The Diagnosis Was Right Once – Will It Be Right Again?

A word before you begin.

What follows is an essay about economics. 

I know how that word can land — numbers, dates, ratios, heavy going for most readers. You may be tempted to set it aside.

Please don’t. It is less economics than an account of forces already shaping your life.

The patterns this essay traces are not academic. They are operating in your life right now. They shape what your wages buy, what a home costs, what your savings will be worth thirty years from now, and what kind of country your grandchildren inherit.

Economics moves whether you study it or not.

The only question is whether you want to understand the direction in which it will move.

I am eighty-four. I have written six books and hundreds of articles. I would not have written this one if I did not believe it was worth some thoughtful minutes of a reader’s time.

That is what I am asking — some thoughtful minutes of your time. Read it through, and decide for yourself.

• • •

I. The American Economy, 1900 to 2026

1900 to 1929: The Industrial Colossus

Andrew Carnegie sold the Carnegie Steel Company to J. P. Morgan in 1901 for $480 million. The deal created United States Steel, the first billion-dollar corporation in history.

By that year the United States had already become the world’s largest industrial economy, and it was a country in the middle of something. The trusts dominated whole sectors. Standard Oil controlled roughly 90 percent of American petroleum refining. The railroads were organized into a handful of empires. Meatpacking, sugar, tobacco, and banking each had their kings. The Sherman Antitrust Act of 1890 had been written precisely because

Congress recognized a danger.

Wealth was concentrated to a degree the country has not exceeded since. The top 1 percent of households held about 45 percent of all American wealth in 1916. The top 10 percent of earners took home nearly half of all income by 1928. The working day in steel, textiles, and meatpacking commonly ran sixty to seventy-two hours a week. Children worked in mines and mills. The twelve-hour shift was ordinary. The 146 deaths in the Triangle Shirtwaist fire of 1911 became a symbol because the conditions that produced them were ordinary.
Mass immigration — roughly 13 million immigrants between 1900 and 1914, predominantly from southern and eastern Europe — provided continuous downward pressure on industrial wages. Internal migration from farm to city did the same.

Crises were regular. The Panic of 1907, triggered by speculation in copper and transmitted through trust companies that operated like banks but with thinner reserves, contracted real GNP by 12 percent and dropped industrial output 17 percent. Only the Depression to come would be worse. The 1920–21 depression produced sharp deflation and unemployment that reached double digits. Each crisis killed weaker firms and consolidated ownership at the top.
In 1912 and 1913, the Pujo Committee in Congress documented the concentration of credit in a small group of New York banks. Louis Brandeis, soon to be a Supreme Court justice, called it our financial oligarchy. He was not exaggerating.

The decade ending in 1929 was a long boom. The Dow rose. Speculation expanded. Brokers’ loans, holding-company pyramids, leveraged investment trusts — the financial architecture grew faster than any underlying productive base could justify.

Then it broke.

1929 to 1945: Crash, Depression, Response, War

What had taken three decades to build came apart in three years.
Industrial production fell by nearly half. GDP per capita fell from $858 in 1929 to $455 in 1933. Unemployment reached 24.9 percent at the trough. Roughly 9,000 banks failed. Corporate profits, which had been 8.9 percent of gross domestic income in 1929, went negative — minus 1.2 percent — by 1933. The Dust Bowl emptied counties. Bread lines formed in cities that had been the wonders of the industrial world a decade earlier.

The political response was not revolutionary.

It was regulatory.

The Glass-Steagall Act of 1933 separated commercial banking from investment banking. The Securities Acts of 1933 and 1934 created the Securities and Exchange Commission and required disclosure. The Banking Act of 1935 reorganized the Federal Reserve. The National Labor Relations Act of 1935 — the Wagner Act — gave private-sector workers a federally protected right to organize and bargain collectively. The Social Security Act of 1935 created the first federal pension system. The Fair Labor Standards Act of 1938 established a minimum wage and the forty-hour week.

These measures did not abolish capitalism.

They constrained it.

They erected institutional counterweights to private economic power.

