When the world was on the gold standard, the fastest rate of economic growth happened between 1870 and 1914, when the gold standard was suspended in Europe because of WWI. Not only that, but blue collared workers then saw vast increases in their purchasing power. Had we stayed on the classical gold standard, wages would be higher and the middle class would continue to grow.
For example, in 1915, Henry Ford paid his workers $5 per day. At that time the price of gold was set at $20.67/oz. This means that in terms of gold (which was a legitimate form of payment and was easily redeemable into paper money) a blue collared factory worker was paid 0.242 oz. of gold per day. Assuming a 5-day work week and 40 weeks of work in a year, Ford workers could be paid 48 oz. of gold per year. Today the price of gold is $1200/oz; this means the Ford workers were paid $57,600/year in today’s money. This is significantly higher than what manufacturing jobs pay today.
Similarly, in 1965, the minimum wage was $1.25/hr (5 silver dimes) and under the Bretton Woods Agreement, silver was $1.25 per ounce. Today silver is $15/oz and hence workers would have had a purchasing power of $15/hour in today’s money.
Inflation
This implies that it is government control over a nation’s monetary system, which has allowed the middle class’s income to be eroded by inflation. While the CPI may show us that central banks have kept inflation under control, once we use precious metals as a measurement, the cost of goods and services have gone up much higher than what current inflation would suggest.
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