I have a hard time parsing your message.
#1 incomes have not dropped like a rock. (please do not cite the urban legend that real wages in the US have fallen. This has been debunked already, since the original thesis that got widespread relied on inaccurate inflation data. But even if you accept that the inflation data may be wrong in the other direction, the proper thing would be to say that their growth is stagnant, not that they "dropped like a rock") Today, people work 40 hour work weeks and have 2 incomes, because they consume alot more than in the past. Consumption has outpaced productivity growth. The only way to sustain it is to work longer, or borrow money. The fact that consumption has gone WAY UP over the last twenty years is proof. If people were working 40 hours or more, or 2-income family just to sustain the same standard of living they had in the 50s and 60s, they wouldn't be consuming such a large multiple of what they were in that period.
People today not only own more "stuff" (computers, vcrs, phones, tvs, 2 cars, etc) but use more services (monthly phone bill, mobile phone bill, electricity, gas, internet DSL, satellite TV, renting blockbuster videos, eating out at restaurants, etc)
The amount of disposable income or debt is about the same, because we are not a nation of savers.
#2 India is impoverished by more than just colonialism. I don't buy the theory that left alone, the rest of the world today would have turned out just like us. Nations can be impoverished because of their natural resources or, culture too. Western democracy and capitalism is not an inevitable result of progress, but a chance development, that's why it was so rare in history. Exploitation alone does not account for the truly astounding progress the west has made. In history, many nations had "growth spurts" of development, that were not triggered by exploitation of other lands. Yes, invasion can retard progress in some situations if progress was already happening. On the other hand, invasion can also bring benefits if progress was happening, by cross fertilization of cultures. Britain was invaded many times over history, and the Romans, Celts, Vikings, Normans, etc all brought culture and technology with them. "Closed" nations that resisted outside influences (like China) rapidly fell behind. (and the few colonial concessions, such as Shanghai and Hong Kong are incredibly wealthy compared to the areas that weren't "opened")
#3 Technology and productivity growth are the only long term ways to raise the standard of living. All else is merely reshuffling the pie.
Either you produce more with less, or you produce new things. Taken to the extreme, automation builds everything, and humans return to a hunter-gatherer stage where they only have to pick fruits from the trees of automated factories, or nanotechnology.
The developed nations, to the extent that they produce a surplus through increased productivity, can help other nations catch up, but this can only be done if we keep increasing productivity.
And increasing socialism or unionism in the US isn't going to alter this fact. The rich in the US roughly pay 50% of the national budget. Even if you were to confiscate this amount of money and redistribute it, it would have a neglible affect on the middle class's income.
If you want people's incomes to go up, invest money to increase productivity. If you try to divert too much of the productivity gains away from corporate profits, all you'll do is damage other people's retirement funds. Furthermore, you may retard investment which might curtail corporate expansion, which might push down wages or the labor demand.
My point originally was, as we become less dependant on humans for industrial manufacturing, the differences between nations capacity to produce will depend more on their natural resources, their internal organization, their intellectual property, and less on the people's labor of that country.
This means, it would be possible for a third world country to (with cash) buy and transfer productive technology from the world market, and build modern consumer goods, without neccessarily having to reform its population and go through generations of steps to arrive at that situation naturally. They can "leap frog" all the steps that the major industrial nations went through, by "buying progress"
For example, let's imagine a miraculous nanotechnological assembler, that can build any structure that you can program into it. This means, with the right inputs (instructions on what to build, energy and materials) you can build anything that anyone else is capable of building. There is no longer any inherent advantage that a nation will have from its labor pool alone. US could build aircraft carriers, but so could anyone else.
In fact, with such an assembler, scarcity would almost be eradicated and the need to work to support yourself would be minimal. The basics of life would essentially be free.
The current "crisis" of the West, if you want to call it that, is one of hedonism. People don't want to work hard and educate themselves anymore. They just want to party hard and buy lots of stuff. I mean, what percentage of the population is even studying in the engineering and scientific fields, vs those who graduate with some bullshit degree, just to make enough money so they can go into debt buying a fancy house and car?
Near where I live is Cupertino California. In the high school, 90% of the students are Asian. At my office, I am a white, American minority. The vast majority of the employees are Asian or immigrants. And that's not because they are paid less.
Why is this? Because Americans aren't going into hard-core fields. Americans aren't getting Phds and Masters. Americans are partying it up on campus. You can see this trend in Japan too. The young generation are not hard workers or savers, they are consumers.
