Monday, July 15, 2013

A testamony to the power of markets, even in the face of massive regulations and government growth

The standard liberal economic narrative holds that the period from Reagan to Bush the Younger was characterized by unregulated, laissez-faire capitalism.  And sure, the economy grew during this period, but most of the wealth was appropriated by the rich -- the poor and middle-classes stagnated or declined during this period.  Well, as is almost always the case with the liberal economic narrative, it has about 10% truth and 90% nonsense.  In a post at his blog Carpe Diem, UMichigan-Flint professor of economics Mark Perry discusses the "disappearing middle class" in America.  Here's an important slice:
In other words, America’s “middle-class” did start largely disappearing in the 1970s, but it was because they were moving up to a higher-income category, not down into a lower-income category. And that movement was so significant that between 1967 and 2009, the share of American families earning incomes above $75,000 more than doubled, from 16.3% to 39.1%.  
What's really amazing is not that the liberal narrative is wrong -- it usually is --, it's that this very same period was anything except a period of laissez-faire capitalism.  During this stretch of time, the federal government has grown massively and the amount of business regulation has increased to mind-boggling levels.  And yet, our belabored economy, only partially free though it may be, still produced wealth at levels great enough to make the lives of the vast majority of Americans materially better during that four decade period.  Of course, things may very well be changing courtesy of Obama's insane economic policies.