25 ms·

WTF Happened in 1971? (2019)

• rossdavidh 6y ago
  For one perspective on the answer to this question, see Peter Turchin's "Ages of Discord" (although he puts the turning point more in the mid-70's).
• Finnucane 6y ago
  I guess that explains the unending poverty and economic decline we've faced for the last 50 years.
  • _jahh 6y ago
    except we've had unambiguously massive economic growth the unending poverty (that I'd remind you has always been worse historically it's just below the poor back then were slaves or indentured servants) is a policy consequence of increasing the share of income paid to the wealthiest (by reducing their taxes and globalization undermining labor power).
    • zbyte64 6y ago
      Right, some people might want to point to a single monetary policy or event but this is a sustained trend of piling on policy after policy. This looks like a "new" ideology showed up and drove policy decisions in a different direction.
  • nipponese 6y ago
    I’m no fiat apologist, but certainly there was poverty before 1971.
  • jnwatson 6y ago
    It was really that 1940-1969 was the exceptional period in US economic growth. We had war manufacturing that transitioned into the only major world economy unincumbered with getting their factories blown up, fueled with inexpensive fossil-fuel energy, before large-scale automation/IT took hold. This, plus powerful unions, provided a unique period where real wage growth for the bottom quartile improved.
• vortico 6y ago
  Previous HN thread (2019): https://news.ycombinator.com/item?id=20811004 https://news.ycombinator.com/item?id=20811004
  • dang 6y ago
    Also a bit from three months ago: https://news.ycombinator.com/item?id=24135845 https://news.ycombinator.com/item?id=24135845
• jmclnx 6y ago
  What happened was Nixon devauled the US Dollar, before it ws pegged to $35 per oz Gold and the US had to pay debts in Gold. https://en.wikipedia.org/wiki/Nixon_Shock https://en.wikipedia.org/wiki/Nixon_Shock
  • api 6y ago
    To be fair, his hand was kind of forced. Other countries were already abandoning Bretton Woods, considering it unfair as it gave the US a disproportionate amount of power to manipulate its currency. It's similar to the currency value struggles that have been a major fault line in the EU.
  • djur 6y ago
    The Nixon Shock was the culmination of several years of gradual collapse of the post-war economic system (including Bretton Woods). If you look carefully at the graphs on that page, a lot of them were trending upwards before 1971.
• JohnJamesRambo 6y ago
  “The government held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard.” These graphs are why I invest in Bitcoin. I see so many similarities to assignats and the lead up to the French Revolution, from the wiki- “The economy did poorly in 1790–96 as industrial and agricultural output dropped, foreign trade plunged, and prices soared. The government decided not to repudiate old debts. Instead it issued more and more paper money (assignats) supposedly backed by seized lands. The result was escalating inflation. The government imposed price controls and persecuted speculators and traders in the black market. People increasingly refused to pay taxes and the annual government deficit increased from 10% of gross national product in 1789 to 64% in 1793. By 1795, after the bad harvest of 1794 and the removal of price controls, inflation reached a level of 3500%. The assignats were withdrawn in 1796 but their replacements also fuelled inflation. Inflation was finally ended by Napoleon in 1803 with the franc as the new currency.” Https://www.usdebtclock.org I don’t mean to be alarmist, but the US Dollar is a devalued currency and you need to leave it any way you can. More than 23% of all USD ever created were created in 2020 to prop up the sham we call the stock market, which is at all time highs amidst a pandemic.
  • shortandsweet 6y ago
    How does bitcoin solve this? Last time I checked there's no fixed bitcoin price either. The currency is so volatile on news, it's sagging and spiking all over the place.
    • beachwood23 6y ago
      You are correct that there is no fixed price. However, you might be assuming that the US Dollar has a fixed price too. The US Dollar is fixed at the price of the US Dollar, which is of course only a relative value. Likewise, a Bitcoin is worth what a Bitcoin is worth. The difference between the two, what the OP is pointing out above you, is that Bitcoin currency has a limited supply and so can't be devalued. Relative to each other, a Bitcoin will increase its value to the USD because the supply of the latter is always increasing.
• triangleman 6y ago
  Love the charts, then scroll to the bottom and "oh, Bitcoin". Sorry but there are other ways. Did you know that the Balanced Budget Amendment (proposal) failed by a single vote in 1995?
  • akhilcacharya 6y ago
    Can't even imagine what current economic recovery would look like if we had a Balanced Budget Amendment under President Ross Perot in '95.
    • triangleman 6y ago
      Truly unimaginable.
  • djur 6y ago
    Yes, we narrowly averted disaster. Did you know that amendment required a supermajority to raise taxes?
    • triangleman 6y ago
      Not true: https://www.congress.gov/bill/104th-congress/house-joint-resolution/1/text https://www.congress.gov/bill/104th-congress/house-joint-res...
      • djur 6y ago
        That's after it was amended. The original proposal did have a 3/5ths majority requirement: https://www.congress.gov/bill/104th-congress/house-joint-resolution/1/text/rh https://www.congress.gov/bill/104th-congress/house-joint-res...
        • triangleman 6y ago
          Fair enough. I know they're just words on paper with escalating levels of authority, and at the end of the day we get the government/money we want/deserve. I personally benefited some $2000/year from the Trump tax cuts that I know my children will have to repay some day at punitive rates, but apparently that's what my fellow citizens want. Without a cultural change, founded on a spiritual change, why should we expect our government, finances, or money to change? I love Hayek but I disagree with that quote at the bottom of the site. A "poison pill" is no solution to our problems.
• ZacharyPitts 6y ago
  Amazed that the site does not call out Nixon completely abandoning the gold standard in 1971. Financial investments thusly did not need to be backed by actual assets anymore, to the point of today where the whole of money is loans against loans against loans.
  • mason55 6y ago
    That’s the point of the site. It doesn’t say it explicitly but leaving the gold standard is the answer to the question in the URL
    • definetheword 6y ago
      Ya, I recognized that it guides you to the conclusion: - read first three graphs... "oh, yes, that looks like a problem" - scroll next 5 graphs... "oh, looks like lots of evidence correlates to that year... what happened that year?" - scroll next 5 graphs ... "oh, wasn't it the gold standard that year?" - scroll to the end.. read quote .. "is this a bitcoin quote? No, someone else... wait, but who is River Financial and why do they want me to care"
    • addicted 6y ago
      Alternatively, whatever forces led to the government taking as major a step as leaving the gold standard is responsible.
      • Blahah 6y ago
        Not alternatively. Leaving the gold standard may have been one proximate cause, while the desire of the government to have simple tools to provide short term economic relief in the face of complex socio-economic problems is one ultimate goal.
    • lumost 6y ago
      Trade with China also opened at around the same time. A plausible explanation for the decoupling of wage growth is competition or the threat of competition with international labor.
• driverdan 6y ago
  The inflection point in most of these charts happen after 1971, many closer to 1980.
  • rtkwe 6y ago
    Looking at economic graphs is hard because it’s laggy. The problems that lead to 2008 were a gradual accumulation through the preceding 10-20 years.
    • driverdan 6y ago
      That's true which is why this is not how you present that data. This feels like it was created by a technical trader who was looking for signals without an understanding of the underlying data.
      • bpt3 6y ago
        It was created by a business with an obvious agenda (and therefore an obvious conclusion they'd like you to draw).
    • jasonhansel 6y ago
      If "it's laggy" is a valid explanation, then literally any economic change since 1971 can be used to "support" the OP's theory.
      • yongjik 6y ago
        s/literally any economic change since 1971/literally any economic change/
• 0898 6y ago
  How do economists measure "productivity", and it is a worthwhile metric? It always seemed super sketchy to me.
  • pydry 6y ago
    Usually just GDP divided by hours worked. It is always super sketchy.
  • raphaelj 6y ago
    Constant $/€/whatever per hour worked.
  • nwellnhof 6y ago
    Basically, all economic data is sketchy. One of the main reasons is that you must adjust historical data for inflation but it's simply impossible to measure inflation objectively.
  • prepend 6y ago
    “ Labor productivity is a measure of economic performance that compares the amount of goods and services produced (output) with the number of hours worked to produce those goods and services.” [0] It’s defined in many ways, but in the US I think it’s usually BLS. One thing that helped me when studying this stuff is that these are all based on some judgement and qualitative work and aren’t platonic terms. This used to frustrate me, but then I realized that these are really hard concepts to truly know so these seemingly arbitrary definitions because at least they allow some shared understanding. And also gets us past a lot of the standard “he said, she said” cycles of defining and trying to get reputable data. [0] https://www.bls.gov/lpc/ https://www.bls.gov/lpc/
  • PaulDavisThe1st 6y ago
    Conservative economists also regard "compensation" as tricky to define. One defense of these graphs is that "real compensation" has actually increased much more than wages. Assuming that you agree with any given definition of "real compensation", that still leaves open the question of whether wages, which are 100% fungible, can be replaced by non-fungible compensation.
