Labor Day 2012 -- the decline of the middle class. Can it be stopped? That depends.

When I took this photo in the window of Tiffany's on New York's 5th Avenue, it was the spring of 1981, and the Regan Revolution was just getting started. The erosion the middle class was just beginning to get underway. The gap between rich and poor, the two "bag ladies" in the photo, could still be represented by an empty place on a park bench. Today it's become a chasm bigger than the Grand Canyon.

The decline of the middle class didn't just happen. It was result of actions taken by ever more greedy and out-of-control financial interests making a naked grab for power and money on a scale that would have been unimaginable in an earlier era. America had its malefactors of great wealth and its robber barons in the past, but our modern malefactors of great wealth are like robber barons on steroids. They've reshaped our political institutions and financial system to suit their interests, they've pretty much taken over Congress and the Supreme Court, and now they're trying to make one of their own President of the United States.

The rise of the American middle class is often dated to Henry Ford's great insight nearly a century ago:

In the rancorous debate over how to get the sluggish economy moving, we have forgotten the wisdom of Henry Ford. In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day . . .  

This is not to suggest that Ford single-handedly created the American middle class. But he was one of the first business leaders to articulate what economists call “the virtuous circle of growth”: well-paid workers generating consumer demand that in turn promotes business expansion and hiring. Other executives bought his logic, and just as important, strong unions fought for rising pay and good benefits in contracts like the 1950 “Treaty of Detroit” between General Motors and the United Auto Workers. 

Riding the dynamics of the virtuous circle, America enjoyed its best period of sustained growth in the decades after World War II, from 1945 to 1973, even though income tax rates were far higher than today. It created not only unprecedented middle-class prosperity but also far greater economic equality than today.

 There's a lot at stake in this year's election. Reversing this process will not be easy. The Obama administration has been forced to make its own compromises with the financial interests that are destroying the middle class, and reelecting Barack Obama does not guarantee a happy outcome. But it will at least give the middle class a fighting chance to take back our country. The alternative is to continue the race to the bottom, full speed ahead. Once a newly triumphant Wall Street controls all three branches of the federal government, you can kiss what remains of the "virtuous circle" and the middle class goodbye.