The history of the twentieth century appeared to confirm that Keynes was right. In the five decades following 1927, despite the Great Depression, the real wages of unskilled workers in US manufacturing increased by 350 per cent, while pay for skilled labour increased by a factor of four. This, as we now know, was the golden age of capitalism, with productivity gains and high growth leading to rising wages and shorter working hours. Whether you were an employee or an industrialist, it was in your rational interest to protect the system.
This ended abruptly in the early 1970s, when wages decoupled from improvements to productivity – which now only fed the incomes of the very highest earners. This phenomenon extended beyond just the US. A 2014 report showed how real wage growth in Britain has been on a downward trend for forty years, with wages increasing an annual 2.9 per cent in the 1970s and 80s, 1.5 per cent in the 1990s, and 1.2 per cent in the 2000s. Since the 2008 crisis that incremental decline has gone into free-fall, with real household wages in Britain falling 10.4 per cent between 2007 and 2015, something entirely without precedent.
That already dire situation is only set to further deteriorate. After the release of the 2017 Autumn Budget, the Resolution Foundation, a London-based think tank, predicted that the 2010s would be the worst decade for UK wage growth since the late eighteenth century. In other words, Britain now faced a stagnation in living standards unseen since the rise of the Second Disruption. While Keynes was right to note the possibility of capitalism creating such abundance as to potentially nurture a system beyond it, he predicted none of this.
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chaos under heaven