Monday, September 03, 2012

60 Years of American Economic History, Told in One Graph

The Atlantic:
In the 60 years after World War II, the United States built the world's greatest middle class economy, then unbuilt it. And if you want a single snapshot that captures the broad sweep of that transformation, you could do much worse than this graph from a new Pew report, which tracks how average family incomes have changed at each rung of the economic ladder from 1950 through 2010.    
Here's the arc it captures: In the immediate postwar period, America's rapid growth favored the middle and lower classes. The poorest fifth of all households, in fact, fared best. Then, in the 1970s, amid two oil crises and awful inflation, things ground to a halt. The country backed off the postwar, center-left consensus -- captured by Richard Nixon's comment that "we're all Keynesians now" -- and tried Reaganism instead. We cut taxes. Technology and competition from abroad started whittling away at blue collar jobs and pay. The stock market took off. And so when growth returned, it favored the investment class -- the top 20 percent, and especially the top 5 percent (and, though it's not on this chart, the top 1 percent more than anybody).   

And then it all fell apart. The aughts were a lost decade for families, and it's not clear how much better they'll fare in the next.

None of this is new history. But it's helpful to have a crisp layout of what's changed.
Let's hope the economy of the United States is not heading in the direction of Japan's.  (Read more about the Japan's economic stagnation and its impact on Japan's younger generation.)

For more on how the US economy may have undergone some profound changes recently, listen to this podcast between Lee Ohanian and Russ Roberts on The Great Recession and the Labor Market.
Lee Ohanian of UCLA talks with EconTalk host Russ Roberts about the recession, the recovery, and the state of labor market. Ohanian describes the unusual aspects of this recession and recovery in the United States as shown by the labor market and the unusual performance of hours worked, productivity, and wages. He also discusses the behavior of business investment and speculates as to why this recession and the recovery has been so different in the United States. The conversation closes with a discussion of the role of the foreclosure process in encouraging unemployment.
Below is a list of links to related articles mentioned in the podcast:

No comments: