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What went right in the twentieth century

TJ Ryan Foundation Research Associate, John Quiggin, writes in Inside Story (23.3.21) about the choices confronting Australia’s leaders in ‘building back better’ after the economic downturn caused by the Covid-19 pandemic.

‘Most societies have a shared story of a “golden age,” a mythical time when men and women lived simply and happily, free from the cares and troubles that afflict them today. The myth also describes how, through foolishness or malice, the golden age was lost. In Western versions, the blame has been placed on women – Eve for picking the forbidden apple, Pandora for opening the box.

‘In the developed world, one historical episode might reasonably be regarded as a golden age. Between 1945 and 1973, countries in Western Europe, North America and Oceania experienced strong economic growth combined with very low unemployment and sharply declining inequality. The dominant policies used Keynesian macroeconomics to stabilise the economy and develop a fairly comprehensive welfare state to protect citizens from falling into poverty due to old age, incapacity or unemployment.

‘Those Keynesian policies produced, or at least coincided with, the longest period of widely shared prosperity in the history of the developed world. Not only was economic growth consistently strong and unemployment low, but income distribution was equalised to a degree not seen before or since. At the time, this “Great Compression” was seen as part of the natural evolution of a capitalist economy; in retrospect, it is quite exceptional.

‘… This isn’t the place to attempt a detailed explanation of the golden age. But it’s a reminder that we shouldn’t be satisfied with a return to the pre-pandemic economy, in which periods of marginally positive growth in real wages, and occasional reversals of the trend towards ever-greater inequality were treated as triumphs. Rather we should be looking harder at what went right in the mid twentieth century and how we can recapture broadly shared prosperity.’

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