Economic Insecurity and the Institutional Prerequisites for Successful Capitalism

Fifty years ago, President Truman signed into law the Employment Act that committed the U.S. government to the goal of employment opportunities for all Americans. The act represented a pledge to avoid another Great Depression. It acknowledged that government has a vital role to play in establishing national economic stability and prosperity. U.S. economic performance during the past fifty years can be divided into two periods of roughly equal duration. The first was characterized by a successful economy: cyclical instability was controlled; public investment and human resource development were supported; and flaws in selected markets were corrected. It was a period of robust economic growth, rising worker incomes, and falling inequality. The second period brought a reversal of fortune. We have avoided another depression but suffer from a return of financial instability. Economic growth has been sustained for the near term, but public infrastructure is neglected and family earnings are stagnant. Corporate profits have been stabilized, but inequality has increased considerably and economic insecurity now pervades the work force. Our current difficulties make it necessary to consider not only how we measure the success of an economy but also the institutional prerequisites for a successful twenty-first-century capitalism. But first we must ask: What accounts for the split in the United States' economic experience during the post-World War II era?