The war that followed completed the reconstruction. Federal spending poured into industrial mobilization. Unemployment fell to 1.9 percent by 1945. Top marginal tax rates exceeded 90 percent. Wage and price controls held. By war’s end, the federal debt had risen above 100 percent of GDP, and the country had built the productive base for what came next. The GI Bill, passed in 1944, would, after 1945, send millions to college and put millions more into homes they would own.

1945 to 1973: The Great Compression

What followed those years of war and reconstruction is the period American politics has been arguing about ever since.

The country between 1945 and 1973 became, in measurable particulars, more prosperous and more equal than any large industrial economy in human history.

GDP per capita rose from $1,609 in 1946 to $6,725 by 1973. Real median family income roughly doubled. Productivity and worker compensation rose almost in lockstep: between 1948 and 1973, productivity grew about 97 percent and the compensation of typical workers grew about 91 percent.

The top 1 percent’s share of pretax income, which had been near 24 percent in 1928, fell to roughly 10 percent by 1978. Union density peaked at approximately 35 percent of the workforce in 1954 and remained above 25 percent through the 1960s.

Recessions did not vanish.

The downturns of 1948–49, 1953–54, 1957–58, and 1960–61 were real. But they were shallower and shorter than the convulsions before 1933, contained by deposit insurance, by SEC oversight, by the Federal Reserve’s now more competent stewardship, and by automatic fiscal stabilizers like unemployment insurance. The 1929-style cascade — the bank run that took the system down with it — did not recur.

Antitrust enforcement was vigorous. The breakup of Alcoa, the prosecution of IBM, the divestiture cases against AT&T — these were not edge events. They were policy. The federal government treated extreme economic concentration as a threat to a republic and acted accordingly.

The financial sector was held in check. It accounted for roughly 2.8 percent of U.S. GDP in 1950 and 4.9 percent by 1980. Banks took deposits and made loans. Investment banks underwrote securities. The two activities were separated by law. Securitization was nascent. Derivatives, in any modern sense, did not exist.

Public debt fell from above 100 percent of GDP at the end of the war to under 25 percent by the early 1970s.

The American middle class of 1965 was the broadest, most prosperous, and most secure in the country’s history.

It would prove to be a peak.

1973 to 2008: The Reversion

The consensus that had built the apparatus would not hold.

Beginning in the early 1970s, the country dismantled, piece by piece, the institutional architecture it had built between 1933 and 1945. The reasons were many — the inflation of the 1970s, the oil shocks, the Vietnam War’s fiscal hangover, the rise of competitive challengers in Germany and Japan, the intellectual ascendancy of monetarism and rational-expectations theory, and the political organization of business interests in response to the regulatory gains of the 1960s and early 1970s.

But the policy direction was unmistakable.

The Carter administration began deregulation in airlines, trucking, and natural gas. The Reagan administration accelerated and broadened the program. Top marginal tax rates fell from 70 percent in 1980 to 28 percent by 1988. Antitrust enforcement under the Chicago School consensus narrowed dramatically; concentration was deemed harmful only when it produced demonstrable consumer-price effects, which excluded most concerns. Labor lost the air traffic controllers’ strike in 1981 and never recovered the political ground. Glass-Steagall was eroded through the 1980s and 1990s and formally repealed in 1999. The Commodity Futures Modernization Act of 2000 placed derivatives largely outside federal oversight.

The data tracks the policy shift with precision. From 1973 to 2014, productivity grew by roughly 72 percent. The compensation of the typical American worker grew by roughly 9 percent over the same forty-one years. Hourly compensation for production and nonsupervisory workers — about 80 percent of the workforce — was nearly flat in real terms across decades during which the economy roughly tripled in real output.

Where did the surplus go?

CEO compensation at the top 350 American firms rose from roughly 21 times the pay of the typical worker in 1965 to 60-to-1 by 1989, then 380-to-1 by 2000, and 281-to-1 by 2024. Put another way: in 1965, the typical worker’s annual pay equaled three weeks of a top CEO’s earnings. By 2024, the typical worker’s annual pay equaled less than a single day of the CEO’s earnings. Realized CEO pay grew about 1,094 percent between 1978 and 2024.

Typical worker pay grew 26 percent over the same period. The top 1 percent’s share of household wealth, which had bottomed near 22 percent in the late 1970s, rose above 30 percent by the mid-2010s.

