I know people always choose Hitler if they could go back in time and kill. Someone, but tbh I would choose Nixon, if I remember correctly, most of our problems we have in the US are directly related to him and his fucking over America for corporate greed.

I was born. I am so sorry y’all.

I think they all played a role, but it was Nixon’s neoliberalism that prevented the trend from correcting.

The short answer is that corporate lobbying exploded starting in the early 70’s.

This is a deep and complex topic but the TL;DR is: money talks and this was the moment in US history where the people with the money were allowed direct access to the lawmaking process in congress. For the first time in history lobbyists were allowed to sit in congressional committee meetings and not just wait in the hallway outside. From that point on, corporate America has had more ‘representatives’ in congress than US citizens do.

And businesses only care about profits, and the single biggest expense most businesses have is labor. Decreased labor cost = more profits. So one of the first things that happened is wages stopped growing.

There is so much to talk about here including how and why it happened, who caused it (spoiler: Nixon is a recurring character), and what other impacts it had (too many to list).

This website does a great job of laying out the argument and providing citations: congressionalresearch.org. There are also some very helpful charts that really drive home the impact the increase in lobbying has had.

If you’re interested in this sort of thing I also recommend reading about The Powell Memorandum, 1971 which is basically the blueprint for modern capitalism and advocates specifically for increased corporate lobbying. Fun fact: It is also considered by some to be a forerunner to Project 2025.

There are a lot of other good points being brought up like decreased union membership but I would argue that increased lobbying is the root cause and all other explanations are symptoms.

There’s a fair amount of evidence linking wage stagnation over the last 50 years to erosion of collective bargaining and union membership. Unless there are very strong incentives companies are not going to pay employees more than they need to. Employees as a group have a lot of bargaining power, but as individuals, very little. Unless you happen to worn in a highly skilled, and high demand occupation, which are exactly the jobs that have seen wages remain comparatively high.

The gold standard was the only thing ensuring the dollar didn’t lose all its value. Poor people hold dollars while rich people knew about this. This is how we got here with that much inequality

For anyone who hasn’t seen it: wtfhappenedin1971.com

Anyone knows where to find data for European countries or the EU?

It’s been a ling time that we should be able to work less and have more freedom IMO but I’d love having it backed up by raw numbers like this.

1970 was the last time the government collected more than 3% of GDP in taxes. After that point, there was less and less of a need to avoid taxation.

We need a new tax bracket for the ultra wealthy. The top current bracket is 37% above ~$300,000. For most of the 20th century, the top tier tax bracket was 91%. We need a 91% tax bracket on income beyond $600,000. We need some sharp incentive for the wealthiest among us to avoid.

No sources from me, only uneducated guesswork.

Two events of 1971 stand out to me, as I knew of them beforehand:

• My brother was born. Not relevant to the question at hand (I hope), I just wanted to mention it.
• The oil crisis.

The latter strikes me as probably a big factor. The world was basically using oil for everything (Even more so than now), and an oil shortage (or fear thereof) is likely to send a drastic shock to the system. Manufacturing, logistics, energy, EVERYTHING becomes more expensive, resulting in having to do more with less.

Shortly after the (percieved) shortage, there was an oil glut and overcorrection. I’m not clever enough to say what effect this would have in exact terms, but I highly doubt that an already turbulent world economy did well because of it.

The first oil crisis was in 1973, which is roughly what the graph suggests.

In 1971 the oil-fuelled postwar party was still in full swing.

confused by exactly how badly the people there were going at each others throats in the comments

I’m reading that thread and I don’t see anyone being aggressive.

someone there also mentioned Nixonland which actually is a good book to understand the circumstances of era

I don’t think that anything significant happened in that particular year to produce an long-term difference, but computers were becoming a lot more common around that time.

As countries develop economically, they start out with a large primary sector, sometimes called the “agricultural sector”. That deals with agriculture, mining, fishing. Extracting raw resources from the land.

As they develop, the size of the primary sector declines relative to the secondary sector, sometimes called the “manufacturing sector”. It takes in raw resources, and converts them into processed goods.

As they develop still further, the size of the secondary sector declines relative to the tertiary sector, sometimes called the “service sector”… These are services – people do work that doesn’t involve processing resources.

https://en.wikipedia.org/wiki/Three-sector_model

According to the three-sector model, the main focus of an economy’s activity shifts from the primary through the secondary and finally to the tertiary sector. Countries with a low per capita income are in an early state of development; the main part of their national income is achieved through production in the primary sector. Countries in a more advanced state of development, with a medium national income, generate their income mostly in the secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy.

