers (DEC VAX, Wang, etc.), followed soon by the even more dramatic introduction of really cheap PCs into business. This enabled a huge amount of innovation and introduction of efficiencies into businesses big and small, which probably contributed in a big way to this shift: by investing in technology to analyse where costs existed that could be easily reduced through automation, businesses were able to increase productivity without any involvement by the workforce (except by their being laid off). Once networks became dependable internationally (even before the introduction of the internet), a lot of work in service industries could be moved off-shore, and/or outsourced, again increases in productivity at the direct expense of the workforce.

  35. jasonaquest says:

    The idea that there was a fundamental turning point in the nation’s values in the early 1970s seems a bit far-fetched, since people’s core values tend to be slow to change, and the population turns over very slowly.

  36. RJV says:

    You neglect to diagnose why the fruits of the work are not accruing to the workers in the US. Its simple, the Capital became mobile and moved to countries that offered Less Costly Labor, Lower standards of Environmental Controls, in short an environment where profits could be greater, and did benefit workers but in other countries. This suppressed the growth of income in USA. The pendulum is about to swing the other way as clarity is brought to the problem and politicians capitalize on the dissatisfaction. Both Bernie Sanders and DOnald Trump made it clear to workers that free trade agreements are part of the problem. it is not the only cause however! Other comments in this string also have touched other causes.

  37. Women entering the workforce? More dollars chasing fewer goods.

  38. Saralara says:

    ERISA, enacted in 1974. I have long held it was the downfall of our community. The charts really illustrate that.

  39. Michael says:

    I see the point but a simpler explanation is the 1972 is the beginning of an extended period of Republican dominance of the presidency. Nixon elected in 1968, his policy favoring the wealthy go into effect. This really takes root under Reagan and Bush puts the finishing touches on it. If you keep cutting taxes on the wealthy, cutting social programs, cutting regulation, etc, this is what you get – social inequality.

  40. Darren says:

    The irony here. Morality went down and this was posted by the Huffington Post. Here’s another reality check. What happened the year before 1974 or 2 years before 1975 as the figures indicate? Roe vs Wade. That’s what? When close to 60,000,000 million babies have been killed and what about the children they could of had, don’t you think THAT has an effect on the economy? Without people, there is no economy. Now, I don’t believe in greed and I believe in giving people the right to produce and benefit from that. I believe in the economic system of Distributism. Go to distributistreview.com for more info. Don’t make assumptions on the word without investigating it further.

    And then there’s “gay marriage”. A further decay in morals. For one thing, there is no such thing as “gay”. It’s all in the head. It’s a social construct that’s purely psychological. If “climate change” is really worried about then people are concerned and believe in nature. Then what about human nature? There’s temptations to succumb to doing what is not right, not natural. If we can’t agree to what is natural in human nature then how can we agree to what is right and good. It becomes relative which is a philosophy that stands on sand. There is a Truth. Now, go be a detective as if you came to Earth as an alien from another planet and go find the Truth. Go find the one institution that hasn’t changed it’s moral teaching. There’s only one. God exists and He didn’t leave us orphans.

    The sexual revolution or sexual de-evolution as it should be called is destroying common sense and humanity.

    “When sex stops being a servant, it becomes s tyrant” – G. K. Chesterton

  41. Albert Ip says:

    It was the death of Mao in China leading to an explosion of labour supply coupled with the technology which enabled goods to be produced in another country in lower cost than in America. Of course, the greed of capitalism was there to exploit the poor workers in China. The rest is history. Capitalism has no moral. Capitalism’s driving force is greed.

  42. David Conell says:

    So according to this author we are to believe that one day in 1975 Americans woke up and collectively said “Lets change the culture”, then proceeded to do so in a uniform direction.

    I think the world’s a complicated place, there is another explanation(s), the data is bad, but you’d never know fro this partisan hack

  43. kurtzs says:

    Sorry, guys. Biology and technology trump idealism every time. Supply-demand applies to labor as well as to other markets. Population increased by around 100 million from 1974 to the present. Automation ramped up during the past 4 decades with robots and computerization making labor redundant in many cases. No value shift can alter those facts. To empower a skill ceteris paribus, it must become rarer or the need for it must rise. Independent plumbers and electricians are making 6 figures now. With a brittle water and transport infrastructure, sterile soils, droughts,…I expect growing small organic gardens to become a highly valuable skill!

