WTF Happened in 1971? (2019)
wtfhappenedin1971.com
wtfhappenedin1971.com
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.
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.)
WWII ends, you get 26 - 30 years, of a work force. The WWII generation starts to retire. Also, the factories at that point need retooling.
Boomers start to enter their 20s, and start entering the workforce.
As the combined costs of the Vietnam War and the Great Society began to mount, the government was forced to generate mountains of US government debt. By the end of the 1960s, many governments began to worry that their own position, which was interlocked with the dollar in the context of the Bretton Woods system, was being undermined. By early 1971, liabilities in dollars exceeded $70 billion when the US government possessed only $12 billion of gold with which to back them up.
The increasing quantity of dollars was flooding world markets, giving rise to inflationary pressures in places like France and Britain. European governments were forced to increase the quantity of their own currencies in order to keep their exchange rate with the dollar constant, as stipulated by the Bretton Woods system. This is the basis for the European charge against the United States that, by pursuing the Vietnam War, it was exporting inflation to the rest of the world.
Beyond mere inflationary concerns, the Europeans and the Japanese feared that the build-up of dollars, against the backdrop of a constant US gold stock, might spark off a run on the dollar which might then force the United States to drop its standing commitment to swapping an ounce of gold for $35, in which case their stored dollars would devalue, eating into their national ‘savings’.
The flaw in the Global Plan was intimately connected to what Valery Giscard d’Estaing, President de Gaulle’s finance minister at the time, called the dollar’s exorbitant privilege: The United States’ unique privilege to print money at will without any global institutionalised constraints. De Gaulle and other European allies (plus various governments of oil producing countries whose oil exports were denominated in dollars) accused the Unites States of building its imperial reach on borrowed money that undermined their countries’ prospects. What they failed to add was that the whole point of the Global Plan was to revolve around a surplus generating United States. When America turned into a deficit nation, the Global Plan could not avoid going into a vicious tail spin.
On 29th November 1967, the British government devalued the pound sterling by 14%, well outside the Bretton Woods 1% limit, triggering a crisis and forcing the United States government to use up to 20% of its entire gold reserves to defend the $35 per ounce of gold peg. On 16th March 1968, representatives of the G7’s Central Banks met to hammer out a compromise. They came to a curious agreement which, on the one hand, retained the official peg of $35 an ounce while, on the other hand, left room for speculators to trade gold at market prices.
https://www.yanisvaroufakis.eu/2011/02/10/surplus-recycling-...
We never really stopped.
With GREAT emphasis on the fact that is was not the large-scale spending that did it in, but the hidden aspect of it.
You correctly identify the catch-22 for governments: once one government (arguably France I guess, or at least they forced the world to follow them, I guess they didn't start it) showed you could do this, other politicians in other governments had little choice but to follow suit.
In a way you can say that the breaking of the gold standard was the problem. But that's like saying in a heart attack the heart is the problem. It's not wrong, but it's of course not the root cause: it's (usually) the decades-long excess of cholesterol in your arteries, mostly due to unhealthy eating habits, that's where you should look to the root cause. Hiding increasing government expenditures is the root cause.
That's the angle that a lot of people want to push, but is it actually correct? What about the trade deficit angle? Especially with regards to oil imports.
But again, the actual spending is NOT the problem. Nor is the trade deficit. Using sovereignty (ie. government spending inflation) to take away normal people's ability to negotiate with accurate information (and voting) what their fair share of the economic pie is. THAT is the problem.
We could double government expenditures without causing a real problem. But if we double them and only 1% of people go to their boss "I need a raise" because they just don't know, then it'll be really bad: they'll have to compete for goods and services with the other side having double as much money as it does now.
Isn't this an inflationary concern? The problem is that there are too many dollars for the price of gold to stay low. The devaluation has already happened regardless of whether a run has occurred; there is no way to realize the value of your "national 'savings'" without performing the run and dropping the value.
The only way for this concern to make sense is if
(1) You are committed to never spending your "savings", no matter what; but also
(2) You need the paper value of your "savings" to be a particular number, even though you will never do anything with that number other than look at it.
...which is pretty much what the charts show if you scroll through all of them instead of focusing in on the first ~1/3.
Of the 50+ on the page, 4 have to do with the price of gold. The latter half of the page is entirely alternate possibilities.
Am i wrong :)?
This includes healthcare, day care, college costs. Even if only indirectly.
In other words: if the average worker salary suddenly rose by 100% in every area except classical musicians (let's say there's some magical new productivity technology that increases productivity for every job except music, and further say that the workers capture that value) then the classical musician salary would also rise, because otherwise people would stop becoming musicians at the same rates. Nowhere in this thought experiment did the supply of labor change.
>because otherwise people would stop becoming musicians
It's about as cleanly supply and demand as you can get. The supply of musicians willing to work for $x decreases, since they now have the option to do other work that is more preferred than being a musician for $x. Therefore, you now have to pay more than $x to continue incentivizing a musician to be a musician.
Going back to your string quartet example, which I do not know if it's true or not, but let's suppose it is:
>The reason a string quartet costs more now isn't because there are fewer people who can play instruments, it's because other things pay better.
The reason a string quartet costs more now is because there are fewer people who can play instruments (relative to demand, since price is where the supply and demand curves intersect). Because other things pay better, fewer people (again, relative to demand) might choose to play instruments, causing less supply (relative to demand), causing prices to rise.
My point is that it's all still just simple supply and demand curves. If the demand for corn skyrockets, causing the price of corn to increase, and farmers choose to plant corn instead of wheat, then causing a decrease in the supply of wheat, then causing the price of wheat to increase, is that anything other than supply and demand?
I wouldn’t say that because I disagree there is any difference in the application of supply and demand curves between labor and goods. If anything, Baumol’s effect clearly demonstrates that price (wages) is set by supply and demand just like goods, and it’s entirely unsurprising.
