Because that IS what happened and it WAS the consumers who drove it. American manufacturers didn't all start making record profits, many of them went out of business!
Look at what things used to cost and what they cost now in inflation adjusted dollars. Companies HAD to reduce costs because selling prices came DOWN with foreign competition. When TV's were made in the US, a single TV was a major purchase for a household, now people have 5 cheap imported ones in their house.
An American made guitar was also a major purchase, $250 for a Strat in 1954 which is $3,000 adjusted for inflation. A Les Paul was more. Now you can buy an import Strat for less than $250 in 2025 dollars, or less than $20 in 1954 dollars. How does Fender compete with that? They have to make their low end guitars overseas AND they had to cut costs on their MIA guitars. Only the custom shop stuff is priced equivalent to a production guitar in the past. So yeah, it didn't turn in to bigger profits, it turned into lower selling prices.
As for your last statement, that is also not true. The middle class consumer buys way more crap than they did when things were made in the US. Middle class homes have two car garages and families have 2+ cars, multiple TV's multiple cell phones, multiple computers, a collection of guitars, pedals and amps. That's not how my parents and grand parents grew up! One car, one phone with the line shared with the neighbors, one TV or none, one guitar if you saved up for it.