They were better times for the working man

Hedrick Smith wants a return to the times when the middle class was made up of average workers who earned a decent pay.  Corporate management today has abandoned what economists call “the virtuous circle of growth”: well-paid workers generating consumer demand that in turn promotes business expansion and hiring.  This concept was followed in the post-WWII period when productivity and average hourly compensation just about doubled, despite much higher income tax rates.  There was a far greater share of equality than there is in today's 1% world.

Smith does not believe that globalization and the technological revolution can explain why the "virtuous circle" is no longer in use in the U.S.A.  It is still in effect in Germany where average hourly pay has risen five times faster since 1985 than in the United States.  Few could deny that Germany remains a manufacturing and export powerhouse.  

In this country average hourly compensation rose 4.2% from 1973 to 2011 while  productivity increased by 80%.  Corporate profits did much better. In 2006, the year before the Great Recession began, corporate profits garnered the largest share of national income since 1942, while the share going to wages and salaries sank to the lowest level since 1929. In the recession’s aftermath, corporate profits have bounced back while middle-class incomes have stagnated. 

This is simply another example of what appears to be a national sickness: the failure to realize that we are all in this together and the belief that greed is good.