As you reduce the supply of laborers for labor type A because those laborers have better options, then the price for labor type A rises. That’s what Baumol says. That’s what supply and demand says. I fail to see the significance.
Cheap energy is good, but i worry more about our ability to afford those things.
If gas was $.10/gallon, cars would be cheaper. We wouldn't need ridiculously complex gas engines tuned to yield another 1 mpg, or electric cars with $30,000 of Lithium-ion. They could be low-mpg and cheap and it wouldn't matter.
If gas was $.10/gallon, everyone's wages would, effectively, increase since every person who owns a car would spend less on gas, which for many people is a lot of money.
If jet fuel was $.10/gallon, flying would be cheaper. Importing and exporting goods from faraway places would be cheaper.
It's worth noting that due to Jevon's Paradox, investments in energy efficiency also result in greater energy consumption.
There is one mode of transportation that is currently REALLY cheap and that's huge ships. That's why we import so much from China -- sending a huge ship across the ocean is really cheap. If all forms of transit were that cheap (trucks, flights) the world would be very different.
Would cheap energy lower land costs for a house or flat? Cheap energy would improve situation. But a lot of competition comes from productivity and wages. Low wages in Asia made possible to import goods cheaper from Asia rather than produce locally.
But I agree that health insurance, day care, and college would not get magically fixed by lower energy cost. I believe those costs have risen for other reasons.
Also I am not totally convinced by grandparent's theory that energy cost is what caused the decoupling of wages from productivity. Maybe.
Of course, when you double the supply of something, the price drops, which could partially explain stagnating wages. But in the early post-WWII decades it was a big win. Nowadays the negative consequences of moving away from traditional family roles are more obvious.
At the cost of decreasing their mobility, which prevents them from competing in nationwide labor markets, pushing down local market labor cost.
Even when good, the cost is big.
Health care is a good example. Keeping patient data private is a good thing.
However it’s also absolutely crushing in its impact in the industry.
Tiny projects can take months or years.
HIPPA terrifies so many IT people. Driving away top developers.
Provider side has it semi-sorted (at least within the same facility).
Everyone else (insurance, etc) is attempting to clean semi-structured / inaccurate data passed to them, and generate a coherent result.
Another bit of collateral damage is the increasing number of providers who no longer take insurance of any kind and put the onus on the patient to file (and fight) with the insurance companies.
Not even because they want more money! It's more wrong vs correct. And is done just because "that's the way they've always done it" (and they're used to the insurance company fixing it on their side).
The biggest benefit of the move to automated processing and electronic records is it doesn't leave room for Dr. Sue and Mr. Green to have a non-policy understanding on how to handle claims.
It got things done, but it made it impossible to scale when you were trying to untangle 1,000,000 "special cases."
I'm just wondering about why exactly the paradigm doesn't totally work here. I get that we don't want medical devices failing, but that's different than charting. And I get it that we don't want everyone to have your data. But risking that someone does a data copy vs. reducing healthcare costs seems perhaps a risk worth taking (and it's not like the insurance companies who actually charge us money don't already have it).
Oops...last patch didn't include all the drugs the patient was on, so we prescribed one with bad interactions.
Oops...last patch mixed up MRI images, so Patient A is being treated for patient Bs cancer.
etc., etc., etc...
Our bad...we'll get to it in the next sprint.
What do healtcare costs and deaths look like if we removed all our environmental regulations? What's the cost in terms of people not getting treatment for things because they don't want it to be publicly know?
I'm not convinced environmental regulations are a global net benefit to the environment and I can't see how privacy regulations could possibly be beneficial as customers who want privacy protections create a market demand for them. Even in the extremely unfree healthcare market in the US, provides would improve their data security if they thought people were not getting treatment because they worried about their privacy. Regulations create a false sense of security, incentivize companies to keep data breaches and past vulnerabilities secret, and make developers spend time complying with ineffective or harmful requirements instead of actually improving security.
I think one should be very sceptical of regulations and other coercive alleged solutions from governments, especially as politicians have a very strong incentive to serve the corporations who fund their campaigns rather than the voters who rarely even get to hear the name of a candidate who is not supported by corporate spacial interest and wouldn't vote for them anyway as to not "throw away their vote".
I've worked in healthcare tech stacks. It's like saying the GDPR is driving away top developers. Not true in the slightest. The problems with making money in healthcare are business related, not developer related. HIPAA is just another set of rules to abide by when creating systems.
The goal of a regulation, like a project constraint, is to enforce some outcome. This is often a good thing. However, not all implementations of the "code" of that regulation are going to be equal. There's a huge gap between the desired outcome and the way it's articulated as law; there's a ton of wiggle-room there. And that can make a huge difference in how burdensome a regulation is to actually adhere to. And that can have a huge economic impact.
The left talks about how important regulations are, and the right talks about how inefficient they are, and both of these things can be true at the same time.
What would it look like to ask ourselves how regulations could be "refactored" to achieve the same goal in a more efficient way? Maybe the assumption is that too much political capitol would be required to actually put such changes into action. Though, we should at least be asking ourselves this question when drafting new law.
Why isn't there a whole field around "regulation engineering" (not actually suggesting this name, but it gets my point across), including best-practices, case-studies, etc?
Regulation and public service work best in scenarios where the processes and data are well established and accessible.
For example transport via train / cars etc. is rather well understood and most efficient when regulated well and collaboratively/publicly owned and ran because of that. Individual competing actors only create chaos and inefficiencies in comparison. Most clear headed observers would agree to this, just by looking at current and historical examples.
But the logistics and production of relatively new goods and services still need to figure out their place. This is where a deregulated, free market makes sense as long as certain baseline requirements are met (protection of workers, consumers, the environment etc.)
A field that would be very controversial to socialize would be food production. On one hand privatized food production is wasteful and even literally toxic and a lot of countries see food production as a matter of national security, so they subsidize it. Also the logistics and needs of the consumers are well understood. But on the other hand almost nobody seems to think that it would be a good idea to put it into public hands.