  44. Dennis Tate says:

    In 1940 Canada’s P. M. Mackenzie King initiated an exceptionally good central banking system where roughly half of the nations total supply of money was created through low interest loans from our own Bank of Canada for infrastructure projects that basically all Canadians would tend to agree were necessary. In 1974 P. M. Pierre Elliott Trudeau took Canada off the gold standard, (which of course was necessary), but, he also abandoned the intelligent policy initiated in 1940 and our national debt, as well as the amount of interest owing on that debt, spiralled higher and higher.

    • Dennis Tate says:

      I really like the way that the late Jack Layton summarized the result of this policy change:
      “We never should have privatized our debt and turned it over to the
      private banks, we should have kept it in the hands of the Bank of Canada,
      at least a major part of it, because then we would have been paying
      interest back to ourselves.” (NDP Leader Jack Layton)

    • kipoca says:

      That public debt isn’t necessarily bad. That’s economic growth. You can’t send productivity through time backwards.

  45. aztekman says:

    The mid 70s was also where the “social” mores of the “hippies” generation became the “responsible adult”.
    So US started going from “the greatest generation” who “worked hard and selfishly” to “man, what happens, happens”

  46. There was a change. I think a lot of it had to do with the Harvard Business School mindset. Many large companies were run by engineers. Engineers are very focused on product. To make good products you need good and motivated people. Engineers tend to also be less greedy. The Harvard Business Schools people are only focused on profit. One of the biggest problems with maximizing profit is that the most efficient business model in the world is larceny. It requires little investment and cares little about the long term good. So instead of a focus on good products and motivating people to produce them business are just trying to steal for the guys at the top. Its obvious why that woule go bad. I think bombing HBS is a good start to fixing our economy.

  47. Nancy says:

    This was the direct result of huge increases in corporate influence over Washington…which continues to its culminating point of Citizens United….which insures total corporate control over government. The wolves are now in charge of security for the hen house.

  48. David Galiel says:

    CorruptNixon-placeholder-Ford. Brief blip (rise) in worker income during Carter, then 12 yrs of Reagan-Bush “greed is good” institutionalized the trend.

  49. Dan Rotman says:

    “Something happened here”?
    Reagan and Thatcher happened. Friedman has a lot to answer for.

  50. Aaron Hoffmeyer says:

    Actually, the graphs and the way they are portrayed ignore the obvious. The top marginal effective tax rate in the US actually went up, and your graphs reflect that workers and executives were still fairly in sync. The great divergence came with the 1981 Reagan tax cuts.

    From wikipedia: In 1981, Reagan significantly reduced the maximum tax rate, which affected the highest income earners, and lowered the top marginal tax rate from 70% to 50%; in 1986 he further reduced the rate to 28%.

    That was supposed to free up more money for investing in business. What it did was create huge deficits for the government, and enabled the most wealthy to acquire wealth much more quickly. Rather than invest or spend much of that money, acquiring additional wealth became the rallying cry. The rich were determined to get as much money as possible, as quickly as possible, because the days of higher top marginal tax rates could be just around the corner.

    Instead, they have played this game for 35 years … not content to be millionaires or multi-millionaires, they strove to keep up with their neighbors … the new goal was to be a billionaire … to acquire more wealth than they could possibly spend. And they colluded together to keep wages for their workers stagnant.

  51. CK says:

    One of the ways of looking at inequality would be to identify the components of GDP and split it into public and private. One would assume that a larger share in GDP of public goods would entail fairer distribution to the people. The more the private assets in GDP, there is likely to be more inequality. In socialistic countries with larger share of public assets, there should be less inequality, though it may only be the sharing of poverty. In free markets, the level of inequality would be higher, with sharp differences between the rich and the poor.

  52. Linda says:

    I may be on the wrong page, I’m far from an economist.
    My feeling is that it matters not the gender or color of the worker, if he / she is working, a paycheck is being issued. That check should respond to the seniority of the worker and the skill level of the work. What matters is the greed of the company and its highest paid executives. An 800% discrepancy is outrageous. 100% for the owners and 40% for CEOs in my opinion it’s fair. Everything else should be in compensation for the workforce.

    Roe v Wade didn’t devalue life, it allowed women to value themselves and their right to choose their own health and well being. It’s not morally wrong to make life decisions based on your own circumstances, it’s morally wrong to tell another person that their worth is less than yours. Or that someone else’s is greater than hers.