• wheelie_boy 6y ago
  Reminds me of https://tylervigen.com/old-version.html https://tylervigen.com/old-version.html Especially some of those graphs about stuff like childhood obesity. It would be nice if all problems in a society had a single, simple cause (bad people doing stuff!) and a single, simple solution (stop 'em!), but the world is a complex place I did notice that the people hawking bitcoin didn't include any graphs about climate change..
  • taffer 6y ago
    Essentially, this website wants to make you believe that going off the gold standard (which only existed on paper at the time) is the root cause of all the bad things in the world. All documented by cherry-picked numbers and shoehorned graphs. And now we are supposed to buy Bitcoin to make everything better. It is crazy that this wacky stuff is upvoted on HN.
    • ehmish 6y ago
      Ignoring their conclusion aboutwhat they think it was, it's interesting that _something_ happened in 1971, personally I think it's more likely the opening of trade with china than going off the gold standard. It does a good job of showing the sheer broadness of the effect on American society.
      • taffer 6y ago
        > it's interesting that _something_ happened in 1971 Why do you believe that this is true at all? Someone on the Internet just cherry picked some numbers and shoehorned some graphs to make a point. You could pick any year, and with enough data butchery, you could find all sorts of spurious correlations to all sorts of things. By the way, until the 1980s, China was a dirt poor Third World country that was more or less irrelevant in international trade. In the 1970s China exported fewer things than, for example, Nigeria, Venezuela or Poland. The rise of China took place in the 1990s and 2000s. It is completely impossible that trade with China in the 1970s caused any noticeable change.
• wyldfire 6y ago
  Some of these graphs are laughable and are candidates for "Spurious Correlations" [1]. Childhood obesity is not due to the US getting rid of the gold standard. [1] http://archive.is/9VFmh http://archive.is/9VFmh
  • beamatronic 6y ago
    It could be related to the increase in both parents working. No mother at home to provide nutritious meals. And both parents working is due to the already explained economic factors.
    • gota 6y ago
      Great thinking. I googled "mother employment child obesity" and apparently it is so. The first result on google scholar has 200+ citations[1]. https://link.springer.com/content/pdf/10.1007/s11150-009-9052-y.pdf https://link.springer.com/content/pdf/10.1007/s11150-009-905...
  • JackFr 6y ago
    Indeed. And another good trick used is showing exponential growth on a linear scale and managing the time domain to make 1971 look like an inflection point.
  • swalsh 6y ago
    So many aspects of our lives can potentially be linked back to the economy. Not really trying to make the argument that it is directly related, but income and obesity are highly correlated. Cheap calories often are bad calories. If going off the gold standard impacted the distribution of wealth. It might be plausible that could impact obesity. * again, not aruging for or against the correlation. Just pointing out that it is hardly laughable.
    • rhacker 6y ago
      I'd say it's a correlation.
  • 6y ago
• dexterdog 6y ago
  I don't mean this to say that the women's liberation movement was a bad thing because it was not, but that started in the early 70s and had the effect of rapidly inflating the supply of educated potential white collar employees.
  • blablabla123 6y ago
    Historically, before this liberation event (and it's not the only one) women's ratio in the work force variated greatly especially during war times when a lot of women were encouraged to work outside of the households. I remember the term "reservist work force" from history class.
  • mjh2539 6y ago
    Right; the labor pool increased dramatically, which decreased the cost of wages, but demand and consumption remained basically the same (there'd be an increased demand for gas/cars/clothing/etc with more people going into work, but that would be small).
• icameron 6y ago
  A lot of charts with no context, but my main takeaways are that the US is not in record debt, in fact it was well over 100% GDP in WWII and under that now. Based on the news you'd think US is over spending by records numbers. The numbers are records but as a percentage of GDP they are not. Another surprise is the S&P PE ratio. I thought it was really high now, but actually 2008 was the high point by about twice as much. Again, no context in the article, but these were my takeaways. All the other charts are saddening. Maybe the point is sow fear uncertainly and despair to pump bitcoin?
  • throwaway0a5e 6y ago
    >in fact it was well over 100% GDP in WWII You can't win a war with sustainable budgeting. If you have to use WW2 to prove that the national debt wasn't bad than that's probably a sign it's bad.
    • Enginerrrd 6y ago
      Yeah no kidding. If you have to compare your current status quo with probably the most extreme time period the US faced in the whole 20th century, it's definitely a bad sign.
• bryanlarsen 6y ago
  The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists. The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was passed in 1970; the late 60s and early 70s saw many financial and environmental regulations passed. I like the oil price theory. The period of growth was a period of massive decline in the price of energy. We've since had 50 years of stagnation in energy prices. But that looks to be breaking now. If solar energy & battery prices continue to decline the way they have been, we could see energy prices decline at a rate reminiscent of Moore's law. And energy is a massive component in the price of almost everything we consume.
  • coward8675309 6y ago
    I'm very much with you on this. Increasing standards of living are directly tied to a decreased cost of energy. Aside from property absolutely everything can be decomposed into physical or mental effort — energy [omitted at suggestion of follow-up, merci!]. The industrial revolution allowed the substitution of wood or coal or uranium or PV cells for food that powers oxen, horses, and humans.
    • hollerith 6y ago
      >energy (or energy * distance aka work) Your comment would be improved by omitting the words in parentheses: work is force times distance, and energy and work have the same dimensions (namely mass * distance * distance / time / time). (I agree with the rest of your comment.)
  • anovikov 6y ago
    Why do you think it has something to do with production? It may be simply redistribution. Less goes to employees, more to profits. Just because they stopped fearing a Communist revolution much as Communism was more and more evidently failing.
• bobcostas55 6y ago
  Nothing, these charts are just the result of picking the wrong deflator. This chart shows what happens when you use the (correct) GDP deflator: https://worthwhile.typepad.com/.a/6a00d83451688169e20134878dba59970c-pi https://worthwhile.typepad.com/.a/6a00d83451688169e20134878d...
  • pjc50 6y ago
    There's definitely still a divergence, starting in .. 1975?
    • 6gvONxR4sf7o 6y ago
      I think you’re looking at the red line, which is the point. The red and black lines diverge, but the blue and black lines don’t, and the argument is that the blue line is a more accurate version of the red one.
  • 6gvONxR4sf7o 6y ago
    Can you provide more detail? I’ve definitely wondered about how general-purpose an inflation correction mechanism can be. When I see rising rents, corrected for inflation, I always wonder if maybe rent should be a more significant part of the correction, until it’s flat-ish after the correction. But then food, another universal necessity, wouldn’t be flat. Choosing the right deflator, if I’m using the word correctly, seems really hard.
    • deleted 6y ago
      [deleted]
    • jjoonathan 6y ago
      It's not just hard, it's also political. The amount of nuance can be overwhelming. CPI doesn't account for the ability of consumers to substitute inferior goods, but GDP doesn't account for the sacrifice involved in doing so. CPI focuses on consumers, while GDP focuses on all sectors. CPI includes the price of imports while GDP does not. The list goes on. Making all of these choices and keeping in mind the consequences for doing so is exhausting, but you shouldn't just pick someone who looks like the most credible person in the room and trust them because the very nuance that you were hoping to avoid allows people to torture the numbers to say anything they want, and the most credible person in the room might not want the same thing you do. GP argued that OP was torturing the numbers and I argue that GP is torturing the numbers. Who do you believe? Here's a test to avoid getting lost in the wilderness of nuance: "What would Elysium look like in this model?" I am referring of course to the movie where a small number of rich people live in luxury on a space station while Earth and its population have devolved into a gigantic poverty-ridden slum. In this case, CPI might show that a basic basket of food, clean water, shelter, and education have become prohibitively expensive for most humans, while the GDP measure would argue that most members of the slum can't afford clean water or proper shelter so those things shouldn't be included in the index. Instead, people live in tents and drink barely-filtered water, which are both still affordable, so what's the problem? More generally, any figure expressed in terms of dollars (GDP, value creation, etc) runs the risk of placing low weight on what happens in the slums and high weight on what happens on the space station. The average (unstated subtext: dollar-weighted) person can afford luxurious accommodation in all facets of life and sees nothing but perpetual economic improvement, so again, what's the problem? Which metric is the right one? That depends entirely on the point you want to make, but the "Elysium test" is a very basic honesty check that catches the more egregious errors.
• mikey_p 6y ago
  Didn't the Powell memo happen in 1971 as well?
• parhamn 6y ago
  Sort of related: Is there any measure for cost-to-innovate out there? I’m also curious whether there was a ton of low hanging fruit for innovating/organizing/sciences that we plucked. The “first 90% is easier than the second 90%” kind of thing.
