Democrats Built the Consumer Economy; Then Came the Republicans

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From 1933 to 1968, Democrats ignited middle-class spending and the economy bloomed. After 1968, Republicans squelched (1) the middle class, (2) the spending and (3) the blooming.

From 1933 to 1968, Democrats ignited middle-class spending and the economy bloomed. After 1968, Republicans squelched (1) the middle class, (2) the spending and (3) the blooming.

Jack Lessinger, Professor Emeritus, University of Washington and author of “Schizomania,” writes that “the proportion of income devoted to consumer spending is not fixed for all time. For 35 years, FDR and fellow Democrats boosted spending and the consumer economy by making labor more expensive. Democrats backed labor unions, regulated business, shifted the cost of government from the poor to the rich and created a plethora of entitlements.”

“As they became richer, workers stoked the economy with openhanded spending. The result was full employment, prosperity and rising wages. Not a single recession blemished the 1960s. Growth accelerated.”

Lessinger measures economic growth by percentage increases in the nation’s real GDP per capita.

Decade by decade, the attached chart show that from the lows of the 1930s to the highs of the 1960s, percentage increases in real GDP per capita more than doubled.

The 1960s not only brought the highest acceleration in economic growth, it was also the century’s highest decade of equality. Never before had so many pipe fitters, office and factory workers entered the ranks of the middle class. Except for Eisenhower (a New Dealer at heart) the whole period of climb 1933-1968 (from FDR to Johnson) was Democratic.

As shown by the attached chart, after 1968, the growth rate per decade steadily fell to less than half. The main reason is clear. Republican policies violated the spending requirements of the Consumer Economy. They brought a decreasing share of wealth and income to labor as a result of reduced taxes on the rich, lower trade barriers, mergers, increasing numbers of immigrants, outsourcing, imports, relaxed business regulations, less favorable treatment of unions and spectacular increases in executive compensation. Down came the relative equality of the 1960s. Down came the vigorous ability to spend. Down came the growth of real GDP per capita. And down came the Consumer Economy.

Aren’t consumers spending as much as before? Perhaps. Unfortunately, to keep up the old rate, spending now requires increasing amounts of borrowed money. Hardly a recipe for sustainable prosperity. With its reliance on consumer spending for full employment, the Consumer Economy is no longer an option for the long run future.

The Post-Consumer Economy has already made a start. By 2020, Lessinger predicts, the nation’s vision of the good life will no longer emphasize consumer spending. A new vision will create new mass preferences. And they will be fulfilled by industries as embryonic today as television was in the 1930s. Expect another sustainable wave of prosperity like that of 1933-1968. See Lessinger’s: Schizomania and Your County—Boom or Bust? as well as his website, http://www.predicting2020.com.

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Jack Lessinger