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End of the postwar boom? Following WWII the US dollar became the world's reserve currency, this created a situation of constant demand for USD. The raised the v
by dmm 15y ago
End of the postwar boom? Following WWII the US dollar became the world's reserve currency, this created a situation of constant demand for USD. The raised the value of the US dollar and made resources cheap for the US. (It's also allowed us to abuse the currency quite a bit. This will not last.)
Demographic changes which had been happening for years continued: in 1945 16% of the total labor force worked in agriculture, by 1970 only 4% did (it's <2% now). People were moving from rural areas to cities and getting jobs in industry, changes which brought immediate changes to income and living standards.
In the 70s and 80s huge amounts of industry moved out of the country, first to Mexico and then to Asia, seeking cheaper labor. The rest of the world starting catching up with us, they were moving from agriculture to industry too. This made the more expensive labor of the US less competitive. The US economy shifted to something we couldn't use Chinese labor for: building houses(and weapons) for each other.
The postwar period was really an exceptional time. Lots of things happened really. I don't think you can really attribute the changes that came at the of the 70s to a single event or policy.
- lukesandberg 15y agoThis is the fundamental problem with macro economics. there is no way to isolate variables. So obviously saying it is 100% attributable to Reagan is probably not true. but also (to take some of your points) global competition would effect firms profit margin and theoretically depress income growth. but it does not necessarily explain why income growth shifted away from the middle classes. the issue is more about growth distribution than the presence of growth.
- Andrew_Quentin 15y agoI do not think the graph applies solely to America or that the stagnation or even fall of the share of gains only happened in US. I think much of the west shares the same story, thus, reserve currency, unique place in the world after the war etc explain the large gains in power, but not the effect of the graph as if it were so there would be a different story for Europe which there isn't. Therefore, it probably was the Thatcher Reagan policy changes.
- dmm 15y ago> so there would be a different story for Europe which there isn't. Or the US just dragged the rest of the world with it. The stagnation in the US led to decreased investment and exports in Europe.