• bluedino 6y ago
  Would increases in computers and automation have anything to do with it? And have wages really gone down? As a whole, we're richer than ever. We own more possessions, have bigger houses, spend more money on luxuries, etc.
  • mrlala 6y ago
    >And have wages really gone down? If you include things like the cost of Homes Healthcare *Education Then wages have gone wayyyy down. And then if you factor in things like employer pension plans back then.. well, crazy further. Now if the argument is "well we have more luxuries".. I mean, sure.. but it just seems an impossible task to raise a family and pay for home/healthcare/education compared to what it was even 30 years ago.
  • cambalache 6y ago
    Define "we" and define "rich". Because if by "we" you mean, anyone who has a blue collar job and/or "just" went to a state school, and if by "rich" you mean, able to afford a house,have the luxury of one partner (usually the woman) to stay home, medical costs in any eventuality, send their kids to college, then you are sadly mistaken.
  • collinmanderson 6y ago
    This is my bet. Computer automation probably removed more wages than it created.
• coliveira 6y ago
  The US was forced to stop paying gold for its international debts in 1971, otherwise it would have not enough gold to continue. But this had little consequence because gold was not really the basis in the international currency system since the Breton Woods agreement in which the US forced everyone in the capitalist world to use the dollar as the basis for currency transaction. The Breton Woods agreement was the necessary step for things like the Marshall Plan and the IMF. In summary, the Breton Woods agreement was the piece of financial sorcery used to revive the capitalist world destroyed by WW2.
• wffurr 6y ago
  It's more like WTF happened between 1945 and 1971. I think that was an ahistorical period of low income inequality, and now we're back to "normal" such as it is.
  • milkrocks 6y ago
    it's more like what didn't happen. Between '45-71 Europe and Asia were still rebuilding from WWII, by the seventies they were finally able to compete again.
  • UncleOxidant 6y ago
    > I think that was an ahistorical period of low income equality You mean low income inequality, right? That post WWII era in which the US was pretty much the only developed nation with it's manufacturing capability still intact. That and the GI Bill explain how that era was exceptional - a large number of folks who returned from WWII got free college educations.
    • drocer88 6y ago
      Do you have a source for this claim? Canada , Sweden, Switzerland, Argentina, Spain , Australia , New Zealand and arguably undeveloped India, South Africa, Brazil, Mexico and other parts of Latin America were "intact".
      • XorNot 6y ago
        By population the US dominates the entire list of first world countries you have there, and as you note, the remainder were underdeveloped at the time. The US benefits a lot from simply being big. On some level success is simply about biomass - you need the largest number of brains you can, sitting around thinking about stuff.
      • jholman 6y ago
        >> pretty much the only developed nation with it's manufacturing capability still intact > [some minor developed nations were intact] > [some undeveloped nations were intact] Minor thoughts: a) trivial quibble: Spain was not intact in 1940, I doubt they'd recovered that much by 1945? b) I was gonna say something bout Argentina not being a developed country, but I looked it up, and TIL that Argentina used to be super developed. TIL! c) most of those undeveloped countries had virtually no manufacturing, which is why UncleOxidant excluded them in a comment about manufacturing power But more importantly... The numbers I've seen bandied about (I don't have credible sources) say that the US was 50% of world GDP, and held 80% of hard currency reserves, in 1945. Supposing that's correct, even though you're technically right that the US wasn't "the only developed nation ... still intact", it's still almost-correct-in-spirit. US manufacturing capability in 1945 was way way way ahead of every other country. The point being that if the US economy experiences unusual behaviour in the period 1945 to 1971, one obvious factor is its overwhelming global supremacy in manufacturing in the immediate post-war period.
• matthewbauer 6y ago
  I don't see how 1971 is significant for any of these graphs. Looks like 1979 is when productivity / compensation really start to diverge. What happened in 1979?
  • benaadams 6y ago
    The rise of neoconservatism
  • hindsightbias 6y ago
    Volckernomics, deregulation and then Union workers voting for Reagan cast it in stone. https://publishing.cdlib.org/ucpressebooks/view?docId=ft5d5nb36w&chunk.id=d0e8496&toc.depth=1&toc.id=d0e8312&brand=ucpress https://publishing.cdlib.org/ucpressebooks/view?docId=ft5d5n...
• AnimalMuppet 6y ago
  Those inflation graphs are rather misleading. Plotting cumulative inflation or CPI index on a linear graph gives you an exponential curve. By choosing the scale, you can make the "corner" appear wherever you want.
• api 6y ago
  I think the idea that major historical trends have one cause is a huge fallacy. There are almost always many causes. Other than the end of Bretton Woods a lot of things happened in the early-mid 1970s, like... * Breaking of union negotiating power by explicit anti-union measures and by globalization that allowed corporations to undercut domestic labor with cheaper overseas labor. * The establishment of environmental controls and the EPA. While this was in many ways a very good and needed thing, it made US industries much less competitive with overseas industries that could operate in countries without environmental laws. Nothing was done with tariffs or any other measure to compensate. We just pretended all things were equal and let corporations send pollution and jobs overseas. * The rest of the world rebuilt after WWII and started to compete with the USA in manufacturing. * The depletion of really cheap domestic oil, the Arab oil embargo, and the EPA meant the end of really cheap energy. Around the world cheap energy (often from dirty sources) is closely tied to the growth of the middle class. Expensive energy tends to be correlated with a decline in middle class living standards, and it's not hard for me to see a clear causative factor here. * The 1970s saw the rise of many forms of office and bureaucratic automation such as widespread computer use, copy machines, printers, etc. These cut into the low-mid range of white collar jobs. * The 1970s also saw the rise of industrial automation that reduced the need for many lower-skill factory jobs. * The post-war suburban building boom started to wind down in the 1970s. Building all that housing, highways, etc. employed a lot of people. Furthermore, we started to enter an era of under-building of housing that drove house price appreciation to levels that have really started to harm the middle class. * Women entered the work force in droves. Like environmental regulation this is largely a good thing except that it may have driven down wages due to increasing labor supply. * The rise of consumer debt and credit cards, which made it easy for people to go into massive debt that would over time erode their real purchasing power. * The "maximizing shareholder value" business philosophy started to take over, and many industries saw engineers and experienced operators replaced in leadership by MBA types. This is likely a cause of the next thing... * A much more conservative and risk-averse mentality took over in many industries. A great case in point is aerospace which saw the "can-do" Apollo era mentality replaced with the "if it hasn't flown before, it can't fly" post-Apollo mentality. This is what I've long called a "minor dark age" that began in the 1970s and I think is starting to end now. * The rise of a new kind of conservatism that found itself steadfastly opposed to government investment in industry, science, technology, or other domestic things. This would come to be identified with Reaganism. The US basically stopped building infrastructure and over time cut investment in basic research and other bedrock areas where government historically led investment. * At the same time government spending became less politically palatable, there was quite ironically a monstrous bloating of the Federal budget. Some of this was driven by growing entitlement programs and some of it by runaway defense spending. While the new right opposed most government spending, it tended to favor the almost unlimited expansion of the military budget. * The cultural rise of religious fundamentalism/literalism, luddite green ideology, postmodernism, the New Age, conspiracy thinking (of both left and right leaning varieties), and many other anti-intellectual and anti-modern movements. This is a trend I see cresting today with things like anti-vaccination, Qanon, etc. * Television replaced radio and reading as the major information source for most people, leading to an elevation of style and presentation over substance. People started to be elected on how they look and carry themselves rather than their ideas or competence. That is not an exhaustive list. Instead of debating the one cause and wringing our hands, we should instead look at the many causes and divide them into things we can and can't (or shouldn't) reverse. Things we can and should reverse: anti-intellectualism, unfair trade policy, mis-allocation of government spending, lack of infrastructure investment, financialization ("MBA mentality") of capitalism, excessive consumer debt, under-building of housing. Things we can't or shouldn't reverse: international competition, the need for environmental protections, women in the workforce, and automation.
• cynoclast 6y ago
  The nixon shock and the removal of the secret ballot from congress are two hypotheses I've seen: https://ivn.us/2015/07/16/transparency-the-greatest-flaw-in-congress/ https://ivn.us/2015/07/16/transparency-the-greatest-flaw-in-... This, not Citizens United is what put "money in politics".
• barcadad 6y ago
  Many of those charts can be explained simply by demographics. Baby boomers entering the workforce (esp. the sharp growth in women workers) and starting families represented a huge transition. The OPEC shocks were also very important over the following several years.
• CPLX 6y ago
  A common, and in my opinion reasonable, response, is that the 1970's is the beginning of the current period where there is no longer a political party representing labor in the United States.
• djur 6y ago
  The "hyperinflation episodes" graph is pretty misleading. That big clump in 1991 marks the collapse of the Soviet Union, and as much as he would have liked it, I don't think you can credit Nixon's withdrawal from Bretton Woods as the cause of the fall of the USSR.
