Not sure it's that cut and dry, nor that the rise of computers could be the cause of such a sharp inflection point. Bretton Woods ended around 1971-73...In fact the real wage of nonsupervisory workers peaked in 1973[1]
Except nothing about this story flies: first, the microprocessor did not produce some magically more productive economy. First look here: http://www.intellectualtakeout.org/sites/default/files/image... You can see that world real GDP per capita did not suddenly increase after the 70s, in fact growth actually slowed a bit.
The story also doesn't agree with common sense - microprocessors didn't reinvent the economy, they couldn't even deliver the "paperless office" we were promised (something particularly close to their domain). The fact is that productivity has been growing at basically the same boring pace, and microprocessors are just another boring form of automation, not a game-changer.
Finally, believing this story requires us to ignore all of the other things we know about - the introduction of fiat currency, the Fed's shift to aggressive inflation-squashing (read: preventing full employment), massive consolidation of corporate ownership, financialization of the economy, enormous tax cuts for the wealthy, trade policies designed to reduce worker bargaining power, etc., etc. Are we to believe that none of these changes had an effect?
Seriously, economists have actually worked out the reason behind the wealth gap, he didn't even address or critique the prevailing theory. Most likely because he doesn't even know what it is.
Even then, very small numbers of people were actually working with the computers and the paper office was still in full force. It wasn't until the 1980s that computers were ubiquitous in a way that it clearly affected the vast majority of the population.
I buy your argument that the rollout of computers doesn't quite line up as it ought to if it were the primary factor behind wage-productivity decoupling, but I'm much less familiar with Bretton Woods so I'd appreciate any dot-connecting you can offer.
Voila! Wage slavery.
The investors are the lenders, not the borrowers. That's what the term "investor" means.
Doesn't really apply after 1980. In any case, workers typically don't hold large cash savings - what matters far more is the effect of inflation vs pay negotiations. The higher the inflation, the more frequently workers need pay rises and the larger they have to be. This makes the stakes higher and provokes strikes. This was a big driver of the UK industrial strife in the 70s.
http://www.livingstandards.org/wp-content/uploads/2012/02/De... has a UK-US comparative study but only uses data from 1972 onwards, which doesn't help. It claims that runaway health costs are a big part of the equation, among other things.
(I want to find some UK graphs covering the same time period to see whether they show the same effect, and for other non-Bretton Woods countries as well)
Are your workers keeping their savings a hundred years? It takes about 21 years for inflation to cut the value of savings in half.
Workers tend to have loans, such as car, house, college, etc. Inflation helps them by making their loans cost them less to make fixed payments on over time. Inflation costs lenders, not debtors.
If a worker has substantial savings, then they should not hold it in cash, which has always been a terrible idea. Diversify, and invest in multiple classes of assets.
Thus inflation is a net benefit to workers.
In a paper money system, you have inflation of 10%-30%. (The CPI is currently low, but it is a misleading and biased statistic.)
When you have 10% inflation, who gets that new money? It isn't workers. That 10% goes to the government (deficit spending), big banks (quantitative easing), and large corporations (who can borrow cheaply).
Inflation concentrates wealth among insiders, because they get to print and spend the new money ahead of everyone else. 10%+ annual inflation is a 10% tax on the total value of the economy, with it all going to insiders.
When volatility is high, everyone has to have higher prices to help plan for an uncertain future, so it is a drain on all aspects of an economy. If inflation were zero, then planning could be perfect, and there would be a much more efficient system. However, zero inflation is nearly impossible to do, since there are accidents, demand shocks, wars, and other events that shake an economy. History has shown that deflation can lead to a deflationary spiral, seriously damaging an economy and putting everyone out of work, so the Fed targets slight inflation. This provides protection against runaway deflation and also provides stable, predictive economy so people and businesses can plan. See, for example, the Great Moderation and related literature [3].
The CPI is quite accurate, and matches multiple other places that also measure inflation, such as the MIT based Billion Prices project [4]. If CPI and actual inflation were vastly different, there would be a host of financial products one could invest in that capture the difference, since many items are tied to formal CPI. Knowing people that work in places that would create such trades, if CPI were as far off as you claim, I've asked them, and they say there is no arbitrage. Can you show me where people are consistently making money trading with their "better" knowledge of inflation versus the standard CPI? Finally, if inflation were 10%-30%, as you claim, then prices would double every 2-7 years, which is clearly wrong. Using your claims, prices from 1971 till now (2015-1971=44 years) would be 80 =2^(44/7) to 4,000,000 = 2^(44/2) times higher, which is clearly false, bordering on ridiculous.
You're also wrong about who benefits from inflation: basically borrowers (you and me and mortgage holders, etc) owe less money in real terms, and lenders will get paid back less than they lent, in real terms. Over the life of a loan, future fixed payments are easier to make, not harder.
So inflation transfers value from lenders to borrowers, not the other way around. Inflation hurts banks and benefits borrowers. You have your claims backwards.
[1] http://pages.stern.nyu.edu/~ekerschn/courses/c150042/lecture...
[2] http://en.wikipedia.org/wiki/List_of_recessions_in_the_Unite...
What the CPI would look like if its methodology was not constantly being adjusted: http://www.shadowstats.com/alternate_data/inflation-charts
CPI is rarely adjusted, and all reasons are quite well explained at the BLS site [1]. As people buy less horses and more cars it makes sense to adjust the basket of goods to match what people currently buy, not what they used to buy. They also provide the methodology on how data is gathered, processed, what changes were made, why, and the effect on future numbers using both old and new methods. They select new methods because it tracks what CPI is supposed to track better than old methods.
Shadowstats is often a nonsense site. The article you link provides no methodology, and as I pointed out above, if the inflation they claim existed we'd see it in massive price changes. Those changes are not there. Do yourself a favor: take the shadowstats claimed inflation, start in 1985, and compute how prices should have increased. Then look at prices of those goods from 1985 till now. You'll see it's nonsense.
The Billion Prices project is an independent group trying to compute inflation as accurately as possible. Here [2] is one place showing how well BPP and CPI match up.
And as above - if shadowstats, or any group had a way to compute inflation that was much different than CPI, there would be huge wealth flowing to them from simply trading derivatives based on the mismatch between the official inflation and their more accurate number. I've seen no one doing that, and I've looked. Care to show me who is making all this money based on having more accurate inflation numbers?
Inflation and deflation cycles, compared to now, were more severe, yes, but we ALSO have far more liquidity in markets and a wider swath of the population is educated and participating in capital markets, directly or indirectly. That can contribute to stability. Comparing before/after without taking the fact that the world has completely changed in those two epochs is completely risible.
Wonder how much that has to do with this ... (and also how interesting how suddenly keen the "free market" fanatics were to take government money ....
Maybe not, but seems plausible.
Correlation does not equal causation.