Well then you are missing the way way back side. If productivity increases, and reduces the need for workers, fewer people have money to buy goods - even when they are cheaper (though that doesn't happen due to price stickiness and profit motive/greed). This causes a downward spiral that we've been living in for decades.
I'm so tired of market fundamentalism. It is a soulless religion.
China has seen an increase in their middle class because they use policy to build it. In the 40s through the 60s in the US rich people paid huge percentages of their income in taxes (and only the top 5% at first paid that), which was directly redistributed back to workers through public works and other programs. Wages and salaries were controlled with both floors and caps. This even lead directly to employer benefits such as health insurance - they couldn't pay more, so they needed to offer something else - and the economy was so good from these policies that there was a lot of demand for everything.
Europe and Japan acheived similar wonders with similar policy. We can look at those places today to see the countries where those redistributive policies are stronger, are weathering the shit-storm market fundamentalism brought us over the last decade, better than the free market states.