In the West it seems that there has been a gradual degeneration of day-to-day clothing. Even as late as the 1960s, men attended baseball games in suits an ties, and women got "dressed up" to go shopping. How is it that old people today, who lived through this change didn't object to this massively visible cultural shift? Is the degeneration (from suits to jeans and teeshirts in 50 years) of clothing for the majority of daily wear cyclical in history?
I can't speak to the cyclical nature of clothing, but I think your first question has a rather simple answer - baby boomers. The Baby Boom generation that was born in the 40s and 50s, came of age as "hippies" in the 60s and 70s. Suits and hats for everyday wear was what their parents wore. The movements embraced by the new western youth preached social change, something that was largely incongruent with the "stuffed shirt," rat race" running image of their parents' generation. They naturally gravitated to more casual, less socially stratified clothing (i.e. clothing not restricted to one social class or another).
The fashion designers of the 60s and 70s followed suit (no pun intended) and as the Baby Boom Generation became the dominant culture makers in western society, this casual aspect of everyday clothing became more and more ingrained in the culture.
The real change in Work Wear came about at this time as well. In the 50s and 60s, "Aloha Fridays" became very popular in the US due to the popularity of all things Hawaiian in the US skyrocketing in the period just before and after Hawaiian statehood, and marketing promotions by Hawaii itself. Employers around the country were encouraged to allow their employees to wear Hawaiian shirts on Fridays. This eventually morphed into "casual Fridays" when employees realized that this was a "perk" they could offer to their employees that didn't actually cost the anything.
Fast forward to present day. Now the children of the Baby Boomers (Gen X and Y) are the most prevalent age group in the workforce. Having been dressed by their parents in casual clothing their entire lives, they came into the workforce in the 90s and 00s expecting a casual environment and the casual clothing to go with it.
In summation, the 60s changed everything, clothing included.
As to your question of why the older generation didn't "object" to this casual shift, the short answer is that they did (repeatedly and vehemently) but they eventually lost the argument.
*Just as an anecdotal side note, my grandfather was born in the 20s, went to Europe with Patton's army in WWII, and wore a hat every time he left the house until the day he died. My father was born in 1950, was in the Army during Vietnam (although he never went "in country"), and I don't think I've ever seen him in a suit. If that isn't a testament to the differences in their respective generations, I don't know what is.