Peter Radford has a good post over at the Real World Economic Review.
Excerpts (bold emphasis mine):
For a long time after World War II, up through the late 1970′s at least, there was an unwritten but clear ‘social contract’ operating in the US. Originally this was driven by the benevolence felt towards those returning GI’s from WWII, but then it became generally accepted. The deal was that big business was free to innovate and make profits as long as workers shared fully in the productivity surge that innovation would create. So even as technology threatened some jobs the overall workforce benefitted from rising wages and those who became unemployed were protected by things like unemployment assistance and the other aspects of the New Deal, and could find their way back into the workforce quickly because the economy was relatively dynamic.
This dynamism was not a function of the devastation of America’s competitors – they were also our markets – but was more a function of a positive feedback loop within the economy. Rising wages fed demand, which fed profits, which created opportunities for business, new jobs and boosted demand. The economy rumbled forward on a self-sustaining path as long as neither wages nor profits crowded out the other.
This was neither a worker’s paradise nor a capitalist’s dream. It was a compromise.
But this mutually-beneficial contract broke down, in large part due to Reaganism, as Radford explains:
Just as the Republicans have waged war on big government by attempting to ‘starve the beast’, thus robbing government of the funds to address social issues. So too has business starved another beast: the middle class. By hammering wages and by squeezing employment in order to boost profit the business community has eroded the very machine upon which it thrives. It has robbed the workforce of the funds needed to propel business forward. It has dampened demand. It has starved itself.
To get back on track we need to return to that post-war social contract. We need to abandon Reaganism. We need to put business back into a box.
Read the full article here: “Robots don’t buy stuff”
The following graph vividly illustrates the way in which worker real wages no longer tracked productivity starting in the late 1970s. Thereafter, the economic benefit of increased productivity accrued disproportionately to the 1%.