The financial sector grew in every measurable way. Its share of U.S. GDP rose from 4.9 percent in 1980 to 8.3 percent by 2006. Its share of all corporate profits grew from about 14 percent in 1980 to nearly 40 percent by 2003 — and to roughly 50 percent by 2010.

Compensation in finance, comparable to other industries through 1980, rose to about 70 percent above other sectors by the 2000s. Derivatives notional outstanding grew from a rounding error in 1980 to several times global GDP by 2007. Putting it another way, by 2007, the face value of financial side bets traded around the world exceeded ten times the value of everything the world produced that year. In 1980, those same side bets had been too small to measure.

Union density, 22.2 percent of the workforce in 1980, fell to 12.5 percent by 2008.

NAFTA in 1994. China’s accession to the World Trade Organization in 2001. The expansion of containerized shipping. American manufacturing employment fell by nearly a third between 2000 and 2010 alone. In Youngstown, in Flint, in Gary, in Bethlehem, the mills and the plants closed and were not replaced. Towns built around a single industry became places where the working life of two and three generations had simply ended.

Crises returned. The Latin American debt crisis of 1982. The savings and loan collapse of the late 1980s, which cost American taxpayers roughly $124 billion. Black Monday in 1987. The Mexican peso crisis of 1994. The Asian financial crisis of 1997. The collapse of Long-Term Capital Management in 1998. The dot-com crash of 2000–2002. Each was contained at increasing public expense.

Then came 2008.

2008 to 2026: The Present Position

American household debt had grown from 50 percent of GDP in 1980 to 99 percent by 2007. The shadow banking system, operating outside federal deposit insurance, had grown to rival the conventional banking system in size. Mortgage-backed securities, collateralized debt obligations, credit default swaps — speculation in financial claims far exceeded the value of the real assets they claimed to represent. When confidence in the underlying mortgages broke, the entire structure unwound, and the financial system seized.

The federal response was, to a remarkable degree, the response of capital protecting itself. The Troubled Asset Relief Program socialized roughly $700 billion of authorized losses to keep the largest financial institutions solvent. The Federal Reserve expanded its balance sheet from under $900 billion in 2008 to over $4 trillion by 2014. Bank of America, Citigroup, and JPMorgan Chase, the institutions deemed too big to fail, emerged from the crisis larger and more concentrated than they had entered it. Roughly 10 million American households received foreclosure notices, and 6 to 7 million ultimately lost their homes. Unemployment exceeded 10 percent at the trough.

The Dodd-Frank Act of 2010 imposed some new rules.

None reversed the basic structure.

Three further developments shaped the period after 2009.

• First, the rise of platform monopolies. By the early 2020s, a handful of firms — Apple, Microsoft, Alphabet, Amazon, Meta, and increasingly Nvidia — had reached scales of market capitalization unprecedented in American business history. In 2024, a federal court ruled that Google had unlawfully maintained its monopoly in general search. The Federal Trade Commission’s challenge to Meta’s acquisitions of Instagram and WhatsApp moved toward trial. Cases against Apple and Amazon advanced. Nvidia’s share of the market for AI training chips exceeded 80 percent.
• Second, the gig economy. New categories of work emerged — Uber and Lyft drivers, Instacart shoppers, DoorDash couriers, Amazon flex workers — that recreated, with technological mediation, conditions of casual day labor the New Deal had attempted to abolish. By the mid-2020s, an estimated 36 percent of American workers had done some form of independent or contingent work in the prior year. Wage protections, unemployment insurance, employer-provided health coverage, and the right to organize did not extend, as a matter of law, to most of these workers.
• Third, the COVID transfer. The pandemic of 2020 produced a massive divergence in fortunes. Federal Reserve emergency intervention and trillions in fiscal stimulus stabilized asset markets and household balance sheets. Asset owners — concentrated at the top — saw extraordinary gains. The S&P 500 more than doubled between March 2020 and the end of 2021. American billionaire wealth grew by approximately $1.7 trillion in the first eighteen months of the pandemic. Meanwhile, low-wage workers in service industries lost employment, faced eviction, and bore the brunt of pandemic mortality.