Sometimes, even as a consumer, this is desired, for ex when new drugs are coming to market. Sometimes, as you point out, it’s stifling.
Government is also inefficient by design. Imagine the gov’t pivoting to different laws every week - it would be completely unsustainable and would drive people crazy.
To answer your question, “regulation engineering” probably doesn’t exist because it’s designed to be slow.
I don't understand this argument. The goal is not to be intrinsically "slow", but to be suitably "careful". If you can be as careful as needed, but execute that careful process in such a way that no time is wasted, that's a win. The two are separate questions.
To put it differently: high-security systems programmers don't move their fingers more slowly on the keyboards because "going slow is better". They put checks in place, and they take as much time as is needed to do things right, but padding that time just for the sake of "slowness" helps nobody.
> Government is also inefficient by design. Imagine the gov’t pivoting to different laws every week - it would be completely unsustainable and would drive people crazy.
Speed of change has nothing to do with efficiency of implementation. I'm talking about writing laws that are efficient for companies to deal with, not streamlining the law-passing process so that legislators themselves are unburdened. It's a totally separate thing.
> inefficiency can be a feature...for big companies because it creates a slow and expensive hurdle for smaller competitors
This is true, and could be part of the reason this problem hasn't been addressed. But corporate lobbyists are just one of the many forces influencing legislation, and formalizing ideas around "efficient regulation" would only shed even more light on bad-faith attempts at making laws less efficient for the purpose of moat-building.
"Being careful" doesn't necessarily lead to slowness directly, but making the carefulness verifiable (and making that verification, by an external stakeholder, mandatory) usually does.
This approach (regulation and inspection by a government agency) is generally how society makes actors internalize otherwise external costs, but there are other variations such as government codes and standards.
Fine-grained mandatory process specification is usually the least desirable route to safety, but that's often what companies end up asking for in return for giving them a pass when the process inevitably fails to prevent a bad outcome with a large blast-radius.
However, in some specific circumstances where you don't have another means, directly enforcing slowness in some way may be your best option for at least limiting the damage caused by a failure, even if it doesn't reduce the chances of an error (though sometimes it does that too). Vehicle speed limits are one example, rate-limits on transactions (or comments) are another. In other circumstances, requiring speed (eg. monitoring with a fast response time, quick deployment of a fix) may be the right choice for limiting the damage a failure can cause.
What keeps me from returning to the medical space is not trusting other people to take privacy and data security (not HIPAA and definitely not HIPPA) seriously enough. I don't feel sufficiently aligned with the decisions of any medical company I've worked for to compromise my ethics for them.
The asks HIPAA makes are minimal, largely reasonable where they exist, and are more about responsibility and management than anything a "top developer" has to care about.
The 70s and 80s mark a political shift to privatization of public service/infrastructure and deregulation of and trade-agreements for the investor market.
> Our incomes are like our shoes; if too small, they gall and pinch us; but if too large, they cause us to stumble and to trip.
Liberalism is not at odds with sensible resource distribution. On the contrary: A free society is rooted in participation of all, both political and economical.
Actually it doesn't. The relative decrease seems to only have affected men: https://wtfhappenedin1971home.files.wordpress.com/2020/06/me...
When I look at the graph of oil prices between 1970 and 2020, I see it jumping around between $20 and $160, but they are always higher than they were in 1970. What exactly are you saying is the problem with oil prices? Are they too high or too low?
This is referring to the decades before 1970, not after the oil crisis.
> We've since had 50 years of stagnation in energy prices.
This is the period of 1970-2020. The price of oil has oscillated (jumping around, as you say) during this period, but the overall price of energy has not had a clear long-term trend.
The earlier poster's argument is that the stagnation in other metrics (from a period of impressive growth before 1970) may reflect this stagnation in energy prices (from a period of impressive reduction before 1970).
When the government can print money willy-nilly, it can finance any boondoggle it wants to. This free money would pull qualified people away from more productive endeavors. It makes sense that this trend would, over time, impoverish society and enrich those in Washington's orbit.
No, prices were super-high for more than a decade, before returning to let's say roughly double the pre-crisis price for the 90s, then spiking again.
Or regarding recent decades as normal, 1922-1972 was a window of steady low prices.
https://i.insider.com/58593c27ca7f0c20008b6b76?width=800&for...
If this was actually happening, we would see the impact in increasing labor prices, not stagnating labor prices.
And incomes of people near the top, in all fields, increased relative to the median too.
Yeah, that's a different argument. Its arguing that low-cost finance is crowding out savings. However, in this case if you look at the savings rate, its still a little too high relative to historical averages. Of course, 2020 is nuking all of the statistics. But prior to the COVID shock, both gross and personal savings were high and climbing despite constantly juicing the markets with cheap finance.
https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/GSAVE
You can see union membership was on the decline since the 1950s, but it accelerated around the 70s. It is hard to see the timeline in that graph, in this one it is harder to see the acceleration, but it is easier to see the timeline: https://rpubs.com/jncohen/uniondensity
Anecdote from Finland: in a personal conversation, one long-term union representative bemoaned that, until mid 2000s, companies considered unions as partners, consulted difficult staffing decisions with them, or at the very least felt obliged to justify the reasoning behind companies' decisions. After the crisis, the mood all changed - spending cuts, layoffs or any changes to salaries or benefits are now presented as a done deal from higher up, any union negotiations are treated as a mere formality.
The reason no other explanation makes sense to me is that any purely market based explanation, like energy or China, we would see a corresponding drop in US labor force productivity, but the whole point is that that productivity did not drop.
One question i have for you is, why didn’t the union just fight the cuts? A union is not a nicety granted by the corporation, its whole reason to be is to fight corporate power when needed. It sounds to me like that union was already made powerless by the time the crisis occurred.
