These are all self-inflicted wounds
Robert Reich for Inequality Media
I rarely ask you to look at charts. Today is an exception.
This one is from the Economic
Policy Institute. It compares the typical American’s pay starting just
after World War II (light blue line) with the nation’s increasing productivity
since then (dark blue).
The chart shows the widening divergence between the rise of
pay and the yields from productivity.
In the first three decades after World War II, the typical American’s pay rose in tandem with the nation’s growing productivity. The benefits from higher productivity were broadly shared.
But then, starting in the late 1970s and dramatically after
1980, pay barely grew, even as productivity continued to soar. The benefits
from higher productivity went increasingly to the top.
Why?
I’ve been looking into this question for a long time.
I’ve also been living it, as head of policy for the Federal
Trade Commission under Jimmy Carter,
secretary of labor in the Clinton administration, and an economic adviser to
Obama. I’ve chronicled this in my upcoming memoir, Coming Up Short.
Much of the answer has to do with a giant upward shift in
power.
It started in 1971, with a memo written for the U.S. Chamber
of Commerce by Lewis Powell exhorting corporations to play a far more active
role in American politics. They did, and their increasingly active role paid
off, at least for their CEOs and top investors.
It continued through Reagan’s tax cuts and deregulation, his
legitimization of union bashing, and the emergence of corporate raiders who
insisted that corporations maximize shareholder value above all else.
And onward through George H.W. Bush and Bill Clinton’s North
American Free Trade Agreement, their support for China’s accession to the World
Trade Organization, and their deregulation of Wall Street.
And then through George W. Bush’s tax cut — again, mainly
for big corporations and wealthy individuals — and Barack Obama’s bailout of
Wall Street after it nearly destroyed the world economy.
Deregulation. Privatization. Tax cuts. Free trade. Stagnant
pay for most. A soaring stock market for the top.
That’s the legacy of neoliberalism.
It also brought us Trump — who exploited the anger and
resentment stirred up by all this and pretended to be a strongman on the side
of the working class (while quietly giving the emerging American oligarchy
everything else it wanted, including a giant tax cut; he’s readying another as
you read this).
Now some neoconservatives, posing as “moderates,” are hijacking the story and trying to rehabilitate neoliberalism.
Consider David Brooks, who wrote recently in The New
York Times that:
— “wages really did stagnate, but they did so mostly in the
1970s and 1980s, not in the supposed era of neoliberal globalism.” (Brooks is
wrong. Look at the above chart. Pay did begin to head up again in the 2000s but
the pay-productivity gap has continued to widen.)
— there was “a return to higher productivity and higher wage
growth, from 1994 to today. That is to say: Median wages have grown since NAFTA
and the W.T.O., not declined.” (Wrong again. Look at the chart.)
— “the inequality gap is not as great as one might think.”
(Well, I think it significant, and most analysts agree.)
— “the basic approach to economic policymaking that
prevailed between 1992 and 2017 was sensible and … our job today is to build on
it.” (Sensible only as compared to Trump’s first and second terms. But as I
said, hardly sensible when you consider that widening inequality combined with
unbridled globalization, deregulation, and union-bashing contributed to the
rise of Trump.)
Neoliberalism should not and cannot be rehabilitated.
We need instead a strong, bold progressive populism that
strengthens democracy and widens prosperity by:
— busting up big corporations,
— stopping Wall Street’s gambling addiction (e.g.
replicating the Glass-Steagall Act),
— getting big money out of politics, even if this requires
amending the Constitution,
— requiring big corporations to share their profits with
their average workers,
— strengthening unions, and
— raising taxes on the super-wealthy,
— to finance a universal basic income, Medicare for all, and
paid family leave.
Those now trying to rehabilitate neoliberalism won’t like any of this, of course, but we cannot return to the path we were on. It will just lead to more Trumps, as far as the eye can see.
© 2025 Robert Reich
Robert Reich is the Chancellor's Professor of Public Policy at the University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, for which Time magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. His book include: "Aftershock" (2011), "The Work of Nations" (1992), "Beyond Outrage" (2012) and, "Saving Capitalism" (2016). He is also a founding editor of The American Prospect magazine, former chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." Reich's newest book is "The Common Good" (2019). He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.
