Companies paid workers well, because those workers bought the company's products. Creditors of the company were on board; their loans would only be made good if the company was in the black.
And if investors wanted to make money on their savings, they'd invest in these companies. Wanting those companies to do well, so that they can make that profit, they'd also look kindly on paying workers living wages.
Thus, a hands-off approach to corporate governance, along with an absent-minded (or malicious?) neglect of unions, seemed to work. In fact, many went so far as to conclude that because of these laissez-faire attitudes, American was assured a future of enduring prosperity.
But it only worked because the companies relied on the prosperity of their own workers. Or, at least, were forced to through collective bargaining. And investors, in turn, relied upon the prosperity of those companies.
In other words, it only worked because of a historical accident: an economy functioning in isolation, on a continent separated from its developed-country peers by entire oceans.
Enter globalization.
Suddenly, a company can propsper without the purchasing power of the American consumer. If it can cut costs and gain competitive advantage by moving to cheaper labor markets, why not? They can suck American consumers dry and, if the pot runs out, well, there are these growing middle classes in India and China.
Moreover, investors can now move their capital freely. If there's more profit to be made in Bangladesh or Burma or Croatia, that's where they'll go. The increased capital investment, in turn, leads to changes those countries' comparative advantages -- likely to investment in longer-term projects that will give them comparative advantage in more sophisticated industries. Or in any industry whatsoever -- including those industries that America used to embrace.
With the opening of borders, America's future doesn't look so bright. We don't have any claim to the world's capital investment. We don't have any fences limiting the customer base of industry. In other words, we're out in the deep water with the rest of what we so quaintly referred to as the "Third World."
And our "serendipity" style of corporate and labor governance hasn't got a lifeline to throw us.
Might we look to Western Europe as an example, whose corporate governance regime includes a greater safety net, and whose members started integrating economically decades ago?