As of the third quarter of 2025, Federal Reserve data show the top 1 percent of American households holding 31.7 percent of total household wealth and 35.6 percent of all financial assets. The top 10 percent holds approximately 67 percent of total wealth. The bottom 50 percent of American households — roughly 165 million people — holds approximately 2.5 percent.

GDP per capita reached $89,962 in 2025. Real GDP grew at a 2.0 percent annual rate in the first quarter of 2026. The unemployment rate was 4.3 percent in March 2026. Public debt stood at 122.6 percent of GDP at the end of 2025. The 2025 trade deficit was $901.5 billion.
The country’s wealth concentration in 2026 is within striking distance of where it stood in 1916.

• • •

II. A Reading Room in London

In the 1860s, in the Reading Room of the British Museum, a man worked at his books each day from morning until late afternoon. He was poor, he was often ill, and he had been for years a refugee from his own country.

He was supported, when he was supported at all, by a friend who managed a factory and sent him whatever could be spared. He pawned his coat and his wife’s silver. Three of his children died in childhood from poverty-related illness.

What he was working on, ten or more hours a day for years on end, was a description.

Not a polemic. Not a manifesto — that came earlier and was a different kind of writing. What he was working on now was a clinical examination of one organism: industrial capitalism left to operate without political restraint.

He read English factory inspectors’ reports. He read parliamentary blue books. He studied the official statistics of the country that had industrialized first. He wanted to identify, beneath the surface phenomena of any particular country or era, the laws of motion that any unregulated capitalist economy would express over time.

He claimed to have found seven.

• The first was the concentration and centralization of capital. Competition under capitalism, he argued, did not preserve a balance of small producers. It destroyed it. Larger firms, with greater economies of scale and easier access to credit, absorbed or eliminated smaller ones. Capital concentrated in fewer hands. The credit system accelerated the process by pooling capital across firms, creating ever-larger combinations.
• The second was what he called the reserve army of labor. Capitalism, he argued, required a permanent pool of unemployed or underemployed workers to discipline wages. Without it, labor would gain bargaining power and the surplus extracted from labor would erode. Mechanization, immigration, the displacement of agricultural labor, and the periodic crises of the system itself all served to maintain this reserve. He did not consider it a defect. He considered it structural.
• The third was the cyclical crisis. Crises, he argued, were not aberrations or failures of policy. They were inherent features of capitalist accumulation. The drive to expand production ran ahead of the purchasing power of the workforce that produced it. Speculation amplified the cycle. Booms generated the conditions of their own busts. The crises served a function: they destroyed weaker capital and concentrated ownership further.
• The fourth was the rise of what he called fictitious capital — tradable claims on future income whose market prices fluctuated independently of any real productive asset they ostensibly represented. Stocks, bonds, and the more exotic instruments built upon them, he predicted, would grow disproportionately and would become a primary site of speculation and crisis.
• The fifth was the divergence of wages from productivity. The whole architecture of his theory rested on the claim that workers, under conditions of weak labor power, would receive a smaller and smaller share of the value their labor produced. The gap would accrue to capital.
• The sixth was the commodification of life — the turning of human existence, piece by piece, into goods for sale. Capitalism, he argued, transformed more and more of human existence into commodities — including labor itself, and in time, areas previously held outside the market: housing, education, healthcare, attention. The boundary between market and non-market continually retreated.
• The seventh was the global reach of capital. Capital, he predicted, would not respect national borders. It would seek the cheapest labor, the largest markets, and the weakest regulation, wherever those could be found, drawing the world into a universal interdependence of nations under the requirements of modern industry.

He published the first volume of his work in 1867. He died in 1883, with the second and third volumes still in manuscript. He never saw the American twentieth century. He never saw the Federal Reserve. He never saw the New Deal. He never saw the rise and fall of organized labor. He never saw Bretton Woods or its dismantling. He never saw a tech monopoly. He never saw an algorithm price an apartment.

He was working with the data of his own time and a hypothesis about where the system, if left alone, would go.

• • •

III. The Patterns

He predicted concentration. Standard Oil controlled 90 percent of American petroleum refining at its peak. United States Steel, capitalized at over a billion dollars in 1901, dominated steelmaking. The trusts of meatpacking, sugar, tobacco, and the railroads each organized whole sectors of American industry under unified control. Antitrust action from Theodore Roosevelt through the New Deal and the postwar period interrupted the trajectory: the breakup of Standard Oil in 1911, the Alcoa case, the IBM prosecution, the AT&T divestiture. After 1980, the trajectory resumed.

