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The "lucked out with our industry remaining intact while the rest of the world dealt with the fallout of the world wars" part can't be understated, though. The

The "lucked out with our industry remaining intact while the rest of the world dealt with the fallout of the world wars" part can't be understated, though. The reason the new social contract was able to hold was because America was the economic engine that rebuilt the Western world, and enjoyed monopoly industrial status for a while. That a.) created plenty of excess economic value that could support a large middle class b.) created enough social cohesion that the working class could remain unified politically and c.) took away all the other options for would-be capitalists to play governments against each other. They were forced to accept those 90% tax rates and unionized labor contracts because nobody else had any physical capital stock. There were plenty of efforts to establish a social contract for workers starting in the 1890s, but they never took until the Great Depression, and during the Depression there was a significant chance they would be rolled back. Roosevelt's most ambitious reforms (eg. the NRA [1]) were found unconstitutional by the Supreme Court, and there was an active coup attempt [2] against him. For the first few years after WW2 it was very uncertain if the U.S. would end up sliding back into the Great Depression, until it became clear that the Marshall Plan and other reconstruction efforts would stimulate plenty of demand to keep money coming in and give workers bargaining leverage. Similarly, the era of the great American Middle Class collapsed in the 1970s, and the catalyst was foreign competition. By then other countries had rebuilt their capital stock and domestic industries. This let them put out products just as good as American ones at prices just as cheap, and because Americans had fat union contracts that allowed them a high standard of living, foreign competitors were able to undercut them. Having a good union contract with your employer does you no good when your employer goes out of business, and that was the situation for many of the dominant 1930s-1970s companies in America in the late 70s through the 80s. [1] https://en.wikipedia.org/wiki/New_Deal#NRA_%22Blue_Eagle%22_campaign https://en.wikipedia.org/wiki/New_Deal#NRA_%22Blue_Eagle%22_... [2] https://en.wikipedia.org/wiki/Business_Plot https://en.wikipedia.org/wiki/Business_Plot

greenyoda 4y ago
> This let them put out products just as good as American ones at prices just as cheap Actually, some of the competing products, like cars, were significantly better than American ones. In the 1970s and 1980s, American cars were notoriously unreliable gas guzzlers, and Japanese cars grabbed a large chunk of the U.S. car market (which they have to this day). The resulting loss of jobs in the U.S. auto industry (and in all the industries that supply the auto industry) played a part in the collapse of the middle class in the 1970s, bringing down once thriving cities like Detroit.
drewda 4y ago
One related argument I've read is that after the Russian Revolution of 1917, American capitalists had more incentives to look for points of compromise with labor. The threat/appeal of socialism/communism was helpful to making the New Deal happen and hold. See the "The Rise and Fall of the New Deal Order, 1930-1980" by Steve Fraser and Gary Gerstle — and even more relevant to today, "The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era" by Gerstle.

greenyoda 4y ago

> This let them put out products just as good as American ones at prices just as cheap Actually, some of the competing products, like cars, were significantly better than American ones. In the 1970s and 1980s, American cars were notoriously unreliable gas guzzlers, and Japanese cars grabbed a large chunk of the U.S. car market (which they have to this day). The resulting loss of jobs in the U.S. auto industry (and in all the industries that supply the auto industry) played a part in the collapse of the middle class in the 1970s, bringing down once thriving cities like Detroit.

drewda 4y ago

One related argument I've read is that after the Russian Revolution of 1917, American capitalists had more incentives to look for points of compromise with labor. The threat/appeal of socialism/communism was helpful to making the New Deal happen and hold. See the "The Rise and Fall of the New Deal Order, 1930-1980" by Steve Fraser and Gary Gerstle — and even more relevant to today, "The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era" by Gerstle.