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The End of Prosperity: A Long Tail Analysis of Economic Decline

Ken Simmons

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Published in The End Of Prosperity: How Higher Taxes Will Doom The Economy If We Let It Happen

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For decades, the developed economies of the world have enjoyed a period of unprecedented prosperity. However, in recent years, there have been growing concerns that this era of prosperity may be coming to an end. This article will explore the long-term factors that have contributed to the decline of prosperity, focusing on the intertwined issues of economic stagnation, rising inequality, and the erosion of social mobility.

The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen

by Arthur B. Laffer

4.4 out of 5

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Economic Stagnation

One of the most visible signs of the end of prosperity is economic stagnation. In the United States, for example, real GDP growth has averaged only 2% per year since 2008, well below the historical average of 3%. This slow growth has led to a decline in living standards for many Americans, as wages have failed to keep pace with inflation.

There are a number of factors that have contributed to economic stagnation. One is the decline of manufacturing. In the past, manufacturing was a major source of jobs and economic growth in developed economies. However, in recent decades, manufacturing has declined as a share of the economy due to factors such as automation and globalization. This has led to a loss of jobs and a decline in wages for workers in manufacturing-related industries.

Another factor that has contributed to economic stagnation is the rise of the service sector. The service sector is now the largest sector of the economy in most developed countries. However, service-sector jobs often pay lower wages than manufacturing jobs, and they are less likely to offer benefits such as health insurance and paid time off.

Finally, economic stagnation has been exacerbated by the Great Recession of 2008-2009. The recession caused a sharp decline in economic activity, and it led to a loss of jobs and wealth for many Americans. The economy has recovered from the recession, but growth has been slow and uneven.

Rising Inequality

Another major trend that has contributed to the end of prosperity is rising inequality. In the United States, the gap between the rich and the poor has been growing steadily for decades. The top 1% of earners now own more than 40% of the nation's wealth, while the bottom 50% of earners own less than 3%.

There are a number of factors that have contributed to rising inequality. One is the decline of unions. Unions have traditionally played a role in reducing inequality by raising wages and benefits for workers. However, in recent decades, union membership has declined significantly, and this has led to a decline in the bargaining power of workers.

Another factor that has contributed to rising inequality is the globalization of the economy. Globalization has led to increased competition for jobs, and this has driven down wages for many workers. Additionally, globalization has led to a greater concentration of wealth at the top, as multinational corporations have become increasingly powerful.

Finally, rising inequality has been exacerbated by tax policies that favor the wealthy. In the United States, for example, the top 1% of earners receive a disproportionate share of tax cuts, while the bottom 50% of earners receive a disproportionate share of tax increases.

Erosion of Social Mobility

A third major trend that has contributed to the end of prosperity is the erosion of social mobility. Social mobility refers to the ability of individuals to move up the economic ladder. In the past, social mobility was relatively high in developed economies. However, in recent decades, social mobility has declined, and it is now more difficult for individuals to move from one income bracket to another.

There are a number of factors that have contributed to the erosion of social mobility. One is the rising cost of education. In the United States, for example, the cost of college tuition has increased by more than 250% since 1985. This has made it more difficult for individuals from low-income families to afford a college education, which is essential for upward mobility.

Another factor that has contributed to the erosion of social mobility is the decline of the middle class. The middle class has traditionally been the backbone of the American economy. However, in recent decades, the middle class has been shrinking, as more and more families have fallen into poverty or moved into the upper class.

Finally, the erosion of social mobility has been exacerbated by discrimination. Discrimination based on race, gender, and other factors makes it more difficult for individuals from disadvantaged backgrounds to succeed. This discrimination can take many forms, from unequal access to education and employment opportunities to outright violence and hate speech.

The end of prosperity is a complex issue with a long history. The factors that have contributed to the decline of prosperity are interconnected and mutually reinforcing. Economic stagnation, rising inequality, and the erosion of social mobility are all symptoms of a deeper problem in the structure of our economy and society.

If we want to reverse the trend of declining prosperity, we need to address the underlying causes of these problems. This will require a fundamental change in the way we think about our economy and society. We need to create an economy that is more inclusive and sustainable, and we need to build a society that is more just and equitable.

The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen

by Arthur B. Laffer

4.4 out of 5