The following is just a snippet of what Noam Chomsky has to say about what's happened and is happening with the American economy. As usual, he's the man when it comes to understanding the essence of the situation. I've noticed over time that virtually every article/lecture he writes/gives is always more in-depth and profound then it's title, and I'm sure you'll notice the same thing as you read this one.
"In the 1930s unemployed “working people” could anticipate realistically that the jobs are going to come back. If you’re a worker in manufacturing today -- and the unemployment level in manufacturing today is approximately like the Depression -- if current tendencies persist, then those jobs aren’t going to come back. The change took place in the '70s. There are a lot of reasons for it. One of the underlying reasons, discussed mainly by economic historian Robert Bernard, who has done a lot of work on it, is a falling rate of profit. That, with other factors, led to major changes in the economy -- a reversal of the 700 years of progress towards industrialization and development. We turned to a process of deindustrialization and de-development. Of course, manufacturing production continued, but overseas (it’s very profitable, but no good for the workforce). Along with that came a significant shift of the economy from productive enterprise, producing things people need, to financial manipulation. Financialization of the economy really took off at that time.
The 1970s set off a kind of a vicious cycle that led to a concentration of wealth increasingly in the hands of the financial sector, which doesn’t benefit the economy. Concentration of wealth yields concentration of political power, which, in turn, arrives to legislation that increases and accelerates the cycle. The physical policies such as tax changes, rules of corporate governance, deregulation were essentially bipartisan. Alongside of this began a very sharp rise in the costs of elections, which drives the political parties even deeper than before into the pockets of the corporate sector.
A couple years later started a different process. The parties dissolved, essentially. It used to be if you were a person in Congress and hoped for a position of committee chair or a position of responsibility, you got it mainly through seniority and service. Within a couple of years, you started to have to put money into the party coffers in order to get ahead. That just drove the whole system even deeper into the pockets of the corporate sector and increasingly the financial sector--a tremendous concentration of wealth, mainly in the literally top 1/10th of 1 percent of the population."
I'll stop copy/pasting now and hope you'll read the entire article yourself. Moreover, I hope you'll become a fan of this most intelligent and well-informed person. If you aren't aware, he's a professor at M.I.T., and in my opinion one of the luminaries who make that school so prestigious.