With all the talk of economics spurred by Piketty's book I think its time to realize that a lot of our economic problems were already solved a long time ago.
America's middle class really began to emerge after WWII and much of what we think of as 'The Greatness of America' really never existed in most of American history until that period. I am no economist, but it doesn't take one to see the obvious. The middle class as it is envisioned by most American's had maybe 30 years of creation and another 30 of decline taking us to today.
Though one can attribute the growth of the middle class to many variables I think I can show it can be almost all attributed to tax code.
Tax code?
Yep, as wonky and boring as it sounds, how the government chooses to tax wealth directly effects how it is distributed. And even more interesting is that how wealth is distributed in a society can have a lot to do with the quality of goods that society produces, which in turn increases demand for those good creating more jobs and wealth.
Its all interrelated...
Money in itself has no value, its value only becomes realized when it can be used for a purpose which gives it value. Even just giving away money has huge variations in value giving the same amount. Lets take $100 bill and get rid of it in some different ways that have no financial return.
If you use that $100 bill as kindling for a fire its only value is that of paper. If you throw that bill up in the air allowing who ever finds it to gain $100, its only value is the good feeling you might have from randomly helping some person, but not knowing if the bill will even be found or if the person who finds it even needs the money, makes even that little value less. Now walking up to a poor hungry person and directly giving them that $100 and seeing the look on their face, has a lot more value even if you get no 'social credit' from anyone knowing you are doing it. Now you could also take that $100 bill and go to a church on Sunday and directly hand that bill to the poorest person in the church in front of everyone, giving you the good feeling of helping, the smile and gratefulness of the recipient and the social credit from everyone in the church seeing you do it.
In all of these cases you have given up $100, but the 'value' of what you got can vary greatly, even though none of that value is of a monetary or goods nature. Even the greediest guy in town, if hes wealthy could reasonable see that he can get more value from $100 bill by going to church and giving it away in front of everyone, than he could from anything he might buy with it. The is one of the main roots of philanthropy and why some of the greatest philanthropists were also some of the greediest people.
Now you might think I have gone on some tangent here, but I have not and I am now going to explain how this all ties in. See back in the hey day of Americas emerging strong middle class the top tax rate was generally approaching and sometimes even over 90%. Yep 90% went to the government after a certain level of income.
So say you own a company with 100 employees and you have now reached that point, but have an extra $1mil dollars in profits. You could just keep it and give the Government its $900k because $100k is still a lot of money. Or you could also give each of your employees an extra $10k in salary and you will have 100 people who are very happy with you, life, their job etc. The first is much like giving the money to the wind in my previous examples, since you don't know how the government will spend that $900k and the $100K isn't going to change your life at that point. The latter is much like giving the bill at the church in that you directly get to see who benefits and everyone gets to see you do it. Even the greediest can see such value.
Thats why the wages of the 50's 60's and even 70's were higher, because most at the top saw more 'value' in direct distribution more so than skimming that 10% for themselves only to give most to the government. That was the engine that created the middle class. It also had a side effect of making workers very happy and committed to their jobs, wanting to do the best they could for that person/company giving them the great wages. This in turn made American products very high quality and very competitive on the international markets. Like German products today, you might pay more but you get what you pay for. Germany today is economically very much like America 1960 and a second historical example of how looking out for the workers doesn't hurt the bottom line of the economy, but actually strengthens it.
The reverse view is that if all you are doing is working for crap wages so some greedy ass can get rich, why should you care about the quality of your work? Thats what began to happened in the 80s. Money lost all value except what you could buy with it, and those at the top kept it all, making workers less and less satisfied leading to the end of 'American quality'. This in turn lead to the end of American products dominating many markets (cars for example) lessening demand and therefor jobs. Its all interconnected.
So just by increasing the top tax rates to a point where even the greedy can see the non financial value in money is what makes a strong middle class and in turn a strong industrial nation. Many of our problems of today were already solved before, we just allowed them to become unsolved.
We are not a nation at the edge of crisis because of a lack of solutions, but because of a lack of will to solve.