Do you follow main stream economists today? Ray Dalio (Bridgewater), Jeffrey Gundlach (Double Line), Raoul Pal (Real Vision), and Warren Buffet (Berkshire) have made very big bets for Gold and Gold stocks because our currency is being debased at a rate we have never seen.
Looks at $1 gasoline. Looks at $2 eggs. Looks at $3 gallon of milk. Debased. Sure thing. (Maybe gasoline is an unfair example, but essential good prices are largely unchanged in the last decade. The point stands)
This is clearly a straw man.
MMT provides an alternative theoretical basis that might explain the apparent disconnect between money supply and inflation:
https://www.investopedia.com/modern-monetary-theory-mmt-4588...
> According to MMT, the only limit the government has when it comes to spending is the availability of real resources, like workers, construction supplies etc. When government spending, meaning the amount of money introduced into the economy, is too great with respect to the resources available, that's when inflation can surge if decision makers are not careful.
Have a nice day!
Perhaps the basic consumer goods you mentioned continue to benefit from the deflationary effect of automation and technology, thus their prices fall in real terms (assuming that the dollar has lost value during the last decade, given rising prices in the sectors I mentioned).
I think we're in a period of both dollar inflation (due to the Fed's monetary policy and government's continued debt spending) and deflation (due to technology/automation and the Eurodollar system's global demand for dollars), resulting in dollar debasement while many everyday consumer items retain their nominal price or even decline in dollar terms.
Also: the Forbes article about Buffett buying one gold-related stock notes that: "Mr. Buffett is not a fan of gold as an investment. " (Source: https://www.forbes.com/sites/robertberger/2020/08/28/warren-... )
Gold producers, on the other hand, one of their biggest expenses is fuel. Fuel is cheap and Gold is fairly high. Combining those two seems like a good investment for a time.
Please do not base your vision of the future on exponentially-growing energy consumption
Cheap clean energy by itself isn't a problem, but many of the behaviors it enables certainly are. We should be attacking the problematic behaviors rather than blaming it on cheap energy. The alternatives to cheap clean energy are much worse for the environment.
The massive increase of women joining the labor market in the US just after 1970 largely as a consequence of the widespread adoption of oral contraceptives in the young population. [1]
The People's Republic Of China was formally admitted to the UN in 1971, and following that in 1972 Nixon visited - effectively opening China as an actual labor market.
Edit: I think one of the major takeaways should be that, changes in worldwide monetary policy allowed for pent up demand for globalization to be realized and that accelerated shifts from onshore to offshore manufacturing. Basically it allowed the US to stop building, and start buying.
[1] https://dash.harvard.edu/bitstream/handle/1/2624453/Goldin_P...
This drives down the cost of labor. If, to make ends meet, you need two people working, they won't be able to easily move to pursue better employment unless both find employment at the same place at the same time, or that the new offer is significantly better than the previous one. As this would depress salaries everywhere, that's very unlikely.
This part of your comment was super confusing. So much so it seems better in reverse:
>As that's very unlikely, this would depress salaries everywhere.
Another thing I didn't see in that data set was the relative growth / decline of union membership; i.e. how that affected wage growth, indirect effect of negotiating power. It would also be interesting to see whether that was a leading co-factor or a following co-factor.
The way things are now in the US wasn't inevitable.
I always wonder how much of the California economic claims are due to California vs due to access to cheap overseas labor with major ports.
An easy to build open-source pocket sized fusion reactor would be nice.
I do think that the early 1970s was the culmination of a bunch of different cultural, political, economic, and social trends meeting together and creating a very different global consensus.
BTW, the Gold Standard was already out the window with original Bretton Woods. Only certain actors (governments and certain NGOs) were allowed to redeem money for Gold. Gradually lots of caveats and weird rules were added to the system because of various structural inefficiencies. The oil shocks just toppled the system, but the financial system of the world was already untenable.
Is it really? What would be different if energy was much cheaper? Would we have more advanced rockets or robots or phones? Better CPUs? More and cheaper housing built in dense cities? Cheaper education or medicine? More job security? Even more food?
I realize that energy is an important input into some industrial processes, but I don't really think we're constrained by it (or by manufacturing in general) right now...
Would a lower energy cost bring wages up? No reason to believe that would be the case.
Would it lower the cost of goods so that at least the working poor could have a better standard of living?
Perhaps, but how much of the cost of a good is the energy, how much labor and raw materials? Would we see even more job loss due to lower cost of energy as it becomes even cheaper still to automate?
(Edit: to be clear, OP wasn't saying lowering energy costs would do anything more than lower the cost of goods. But that statement alone, coupled with the article showing declining wages, etc. suggests OP was implying lower energy costs could reverse or stop the trends shown.)
Considering that percentage is higher than margins in quite a few businesses I'd say it has a limiting effect on the economy.
What is the cost of water in the GDP? Much less than the cost of the energy. What would be the GDP without water? Nil. There would be no GDP because we would all be dead.
Also, you somehow equated the complete lack of a resource with a price increase. What would the effect on the GDP be without any energy? Well, we might not all be dead, but a significant portion of us might for various reasons including wars and massive world unrest because of instability. Even if you ignore all that, the economy as we know it would grind to a halt.
For physical goods, most of it. Raw materials in particular aren't expensive except in terms of the energy required to extract them and process them (modulo supply and demand).
For labor it's more complex, but in general falling energy costs drive capital investment in automation (displacing and lowering demand for less-skilled labor) to lower price and capture greater market share (in order to get a return on the investment of capital), lowering labor's share of the final price, and the Jevons paradox drives increased consumption of the lower priced goods (as well as the lower priced energy). Software has been driving the same sort of dynamic for a while, though the way it affects industries seems to be more contingent, 'lumpier', and less predictable (eg. in hindsight, the disappearance of the travel agent as a result of online booking was somewhat obvious, but AirBnB effectively adding a lot more inventory to the market wasn't).