• not2b 6y ago
  Business managed to exploit a number of crises to break the power of labor unions. The gold standard had nothing to do with it: sticking with gold would not force management to share productivity gains with labor.
  • lumost 6y ago
    One can argue that strong money places limits on the finance sector and non productive speculative investment.
• tw04 6y ago
  What happened? Outsourcing happened. The 1970s is when the US went full-bore on the "global economy" and started outsourcing all sort of manufacturing jobs to the east. The gold standard and oil crisis are just easy excuses to distract from the fact we've been outsourcing our middle class for 50 years then acting surprised wages have stagnated. It was an easy way to break unions and drop wages. The story of "those jobs were replaced with tech jobs" is nice to claim, but the numbers don't really add up. https://www.cnbc.com/id/47323840 https://www.cnbc.com/id/47323840
• anovikov 6y ago
  Not sure what the "income growth" chart actually means, but if both bottom 90% and top 1% income, although by very different tracks, grew by about 3x in 1917-2012, then something is wrong. Because real GDP per capita grew 7.43x [1]. Logically the percentiles between 1% and 10% from top don't matter all that much, and in any case they must be in between top 1% and bottom 90% -> arrive to about same result although by some middle sort of track. Any explanation? That chart seems to be a gross misinterpretation of something. Proportion of income in GDP could have only increased since, maybe income of the rich, but still. Where did the 2.5x difference in growth rates come from? [1] https://www.measuringworth.com/datasets/usgdp https://www.measuringworth.com/datasets/usgdp
• gshubert17 6y ago
  Morris Berman's Dark Ages America posits that the U.S. leaving the Bretton Woods agreement (of which devaluation relative to gold was one aspect) was the policy change desired by finance capitalism. Bretton Woods had restricted international capital flows and let nations restrain some abuses of financial power. In effect it made it easier for countries to set up welfare states if that's what they wanted. Afterwards, without these restraints, the top few percent in wealth were better able to use their money to make more money. The FIRE (finance, insurance, real estate) economy grew relative to the ordinary industrial, commerce, and service economy, in which lower- and middle-income people worked. Hence the growing inequality and relative impoverishment. I believe Berman says the discipline imposed by the semi-gold standard was only part of the reasons for prosperity from 1947-1970s. And for the big economic changes afterwards. Restraining abuses of globalism and financial capitalism were also important.
• williesleg 6y ago
  China.
• jeffbee 6y ago
  I guess this was all caused by IBM moving from iron core to semiconductor memory, depressing the wages of the vast wire-wrap profession.
• corpMaverick 6y ago
  Unexpectedly, a 1970 law that increased transparency in congress ended up benefiting powerful special interest groups. http://congressionalresearch.org/Citations.html http://congressionalresearch.org/Citations.html https://www.youtube.com/watch?v=SBmurUJMBJA https://www.youtube.com/watch?v=SBmurUJMBJA
• prepend 6y ago
  I think this may just be the greater shift to programming and digital tools. This makes it more important to have fewer employees who are responsible for the productivity gains of large groups of workers. I think the specific inflection point is a bit manufactured, but I the theme over these decades is tech. I love tech because it allows for near zero marginal cost of distribution and one person to reach many. But I think it’s harsh on “analog workers” where it’s about lots of people instead of clever tech.
• deleted 6y ago
  [deleted]
• treggify 6y ago
  Nixon was president and the war on drugs started.
• pottertheotter 6y ago
  Anyone read Piketty's Capital? I'm reading it right now and this seems to line up well with the book.
• aazaa 6y ago
  Plenty of events to choose from here: https://en.wikipedia.org/wiki/1971 https://en.wikipedia.org/wiki/1971 Highlights: - "A new stock market index called the Nasdaq Composite debuts." - "Starbucks, a major coffeehouse and outlet in worldwide, is founded in the U.S. State of Washington." - "The U.S. ends its trade embargo of China." - "President Richard Nixon declares the U.S. War on Drugs." - "Southwest Airlines, a low-cost carrier, begins its first flights between Dallas, Houston, and San Antonio." - "American President Richard Nixon announces his 1972 visit to China." - "President Richard Nixon announces that the United States will no longer convert dollars to gold at a fixed value, effectively ending the Bretton Woods system. He also imposes a 90-day freeze on wages, prices and rents." - "The United Nations General Assembly admits the People's Republic of China and expels the Republic of China (or Taiwan)." - "Ray Tomlinson sends the first ARPANET e-mail between host computers.[" - "The People's Republic of China takes the Republic of China's seat on the United Nations Security Council (see China and the United Nations)." - "The U.S. dollar is devalued for the second time in history." These events can be grouped into categories: - pro-deflationary (e.g., China rising, the first email message, Southwest) - anti-working-class (War on Drugs) - increasing financial speculation (NASDAQ) - financial (end of Bretton Woods, US dollar devaluation) - consumerism (Starbucks makes coffee cool and diverts billions from working-class savings) I know that the site advocates the end of Bretton Woods as the main cause, but that event is just one in a spectrum of major arcs that had major emergences in the early 1970s after slow burns in the 50s and 60s.
  • nipponese 6y ago
    Not specifically happening in 1971, but one could argue this is the start of the Information Age and subsequent "digital divide"
  • hosh 6y ago
    I'd add that in 1970, the intermodal shipping container became an ISO standard. Containerization has been developing since 1956, and along with minicomputers, would have an impact on world trade and manufacturing for decades to come.
    • jandrese 6y ago
• ohyes 6y ago
  This is clearly because 1970 is the Unix epoch when this version of the simulation began. It took about a year for things to get sufficiently out of whack so that stuff started to diverge in a noticeable way. I hope our implementors are proud of me for making reference to the simulation that we're all in.
  • qsort 6y ago
    unironically still a better theory than the op.
  • ehnto 6y ago
    The simulation the implementers are in doesn't allow for nested references.
    • 0-_-0 6y ago
      Hey, don't crash the simulation! I haven't had dinner yet.
  • davidkuhta 6y ago
    That would be the revised simulation history, the original did actually diverge in 1971. https://stackoverflow.com/questions/11573024/when-was-unix-epoch-time-revised-from-1971-to-current-1970-value https://stackoverflow.com/questions/11573024/when-was-unix-e...
    • ohyes 6y ago
      that is a really interesting tidbit of unix lore.
  • RhysU 6y ago
    A coworker and I were recently indulging in dark humor about pandemics being due to load shedding required on account of unexpected simulator platform downtime.
    • shrimp_emoji 6y ago
• thanhhaimai 6y ago
  The biggest reason for the wage drop is the trade with China. The US and China started trading in 1971: https://apjjf.org/2013/11/24/Dong-Wang/3958/article.html https://apjjf.org/2013/11/24/Dong-Wang/3958/article.html As with any economic question, it's usually not due to one reason. The combination of energy price and workforce age comes into play. But the biggest trigger of all was the trade with China. That put a serious pressure to job competition, and led to significant wage stagnation in the US. On the other hand the 1% benefited a lot from the trade. https://en.m.wikipedia.org/wiki/China%E2%80%93United_States_relations https://en.m.wikipedia.org/wiki/China%E2%80%93United_States_...
  • refulgentis 6y ago
    Many, many, many, more of "the 99%" benefited than the theoretical benefit of opening the US to competition did to "the 1%". https://ourworldindata.org/exports/share-of-population-living-in-extreme-poverty-by-world-region_v4_850x600.svg https://ourworldindata.org/exports/share-of-population-livin...
    • ocommentator 6y ago
      Exactly, it would be interesting to look at the growth in real income and income equality from a global perspective.
      • Aicy 6y ago
        How come this graph leaves out North America?
  • ertian 6y ago
    Total US trade with China was vanishingly small well into the 1980s, and didn't start to become significant relative to total US trade until the mid-to-late 90s[1]. I think there's a better argument for trade at large, since ~1970 was a turning point for many _other_ Asian countries, in particular Japan, Taiwan, South Korea, Singapore, etc. There wasn't a clear, sharp line, though. [1]https://static.seekingalpha.com/uploads/2018/2/15/saupload_combined-value-US-exports-to-China-and-imports-from-China-198501-201712.png https://static.seekingalpha.com/uploads/2018/2/15/saupload_c...
• pmcollins 6y ago
  there’s an inflection point in the immigration rate to the usa right at that time. would have a depressing effect on wages, but not on productivity. https://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population-over-time https://www.migrationpolicy.org/programs/data-hub/charts/imm...
• motohagiography 6y ago
  Was this not also the beginning of the Fed holding down interest rates? Gold is one part of it, but rates have declined fairly steadily since then.