    Union leaders got too big and too greedy. They were looking after themselves and not their members. And some members got too cocky about time off and job performance. There didn’t seem to be a conciliatory way to get in shape and they crashed under their own weight. But there is a definite need for unions. Corporate greed has proven that.

    Regulations probably need to be controlled. You can’t broadly regulate companies. There are individual concerns at be considered.

    I watch my grandchildren struggle so hard to make ends meet. Some of them making the same money I did at their age. So afraid everyday one of their kids will get sick and they will need a day off and they will get fired.

    And investors. Everyone wants to get rich of the backs of someone else. Investing is good for everyone if you’re using it as a long term financial gain.

  53. Jim Paradis says:

    All these replies and nobody mentions one other thing that happened in the mid-70s: the Watergate scandal. I submit that the Watergate scandal and the subsequent pardoning of Richard Nixon did two things: first, it destroyed Americans’ faith in government as a force of good, and second it was the first instance of “too big to fail”. Ford reasoned that prosecuting Nixon would “tear the country apart” and so made sure that didn’t happen. You can draw a straight line from this reasoning to the “too big to fail” phenomenon that lets major players commit malfeasance with impunity.

    It was with this scandal fresh in the public’s minds, coupled with the Iran hostage crisis, that Reagan sailed into power on the idea that “government IS the problem”. Between WWII and 1975, government served as a check on corporate overreach. That started to come apart with Reagan.

  54. Leon Trotsky says:

    Capitalism is a system of accumulation. The only money which has any value in this system is that appropriate (stolen) from labor. Accumulation reduces aggregate demand, on the one hand, and politically disenfranchises the class lacking capital. The end game here is serious and stark: Continuing trends for the working class of less and less access to even basic necessities, and the gutting of democracy and even republican political structures.

  55. Entdx says:

    Illegal immigrants are damaging for economy as was outsourcing to the 3rd world and deindustrialisation(coincides with x BTW).
    Also social rights movement did not really helped. Contrary it probably fixed new layered society and provided way to manipulate society(Black Detroit happened, as transition of entire new layers like females to new jobs).
    Maybe stagflation and MMT voodoonomics trumph was indicators of problem.

  56. Stephen Kohler says:

    Also, let us not forget that two things in everyone’s monthly expenses did not exist in 1975. The internet and cell phones. These two bills alone can top out at 400 to 500 dollars. Plus the cost of a college education is probably 10 times higher than it was in 1975 and the average summer job for a student only pays about 2;5 times as much.

  57. Bill James says:

    The economy is a flywheel building momentum as labor applies energy. Three things occurred in the early 1970s to trigger the debasement of the value of labor.
    1. Nixon removed the dollars’ convertibility to gold.
    2. US Peak Oil was in 1970.
    3. Rapid expansion in dependence on foreign oil.

    The Federal government printed more money to buy foreign oil, finance Viet Name and subsequent oil-wars, and reinflate the economy after the dot.com and 2008 crisis. As money is printed, those who have assets see the value of those assets appreciate in value; the same house increases in price. Those who must exchange their labor to buy assets (the poor and young) find the value of their labor is debased.

    Government transfers wealth from the “have nots” to the “haves.”

  58. Dannyd says:

    That’s what happens when you put a Rockefeller in the white house. Coincidence? I think not.

  59. Julian says:

    It was cutting tariffs. The government stopped protecting Australian manufacturing, wages, and therefore GDP from imports from countries with slave labour, poor human rights, and little or no environmental laws. That was and still is the cause.

  60. johngarvinclark says:


    Listen to the whole talk, but pay particular attention to the part from 23:40 min to 58:00 min. The main point: In 1971, Volcker foresaw and told Kissinger that the price to be paid to maintain hegemonic control was the destruction of the standard of living for blue-collar America, the American middle class. But who decided that we should take this path. Let me know whether this information explains as much for you about what has happened over the past 50 years as it does for me. Consciously rejecting this hegemonic role may be the place to begin reclaiming/rebuilding our country. Our insistence on the necessity/desirability of US hegemonic control is the negative side of our centuries-old, country-wide, bi-partisan belief in American exceptionalism, an un-examined belief that has become cancerous to our society because it is un-examined.
    I believe that Sen. Sanders is more willing and able than Sen. Clinton to carry on the work of Pres. Obama in examining/reducing the cancerous effect of American exceptionalism on our domestic and foreign policy.

  61. Steven Giddings says:

    Computers. Computers started being able to do entire programs by the mid seventies and entire systems by the early eighties. That means that employees could be given tools that could really increase their productivity. Since pay is not, and has not been coupled with productivity, and since we’ve been getting better and better at developing productive systems, employee productivity rises and pay remains low. I’ve been in the IT industry since ’70, successfully, but the starting and normal rate for a consultant is the same now as it was them. Inflation has more than doubled the cost of living in that time, we’re better at developing solutions than we were then, I’ve got a lot of successful experience in that time, my pay is the same. The solution is for a move to more scientifically based promotions that is goal oriented toward rewarding and developing employee productivity. Scientifically based, in other words, eliminate or minimize the opinion based promotions and raises.

  62. Steven Giddings says:

    Actually, this is just highlighting a very basic issue. Business, political, and legal systems are run using an opinion based decision making methodology, (like the “good old boy” system). With the increase of knowledge, facts, and access to them, (the internet), more people can spot more problems easier than ever before, such as this. As long as the systems America depends upon rely upon opinion based decision making, progress will be slow, and random, if it happens at all. Converting business, political and legal systems to a fact based, goal oriented, decision making methodology would not solve anything, by itself. it would just give them/us the tool to solve everything.

  63. redwoodtwig says:

    Thoroughly interesting factual look at the economic landscape of the 1900’s.

    The middle 1970’s were when the huge surge of baby boomers were entering the workforce and society was reorganizing itself to adjust all sorts of shifts and changes in economic activity.

    I think the author is quite correct in saying that the basic cause of the changes since the mid 1970’s has been a major shift in our moral compass. I still remember the shock I felt when I learned that one of the key advisors to the president actually came out and said “greed is good.” This was almost exactly opposite of what I had been raised to believe. Looking back now, I realize that this way of looking at life, putting one’s own desires ahead of everyone else’s, applies not only to greed for more and more money, but also to greed for being able to satisfy oneself more and more. In other words, the hippies and the yuppies were both movements in which pleasing one’s self was the single most important thing in life.

    I think the turning point in 1975 was due to the arrival of the baby boomers in the work place. The moral values of the previous generation had been part of their early childhood, but by 1975 the vast majority of baby boomers had modified their values to be more in tune with what their culture had been teaching them in the years leading up their entering the workforce. Each of these can be seen as cultural shift points, and all of them shift emphasis from what they can do for their country to what their country can do for what they are most greedy for.

    1969: The song “My Way” released. It is certainly a song in praise of greed in the sense of having one’s own way. And became so popular that I doubt anyone over the age of 40 hasn’t heard it several times. As it happens, according to Wikipedia, his daughter later said “[Frank Sinatra] didn’t like it [because] he always thought that song was self-serving and self-indulgent.”

    1969: The movie Midnight Cowboy is released. Again, Wikipedia: “The film won three Academy Awards: Best Picture, Best Director and Best Adapted Screenplay. It was the only X-rated film ever to win Best Picture, though its rating has since been changed to R.” This marked the beginning of a major shift in how Hollywood’s huge moral influence shifted from plots with the standard heroic figure to plots with protagonists of ambiguous morality at best. It is a wonderful portrayal of greed and need as it plays out in the world of the very poor and homeless, which at that time was a miniscule percentage of the population.

    1969: Woodstock and the huge number of songs that came out of the hippie movement. Strong desire, even greed, to have personal freedom both to do whatever they most enjoyed (at the time) and freedom from interference by government. And also strong desire to change the system, though usually not very clear about how.

    1972: Title IX, gender equality in college sports. A major side effect of this was that most colleges made physical education optional rather than mandatory so that whoever wanted to join a varsity team could. I don’t have research to back me up, but my sense is that during the 1970’s university education started fragmenting more and more so that there began a flow into the workforce specialists in handling statistics who never had to take more than one or two culture related classes. Who never had any exposure to thinking about ethics and morality other than home, high school, and the songs, movies, and events in their formative years. But who quickly learned how to make corporate earnings multiply by looking only at the numbers and making decisions based on the numbers only.

    1981: Ronald Reagon elected president. He himself never said “Greed is good,” but I recall the flap when one of his advisors did. In any case there’s an excellent summary of how he changed the economic structure of this country at https://consortiumnews.com/2011/10/05/reagans-greed-is-good-folly/ and that narrative certainly matches what the graph shows.

