(FORTUNE Magazine) – That old crowd-rouser, ''Happy Days Are Here Again,'' rang through another political convention hall this summer -- the one housing the Republicans. While they celebrated the longest peacetime economic expansion ever, those former good-time Charlies, the Democrats, were warning that the economy is living on borrowed money and borrowed time. What's going on here? For a Democratic answer to that question, see the latest book by Barry Bluestone, an early member of the radical school of economics and a professor at the University of Massachusetts, and Bennett Harrison, who teaches political economy at MIT. In previous works they originated two of the catchier economic concepts of the 1980s, the deindustrialization of America and McJobs. Now, just in time for the elections, Bluestone and Harrison have produced The Great U-Turn: Corporate Restructuring and the Polarizing of America (Basic Books, $19.95). The book, partially underwritten by the Joint Economic Committee of Congress, is shrill and highly partisan, but it provides a useful preview of arguments the voters will be hearing from Democrats this fall. THE TONE is set by the first paragraph, in which Bluestone and Harrison push every hot political button at their disposal: ''The standard of living of American workers -- and a growing number of their families -- is in serious trouble. For every affluent 'yuppie' in an expensive big-city condominium, working as a white-collar professional for a highflying high-technology concern or a multibillion-dollar insurance company, there are many more people whose wages have been falling and whose families simply cannot make ends meet.'' Shorn of its class warfare rhetoric, the argument of The Great U-Turn goes something like this: Beginning in the late Seventies, American companies responded to an unprecedented onslaught of international competition by undertaking a massive restructuring aimed solely at increasing short-term profits. Much of this restructuring was directed at the labor force: Companies shifted to temporary and part-time employees or cheaper foreign labor, fought unionization, and extracted wage concessions and two-tiered wage agreements from workers. At the same time, the Reagan White House deregulated key industries, cut corporate taxes, kept money tight, raised military spending, and hacked away at social programs. THE RESULT? Wholesale deindustrialization, lower average wages, increased inequality of income, and the ''zapping'' of organized labor. As Harrison and Bluestone see it, ''Essentially, the restructuring process involved more than anything else the abrogation of the social contract that labor, management, and government had slowly but surely constructed in the course of nearly fifty years of union struggle, collective bargaining, and government regulation of the age-old battle over the disposition of the nation's total output. The common denominator of many, if not all, of management's 'innovations' was an assault on the cost of labor.'' Not many economists would agree that the Reagan boom was triggered by a malevolent conspiracy against labor. The economy has changed, to be sure, and many wage earners (and managers) have suffered in the resulting dislocations. Manufacturing contributes as large a proportion of GNP as it did at the beginning of the Reagan years but does so more efficiently, with fewer people. So are all those displaced steelworkers reduced to flipping burgers? Some are, and some are still unemployed. But most of the 16 million net new jobs Candidate Bush brags about are the ''good jobs at good wages'' that Candidate Dukakis says he wants. Unemployment, as Harrison and Bluestone must have noticed, is the lowest in years. Real median household income, the best measure of family prosperity, is up 9% under Reagan; under Carter it declined 3%. Yes, the gap between rich and poor has widened, but it's hard to blame that on corporate restructuring. It stems largely from failed welfare policies and the stubborn pathologies of the underclass. With the facts so heavily against Harrison and Bluestone, you can't help wondering whether the facts are really what drives their argument. What's the beef? It turns out that the authors' quarrel is not so much with the Reagan boom as with capitalism itself. ''The Reagan revolution (and the conservative ideology underlying it) is utopian,'' they write. ''It is dynamically unstable. It requires selfless individuals, who -- contrary to all of history -- believe that individual competition in a totally unfettered market will serve their interests best and who accept self-defeat with perfect equanimity, blaming no one but themselves and seeking no allies. With the exception of a few 'Rambo' characters here and there, the human race simply does not behave this way.'' THE AUTHORS propose an economic alternative to this impossible system: the ''peace of mind'' that comes from ''both economic growth and a modicum of economic security.'' They would achieve it by slashing military spending, adopting a national industrial policy, starting more trade unions, building more public housing, reregulating ''the runaway financial sector,'' raising the minimum wage, and implementing ''managed international trade'' (protectionism). They also favor universal health insurance, universal child care, comparable worth, and increased welfare benefits. As this political season is demonstrating, there is a potential constituency for such a profligate economic vision. The U.S., Peter Drucker has pointed out, has not developed social policies to take care of workers made redundant by entrepreneurial innovation. This considerable political oversight has created a class of resentful Americans ripe for economic demagogy. These disaffected voters, many of them blue-collar Reagan Democrats, are an important audience for Dukakis and the speeches in which he often echoes The Great U-Turn. Joseph Schumpeter warned 40 years ago that the social disequilibrium caused by the ''creative destruction'' inherent in capitalism would make an inviting target for economic levelers touting the peace of mind provided by an entrepreneur-free, socialist economy. Michael Dukakis, though he would surely protest any charges of socialism, is mounting an attack of the kind Schumpeter described. Terms like ''the Swiss cheese economy'' often take the place of articulated positions, which have remained blurry at best. U-Turn, because more candid, is also more frightening.

BOX: EXCERPT: For more than a decade, the United States has been evolving as an increasingly unequal society . . . The time has come for a serious reappraisal of just how poorly the economy has performed under the conservative business and government policies of the last decade, and how the prospects for average American workers and their families have actually worsened.