  • AnimalMuppet 6y ago
    That was 1980, with the Volcker Fed. From at least World War II to 1980, we had cycles of recessions and recoveries. Each cycle had higher inflation (at corresponding points in the cycle). Since 1980, each cycle has lower inflation, but higher unemployment.
• sleepysysadmin 6y ago
  Many graphs don't adjust for inflation or really show the pattern at 1971. Some show 50-60s and other 80s. It also doesn't account for the momentum of human markets. If you make a change that's bad, it can take decades for the consequences to really hit. We know what happened, the problem is in social science. The biggest subject is whether or not there's an actual problem here. I don't think there's a problem. https://en.wikipedia.org/wiki/Civil_rights_movement https://en.wikipedia.org/wiki/Civil_rights_movement https://en.wikipedia.org/wiki/Labor_force_in_the_United_States#/media/File:US_Labor_Participation_Rate_by_gender.svg https://en.wikipedia.org/wiki/Labor_force_in_the_United_Stat... https://en.wikipedia.org/wiki/Equal_Employment_Opportunity_Act_of_1972 https://en.wikipedia.org/wiki/Equal_Employment_Opportunity_A... The overall participation rate is still more or less 60% and as women other other minority earned the right to join the workforce. This has been fantastic for our society. Every egalitarian society has benefitted greatly. But now there's 20% less men working. What are they doing? Worse yet, this is a competition. So as talented women joined the workforce, they displaced less talented men. That's great for the economy. Worse yet, supply vs demand occurs. Supply of labour went up, demand more or less stayed the same. This means wages stagnate or lower. Minimum wage is increased but this only sets wages to stagnate while increasing unemployment. In terms of society, this is fantastic. We have gained much more talent from minority groups. We don't have discrimination any more relatively speaking. Overall this is great news. However there's a human cost. From the page, 72% of black women having kids outside marriage. Is it because the father is not there or involved or is it because marriage is not a consideration? Marriage is at historic lows. So is birth in general. Now lets say there's a problem as per OP's assertion. What's the fix? Remove civil rights? Hell no. That's not the fix. What if the problem is deeper than this? John Keynes said like 100 years ago that we will be down to a 10 hour work week about right now. Yet here we are working 40+ hours. One of the last graphs on that page hits on this. Doctors barely increased whereas "administrators" has greatly increased. Moreso occurring in the 1990s but it's telling of the problem. We have people working too much and we have left no room for everyone else. Civil rights increased supply but the same amount of jobs are needed because of productivity increased. So now we have >50% of our society pretending to work. They have a job that does nothing. We need to reduce the supply of labour. We need to go down to like 10-20 hour weeks.
• fumblebee 6y ago
  Graphs like these serve to suggest to people that there's a single, operative reason at their core instead of it being a complex, multivariate issue. They also tend to cause people to over-attribute the effects of the story told in the graph(s) to the majority of the population instead of a minority with disproportionate impact. Regardless, taken together the graphs are compelling. The real cause will likely remain forever elusive, but here's a few hypotheses. * The rise of globalisation and the outsourcing of low skilled jobs to other countries. * The abandonment of the gold standard. * The oil crisis. * The disarmament of labor union power. * The concentration of a highly educated 'creative class' in fewer urban areas. * Women entering the work force en masse.
  • AWildC182 6y ago
    I came to this conclusion as well as it seems like a lot of extremely pivotal economic events took place around 1971. It was basically the year the modern economy was born.
• OliverJones 6y ago
  Uncle Milty (Milton Friedman) published, on Sept 12, 1970, The Social Responsibility of Business is to Increase Its Profits. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html https://www.nytimes.com/1970/09/13/archives/a-friedman-doctr... This doctrine of irresponsibility was gobbled up by businesses. It gave them (us) permission to switch from the post-WW2 cooperative way of doing business to an extractive model: get the most you can from workers, suppliers, host communities and other stakeholders without shares. Externalize all the costs you can get away with fobbing off on others. The Hayek / Friedman / Chicago School fanbois need to address the biggest externalized cost of all: disposal of CO2, methane, and other greenhouse gases. If the social responsibility of business were to increase its profits a century from now, maybe the Friedman Doctrine would be helpful. But, yeah, no. As it is, the Friedman Doctrine means "take all the money and run." Lots of plutocrats argue for a guaranteed basic income. Why? if Amazon / FB / Doordash / Uber impoverish everybody, nobody will have any money to spend on Amazon / FB / Doordash / Uber. That's all a consequence of the Friedman Doctrine.
  • renw0rp 6y ago
    Good that you have your scapegoat. Looks like he has invented greediness
  • TOGoS 6y ago
    Friedman may have written them a nice excuse, but capitalists have always behaved this way. Look at the behavior of the robber barons around the turn of the 20th century for example. The question is not one of motivation, but what allowed them to get away with it? So I would like to combine your comment with the root from another thread: "Business managed to exploit a number of crises to break the power of labor unions. The gold standard had nothing to do with it: sticking with gold would not force management to share productivity gains with labor." Among the 'number of crises' being that the boom from rebuilding after WWII was basically over, which has also been mentioned in other comments.
    • EricE 6y ago
      "Friedman may have written them a nice excuse, but capitalists have always behaved this way" And communist don't? People behave this way if left unchecked. Greed is hardly something unique to capitalism.
• rhacker 6y ago
  You can clearly see when income stagnated, the debt load by the public skyrocketed. It's almost as if the bulk of the ability to pay for things without a loan went to the 1%, and the ability of the 1% to gain even MORE money when a loan happens... goes to the 1%. I think we're stuck in a feedback loop that doesn't have a chance to break out unless we make laws against whatever is causing it.
• viig99 6y ago
  August 15th 1971, President Richard Nixon announces that the United States will no longer convert dollars to gold at a fixed value, effectively ending the Bretton Woods system. He also imposes a 90-day freeze on wages, prices and rents.
• namesbc 6y ago
  1970s was the beginning of austerity movement in the US. Federal government was paying for white people's housing, education, etc. but after the civil rights act a white supremacist nation decided it was better to throw it all away rather than share a bit of success with non-white people.
• telaelit 6y ago
  The beginning of the failed neoliberal politics.
  • CryptoPunk 6y ago
    Social welfare spending, as a percentage of GDP, has massively increased since 1972. On the regulatoey side, major regulatory agencies, including the OSHA and EPA, were also created in the 1970s. Every broad-based measure of regatory burden shows increasing since 1971. So if anything, post 1971 United States has demonstrated the failure of abandoning economic liberalism in favor of central economic planning.
    • Miner49er 6y ago
      Taxes on the wealthy have decreased substantially in the US since the 50's. Even if social welfare spending is increasing, the wealthy are paying for less of it then they did before the 70's.
      • CryptoPunk 6y ago
        No they haven't. The top income tax rate has decreased, but other trends have counter-acted the effect of that decrease, like: * all brackets creeping down due to inflation * all brackets creeping down as a share of average income through the average income increase without a proportional raising of the bracket thresholds * the closing of tax loopholes. The result is that the effective tax rate for the wealthiest has barely decreased from the 1950s: https://files.taxfoundation.org/20170804133536/Average-Effective-Tax-Rate-on-the-Top-1-Percent-of-U.S.-Households.png https://files.taxfoundation.org/20170804133536/Average-Effec... And this only covers reportable income. The cash economy was much more significant in the 1950s, so a lot of income could escape the gaze of the state. >>the wealthy are paying for less of it then they did before the 70's. No, the wealthy contribute a larger share of it than ever before. Anyway, you're only focusing on tax rates on the top 1%, while ignoring every other factor, including major structural properties of an economy like what percentage of GDP is mandatorily redistributed by the state for social welfare programs, that would determine whether an economy is classified as economically liberal or social democratic.
• peacefulhat 6y ago
  The book Winner Take All Politics claims it’s due to rule changes within political parties such as the presidential primaries, giving far more importance to high earners and shareholders.
• ocommentator 6y ago
  Would be interesting to look at this from a global perspective. What about income relative to GDP, and income equality for all people on earth? Could it be that globalisation has benefited other people than US citizens since 1971?
• Ericson2314 6y ago
  I highly recommend https://www.versobooks.com/books/3717-automation-and-the-future-of-work https://www.versobooks.com/books/3717-automation-and-the-fut... (or read https://newleftreview.org/issues/ii119/articles/aaron-benanav-automation-and-the-future-of-work-1 https://newleftreview.org/issues/ii119/articles/aaron-benana...) It's a solid back-to-the-basics refresher. Without making causal guesses, the stats clearly show that demand stopped absorbing increasing supply, the Keynesian feedback loop was broken, and everything went to shit since. The causes seem numerous and intricate but a few observations: - As pointed out in https://phenomenalworld.org/interviews/trade-wars-are-class-wars https://phenomenalworld.org/interviews/trade-wars-are-class-..., everyone trying to be exporters in general leads to a glut. Here is sort of the origins of that, with the US "overproducing" as it exports to a post-WWII destroyed world, then Japan and Germany coming back to try to export more, and then everyone else thereafter. - From the perspective That 1930-1970 is the anomaly, cycles of destruction and rebuilding are a hack to help create enough labor scarcity for society to function better. - We'd be better of making labor scare and compelling investment in physical capital by shrinking the workday than starting world wars!!
