1945-1980: Consumer demand created by high wages, government programs, and entitlements. Put simply: government ensured that the middle class had money for consumption. Their ability to spend money caused the capitalist to innovate and add jobs in order to capture that money. That is what capital does - it functions off of demand. When their is no demand - like now - For 45 years government policy was designed to create middle class demand. And during those years, America had its most sustained economic boom.
But the ultra wealthy wanted more. So they purchased a political party and poured trillions into think tanks and popular media > opinion management.
1980: Business funds the Reagan ascendancy because they want cheaper labor, monopoly-friendly regulations, and lower taxes - In short, business got sick of tax and labor policies of sustaining a solvent middle class of consumers. And business got sick of the regulatory burden of protecting air and water. And business got sick of paying for the infrastructure costs of the modern industrial state - they got sick of the paying to maintain roads, bridges, and energy grids. So Reagan broke unions and laid the rhetorical groundwork for ignoring the environment and infrastructure (which he did to make room for tax cuts. But his spending cuts never amounted to anything because he spent like a drunken sailor RE the Pentagon Budget and new War on Drugs). Most brilliantly, Reagan used the Cold World to bring the 3rd world into the global system (-he wasn't fighting the Soviets in Grenada anymore than McCarthy was fighting soviets in Iowa. Reagan was using a brutal, military form of coercive neoliberalism to give American capital access to 3rd world labor and resources. He supported dictators who let foreign capital walk away with all the resources of the hose country. Thus starts the great era of capital flight to human rights abusing dictator run countries in Asia, South America, Central America, and the middle east.
1980-2008: Cheap labor comes to America. Walmart is the new model > low wages and little to no benefits. High paying manufacturing jobs disappear, shipped to Asian sweatshops. Clothing and sneakers and silverware are made for pennies by workers with no freedom who live in mud huts (-capitalism and freedom?). Reagan has a problem though. What happens to the domestic economy if the break bulk of workers no longer have sufficient wages and benefits to consumer. Answer: expand the credit system. And thus begins the great era of debt based consumption. Morning in America paid for by Amex, Master Card, Visa, and sub-primes. It got so bad we had to hawk the last thing left with any value: our homes. Now there is nothing to fuel demand. The wealthy have all the money and the middle class is too bankrupt to borrow another dime.
FDR's wage based consumption is replaced by Reagan's credit based consumption.
America swallowed poison in 1980. The concentrated wealth that took over the Republican Party destroyed the goose that laid the golden egg: demand. They tried to make up for the failed trickle down by expanding credit. This resulted in the Bush Financial Meltdown. The game is over and no election will change that. If the GOP re-takes Washington, they will do what they always do: change the conversation from the economy to evil doers. Get ready for the War on Terrorism Part II. If you thought Bush bankrupted and destroyed our freedoms with the Patriot Act, you ain't seen nothing yet.
(Oh, one more thing. Austerity doesn't work when the problem is demand. Morons)