Not sure what happens when software and energy both more directly affect each others' supply and consumption, but the effect on the rest of the economy is going to be... interesting. Smarter energy grids that shift the economics of energy plants and sources at different scales; vehicles, homes, factories, & data centers that can all adjust their energy use/storage to take advantage of spot pricing, energy costs driving the ROI of training machine learning models etc. and thus changing the return on investment in compute capacity (and in software efficiency), and so on. There are a lot of feedback loops, and as "software eats the world", more (unanticipated) feedback loops will be created.
So energy is special: it is the universal input to industrial processes. Unlimited energy would make almost anything (more) plentiful. We'd essentially have more of what people want, whatever that is. So yes, more and cheaper housing in dense cities, but it's probably easier to see that faster and better transport options would result. That limits everything, not just manufacturing.
You should probably reevaluate this. Energy costs are most of the costs of production much of the time. Sometimes it is hidden in the costs of components or of the labor involved, but it’s fundamentally an energy cost.
We wouldn't need rockets at all, or at least far less; we could power things like launch loops and railguns to get things into space (and then either settle for rockets to circularize or else use laser ablation or orbital tethers or other fancier systems to circularize).
> or robots or phones? Better CPUs?
Robots, phones, and CPUs all benefit from power being readily available. For the latter-two, power storage is a critical factor as well, but it's at least a little bit less critical when there are ample places to cheaply recharge.
> More and cheaper housing built in dense cities?
Dense housing tends to require things like elevators (unless you expect people to climb tens or hundreds of flights of stairs every day), climate control (in places naturally too hot or too cold for humans to safely live), and the very equipment and materials to construct that housing in the first place (cranes and bulldozers don't run on magic, and neither do steel mills or window factories). Not to mention the things people like to be able to do within those homes, the vast majority of which require electricity. Cheaper electricity makes these things cheaper.
> Cheaper education or medicine?
Electricity is typically required for distance education and telehealth. It's also typically required for modern education and medicine, period. Cheaper electricity makes these things cheaper.
> More job security?
Not only does energy itself tend to create jobs (especially solar, what with all the rooftops and parking lots begging to be made useful with solar panels), but so does the resulting burst in commercial and industrial opportunities when people are able to drive down or outright eliminate electricity's cost to business.
> Even more food?
Vertical farming at scale will absolutely require more electricity. So will water production; desalination is typically an energy-intensive process, but with enough energy production, it could make water shortages in places like California a thing of the past. Even traditional/flat farms have tractors and combines and other equipment that are costly to run; slash those run costs, and farming just got that much more viable for smaller farmers that can't otherwise foot the bill.
> I don't really think we're constrained by it (or by manufacturing in general) right now...
Right now the energy and manufacturing capacity we have is built on egregious exploitation of fossil fuels, particularly coal and oil. Those won't last forever; either they'll run out, or we'll end up wiping ourselves out with the resulting greenhouse gases (or probably both).
https://surplusenergyeconomics.wordpress.com/2019/04/05/149-...
s/some/every/g
If the basic stuff that runs the world (energy and chemical feed stock) doubles in price two separate times in the space of 7 years, you just might expect tough times.
Interest rates lower than inflation, gold and silver not keeping pace with inflation either, general economic stagnation.
Not a good time, no it wasn't.
Unless your currency is the one the oil is required to be priced/sold in worldwide, maybe. Sounds like a great time to have USD to me.
Basically everything doubled in price in 1973/1974, and again in 1979/1980.
They're not wholly unrelated and pretty obviously has driven economic policy and world relations (modern colonialism at the extreme) to some degree.
The added labor could have pushed down the price of labor. Productivity acts as a ceiling for the price of labor, so seem those two track suggests that there was a shortage of labor.
While the trend started in the 60's, likely in response to social changes in the 60's, it could have been accelerated by households struggling with 70's stagflation, sending more people to work to overcome stagnating wages. There'd be something like the paradox of thrift, but for labor, where people work more, but aggregate income doesn't change much.
Real household income has actually gone up 28% since 1985 [2], so there might be something to viewing this through a household lens, not a wage lens.
And as others, and even the link say. there was a lot going on in the 70's, so this is hard to tease apart.
1: https://www.dol.gov/agencies/wb/data/facts-over-time/women-i...
How is that obvious? I see a lot of data, but not many conclusions. And even the data presented doesn't seem to me to present a particularly compelling case that it was the abandonment of the gold standard, among the many, many historically pivotal things that happened in or around 1971, that caused the systemic changes that followed.
[1]A cursory look at the site's blog posts will confirm the site author is indeed one https://wtf1971.com/page/2/
> “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.” – F.A. Hayek 1984
The concept of household income is fuzzy and not necessarily related to rewards to labor. Measuring by hours is the appropriate way to measure. Among other issues.
https://www.forbes.com/sites/scottwinship/2014/10/20/has-ine...
It's baffling that mainstream economists don't believe this (of course a single event with explanatory power diminishes the utility of the economist profession, and the Upton Sinclair quote comes to mind). In the words of a VERY mainstream economist:
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"
In short: as a policy, we should reduce the real returns to labor in order to "keep the labor class employed". This policy choice (enabled by the end of bretton-woods) is quite well-captured in all of these graphs. This is how the end of bretton-woods pummeled the lower-income segments of society.
As for how the end of b-w benefits capital owners, inflation makes the cost of long-term borrowing lower, which means that the market price of risk is decreased; and folks with greater means are more effective at capturing arbitrage between the real cost of risk and the price of risk. For example, high finance instruments (like options, shorts, FOREX, etc) have a higher cost to execute in an environment with higher interest rates. If you go to, say, hunter's point/bayview you will not find people taking advantage of these instruments.
Some will claim "the poor are in debt so they will benefit from inflation" but in reality those debts are typically short-term, high interest rate instruments (sometimes even inflation-adjusted as in the case of some low-end home loans), and so the benefit to diminishing the real value of nominal debt is lower for them than it is for the truly wealthy.