  • monknomo 6y ago
    4 day work week!
• justinzollars 6y ago
  I'm a proponent of the Gold Standard because inflation is a hidden tax. Worse, it is a regressive tax on the poor. There is a cost to having 6 fleets of aircraft carriers, 20 years of endless war and a huge unfunded pension liability. If we decided to pay for our promises in an honest way - it would equal 10% of our GDP for 75 years. Gold is honest money. Fiat currency is not.
  • Ericson2314 6y ago
    Pure inflation is actually progressive: wages and prices go up in tandem (workers are fine), but savings (right peoople's) are debased.
    • 983279432879432 6y ago
      Rich people have no reason to keep significant amounts of currency while poor people have fewer options. Workers must also actively negotiate for higher wages while the value of their wage is passively going down.
      • notahacker 6y ago
        > Rich people have no reason to keep significant amounts of currency Eliminate inflation and they do though (if your currency is guaranteed to hold or even increase its purchasing power, the risk adjusted returns on investing it in productive activies aren't very attractive). Which is bad news for workers who feel they could be productive enough to negotiate for higher wages, if only the rich had any incentive to direct their gold reserves towards creating better jobs.
        • 983279432879432 6y ago
          People can (and do) invest in gold right now. Nothing would change significantly for rich people as they would continue to put most of their money in the same investments they do today which generally have higher risk adjusted returns than gold and would continue to have higher risk adjusted returns than a gold backed currency. The difference would be in the liquid portion of a person's assets and poor people need to hold a much larger part of their assets as cash and are therefore much more affected by inflation. It should also be noted that neither fiat currencies nor currencies backed by precious metals are guaranteed to maintain their value and are usually not the most secure means of long term wealth storage.
• mellosouls 6y ago
  Interview with the website creators: https://www.youtube.com/watch?v=y8QhCW7_DZE https://www.youtube.com/watch?v=y8QhCW7_DZE From https://www.peakprosperity.com/1971-the-year-that-changed-everything/ https://www.peakprosperity.com/1971-the-year-that-changed-ev... Edit: my commiserations to the person(s) having a miserable enough day they needed to downvote a contextual video link...
• deleted 6y ago
  [deleted]
• 0-_-0 6y ago
  Wait, why does only male income stagnate but female income keeps tracking GDP? Was it women entering the workforce en masse that devalued work?
• hosh 6y ago
  In 1970, the intermodal shipping container became an ISO standard: https://www.freightos.com/the-history-of-the-shipping-container/ https://www.freightos.com/the-history-of-the-shipping-contai... As containers became adopted, shipping ports specializing as container ports came to dominate world trade in terms of shipping volume. These ports were designed to bring the port, rail, and highway together. Crane operators efficiently loaded and unloaded containers. There was a flywheel effect as, more efficient container ports were expanded to accomodate larger container ships, which in turn, had port cities investing in more container port capabilities. Traditional ports died, with shipping consolidating into a much smaller group of container ports. As long as there were sufficient rail and highway access to those ports, goods could still be distributed inland. Along with the rise of the minicomputer (https://en.wikipedia.org/wiki/Minicomputer https://en.wikipedia.org/wiki/Minicomputer) to handle logistics, what we got was a world-wide logistics network that enabled things like just-in-time manufacturing. The late 1960s and early 1970s was also about the time ecological consciousness became more prominent. I hear from the old permacuturists and ecologists living through those times when large swaths of ecosystems were destroyed to expand things commercially. With healthy natural ecosystems, you could live land-rich, cash-poor. But with the ability to ship things easily and cheaply all throughout the world, local ecosystems became exploited and overharvested (the end-consumers had no personal stake in the ecosystem from which those resources were extracted from). As productization and monetization of ... everything, including basic essentials of living, is it any surprise that real wages have not risen?
• Synaesthesia 6y ago
  The dawn of the neoliberal era. The start of the process of financialisation and deregulation.
• Afforess 6y ago
  These charts are an amazing Rorschach test, every one with a pet political ideology sees the evidence for their own point of view. HN is quite the big tent of opinions.
• SoSoRoCoCo 6y ago
  To me this flood of charts and graphs makes it even more obvious that the seemingly benign question, "Is the economy good right now?", isn't anywhere near as simple as it sounds.
• stakkur 6y ago
  Ah yes, the 'Nixon Shock', and all that came after. https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock
• dnautics 6y ago
  People are asking why decoupling from the gold standard would cause a loss in earning power for labour: https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi... "when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis." The specific intent of inflation is to devalue the real returns to labor to make unemployment numbers look better. The graphs clearly indicate that this policy is working. Sure, there could be other explanations, but this is quite literally the simplest.
  • trixie_ 6y ago
    Another great use of inflation is to reduce the value of the national debt. It's like a flat tax that affects everyone equally.
    • dnautics 6y ago
      > a flat tax that affects everyone equally. I think you mean "a sneaky way of implementing a regressive tax". If you are spending 90% of your income on your day to day, inflation-sensitive expenses, versus 20% of your income, any positive inflation rate will have a greater effect on your margin of survival. Plug in 10% and 1% and see for yourself.
      • trixie_ 6y ago
        The tax system is not the place to try to solve poverty - you just end up over complicating it without even fixing the problem. Zero tax does not equate to zero poverty. Let the tax system and social services systems stand on their own. Don't conflate one with the other.
        • dnautics 6y ago
          I tend to agree, but it's also crazy to suggest that inflation affects society evenly.
• throwaway5752 6y ago
  Gold standard advocates never use logarithmic scales when it's appropriate and there is a reason for that.
• darig 6y ago
  That was during the Nixon administration... as far as I understand it, he threw out the entire "political science" playbook, and corruption was allowed to thrive unchecked.
• thehappypm 6y ago
  Reading through all these comments, I think the answer is basically that a LOT happened around 1970. We started trading with China. We ended the gold standard. The OPEC oil crisis. The Greatest Generation retiring and the boomers being the main workforce. Shipping changes with container standardization. Maybe the answer is the world changed, in a huge way, in many ways at once.
• swalsh 6y ago
  Another great explaination is the Legislative Reorganization Act of 1970, here's an interesting video. https://www.youtube.com/watch?v=1gEz__sMVaY https://www.youtube.com/watch?v=1gEz__sMVaY
• _greim_ 6y ago
  Consider the lead/crime correlation, in which the increase in crime and incarceration rates starting in 1960 and peaking in 1991 mirrors a rise and fall of atmospheric lead offset 20 years prior. The idea is that exposure to lead during childhood makes someone more likely to commit crime in adulthood. Those same factors would arguably make a person less employable, or at least less productive in whatever employment they did have. But whereas crime rates can just as easily slide one way as the other over time, income distribution cannot. (Disclaimer: This is purely speculative on my part. It seems plausible, but I'm not claiming it's true.)
• Aloha 6y ago
  I've long thought of this as the 1973 problem, not the 1971 problem, most of the trends were not clear until 73-75.
• deleted 6y ago
  [deleted]
• sabujp 6y ago
  ugh not this again
• TimTheTinker 6y ago
  An unpopular opinion, but circa 1970 and many of the effects in these charts likely represents an inflection point where the US population at large left its Christian heritage.
  • AnimalMuppet 6y ago
    I have a bit of a hard time tracking how, say, removing the Ten Commandments from schoolrooms changed the ratio of gains between the 1% and everybody else. Or church attendance. But other people have made a case here that more women in the workforce was a plausible factor. They point to birth control as a key to that. But I suspect that abortion also contributed, and it was legalized in 1972.
    • TimTheTinker 6y ago
      > removing the Ten Commandments from schoolrooms That was just one small part of a society-wide change of worldview. Prior to 1970, Christian values, ideals, and beliefs were assumed by the majority of the US population and respected by all but a tiny minority. However, even by 1900 the philosophical basis for this shift had been laid, starting in 19th-century France and Germany with enlightenment (and particularly existentialist) philosophy, like that of Nietzsche and Sartre, joined by Marxist atheism, and finally making its way to the US and the rest of the post-WWI Western world as secular humanism--and to weaker parts of the Western world, and other places as well, as full-blown Socialism/Communism.
• peter303 6y ago
  40 years between 1930s and 1970s were anomalous period when industrialists shared a larger fraction of their profits with workers. Partially due to stronger unions then. The service economy became a larger fraction of the economy. They were more stingy sharing with service workers.
