Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

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Today is December 21st, 2011, and my guest is Dean Baker. Dean is the co-director of the Center

for Economic and Policy Research. Dean, welcome to Econ Talk. Thanks for having me on.

Our topic for today is the mess that the economy is in, how we got here, and how we might get

out of it, and let's start with the first part. How do we get here? What went wrong?

Well, I hear economy is having been seriously on balance in some ways, really dating back

from the 80s that you could tell a story of sort of a virtuous pattern of growth. 60s, 50s,

60s into the 70s where you had productivity growth, very good productivity growth. In fact,

that was passed on in wage growth pretty much up and down the income ladder. They had led to

increased consumption, increased demand, therefore increased investment, more productivity

growth, et cetera, et cetera. I really broke down in the 80s. You could trace that to

a number of factors. I think a big part of that is the weakening of unions. We saw a big

fall in unionization rates in the 80s. It had begun earlier, but accelerated. Also, the

power of unions was weakened substantially because you had falling the Patco strike. There

was a willingness to fire striking workers, higher replacement workers, so that meant that

was much less effective tool. I'd say globalization played a big role that the way we structured

it certainly in the 80s in particular, you had a big run up in the dollar, which had a very

negative impact on manufacturing workers in the United States, which had been really the

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