The good times for the North Atlantic nations ended in the 1970s, through a combination of oil shocks, runaway inflation, falling productivity, and slowing economic growth. By the end of that decade, manufacturing was decisively shifting to Southeast Asia, creating competition for the United States and Europe. In his influential 1975 book, Equality and EfficiencyArthur Okun, chairman of President Lyndon Johnson’s Council of Economic Advisers, argued that you can increase economic equality or you can increase economic efficiency, but you can’t do both at the same time, a view that paved the way for the market fundamentalism. (The preferred term in the economics profession isneoliberalism”, but I reject it because many critics of market fundamentalism with a more diffuse political agenda also call themselves neoliberals, totally unaware of its other meaning).
DeLong makes a strong case that the 1980s turn to market fundamentalism was a dismal economic failure. He points out that President Ronald Reagan and British Prime Minister Margaret Thatcher, by cutting taxes and regulation, achieved nothing measurable. gets better for employment, wages, investment or economic growth. Inflation came down, spurring a cyclical economic expansion, but that was the do by Paul Volcker, Chairman of the Federal Reserve Board. Meanwhile, the deregulated banking industry first created a savings bank and loan crisis that led to the evaporation of $160 billion, with most of that bill collected by taxpayers, and, later, a mortgage crisis that led to the evaporation of $3.3 trillion in real estate, very little of which was repaid by the government . The real legacy of Reagan and Thatcher, primarily through tax cuts, was to extend and hasten the return of the late 1970s to growing economic inequality, a trend that continues today and which, contrary to Okun, produces absolutely no benefit to economic efficiency.
I take the somewhat conventional view that the long 20th century ended around 1980. Taking DeLong and Piketty as an example, here is my summary of the long 20th century. At first, rapid economic growth hyper-fed imperialism and militarism. The latter spiraled out of control from 1914 to 1945, killing an estimated 100 million people. After 1945, democratization dating from the turn of the century matured to the point where industrialized nations steadily moved toward greater economic equality. But by 1980, both rapid economic growth and the egalitarian trend had ended. Applause, curtain.