How the US economy has changed between the 1950’s and now?

Jeff Brooker

AP Economics- Hour 3A

The US economy was known as the forefront in capitalism and constant economic growth. It is known
as the land of opportunities as it is perceived as country with high standards of living and economic
opportunity regardless of class. This paper assesses where the idea of opportunity for all began, how it
changed and how to change back to the positive economy it once was. How and why there was a
change in the economy is what the basis of this paper lies on.

During the 1950’s and 1960’s, the USA economy was economy that was rapidly increasing. In just over
20 years the average workers hourly rate almost tripled. This all began with Henry Ford’s revolutionary
$5 wage. His concept was to up the workers hourly wage to 5 dollars and in return they would be
motivated. This motivation led to greater production, which meant more business success. Employee
satisfaction is important in employee driven machine line production. The other thing that allowed the
USA economy to boom during this period was that the embracing of technology to further productivity.
Ford’s technology was his streamlined production line. He used the concept of employees only doing
one task repetitively to further productivity. Through this process he was able to reduce the time It took
to manufacture one car. Other US businesses followed suit due to his success. Many businesses found
success now as the notion of employees being the best customers was possible. Ford wanted
employees to be able to afford his products. By increasing the wage, there were more spenders in the
economy. This larger spending economy was also possible, from an inventory side, as employees were
more productive. The cycle of higher wages then equaling more spenders is what led the USA economy
to blossom in the 1950’s and 1960’s.

From about the 1970’s the US economy, began to change. Sadly, the change was for the worse and not
the better. The wages and standard of living for 80% percent of Americans began decline. This is thanks
to the following three things over valuing the rich, under valuing the middle class and the evolution of
the political system to benefit corporations. These causes to the change will be addressed and analyzed
in the paragraphs below.

Society and government changed their view from the 1960’s on importance of the upper income class in
regard to their role in the furthering of the economy and increasing of the average standard of living.
The wealthy were now seen as the backbone and creators of the economy. The US society now believed
that the wealthy create the jobs in the economy as they have the ability to create business opportunity,
therefore they create the jobs that fuel the economy. Due to this thought, the wealthy have been given
significant benefits to being wealthy and ways for them to become even more wealthy. The most
prevalent form of these benefits is tax cuts. The tax rate on regular work completed is 35% however the
rate that the wealthy receive on their investments, capital gains and interest is only 15%. The wealthy
make a substantial amount through non-regular works so the 20% difference in tax rate is a sizable
reward for being wealthy. The wealthy are empowered for being wealthy as they supposedly create
jobs is a falsehood that is causing negative economic growth.
In the same way society changed its views on the upper class, it changed its views on the middle class
too. The middle class under the concept of Fordism was the most important class. If this class was
looked after, all classes were looked after, was the mindset during the 1950’s and 1960’s. This changed
dramatically in the 70’s and onwards. The manufacturing output of the average worker increased by
over $120,000 from 1976 to 2011, yet the average wage of a middle-class manufacturing worker has
increased by barely 10%. The demanding work of the middle class is not being valued by society and
corporations in particular. Henry Ford made a massive profit the first year after implementing the $5
wage, so wages were increased again; whereas Snapple made a record breaking profit in 2009 so it
wanted to lower the minimum wage thinking this will drive its profits higher. Not supporting the
middle-class affected all the classes standard of living.

The last point to make on why the US economy has changed from the positive Fordism to what it has
now has to do with the political system and its favoritism of corporations. The political system back in
the 1950’s and 1960’s was built to favor all citizens and was powered by all citizens. Campaigns were
funded by supportive citizens, politicians were controlled by what their constituents wanted and both
sides of the aisle worked together in congress. This was due to the wealth being averagely evenly
distributed. However, when the wealth started shifting to the upper class the political power
immediately shifted to corporations and upper class. Promises were made to benefit the corporations
as they were the ones funding the campaigns. As much the constituents had voices, they could not
compete with corporate funding as politicians had to value those who could offer them a future. Once
the power was in the corporations, benefits and future no longer lied in the middle class who drove the
economy. There was no longer a drive for the politician to strive for a high standard of living for all its
constituents.

This lower and falling standard of living is not a never-ending cycle or future. Although tough, there are
ways in which a rising standard of living can be achieved again. The biggest necessity for this decline to
be broken would lie in striving for a more equal distribution of wealth. The inequality leads to the
corruption of a political system, the poor decision making on what class has the importance in economy
development and lack of spending ability to boost the economy. For this nearer equality to occur there
needs to be a political shift in party concepts. There needs to be more bipartisanship to create
legislation that will reform the economic imbalance. This would mean Tax reform, social welfare
adjustments and infrastructure expansion. Whilst the ideas in the paragraph above seem high radical
and improbable, with the right social movement almost anything is possible.

The US economy has been in the forefront of economical growth from the beginning and is still seen as
one of the strongest in the world. Its start in Fordism gave a strong boost in a positive direction. The
change in value in regard to the role of the classes created a negative shift for the standard of living.
The shift also created a rift in the political system. However, with the right social movement there is still
a chance at equality distribution for standard of living correction. There is still hope for a positive
correction to the movement of US economy.