CHICAGO – In the United States, a domestic political shift from cosmopolitanism to nationalism, and from left-leaning metropolitan “elites” to right-leaning rural “populists,” seems, to many, to be underway. The prevailing economic ideology is also shifting, from a redistributive, regulatory corporatism to something like the old interventionist corporatism.
Disaffected voters are behind both changes. For decades, Americans believed that they were riding a magic carpet of economic growth, owing to advances in science and, later, to the rise of Silicon Valley. In fact, growth in total factor productivity has been slow since the early 1970s. The 1996-2004 Internet boom was only a fleeting departure from the trend.
Over time, as businesses have cut back on investment in response to diminishing returns, growth in labor productivity and hourly wages has slowed, and workers in many households have dropped out of the workforce.
In fact, since 1970, aggregate labor compensation (wages plus fringe benefits) has grown only a little more slowly than aggregate profits have, and average wage growth at the bottom of the income scale has not slowed relative to the “middle class.” But the average hourly compensation of private-sector workers (production and non-supervisory employees) has grown far more slowly than that of everyone else. And the male labor-force-participation rate has declined significantly relative to that of women. In 2015, the share of manufacturing in total employment was just one-quarter of its level in 1970.