A couple of years ago, I wrote about the collapse of decentralized/open decision making in Western societies. Here's a snippet from the article:

The 20th Century's central struggle was between the ideological systems that advocated governmental control of the economy and those that relied on market control. The market-based systems won. Why? In short, market-based systems made better investments, over the long term, than government managed systems. The lesson: systems with large numbers of decision makers, each with capital to invest, make better decisions.

As is often the case, the emerging victory of the market-based system created yet another problem/struggle. Specifically: is it better to trust that individuals empowered with growing salaries/wages will make the best investments for future economic success -- or -- is it better to grow corporate profits (at the expense of wages/salaries) and let capital markets invest the excess?

Between WW2 and 1974, while still engaged in a bitter struggle with Communism, the US hedged its bets on that question. Both individuals and the capital markets received an equal share of the benefits of productivity growth. Incomes rose mightily and we became broadly wealthy, mirrored by generous growth in the capital markets, relative to the start of the century. As a result of this shared decision-making system, smart investments in infrastructure, industry, education, and much more made America the economic powerhouse of the world. In short, we prospered.

However, the shared decision making system ended. From 1974 onwards, the rewards of productivity growth (economic expansion) went exclusively to the capital markets and not into income growth for individuals.

In short, this change led to economic (and by extension political) decision making to become extremely concentrated, and therefore precarious/unstable/stagnant. At the time, I left open the precise "conventional" reason for why this happened. Yves over at Naked Capitalism (channeling Thomas Palley and Raghuram Rajan) sums up a cogent rationale for why it happened. She blames the economic theocracy at the Fed:

What led to the change in the deal was the stagflationary 1970, which was driven both by a commodity prices (most notably the oil crisis) AND labor baragaining power (workers were able to demand that wages keep pace with inflation, which when inflation got beyond a modest level, meant it started to become self-reinforcing).

So the new program was to reduce workers’ bargaining power, both by combating unions, and by tolerating un and underemployment. Rising worker wages had been seen as crucial to greater prosperity; it was quietly abandoned as a policy goal. But this has profound implications. As rising income inequality demonstrates, the benefits of growth accrued substantially to those at the very top...

Reducing worker bargaining power led to disinflation, lower interest rates led to rising asset prices, which in combination with financial innovation, created an until-recently reinforcing cycle whereby rising asset prices [and the substitution of debt for income] funded consumption.