USH28: Economic History of the 20th Century

The economic history of the United States during the twentieth century can be divided into three parts: the beginning of the century (prior to the Great Depression), from the Great Depression to the Oil Crisis of 1973, and after 1973.

The early part of the century looked a lot like the roller coaster that I described in my post on the 'Economic Currents of the Nineteenth Century' (2/6/09). There was a 'Panic' in 1907 set off by a run on a bank that led to "a severe monetary contraction." And there was a recession following World War I that lasted three years and was followed by an eight year period of prosperity (that being the 'Roaring Twenties'--see my post of 2/18/09).

Then came the Great Depression (see my posts of 2/22/09 and 2/26/09)--as I mentioned in one of my posts, what seems to have gotten us out of it was World War II.

Following WWII were twenty-eight years of relative prosperity (yes, there were minor recessions in 1953, 1957, and 1960, but none of them lasted long or cause major problems). To some it seemed as if it would last forever. The AFL-CIO put it this way: "During the period 1945-1973, when a high percentage of workers had unions, wages kept pace with rising productivity, prosperity was widely shared, and economic growth was strong." French economist Jean Fourastié refers to this period as Trente Glorieuses--the Thirty Glorious (years). Wikipedia says: "The period from the end of World War II to the early 1970s was a golden era of American capitalism."

The Oil Crisis of 1973 and resulting stock market drop changed that (see my post of 3/22/09). Even during the more properous periods of the late eighties and late nineties, Americans no longer felt secure. From Wikipedia: "The 1973 'oil price shock', along with the 1973–1974 stock market crash, have been regarded as the first event since the Great Depression to have a persistent economic effect."

To show some of the changes, during the period from 1947 to 1979, all sectors of the economy grew by at least 85%, and the bottom fifth of earners actual saw their income grow by 116%. During the period between 1979 and 2003, the bottom fifth of earners lost 2%, the next fifth of earners only saw a 8% growth in income, while the top fifth of earners saw their earnings rise by 51% (and the top twentieth gained 75%). The book Economic Apartheid in America (where all the information in this paragraph is from) puts it that from 1947 to 1979 "We Grew Together" and from 1979 to 2003 "We Grew Apart". They claim that there has been a major "Power Shift" since the seventies with a strengthening of corporations, lobbyists, CEOs, and people who own assets, along with a weakening of labor unions, popular political movements, and wage-earners. They cite a growing anti-union climate, global trade treaties, tax cuts for the wealthy, 'corporate welfare', and privatization.

The SEIU put it out clearly: "The recession of 1973-74 marked the start of a sustained assault on workers' ability to form unions and negotiate with employers for shared success."

Along with attacks on unions came outsourcing, offshoring, and globalization. As Wikipedia says: "Outsourcing became part of the business lexicon during the 1980s." (I wrote some about this in my post 'Into the Eighties' on 4/3/09.) The deregulation of businesses began in 1974 under Ford and was continued by Carter, but Reagan's policies accelerated not only deregulation but economic inequality on every level. Essentially, the corporate strategy shifted after the oil crisis and resulting recession, from the idea that taking care of their employees was good business to creating lean, mean multinational corporations. Thomas Palley talks about the period from 1945 to 1973 as a Golden Age 'Main Street Capitalism', and the post-1973 economy as a 'Mean Street Capitalism' which he sees as a throwback to the laissez-faire economy that existed before the Depression. Reagan actually "presented his economic proposals as merely a return to the free-enterprise principles that had been in favor before the Great Depression." (Wikipedia)

Peak Oil believers (see my blogs of 7/18/08 and 7/20/08) would be quick to point out that that the post-war prosperity was fueled (literally) by fossil fuels and that it's not an accident that Oil Crisis of 1973 initiated a major change in the economy. If that's true, it means we will never see the kind of prosperity and abundance we had in the sixties again.



Quote of the Day: "The shift to Mean Street capitalism has manifested itself along four dimensions. First, the economy is growing more slowly than in the past. Second, the economy is running slacker and operating less efficiently than before. Third, there has been a significant worsening of income distribution, with wages of ordinary workers actually declining over the last twenty years. Fourth, workers are economically insecure and subject to greater levels of stress. Slower, slacker, more unequal, and less secure are the hallmarks of the disordered economy. Economic booms may temporarily ameliorate these conditions, but once the boom is over, they reassert themselves." - Thomas Palley

References:
AFL-CIO, "Unions Are Good for Business, Productivity and the Economy"
Chuck Collins and Felice Yeskel, Economic Apartheid in America
Thomas Palley, Plenty of Nothing
The Service Employees International Union (SEIU), Path to Prosperity
Wikipedia, many articles (including ones on the Economic history of the United States, List of recessions in the United States, Outsourcing, and Jean Fourastié)