All the other observations flow from that.
I personally also think this is the main answer. In other words, all our massive productivity increases have come from people with a ton of education, and they reap all the rewards, helped with lower taxes. The median worker isn't any more educated and hasn't reaped anything.
> ...I certainly do not believe that r > g is a useful tool for the discussion of rising inequality of labor income: other mechanisms and policies are much more relevant here, e.g., supply and demand of skills and education. For instance, I point out in my book (Piketty 2014a, ch. 8–9) that the rise of top income shares in the United States over the 1980–2010 period is due for the most part to rising inequality of labor earnings, which can itself be explained by a mixture of two groups of factors: rising inequality in access to skills and to higher education over this time period in the United States, an evolution which might have been exacerbated by rising tuition fees and insufficient public investment; and exploding top managerial compensation, itself probably stimulated by changing incentives and norms, and by large cuts in top tax rates...
[1] http://webcache.googleusercontent.com/search?q=cache:x918MB5...
Although the top marginal tax rate has changed drastically throughout America's history, if you look at federal tax receipts as a percentage of GDP, they've been remarkably stable hovering around 17% [0]
Similarly, education spending on K-12 has grown a lot per pupil (in constant dollars) since 1970 [1]. Its roughly doubled (in constant dollars) between 1970 and 2000
[0] https://fred.stlouisfed.org/series/FYFRGDA188S
[1] https://www2.ed.gov/about/overview/fed/10facts/edlite-chart....
As for education, the relevant factor here is college education, not K-12. It's precisely all the benefits accruing to people with a good college education that aren't accruing to those without.
If I had to guess, would assume this timetable is based around the end of WW2. 1971-1945(end of WW2)=26 years. 26 years seems like a feasible amount of time for businesses to grow to the point where business owners don't need to share profits with employees to sustain growth. It's also around the amount of time when business owners welcomed their kids into company leadership positions. The post-war and somewhat "sheltered" children probably weren't as compassionate towards their fellow American (as their war-time parents were), leading to benefit reductions, lackluster pay-raises, and overall reduction of profit-sharing, etc. If you look around, it's pretty clear this has been compounding ever since.
Places like Johnstown, PA were declining about 2% per year from 1950 to 1970.
That means that things were already going wrong long before 1971.
Rognlie(2014) points out fatal errors in Piketty's primary analysis of wealth inequality. In summary:
“ Recent trends in both capital wealth and income are driven almost entirely by housing, with underlying mechanisms quite different from those emphasized in Capital. ” http://mattrognlie.com/piketty_diminishing_returns.pdf
At around the same time, the growth of GDP and standard of living dramatically slowed down in the Soviet Union, too. From venerable ~5% per year in 50s and 60s, to ~2% in 70s, to ~1.25% in 80s.
Different legal, political, financial and managerial framework, the same decline.
https://en.wikipedia.org/wiki/Legislative_Reorganization_Act...
...and the re-emergence of corporate consolidation and the rise of the conglomerate in the 1960s, which reduced the power of labor to negotiate for a fair share of the gains.
The latter is a consequence of the former. The US defaulting on its gold obligation is equivalent to trading oil in exchange for paper rather than gold. Of course the OPEC countries were reluctant to sell their oil for irredeemable pieces of paper rather than something redeemable in gold.
Talking about the “oil price” as one thing before and after 1971 doesn’t even make sense, as the US gold default constituted a change in the unit of measurement for USD-denominated prices (gold versus irredeemable paper notes).
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.
I'll bet if you look this is the start of die off of Unions. Now there is an alternative to employees who start demanding living wages and benefits, you can build your factory in another country where labor has few rights. The only unions you would expect to survive are ones where the labor can't be outsourced. Service unions. Transportation. Mining in cases where the material is too expensive to ship like coal.
Amazon is interesting too. They brought the global supply chain to the consumer. What consequences will that have?
Though Teachers Unions would a counter example.
When analyzing wage stagnation in a finer detail: Going off the gold standard caused a rise in the stock market. Also, we have regulated food prices in the US, so the current metric we use to measure inflation isn't strongly correlated to a living wage. Meanwhile, people who are invested in the stock market and rental properties, aka the upper 10%, have seen a large boom in wealth. (Not just the upper 1% have had a rise in wealth.) Unless we have any other ideas that is being overlooked here, it does in fact look like going off the gold standard started this trend, and has only been amplified by trade and tech later on.
Could it be possible that unionized workers started shrinking in 1971? They're commonly cited by historians as a key element in the rise of working class wages, so it would be a good place to check to see if there is a correlation there.
Can you expand on this?
I was also conceived in 1971, so maybe it was my personal existence. Sorry to everyone affected. I'll be dead within the next 50 years most likely, so be patient.
Globalisation perhaps?
That isn't it. Starbucks didn't open its sixth store until 1984.
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_...
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_c...
So many economists have rationalized the benefits of free trade as being that the country who can make things most efficiently and with the best quality will succeed, but they ignore what goes into "efficiency". But worker safety protections (especially from litigation risk), higher wages, and better time off are all significant sources of inefficiency, from a production standpoint.
The market devotee acknowledges that the market solution to worker protections is unionization and job-shopping, but it's nearly guaranteed to put enough pressure on corporations to offshore as soon as possible. Unions help wages for those jobs which stay, but guarantee there aren't that many left. Free trade with places like China and Mexico is stacking the deck against American labor.
Conservatives have long used unions as a scapegoat for this problem, but it doesn't explain why it's more often the case that a corporation offshores operations instead of moving operations to a state without government mandated unions. There is some truth to their argument, but I don't think they understand that basic safety protections, natural market forces, and potential litigation all contribute to a significantly more costly American worker than one abroad, even if they aren't in a union.