• CryptoPunk 6y ago
  The graph showing divergence between wages and productivity is almost solely due to different inflation indexes being used to measure the two: https://www.brookings.edu/opinions/sources-of-real-wage-stagnation/ https://www.brookings.edu/opinions/sources-of-real-wage-stag... The two inflation indexes produced mostly similar rates until 1971, when the index used to measure real wages began rising faster than the one used to measure productivity.
• nabla9 6y ago
  Cost of labour = compensation + direct and indirect overhead. I suspect that there was a change in direct or indirect overheads. Medical insurance, pension or some other thing. Another explanation is declining wage share. Costs per unit of real gross value added of nonfinancial corporate business: Compensation of employees https://fred.stlouisfed.org/series/A460RD3Q052SBEA https://fred.stlouisfed.org/series/A460RD3Q052SBEA Share of Labour Compensation in GDP at Current National Prices for United States https://fred.stlouisfed.org/series/LABSHPUSA156NRUG https://fred.stlouisfed.org/series/LABSHPUSA156NRUG First microprosessor appeared in 1971 (Intel 4004)
• trixie_ 6y ago
  The ability for the US to print it's own currency has had positive and negative effects. It requires a great deal of self control regardless. It's like a company with the ability to create new shares - great for raising capital, bad for existing shareholders (but hopefully just in the short term) It seems like we've avoided the hyper hyper inflation thus far, though recent events make it seem like the government is ready to spend trillions of dollars on a whim. That in addition to one party's desire to lower taxes, and another party's desire to increase social services - make for a constantly devolving financial situation no matter who is in power. It could be that inflation drives productivity by way of businesses innovating in order to minimize the amount of price increase caused by inflation. Without additional revenue though wages would stagnate and not match inflation. All of this might really be necessary in the 'new world' where countries are more like companies and need to constantly innovate to stay ahead. Given the long history of humanity, I don't believe things are generally as peaceful as they are now, and that may either represent an anomaly or a stalemate, but I don't believe it will last forever. I guess the gist of this post is, if you're a country then a fiat currency is ideal to keep ahead of the pack with your population constantly working/producing/innovating. If you're an individual and understand this game - then holding equities, property, cypto is in your best interest, but doesn't obviate the need for a fiat currency to exist.
• Zviedris 6y ago
  I would say that the end of Bretton Woods could shift people attitude away from money. Why keeping dolars that does not have real value? Invest in property. So money reserves lower, property gets more expensive. And expensive property takes away working class income as rent and ability to afford housing. Actually it takes away ability to negotiate as you don't have spare income to put away for rainy day.
• deleted 6y ago
  [deleted]
• oh_sigh 6y ago
  Why should productivity be tied to compensation? If I hire myself out to dig foundations for a living, I will be more productive if I'm provided with a backhoe versus provided with a shovel. But isn't it the business investing in productivity enhancing measures that is responsible for my increased productivity, not anything intrinsic in myself?
  • AnimalMuppet 6y ago
    Because the person who hires you wants foundations dug, not just to hire a fixed amount of headcount. To an employer, the worker who knows how to run a backhoe is more valuable than the person who knows how to run a shovel.
    • oh_sigh 6y ago
      Right. If only select people could run the backhoe because of training, but anyone could shovel, then it would make sense that part of the productivity enhancements comes from the employee themselves. But let's just say the backhoe didn't require any special training. Should the worker capture some of the performance improvements that were derived purely from the business investing in productivity enhancements?
      • AnimalMuppet 6y ago
        > But let's just say the backhoe didn't require any special training. Can you give me an example of any more-advanced and more-productive tool that does not require at least some special training?
        • oh_sigh 6y ago
          Sure - a manual screwdriver versus an electric screwdriver.
      • ozim 6y ago
        You write it at the end "improvements that were derived purely from the business investing in productivity enhancements". Don't forget investment involves risk. If you buy a backhoe, you might not find customers and you are left with useless backhoe and money spent, you still have to pay the wages to your employees first. Employee is not participating in any of that risk.
• Marazan 6y ago
  Austrian economics infected Executive team compensation. Instead of paying execs money they were paid in shares. Execs took decisions that were bad for the company holistically but good for the share price.
• AtlasBarfed 6y ago
  The computer? Specifically the first microprocessor was around then, wasn't it? https://en.wikipedia.org/wiki/Intel_4004 https://en.wikipedia.org/wiki/Intel_4004 Oh and, uh, I was born around that time. Sorry everyone!
• deleted 6y ago
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• markvdb 6y ago
  These stats can be fascinating. The naked Hayek quote at the end confines the discussion though. It's a warning light that anything not Austrian school will potentially be frowned upon in the discussion the website author pretends to stimulate.
• groby_b 6y ago
  Clearly, we lost the ability to form coherent sentences. Or at least the author did. A bunch of graphs do not make a valid argument. Or even a good question. I am rather disappointed that something that lacks any semblance of analysis or thought makes it to the front page of HN.
• fnord77 6y ago
  I thought the physician : administrator ratio chart was interesting, though a bit of a non-sequitor. It would probably make for an interesting serious analysis. Edward Tufte showed the same trend with professor:administrator ratios in universities over the years.
• gurpreetsatwal 6y ago
  I might be missing something, but what's the connection between bitcoin and the gold standard?
  • jraedisch 6y ago
    Bitcoin could be seen as an attempt to introduce a new non-inflationary base currency.
• d_burfoot 6y ago
  A simple theory would be: normal people don't adequately adjust their salary requirements to account for inflation. Incomes of regular people are going down constantly because of inflation, but they feel like they're doing okay because they have a notion of what a good salary is, and that notion is chronically out of date.
• lolive 6y ago
  Answer: The black hole of tax havens started sucking the added value of workers.
• nickpp 6y ago
  The question is meaningless unless asked at global level. Was the US economy walled off from the rest of the world? If not, what is the productivity/earnings chart at GLOBAL level?
• macinjosh 6y ago
  Some interesting 1971 events from Wikipedia [0] - February 8 – A new stock market index called the Nasdaq Composite debuts. - February 14 - Western oil companies sign a treaty with 6 Khalij el-Arab countries to stabilize oil prices - February 21 – The Convention on Psychotropic Substances is signed at Vienna. Essentially, banning psychedelics globally. - April 1 – The United Kingdom lifts all restrictions on gold ownership - April 20 - Swann v. Charlotte-Mecklenburg Board of Education: The Supreme Court of the United States rules unanimously that busing of students may be ordered to achieve racial desegregation. - May 5 – The US dollar floods the European currency markets and threatens especially the Deutsche Mark; the central banks of Austria, Belgium, Netherlands and Switzerland stop the currency trading. Not implying any correlations here. Just amazing what all was going on at the time. [0]: https://en.wikipedia.org/wiki/1971 https://en.wikipedia.org/wiki/1971
• zith 6y ago
  I like this article on the subject. It examines many of the possible reasons given by others in these comments. https://slatestarcodex.com/2019/02/25/wage-stagnation-much-more-than-you-wanted-to-know/ https://slatestarcodex.com/2019/02/25/wage-stagnation-much-m...
• paulpauper 6y ago
  I dunno why this keeps getting shared. it is just an advertisement masquerading as information in order to promote a bitcoin investing service. The selection of charts demonstrate data mining and do not align with the 1971 target. IN some of the chart you can see that the trend began before 1970. in others it began after 1970. IN other charts there is no change. In other charts there is exponential growth but it seems steeper after 1970 because the data appears compressed on the lower-part of the y axis. This is why log charts are used for exponential growth.
• naringas 6y ago
  money laundering laws are also from that period. https://en.wikipedia.org/wiki/91st_United_States_Congress#Major_legislation https://en.wikipedia.org/wiki/91st_United_States_Congress#Ma... they are a key part of the overall strategy to wage war on drugs.
• csomar 6y ago
  There are a few points not quite highlighted in this thread: - Woman entering the workforce: I think this is the primary driver of wage deflation. You suddenly doubled the supply of the workforce, this means you can afford to pay workers much less. The end of WWII also means you have new supply of men who were doing army stuff. - US Trade Balance: With the gold standard abolished and countries using the USD, the US can now afford to offshore some of its work to other countries. They get these products for free. The US trade deficit is being financed by the money printing machine. There is a tax to trade internationally and to mismanage your country currency: It's the USD. This means less jobs for Americans. Along with the doubled supply of workers, this over-complicates the situation. - Brave new world of Global Capital: Imo, the next challenge is just starting and it's global capital. With a doubled work force and less jobs, your average American will have trouble getting anywhere in life. But wait, it's going to get worse. Your top earners in foreign countries can now transfer their money to the US and buy property. Luckily, they are only doing it now in hot spots (LA, NYC, SF, DC). But it's a matter of time before this spread further, fueled by the Internet (people can discover more places and don't have to rely on the most known ones) and people who used to own in hot spots and decided to buy somewhere else because it's cheaper. Cities like this because it drives their real-estate market and create jobs, so it seems like it should fix the problem. The next decade is going to be an interesting one.
