http://www.nytimes.com/2006/04/05/business/05leonhardt.html
To understand this article, are we to equate economics with mythology? At one time, it made sense (political sense, anyway) to equate economic growth and broadly shared prosperity? And now it doesn't?
Some excerpts:
The Economics of Henry Ford May Be Passé
by David Leonhardt
Mr. Ford announced that he was doubling the pay of thousands of his employees, to at least $5 a day. With his company selling Model T's as fast as it could make them, his workers deserved to share in the profits, he said.
The mythology around this story holds that Mr. Ford wanted to pay his workers enough so they could afford the products they were making.
What was so comforting about Fordism was that it suggested that the economy operated on a virtuous, self-reinforcing cycle. Only when the middle class did well could the country do well. And as the country grew ever richer, so would the middle class.
In the last few years, however, the economy has kept growing in large part because high-income families — the top 20 percent, roughly — have done so well and have been such devoted spenders.
Wages are likely to rise slightly in 2006, but stagnation seems to be the norm over the long term. Except for a span of a few years in the late 1990's, the hourly pay of most workers has done no better than inflation for the last 30 years.
Even some Democrats, who have long embraced Fordism, are coming to the conclusion that Mr. Ford's reassuring cycle is not the only thing that can keep the American economy humming. "You don't need an equitable distribution to have a sustainable recovery," said Jared Bernstein, a liberal economist in Washington.
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