The Long Argument: Capital vs. Labor · Episode 9 of 12 · 25 min
The Great Reversal: PATCO and the Productivity-Pay Split
Around 1973 the most famous chart in American economics splits: productivity kept climbing while typical pay flatlined. The episode lays out two causal stories side by side, markets and technology versus power and policy, including the Powell memo, PATCO, the union-avoidance industry, NAFTA, the China Shock and capital's threat to leave.
Who's who
- Lewis F. Powell Jr.+2 more episodesRichmond lawyer whose 1971 memo urged business to organize politically
- Milton Friedman+1 more episodeEconomist whose 1970 essay declared business's responsibility is to raise profits
- Paul VolckerFed chairman who broke inflation with rates near 20 percent
- Ronald Reagan+11 more episodesPresident who fired 11,345 striking air traffic controllers in 1981
- Robert PoliPATCO president who led the 1981 strike
- Jack WelchGeneral Electric CEO and icon of shareholder value
- David Autor+1 more episodeEconomist whose China Shock papers quantified import job losses
- Martin FeldsteinHarvard economist who made the measurement counter-argument on the productivity-pay gap
Where it happens
- Youngstown, OhioSite of the 1977 Campbell Works closure, Black Monday
Timeline
- September 13, 1970Friedman's essay founds the shareholder-value doctrine
- August 23, 1971Powell Memorandum written to the U.S. Chamber of Commerce
- October 1973OPEC oil embargo; productivity and pay lines part
- September 19, 1977Youngstown Sheet & Tube announces the Campbell Works closure
- August 3, 1981About 13,000 air traffic controllers strike
- August 5, 1981Reagan fires the 11,345 controllers who stayed out
Still debated
The size of the productivity-pay gap, and whether markets or power explains it, remains the central contested question. How much the Powell memo mattered, whether PATCO was a hinge or a marker, and the China Shock and NAFTA magnitudes are also argued.
← PreviousThe Accord: The Treaty of Detroit and Who Was Left OutNext →The Fissured Workplace: Gig Work and Prop 22
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