As of 2026, four firms control roughly 70 percent of U.S. domestic air travel. Four firms control approximately 80 percent of U.S. beef processing. A small handful dominate digital platforms, cloud computing, and AI infrastructure. Nvidia holds over 80 percent of the market for chips that train AI systems.

He predicted a reserve army of labor. In 1910 it was the immigrant: 14 million arrivals over fourteen years, providing continuous downward pressure on industrial wages. In 1933 it was the unemployed: one out of every four American workers without work. In 2001 it was the offshore worker: an entire global supply chain assembled to take advantage of wage differentials. In 2021 it was the gig worker, working without benefits, without unemployment insurance, without the right to organize. In 2026 it is increasingly the artificial intelligence system, which threatens to displace categories of cognitive labor previously thought secure. Real wages for the bottom half of the American workforce, adjusted for inflation, are roughly where they stood in 1973.

He predicted recurring crises. Since 1900, the United States has experienced major financial or economic crises in 1907, 1920–21, 1929–33, 1937–38, 1973–75, 1980, 1981–82, 1987, 1990–91, 1998, 2001, 2007–09, and 2020. The interval has not lengthened. The interventions required to contain each one have grown larger, more socialized, and more skewed toward the protection of capital than of labor.

He predicted the rise of fictitious capital. The U.S. financial sector, which generated roughly 2.8 percent of GDP in the early postwar years, generated 8.1 percent of GDP in the fourth quarter of 2025. Its share of all corporate profits grew from about 10 percent in 1947 to roughly 50 percent at its 2010 peak. The total value of derivatives outstanding worldwide exceeds global GDP by a multiple. The market capitalization of U.S. public equities relative to GDP repeatedly reaches levels that previous generations of analysts considered impossible.

He predicted the divergence of wages from productivity. From 1948 to 1973, when American capitalism was constrained by strong unions, vigorous antitrust enforcement, financial regulation, and progressive taxation, productivity grew about 97 percent and the compensation of typical workers grew about 91 percent. From 1973 to 2024, with most of those constraints relaxed or removed, productivity grew approximately 80 percent and the compensation of typical workers grew approximately 29 percent. The CEO-to-worker pay ratio at the top 350 American firms rose from 21-to-1 in 1965 to 281-to-1 in 2024.

He predicted the commodification of areas of life previously outside the market. As of 2026, private equity firms own large portions of American nursing home chains, hospital systems, veterinary practices, dental offices, mobile-home parks, single-family rental portfolios, dialysis centers, and primary care practices. Personal data has become a commodity traded between platforms. Attention itself is a commodity sold to advertisers. Higher education, healthcare delivery, and significant portions of K-through-12 education operate on commercial logic.

He predicted that capital would not respect national borders. American manufacturing employment, which stood at over 17 million workers in 1980, fell to under 12 million by 2010. Capital flows respond instantly to interest-rate differentials. The threat of relocation disciplines wage demands in jurisdictions where labor cannot follow. The 2018–2026 partial reversal — tariffs, reshoring incentives, semiconductor export controls — has not undone this. It has added a layer of geopolitical complication to a system that remains, in its operating logic, global.

There is one prediction he made that the American record has not borne out: the prediction of inevitable collapse. Capitalism, he believed, would eventually break under the weight of its own contradictions. It has not.

The American system has been pulled to the edge several times — in 1907, in 1932, in 2008 — and each time it has been pulled back. Not by its own self-correction, but by the political community choosing to step in. In 1933 with the New Deal. In 1944 with the war economy and Bretton Woods. In 2008 and 2009 with TARP and the Federal Reserve’s expansion of its balance sheet. In 2020 with the largest peacetime fiscal intervention in American history.

The state’s adaptive capacity — to regulate, to redistribute, to bail out, to restimulate — was something he underestimated.

But — and this is what the American record shows with greatest clarity — when those adaptive interventions were sustained politically, the patterns he described receded.

