The Guardian carries another of those whining pieces. Where did it all go wrong? Back post-WWII the economy was just lovely, then Ronnie, Maggie, neoliberalism, privatisation, you know, the stuff we here at the ASI do, and it's been terrible since then:
The share of national income that went to the bottom 90% of the population held steady at around 66% from 1950 to 1980. It then began a steep decline, falling to just over 50% when the financial crisis broke in 2007.
Similarly, it is no longer the case that everybody benefits when the US economy is doing well. During the business cycle upswing between 1961 and 1969, the bottom 90% of Americans took 67% of the income gains. During the Reagan expansion two decades later they took 20%. During the Greenspan housing bubble of 2001 to 2007, they got just two cents in every extra dollar of national income generated while the richest 10% took the rest.
Those responsible for global financial crisis got away with it while those who were innocent bore the brunt of austerity
The US economist Thomas Palley* says that up until the late 1970s countries operated a virtuous circle growth model in which wages were the engine of demand growth.
“Productivity growth drove wage growth which fueled demand growth. That promoted full employment, which provided the incentive to invest, which drove further productivity growth,” he says.
At which point a simple but not simplistic explanation of what happened. The canvas upon which we were painting the economy changed, economics did not.
It really is neoliberalism and globalisation to blame, or thank according to preference. Consider Milanovic's Elephant Graph. Which shows whose incomes have been gaining these past decades. Yes, the 1% (note that the global 1% includes me and most likely you too, above about £25,000 a year is that global 1%) but the vast majority of the gainers have been the 10% to the 70% of people out there. China got rich, India's getting there and even Bangladesh, yes Bangladesh!, has been growing at 5 and 6% for two decades now.
All those old economic drivers, productivity, wages, demand, they're all still working away. It's just that they're operating on the global economy now, not just a small series of national ones. And as before the gainers are the poorer end of society.
30 years back the great demand was that we must aid that global South to develop. Excellent, it's happening, why is everyone complaining?