    What can we do about it? Nothing and everything. Another cultural shift is currently happening, though at this point I don’t know what the key song, movie or events might be. The children of the baby-boomers are starting to arrive in great numbers in the workforce and soon will be in positions where they will do things that will indeed shift us to a new moral compass. I don’t know what it will be, but I do hope that greed becomes less important. And the best way for that to happen is for each of us to think about it once in a while.

    How does a cultural shift occur? By the members of the culture voting for what they want by buying songs, movies and tickets to events. Money talks, and the big guys can’t argue with what the public buys. So the coming cultural shift is essentially in charge of our cultural icons and it is up to the Lady Gagas and Justin Biebers to come up with cultural shift points that bring together the widely divergent strands of greed currently tearing our culture apart.

  64. Bruce snider says:

    That is the same time computers came on line in a major way and began to affect overall economic and manufacturing productivity for the first time without increasing labor productivity. IBM 360/370s were sold in large numbers to all industries. Look at Moore’s law and the increase in computational power starting with semiconductor based computers in the 80s and beyond. Man has figured out how to increase productivity rough automation with less labor. As an extreme example look at what high speed networking and flash trading have done recently to redistributing money in the equity markets.

    Basically labor productivity and economic productivity are now decoupled for most economic activity because automation means less labor for more goods.

  65. What you have said is fair enough but I would simply point out that women joined the work force in droves during the 70s with the result that real wages fell through the floor. Does that imply women are at fault? Of course not. But it cannot be denied that before the mid 70’s a couple with one or two children could live reasonably comfortably from the wages of one breadwinner working at a basic skilled job where as now, even professional working couples can barely make ends meet with two salaries, let alone ordinary working people. Surely people do not actually believe that the moneyed establishment acceded to developments which first saw women win the right to vote and then relative equality in the work place because they supported the the underlying principle of equality?

  66. Tim Swartz says:

    The conflict order changed.
    Man vs. Man, Man vs. Nature, Man vs. Society, Man vs. Self, and Man vs. Technology.

  67. Eddy Cheek says:

    I disagree somewhat. The date he points to around 75 is the Nixon recession after Watergate. Things start back up in the late 70’s with Carter and almost everyone was gaining as before. It was the Reagan recession and his policies that really started the fall of the middle class that is still going on today.

  68. Interesting. However, the author, Stan Sorscher,
    EOI Board Member?, does not even mention the Vietnam War, which ripped America’s soul to shreds in the latter 1960s and early 1970s. A war America entered, not to save anyone from communism, but to replace France in Vietnam, and thus enjoy Vietnam’s rubber trees, oil and other natural resources; and that entire regions’s natural resources. A pure and simple rich white men’s U.S. military-industrial complex war for giant future American industry profits, and for giant profits produced by the war itself, using poor and middle class Americans to fight the war. The Vietnam war explains the shift in “consciousness”, the shift in perspective, the shift in values, the shift in morals, between the rich Americans and American industry, and the rest of America. That perspective remains very much alive today in the rich Americans and in American industry; seriously exacerbated by rich Americans and American industry moving their production facilities to cheap overseas labor markets, such as Vietnam, Indonesia, China, India, Pakistan, Mexico, etc.; and seriously exacerbated by rich Americans and the military-industrial complex inventing plenty more wars for poor and middle class Americans to fight for rich Americans and American industry. I doubt I needed a B.A.. in Economics, 1968, from Vanderbilt University, to figure that out. All I needed was to have been paying attention with an open mind.

  69. Ernie Ferguson says:

    I think another huge factor was allowing banks to have branches in other states. When banks were local entities, they were dependent on the local economy. They invested for.local growth.

    Another factor at this tone was that.most of the increase in production was due to computers and not workers.

  70. Steve Renshaw says:

    As one other person pointed out that when Nixon stopped the $1 to gold conversion window and truly made the DOLLAR fiat currency, this made all of this possible. Since we are not playing with real money, the rich can manipulate money supply to make themselves more and more and more and more and more wealthy because the system is rigged for them.

  71. ntguardian says:

    That’s one hell of a chart, one that I could stare at all day long pondering. I now REALLY want to know what happened there. That said, his answer is not sufficient. Even if he’s correct, I want specific examples or events indicating the shift. (I don’t necessarily disagree with him; my own thought is that in the heat of the Cold War America abandoned the egalitarian ideals that drove her forward and inspired the world and adopted a “If it’s remotely Communist then it’s bad!” ideology.)

  72. ozmirage says:

    Part of the conundrum is based on money madness, where those who acquire surplus money, and cautiously trade it, so they no longer need to labor to acquire more, and thus no longer contribute surplus goods and services, are esteemed. The poor are misled to envy and hate the rich, and are goaded to attack them and take their property from them, as if that would make everyone prosperous.

    Wealth (money, jewels, etc) is not prosperity. If it were, give everyone a billion billion quatloos and we can all be happy forever after. . . except civilization would promptly collapse. (If you’re fabulously rich, why bother working?)

    Reality is far different. Prosperity is the production, equitable trade and enjoyment of surplus usable goods and services. Doing more with less so more can enjoy is the recipe for finding happiness. Doing less with more so fewer can enjoy is the recipe for misery.

    Our civilization is warped by money madness and usury, so that we seek the abstraction (“make money”) and not the reality (“make more goods and services”). Why else would a corporate CEO be more valuable than the equivalent number of workers hired with the same personnel budget? People who can manage money madness, usury and government corruption are scarce and expensive.

    By the way, a dollar bill (Federal Reserve Note) is not a dollar. It’s a debt, denominated in dollars. No dollars have circulated since 1933. Thus it is misleading to try to account for equitable trade with a repudiated security versus lawful money. Which is but another aspect of money madness we suffer under.

  73. dballing says:

    Here’s what changed: Intermodal transport container standardization, making it far easier (and thus cheaper) to get goods from a warehouse in the middle of south-east asia all the way to a retailer in East Nowhere, Ohio.

    Unions are the ones screwing American labor. (Well, screwed, past tense). They convinced everyone that American labor was so superior to everyone else’s, that it deserved this premium compensation rate compared to the rest of the world, etc., etc. But then, when it became easy to actually obtain goods from these other places, we learned that wasn’t really the case, and that there was literally no reason to pay an American 20X as much as someone in asia to make the same damned things. The only reason to do so would be “I hate money and so want to set a bunch of it on fire effectively.”

  74. The way in which facts and figures are being thrown about , and the way that, uncommon language and ideas, are being added to the mix. Shows me why more and more people distrust higher (?) education and well read people. This is an issue that shows how easily and destructively distortion and manipulation can happen. The over all effect on people who should be, and could be, both more aware and more knowledgeable , seems to be their withdraw from the arena where issues are discussed, debated and eventually solved. I am not as well educated or versed as many others in this discussion. Perhaps that is why I am depending too much on my “emotional read” of this issue. It bothers me I am unable to rationally and intellectually offer up a solution to this issue. This inability should not and will not diminish my belief that my “emotional read” tells me something is very, very wrong,. That the power, influence and wealth in this country have become too focused and needs to be redistributed making people more like each other, instead of putting people into more and more groups that serves only to divide them.

  75. Kathy says:

    Folks, 1978 The Revenue Act created the 401k. All us working people were incented to give our money to Wall Street so they could gamble with it and make tons of money with our savings. Created a lot of bad behavior in government and business policy ever since. Repeal the 401k.

  76. Josh says:

    Top tier tax rates were 90% during the most prosperous times of the country. This created an incentive to re-invest into their businesses, thus creating more jobs, rather than siphoning all the wealth off the top in the form of compensation.

  77. blue_Shift says:

    We’re looking for moral rather than structural causes at that point, but the cause was almost entirely structural: the end of the Viet Nam war, the end of the Apollo space program, and the end of the big build phase of interstate highway. This is a massive unwinding of substantial amounts of cash flowing through the US economy.

    There is a second force, and that is the arrival of parity from the nations demolished in WWII: Japan and Germany in particular were beginning to saturate our markets with quality manufactured goods, putting pressure on both wages and prices.

    Remember what followed? Inflation that saw mortgages at 15% and higher.

  78. David Russell says:

    The usa declared bankruptcy on August 15, 1971 and abanded the gold standard. Congress is free to spend whatever they desire since a federal reserve notes is not redeemable for anything of value. Then in 1972 Nixon went to China, a huge pool of cheap labor. Add increasing federal debt and taxes with cheap foreign labor with no accounting for the social cost and you see a country decline. Sir James Goldsmith had a lot to say on the social cost.

  79. Denise says:

    I read the article, and about 1/2 of the many comments back and forth. My conclusion is that everything boils down to this one fact: the economy, the 1%, the 99%, NAFTA/TPP, moral narratives, unions, ineffective government, etc., etc., etc. are not the underlying problem. Those many things are the symptom. The true problem is massive corruption across the board. And we are overcomplicating the description of the problem (trying to micro manage the symptoms) instead of addressing the root cause. But since the corruption is now at every level, I don’t know how we could prosecute corruption at the judicial level.

  80. I think the explanation is much simpler.

    The change in values, morals, etc argument is, as it always is, enticing, but there has always been a “greed is good” crowd and a “fair is good” crowd. You need look no further than “It’s a Wonderful Life to see their ongoing conflict play out to a Happy Ending for the “fair is good crowd” (which includes me). It is however, both too easy an answer and one that ignores the more parsimonious explanation.

    It’s too easy because its a commonplace answer. Every generation enters its dotage complaining that the younger generation has lost its moral compass and doesn’t value the things that matter. There’s lots of evidence of this in the comments above. And the “greed is good” crowd is usually the first to complain about the lack of morality and principles among the fair is good crowd. It’s a political explanation, and one that helps to explain why people often vote aganst their own interests.

    And there is a more parsimonious explanation, even if its not simple. What you should be digging for are the changes that put the “greed is good” folks in control and allowed them to treat “fair” as a burden on the bottom line. Computers, networks, reduced shipping costs, and more competitive workforces are arguably the four horseman you are looking for.

    First on the list is computers (the personal computer is invented in 1975: literally the year that Bill Gates and his college buddies start Microsoft. That’s a small thing at that point, but it’s just the latest iteration of a shift in the way work is done that started in the 1950’s and was entering its fourth major round of change with the PC. Custom built computers gave way to mass manufactured mainframes, then minicomputers, and finally personal computers (and there have been another three to five major iterations since. Computers change the way accounting is done, reduce the value of workers who work with numbers, and make the conglomerate possible. Companies got a lot bigger because of computers, and big companies are far more likely to treat employees as interchangable parts. That enables the “greed is good” crowd in important ways.

    The other three factors all happen in parallel with the growth in computerization and extend the power of “greed is good” people. If you can make something cheaper in North Carolina than you can make it in Massachusetts or Michigan you do so. It’s a small step from there to making it in Canada, Mexico, Japan, Korea, China or any of 150 or more countries that have educated workforces that will happily improve their standard of living at lower wages that U.S. workers earn. And in the process, companies that don’t adapt (that stay fair instead of greedy) are outcompeted, acquired, or put out of business, further increasing the power of “greed is good”.

    It’s not clear what the solution to this is except, perhaps, to break up conglomerates and insist that no company so big as to be a monopoly threat, but I do know that an appeal to morals and values will not be an effective solution.

  81. Nancy says:

    Great article. Nit: in Figure 1 caption, you might replace “embiggen” with “enlarge”

  82. Sonofhades says:

    First of all, you must understand that the richest of us never pay any taxes. They own companies etc. These companies charge people for their products / services. All costs – and this includes any TAXES – are added to the prices, so that the customers end up paying it all. The companies only have to deliver these taxes to the government after a set period of time. In effect, this is an interest free loan.

    In that respect, it is rather sad to hear these rich folk people complain about the high taxes that they have to pay of the money they’ve earned (someone else has actually done all the hard work as well) and how they are entitled to pocket some these taxes with certain deductions and complex schemes that are perfectly legal due to money they’ve spent on the corruption of the legislators who were supposed to protect the common interests of the entire nation.

  83. ntguardian says:

    I have written a response to this article, exploring the data and using statistical tests to determine whether a divergence did take place in 1973. I found that there is no statistical evidence for a detachment of wages from productivity, but both did slow their growth around 1973.

    Read here: https://ntguardian.wordpress.com/2016/09/12/wages-detach-productivity-1973/

  84. Jim Pirko says:

    Remember the point during the early 1970s when the working middle class was cut out of the prosperity brought by increasing productivity?

    That coincided with the 1973 OPEC Oil Embargo, escalating global oil prices, and the acceptance of “Free Trade” deficits during the Nixon Administration.

    People are justifiably angry now, but do they realize the causes of these effects?

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