Greed, or something more?

Krugman has another installment in his never-ending series in defense of the post-war social contract. On this occasion, the issue is whether there was a jolt of economic dynamism beginning in the 1980s, resulting from a stagnant corporate being shook up by the shareholder value revolution and related rise of activist investors, private equity, leveraged buyouts, and so on. This is something that's out there. See, for instance the usually astute Noah Smith taking for granted that there's clear distinction between dynamic u.s. corporations and hide-bound Japanese firms, which is directly related to the impenetrable defenses of corporate ownership in Japan.

Anyways, unsurprisingly, Krugman says this is nonsense and that, no, the only thing financialization achieved was increasing the wealth and income at the top, which he notes is an adequate explanation of why elite discourse all but assumes it was a good thing. In the process, he gives an interesting chart: (jump)

The point he wants to make is that the 50s-60s saw a higher rate of growth than just about any subsequent period. There is, however, another way to read this chart, which is that real problems began to appear in the late 60s, culminating in what looks like 5-10 years of stagnation beginning the in the late 70s. The early-80s recessions, then, can be seen as a real turning point, bringing back steady (if not quite as high) productivity growth.

Now, this doesn't prove that the resumption of productivity growth had anything to do with the stock-market shake-up in particular, or financialization or neoliberalism more generally. It does, however, at least suggest that that political program--even if as Krugman claims has had as its main consequences an increase in profits to the exclusion of everyone else's income--gained traction in the context of a real economic problem. Yet, it's also possible that growth would not have returned automatically, and that the gradual sacrifice of the post-war protections and achievements of labor did in fact produce an increased dynamism in the economy. This doesn't mean it was necessary, only that avoiding that sacrifice while also eliminating stagnation might have been easier said than done.