Status 451 had a great post about the 1970s as lacuna in cultural memory – we don’t remember how bad it was.

But the harder the US pressed, the more stress it placed on Bretton Woods, until finally in 1971 it collapsed under the strain and the global economy flailed around, confused. This heavily favored the US, and the US pressed its advantage to get two decades of stellar growth and fund all those government programs and concessions to public sector unions. The US, as leader of the free world, dictated the terms: all global currencies would be pegged to the dollar, which in turn would be pegged to gold. But the basic story is: after World War II, the great powers came together at Bretton Woods to design a new financial system. As usual, economists will debate the exact causes forever.

The government wasn’t exactly socialist per se, but it kept starting and expanding programs like Medicare and Medicaid and Social Security, and every night you went to sleep knowing there would be probably be another uncontroversial, mostly-successful government welfare program tomorrow. Starting a new business was considered some bizarre act of alchemy, like discovering a new form of matter normal people worked for the same giant company their whole life and got a nice gold watch as a reward when they retired. As long as companies followed the script, the government embraced and protected them. Executive pay was taxed so heavily that nobody had much incentive to try to increase their profit margin workforces were so heavily unionized that companies were nervous about any changes that might upset employees.

There were corporations, but they didn’t do anything garish like compete with each other. The post-WWII-but-pre-1970 economic world – the world of “embedded liberalism” – was a pleasant place. The global economy, after twenty-five years of good post-war growth, suddenly blipped.

Neoliberalism a brief history