  • nxpnsv 6y ago
    Aren't you a quarter of a century off on the WWII thing?
    • csomar 6y ago
      It takes a generation to create new workers. A quarter of a century before, you had men who went to war and die instead of a factory and stay alive. Now you have a new generation where men didn't need to go to war.
      • nxpnsv 6y ago
        Perhaps. Seems to me that if that was the principal reason for the change, then the transition would be smoothed over several years.
• EricE 6y ago
  Didn't someone a few years before 1971 claim a little inflation wasn't so bad?
• simonblack 6y ago
  What happened was that purchasing value separated from currency numbers. That was enabled by the moving away from the gold standard, but was not the abandonment of the gold standard per se. It allowed the wage numbers to increase, but not sufficiently to keep up with inflation. In other words, where before there was one rate of change, there were now two different rates of change. A concrete example: before 1970 a blue-collar worker had a big enough wage that enabled him to buy a house, car, and good standard of living while his wife was able to stay home and look after the house. Today his wage needs to be supplemented by his wife's wage, and they do not have sufficient to have a house, car and good standard of living. In fact they struggle to make ends meet. If wages had kept in line with cost of living rises, that blue-collar worker would be making over $2000 per week.
• elihu 6y ago
  https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock In 1971, the US abruptly stopped backstopping Europe's Bretton Woods system that kept Europe's currencies stable, making them convertible with US dollars and gold. (I'm not an expect in this area, I just sort-of-recently read "And the Weak Suffer What They Must?" by Yannis Varoufakis, and hopefully I'm remembering it more-or-less correctly.) https://www.amazon.com/Weak-Suffer-What-They-Must/dp/1568585047 https://www.amazon.com/Weak-Suffer-What-They-Must/dp/1568585...
• deleted 6y ago
  [deleted]
• mk81 6y ago
  Mass immigration and sending manufacturing to lower wage countries.
• yuhong 6y ago
  My favorite year is actually 1974. I really wished hyperinflation of the USD and collapse of the US government happened back then.
• new_realist 6y ago
  Isn’t this the Iron Law of Wages at work?
• ncmncm 6y ago
  Looks like nobody here has read the Powell Memorandum. They have stuck to that script ever since it csme out, and it has worked. People are easily persuaded by modern methods to vote against their own interests. Almost half the voters chose "even more of that"!
• ShinyObject 6y ago
  Under FDR and the conditions of the great depression, labor was able to get a seat at the table. 1940s onward the ruling class (corporate executives and corporate-aligned members of the political class) worked to dismantle the great society projects, the red scare was also used to this end. By the 1970s labor had lost its seat at the table, unions had been demonized by the corporate class and their wholly-owned media organizations. Capital demands ever-increasing profits, those profits would be achieved by workers finding ways to increase productivity, and workers receiving an ever-decreasing percentage of the benefits. This accelerated in the 80s under Reagan, Clinton being elected in 92 represented the democratic party fully abandoning labor. Capitalism has a ways to go in China but is exhausted in the United States and Europe. Seeking increasing profit where none exists, it's now eating away at the base infrastructure like a starving body eating away its own muscle. Historian podcaster Matt Christman has talked about this subject a bit in recent months on twitch streams, for example in this clip: https://youtu.be/DwH9i1yZR6E?t=1549 https://youtu.be/DwH9i1yZR6E?t=1549
• sparg 6y ago
  Ok i see not many people get this but let me explain how bad things truly are. Ever since the reinaissance nations used gold was the reserve currency in one way or another(the romans also used gold and all other civilizations in fact one of the reasons the byzantine empire survived was because they were forced to adopt gold as a currency since hordes arriving at constantinople were better deal with by bribing them than fighting them and the barbarians demanded gold as payment so they adopted gold as a currency once again). The western roman empire went on hyperinflation and was never able to regain it's stability. https://www.youtube.com/watch?v=5YeEGcrinSM https://www.youtube.com/watch?v=5YeEGcrinSM Now you may be asking what the hell does rome has to do with the renaissance or gold. Well gold is a natural currency due to it's high stock to flow ratio(the mined stock per year is too small relative to the existing stock) this gives gold a yearly inflation of around 1.50%. The problem with gold is that as a currency it's horrible and hard to transport and protect , in fact the byzantines adopted gold as the official currency due to what i mentioned above but the public still had a fiat currency for everything except paying taxes. So to pay taxes people needed to exchange fiat for gold and then pay the taxes in gold , this gave the government in the eastern roman empire the ability to balance budgets on a currency with 1.50% yearly inflation. So europe ends up getting out of the dark ages and gold is once again a currency, then spain discovers the americas and brings lot's of gold to europe destroying it's economy since this sudden intro of gold caused massive inflation ironically https://en.wikipedia.org/wiki/Spanish_treasure_fleet https://en.wikipedia.org/wiki/Spanish_treasure_fleet But it also gave the whole of europe a golden age as a stable and abundant currency was introduced. Eventually in the 19th 20th century gold was used as the reserve of fiat currencies. This meant that governments WERE FORCED to balance budgets since they could not print more gold. So from 19th century to 1939 the world prospered in some way constantly even if with massive wars. But at the end of the war the powers united at bretton woods to create a new world trade system but there were a few problems. 1_The soviets did not attend. 2_They had insane ammount of armies relative to western powers in europe. 3_All western powers minus the usa were destroyed. The idea was to avoid the problems that gold had by creating a global currency called the bancor so central banks could trade with each other and devaluate against that currency if needed. But the usa smartly opposed this since in the case of the soviets marching west they were the only ones capable of financing the defense of europe. So at the end on bretton woods instead of the bancor something differnet happened the us dollar was adopted as the reserve currency backed in gold and all other currencies were going to be backed in us dollars. So in the case of a war with the soviets the usa could inflate the usd and break the parity to finance the defense of europe. But that did not happened directly what happened was that after the korean war and eventually the vietnam war and LBJ programs i may add the usa broke the parity with gold. This was all fine to a certain point until one understand that the usd was convertible to gold and countries like france demanded the gold in exchange of the usd. The game theory behind the bretton woods was simple nations WERE FORCED to balance budgets since they could not print usds and the usa WAS FORCED to balance budgets since it could not print gold. But in 1971 this unbalance was so great that nixon broke the gold standard and the world entered into something that never happened since the dark ages. A system based on nothing and no game theory , the usa could print whatever the hell it wanted and other countries could also print what they wanted since now all currencies were floating against each other. This is all fine if there is demand for those inflated currencies thus globalism and opening china , if the velocity of money goes up it's irrelevant to some level how much you print since the demand for said currency also goes up. https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V The problem is that disconnecting currency from gold which had a natural low inflation of 1.50% caused massive damage from a game theory because 1_Politicians could inflate without problem 2_Balancing budgets became irrelevant 3_They could change the definition of inflation to hidde the inflation. So first they removed real estate from inflation indexes we went from 1_One worker being able to buy a house with two years of minimum wage in 1971 2_One worker needing a good job to buy a house in a 15 years mortgage in 1980 3_One worker needing a really good job to buy a house in a 15 year mortgage in 1990 4_One husband & wife needing to work on good jobs to buy a house in a 30 year mortgage in the 2000s This is happening because currency was disconnected from a real good with low inflation , gold was not used because muh shinny , it was used due to it's low inflation. When the dxy index that meassures the value of the us dollar relative to other fiat currencies(that constantly devaluate against the us dollar to keep their parity) shows exactly what i mean. Every time the dxy goes down bitcoin & ethereum or other cryptocurrencies which now has a low inflation goes up(and so does housing which also has low supply). Basically it's a road to hell because every currency is devaluating against each other , the usd / euro rate can be the same for 10 years but relative to real estate both have lost their value. This was not the case before 1971 we are living in an insane experiment and the worse thing is that asset owners benefit from this shit which is leading society into feudalism. As for how do we get out of this , who the hell knows as it seems the elites will introduce ubi to keep capital going up while purchasing power goes down. Maybe if we are lucky bitcoin takes over and forces politicians to reform this system but otherwise it's in their interest to keep it so it's hard to say what's going to happen.
• snomad 6y ago
  This video has a nice summary of all the changes in the 1970s, and how many other prominent authors have documented that radical shift. https://www.youtube.com/watch?v=1gEz__sMVaY https://www.youtube.com/watch?v=1gEz__sMVaY The author believes the problems can be traced to the US congress switching from closed (anonymous) to open voting on January 3rd, 1971 Somewhat related, this post shows how the US congress has grown incredibly divided over time https://www.realclearscience.com/journal_club/2015/04/24/political_partisanship_in_three_stunning_charts_109196.html https://www.realclearscience.com/journal_club/2015/04/24/pol...