The US underwent a good bit of that secondary-tertiary transition in vaguely the timeline that you’re looking at.

The way a market allocates labor in the economy is via wages. If there is a lot of demand for labor for a given job relative to supply, wages for that job rise. This causes more workers to shift into that job. If there is little demand for labor for a given job relative to supply, wages fall. This causes workers to shift out of that job.

The US used to do a lot of low-skill assembly-line production, a lot like China does today. It used workers who were coming off farms – just like China has. Forged a lot of the practices involved, in fact:

https://en.wikipedia.org/wiki/American_system_of_manufacturing

The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century.[1] The two notable features were the extensive use of interchangeable parts and mechanization for production, which resulted in more efficient use of labor compared to hand methods. The system was also known as armory practice because it was first fully developed in armories, namely, the United States Armories at Springfield in Massachusetts and Harpers Ferry in Virginia (later West Virginia),[2] inside contractors to supply the United States Armed Forces, and various private armories. The name “American system” came not from any aspect of the system that is unique to the American national character, but simply from the fact that for a time in the 19th century it was strongly associated with the American companies who first successfully implemented it, and how their methods contrasted (at that time) with those of British and continental European companies. In the 1850s, the “American system” was contrasted to the British factory system which had evolved over the previous century. Within a few decades, manufacturing technology had evolved further, and the ideas behind the “American” system were in use worldwide. Therefore, in manufacturing today, which is global in the scope of its methods, there is no longer any such distinction.

The American system involved semi-skilled labor using machine tools and jigs to make standardized, identical, interchangeable parts, manufactured to a tolerance, which could be assembled with a minimum of time and skill, requiring little to no fitting.

Since the parts are interchangeable, it was also possible to separate manufacture from assembly and repair—an example of the division of labor. This meant that all three functions could be carried out by semi-skilled labor: manufacture in smaller factories up the supply chain, assembly on an assembly line in a main factory, and repair in small specialized shops or in the field. The result is that more things could be made, more cheaply, and with higher quality, and those things also could be distributed further, and lasted longer, because repairs were also easier and cheaper. In the case of each function, the system of interchangeable parts typically involved substituting specialized machinery to replace hand tools.

So when that transition happens, what you’re gonna see is manufacturing industry going into relative decline. That’s gonna mean reduced relative demand for labor, and it’ll put downwards pressure on wages.

The US still manufactures a fair bit of stuff in dollar value – more than in the past in dollar terms, though the manufacturing sector is smaller as a relative percentage of the economy. However, the manufacturing processes it uses today tend to rely a lot on computerized automation, so that you don’t require a lot of low-skill labor on an assembly line, which employ comparatively-few people to manufacture a lot of stuff – they have high productivity, produce a lot in dollar terms per person employed.

inflation basically

From ChatGPT:

Ending the Bretton Woods system in 1971 had a cascading effect on corporate profits and income distribution. Wealth shifting toward shareholders and executives rather than workers:

1. Deregulation of Money and Credit

Once the dollar was no longer tied to gold, the U.S. government and Federal Reserve had more flexibility in managing the money supply. This led to:

• Higher inflation, which eroded workers’ real wages.

• Easier access to credit, fueling corporate financialization (more focus on stock buybacks, mergers, and financial engineering instead of wage growth).

2. Rise of Shareholder Capitalism

With the shift away from the gold standard, corporate governance changed. Instead of focusing on long-term growth and worker stability, companies prioritized maximizing shareholder value, which became a dominant ideology by the 1980s (reinforced by Milton Friedman’s theories).

• Stock Buybacks & Dividends – Companies increasingly used profits to buy back shares, boosting stock prices and benefiting executives/shareholders.

• Executive Compensation in Stocks – CEO pay shifted from salaries to stock options, aligning their interests with shareholders rather than employees.

3. Decline in Labor’s Bargaining Power

As globalization and automation accelerated, companies could move production abroad, weakening the leverage of American workers. Meanwhile:

• Unions declined, further reducing workers’ ability to demand wage increases.

• Deregulation in industries like finance, airlines, and trucking shifted power away from labor and toward corporate management.

4. Explosion of Financialization

The detachment from gold allowed an unrestricted credit boom, fueling speculative bubbles and making the financial sector more dominant. Instead of reinvesting profits into worker wages or capital expansion, firms:

• Focused on financial activities (derivatives, leveraged buyouts, etc.), which benefited investors rather than workers.

• Moved toward short-term profits, cutting costs via outsourcing and automation.

End Result

With productivity still rising but wages stagnating, the gains went disproportionately to executives and shareholders. This is why, after 1971, you see charts showing a widening gap between worker pay and corporate profits.