I think that one of the central reasons this has been happening is that the American ruling class has been insulated in their ivory towers and Ivy League schools for too long. They're genuinely more concerned with "saving the world" than creating a cohesive, prosperous society. It explains why so many lives and money is used to intervene in countries on the other side of the planet, why immigration from 3rd world countries is heavily promoted despite fierce resistance from the lower class, and why they have all but abandoned the idea of low-skilled labor becoming more valuable.
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) 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?
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.
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.
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.
Fixed, thank you.
(We might have recently passed Belle Epoch-levels of inequality - not sure this is an accomplishment we should brag about)
Its worth noting that large scale disasters (of all sorts) were always great equalizers, a countervailing force to rising inequality. In general, the more you had to lose, the more you lost.
We've been getting better at preventing or coping with a lot of these things like plagues, famines, and so on, but we've become even better at insulating accumulated wealth from being destroyed by them (including by financial crises), by privatizing gains and socializing losses.
I have a feeling that we've entered a new period of larger scale social unrest and natural disasters which may or may not significantly destroy and/or redistribute wealth to level the playing field again somewhat.
(I don't know. But it has to be asked)
The answer is that 1875-1920 looks an awful lot like 1975-2020.
When we're unformed voters, then who we vote for and what policies end up getting enacted to not serve our best interests.
While this at first may not seem like much, it's a key butterfly effect for many of the other problems we have today. It's not the whole picture, but the root of a larger picture.
https://link.springer.com/content/pdf/10.1007/s11150-009-905...
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.
* again, not aruging for or against the correlation. Just pointing out that it is hardly laughable.
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.
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.
And communist don't?
People behave this way if left unchecked. Greed is hardly something unique to capitalism.
People complain that corporations and businesses have too much impact and control over our society (which I agree with) and then in the same breath complain that they don't take on enough social responsibility. These are incompatible statements. Businesses should not have any social responsibility other than doing the thing for which they exist: make money. All other social responsibilities, such as ensuring we live in free, fair, and just society, fall to the people and their representatives.
Unfortunately, in our current situation, the people's representatives have spinelessly kowtowed to businesses and corporations and are completely unwilling to embrace any such social responsibility. But the blame and fault for this lies solely at the feet of these representatives and their governments (and, to an extent, the people who continue to elect them).
- 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"
So, what about the (perhaps too simple) explanation that 1971 is when the developed world finally caught up from the destruction of WWII and investors recognized this? That would mean an end to free wealth for the US, as factor productivity is no longer the highest in the world.
~1970 is about when the % of workers in unions really started to fall in the US.
Since then the captains of industry in the West have been able to arbitrage labor world wide. Thus labor unions in developed nations, a symptom of labor scarcity, lost their leverage.
[1] http://minotusa.com/uploads/40/NorthDakotaIntermodalInitiati...
We live in Brooklyn near the water. The entire coastline from Red Hook to Greenpoint was once dedicated to the loading, unloading, and storage of pre-shipping container cargo. This industry employed many thousands of people. It was a dangerous job but it sustained families, and it was a bootstrap to a career in the shipping industry. (There are analogies in textiles and meatpacking, in this same city).
Now, the warehouses have been converted into housing, coffee shops, art centers, and the like. The working class job is the service industry (waiting, serving coffee, delivering food), and it’s a very different culture from the working class job of the 60s.
I’m not at all saying the technological innovation was a bad thing. But it did have a huge impact on the local economies of every seaport in the world (Bay Area included, for those that live there).
If you’re interested in learning more, there’s an 8-part audio documentary on shipping containers. You can listen to episode 7 about automation here: https://soundcloud.app.goo.gl/AfzxGaUKuceh4W9W7
I have a feeling that use of expanded polystyrene foam (colloquially styrofoam, which is actually a brand name for a different material), as a packing material had a great deal to do with the trend as well. Loose foam packing peanuts were patented in 1965, I'm not sure when foam cushioning blocks were introduced.
Proof: look at stock returns when management pays more wages vs cuts wages/jobs
We've also seen a great domestic expansion in the upper middle class and a reduction in the lower class since then. More people are "middle class" than ever before with a larger percentage being "upper middle class". However, the middle class feels further away from the upper middle class in large part because there are simply many more upper middle class people than ever before (and more upper class for that matter).
I'm not trying to make a counter argument or anything but just trying to make an argument that we can't do an apples-to-apples comparison between today and 1971. Relative wages are less for a group of people, but consumer goods are relatively cheaper as well. Home prices are relatively higher but interest rates are far, far lower. The middle class has grown and poverty has been shrunk to record low levels (people often forget how many people were impoverished in this country not too long ago) but a lot of that growth has been in new upper middle class people.
We've seen union participation fall, yes - but have we asked "why" it has fallen?
see: https://news.ycombinator.com/reply?id=25189476&goto=item%3Fi...
It’s freely available here:
https://mises.org/library/what-has-government-done-our-money
Effectively what we're talking about are central bank operations, which is a dry and boring subject within economics, that is both misunderstood by mainstream economists and misused (for political reasons) by heterodox economists (many of whom are charlatans).
Generally speaking though, everyone tends to agree that central bank policies became looser over the 20th century, and IMHO that's really the only relevant kernel of truth in the OP link, who seems to be a promoter of fringe economic theories.
The best place to read about the topic is at the Federal Reserve Bank's website. Alternatively, I would recommend reading any of this :
Sorry but there are other ways. Did you know that the Balanced Budget Amendment (proposal) failed by a single vote in 1995?
https://www.congress.gov/bill/104th-congress/house-joint-res...
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.
Sounds like a great way to ensure that compromise has to happen, except that the party in power ends up getting credit for anything that gets done (or doesn't get done), plus to the other side they're dangerous fanatics who can't be trusted.
If you're in the minority, why not just ensure that the ruling party (if it can even be called that) fails to accomplish anything? Your side will love blocking their agenda, and if enough people aren't paying attention maybe they'll blame the other side for "not getting anything done".
As long as your party can hold out hope for not losing too badly in the next election, the status quo works just fine.
Too much "legislating" is indeed _the_ problem. At least with gridlock they can't screw things up worse than they are.
Just look at AB 5 in CA - tailored by labor unions with all sorts of collateral damage and unintended consequences that are still reverberating through CA economy. What's hilarious is that many independent tech writers who were in favor of it initially suddenly got to find out the wisdom of our legislators first hand when AB 5 proceeded to destroy their current business model as an independent, for higher worker.
Ha! Delicious irony indeed.
Making new laws _should_ be hard. It also would be good if congress started to do their job instead of delegating it to the executive branch. And for every new hair brained law it would be awesome if they were required to at least remove one other one - removing five would be better still.
If you think complexity favors you vs. big businesses or special interests....
It's definitely a negative thing as nothing significant will ever get done
If you don't think our current and rapidly expanding deficit is a real pending disaster...
However given what happened in 1971, it should be surprising there is not mention of Bitcoin!
I interpret this to be an issue with central planning, Balanced budget Amendment still does not remove the root of the problem.
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..
It is crazy that this wacky stuff is upvoted on HN.
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.
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.
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-..., 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!!
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.
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.
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.
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.
- 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.
It is always super sketchy.
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.
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.
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?
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.
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.
Let the tax system and social services systems stand on their own. Don't conflate one with the other.
Say there was 0% inflation for the last 50 years, how much do you think the number above would change?
Are you sure inflation is the reason people live a 'consumptive lifestyle'?
I'd argue it is 'cheap' access to debt - student loans, housing loans, credit cards, etc.. that has prevented people from saving.
Historically though the savings rate to today isn't much different than 60 years ago - around 10% in 1960 down to around 7% today.
Bitcoin is an asset/investment like any other, including the dollar, and all can go to zero under the right circumstances. That is why no single asset should be HODL'd in spite of others, diversify.
It's a warning light that anything not Austrian school will potentially be frowned upon in the discussion the website author pretends to stimulate.
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.
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.
https://www.youtube.com/watch?v=y8QhCW7_DZE
From
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...
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.
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.
The promise of an absence of inflation (which I agree is not the same as a gold-backed currency; moderate price inflation took place throughout the Bretton Woods era) is a guarantee that currency will hold its's value; that's tautological. Which obviously isn't the case for people speculating on timing the market for gold. And taking away the ability for prices on average to rise reduces the yield and increases the risk on investments in production or extension of credit. If you make currency an attractive component of rich people's portfolios, you decrease the proportion of their wealth invested in the wider economy (and since achieving zero inflation means artificially maintaining these rich people's purchasing power, if they scale back their investments everyone else just has to work harder for less...). Which is why an absence of inflation isn't a good thing for workers.
Bretton Woods collapsed because the United States' gold reserves were depleted in half honoring the $35 then $41 fixed exchange. Too many dollars were printed during Bretton Woods to fund the Great Society and Vietnam war. Ending the system made sense because it enabled the United States to keep what was left of its Gold reserves.
Let's say there was 10% inflation instantaneously today. Everything costs 10% more starting today. When does my paycheck increase? Not today. Probably not next pay period. Either when I get my annual cost of living increase, or when I can negotiate it to happen, or when my boss decides that the company really needs to take care of me. Whichever way it happens, it happens later.
Here's the solution - use inflation as a hidden tax to cover the spending without an upfront tax.
Do you have another solution that meets the requirements without changing the requirements?
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.
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.
> 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.
Would you be down to unpack how that works? I'm intrigued.
Keep in mind that their example chose a very gentle substitution (apples and oranges) while my example chose a very extreme substitution (housing and clean water for tents and unfiltered water). A nontrivial amount of your opinion-formation should include deciding where typical substitutions (e.g. moving back in with parents) actually lie on that scale. Of course, this choice is peanuts compared to the choice of whether or not you lump high income earners in with low income earners. Hence my focus on the Elysium test.
- 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.
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.
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/pol...
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
Share of Labour Compensation in GDP at Current National Prices for United States https://fred.stlouisfed.org/series/LABSHPUSA156NRUG
First microprosessor appeared in 1971 (Intel 4004)
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/1568585...
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.)
Could it be that globalisation has benefited other people than US citizens since 1971?
https://publishing.cdlib.org/ucpressebooks/view?docId=ft5d5n...
https://www.migrationpolicy.org/programs/data-hub/charts/imm...
Can you give me an example of any more-advanced and more-productive tool that does not require at least some special training?
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.
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.
https://en.wikipedia.org/wiki/Intel_4004
Oh and, uh, I was born around that time. Sorry everyone!
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.
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"!
It would probably make for an interesting serious analysis.
Edward Tufte showed the same trend with professor:administrator ratios in universities over the years.
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.
- feasability (putting a human in space, and on the moon) was demonstrated - equivalence between Russia and America was set - there was no big price left within reach at that point - Apollo stopped around 72 - international cooperation started
This era's beginning could maybe be dated to the late 1800s and the railroads.
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.
they are a key part of the overall strategy to wage war on drugs.
https://slatestarcodex.com/2019/02/25/wage-stagnation-much-m...
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.
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.
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.
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
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
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
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.
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.
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/Labor_force_in_the_United_Stat...
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.
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.
* 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-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.
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
This, plus powerful unions, provided a unique period where real wage growth for the bottom quartile improved.
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.
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.
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.
Bitcoin is a massive waste of the natural resources used to create and maintain the blockchain entries, nothing more, and probably won't ever be anything else. A properly designed cryptocurrency could be useful, but it won't look anything like bitcoin.
Until Bitcoin crashes entirely, of course.
OK, new topic: Draw a graph of each currency's Big Mac Index, or how much of each you need to buy a Big Mac in some major American city over the same timeframe. (We could do the same thing with Wonder Bread or a dozen jumbo eggs, but the Big Mac Index is actually A Thing.)