The Great Compression of 1945 to 1973 was not the natural product of capitalism. It was the product of capitalism plus the most determined regulatory and redistributive apparatus the country has ever built. When that apparatus was dismantled after 1973, the patterns returned. The wealth share of the top 1 percent climbed back toward its 1916 level. The CEO-to-worker pay ratio rose by an order of magnitude. The financial sector reclaimed its position as the dominant share of corporate profits. Concentration accelerated. The reserve army of labor was globalized. The crises grew more frequent and more expensive.

The diagnosis describes a default tendency, not an iron law. The default operates when the political community fails to constrain it.

The default has been operating, in the United States, for roughly fifty years.

• • •

IV. The Reading Room

The man in the Reading Room of the British Museum was Karl Marx.

The cure he prescribed for the patterns he described was an economic and political catastrophe wherever it was tried. The Soviet experiment, the Maoist convulsions, the Khmer Rouge, the captive nations of Eastern Europe, North Korea — these stand as warnings, not as models.

That ledger is closed.

Let me put a personal point on this, because there must be no ambiguity about it. I do not advocate, in any form whatsoever, the political or economic remedy that Marx proposed. I never have, and I never will.

The remedy was a calamity wherever it was tried, and the men and women who suffered under it numbered in the hundreds of millions. That should be enough to settle the question for any honest observer.

But the diagnosis is something else. And neither I nor any honest reader of the record can deny what the numbers show.

He saw, in the 1860s, what an unregulated capitalist economy would do, given time. The American economy, given roughly fifty years without sustained restraint, has done it. That is not a political conclusion. It is an arithmetical one.

Let me be careful here, because honesty requires it. The parallels between his diagnosis and the American record are not uniform. The strongest are the concentration of capital, the divergence of wages from productivity, and the rise of fictitious capital. On these, the data is hard to deny. Other parts of his framework apply more loosely. The recurring crises are real, but their specific mechanisms have varied. The reserve army of labor maps cleanly onto the immigrant of 1910 and the unemployed of 1933, less cleanly onto the gig worker of 2026, and not at all onto the artificial intelligence system, which is something else again.

And there is one further point, which the historical record makes plainly. He did not foresee the adaptive capacity of the modern democratic state — the New Deal, the war economy, Bretton Woods, the Federal Reserve’s expanded toolkit, the 2008 and 2020 interventions. He believed the system would, in the end, break under its own contradictions. It has not. It has been, repeatedly, pulled back from the edge by a political community choosing to act. That is the gap between his prediction and the record, and it is the most important gap of all. Because the American record shows that when the political community chooses to act, the patterns recede. When it does not, they return.

The framers of the American Constitution built elaborate checks against the concentration of political power. They did not, on the whole, build checks against the concentration of private economic power, because in 1787 such concentrations did not exist on a scale that could threaten republican government.

The twentieth century built such checks. The twenty-first has been dismantling them.
History offers a spectrum of outcomes when economies have reached late stages of the pattern this essay describes.

• At one end stands Russia in 1917 — a society in which the political community failed to constrain economic concentration, failed to enfranchise the dispossessed, and failed to reform itself in time. The result was revolutionary violence, the Bolshevik seizure of power, and seven decades of catastrophe for the Russian people.
• At the other end stands the United States after 1929 — a society that, faced with comparable concentration and comparable distress, chose the regulatory response. The Glass-Steagall Act, the Securities Acts, the Wagner Act, the Social Security Act, the Fair Labor Standards Act. Reform from within the constitutional order. Capitalism constrained, not abolished.

These are the poles. Between them lie the slower decays — Argentina across the twentieth century, Weimar Germany before its collapse, the long stagnations of societies that neither reformed nor revolted but simply accepted decline.

Where the next chapter of the American story falls on that spectrum is not predetermined.

It depends on choices Americans have not yet made.

The patterns are visible. The data is on the table.

Whether a free people will choose, again, to govern the economic forces in its midst is the question.

And it is not a closed one.

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Charles C. Jett is a Professional Certified Coach, author, and civic educator. A graduate of the U.S. Naval Academy (Class of 1964) and Harvard Business School, he writes at criticalskillsblog.com and civicsage.com on leadership, character, and the decisions that shape republics.