Ronald Reagan's Economic Analysis

Ronald Reagan became the president of the United States in 1981 and he walked into the worst American economy since the Great Depression of the 1930s. America lived on rampant wealth from the beginning of World War II through the end of the 1960s. America gained greatly from the destruction of every other major industrial power during WWII but by the early 1970s that prosperity was running thin. There were several new structural challenges that the economy had to face and it started to cave under that weight. American manufacturers lost their monopoly for producing goods, and as Europe and Japan finished rebuilding from WWII, America found itself struggling to compete with the foreign producers. In the middle of the manufactures getting close

Congress made the 401(k) tax-deferred retirement plan in 1978 to offer fresh incentives for those who were employed to invest in. They wanted workers to invest their savings in the stock market rather than relying on company funded pensions for retirement. The 401(k) aided in the democratization of Wall Street. American households that took part in owning stocks rose from 15.9% in 1983 to 29.6% just 6 years later in 1989. The great bull market of the 1980s gave more American families wealth than any other previous market in history. But even though nearly 30% of American households had some share of stock ownership, there were still more than two-thirds of the country that were completely shut off from direct benefits from the stock ownership. The 70% of American homes that were left that didn’t own any stocks didn’t see the economy as such a delightful thing to behold. The wages that increased steadily from 1945 to 1972 stalled through the stagflation era and it remained flat throughout the 1980s as well. The good paying industrial jobs that were holding the economy up midcentury continued to diminish but even so the unemployment rates were going down. Middle and working-class families that were reliant on wages and salaries for their income had some hope that things were going to get better. They weren’t nearly as bad off as they were in the 70s but

The wealth from the growth went almost entirely to those who had major investments in the market. That left the individuals who were relying on wages and salaries behind and made it more difficult for them to ever get ahead. This uneven distribution of wealth and benefits has been called the “financialization” of the American economy. During this time the wealthiest one-fifth of Americans, who usually owned the most stock, had a 14 % increase in income. The poorest one-fifth, who usually owned no stock, had a 24% decline in income and the middle three-fifths, everyone else’s, income stayed the same. That is how detrimental the economy was and how the rich got richer and the poor stayed