Jeff Madrick's got about the best summation of our economy's deterioration over the last few decades that I've seen:
Between 1973 and 1993, the standard of living for average Americans rose more slowly than in any previous twenty-year period since the Civil War. Although the economy grew, the benefits of this growth were largely enjoyed by the rich. Average wages and salaries grew because the earnings of those belonging to the highest income categories increased rapidly. But there was not a commensurate gain in median family income -- the level at which half of Americans earn more and half of Americans earn less, and probably the best overall measure of the standard of living. In fact, median family income rose only slightly during these years, and it did so largely because of the rapid increase in two-income households.
By contrast, in the preceding twenty years, starting in 1953, median family income doubled. Then, between 1973 and 1993, the average wage of non-management workers fell nearly 25 percent, from $615 a week in today's dollars to only $479. Family incomes fell well behind rapidly rising health care costs, and an ever-higher proportion of Americans went without coverage.
All true. The contemporary economy is far worse for ordinary workers than was the one preceding it. The so-called "inequality wedge" has firmly stuffed itself between the higher and lower income quartiles, ensuring the benefits of growth are disrupted and mitigated as they pour down the economy. Instead, they pool at the top, giving the wealthy an inordinate share of the loot while successive quintiles find themselves screwed proportionately to their incomes.
This, however, is not always how the economy is experienced, as technological advances ensure that the real wages of 1970 will still buy more and better stuff in 2000 (although they'll purchase worse health care, housing, and so forth). So it's tricky. Madrick is reviewing Ben Friedman's The Moral Consequences of Economic Growth, which argues that stagnant periods create conservative societies while robust, broadly-shared growth gives rise to generous, progressive electorates. Convincing stuff, but not necessarily easy to address politically, particularly not so long as the conservative governments elected by unequal growth pursue economic policies that increase inequality, thus cycling themselves back into office.