Nickolai wrote:
Most people know of the great depression but few are aware of the great compression. In the 1930's as today, a key line of conservative defense against demands to do something about inequality was the claim that nothing could be done---that is the claim-- that no policies can appreciably raise the share of national income going to families, without wrecking the economy yet somehow Franklin D Roosevelt and Harry Truman managed to preside over a dramatic downward redistribution of income and wealth that made Americans far more equal than before--and not only did not wreck the economy but set the stage for a generation long economic boom. In 1953 Time magazine, sent one of its contributing editors, Alvin Joseph, on a national tour. His mission was to get a sense of America. The portrait he painted bore little resemblance to the America of 1929. Where the America of the twenties had been a land of extreme's ,of vast wealth for a few but hard times for many, America of the 50's was all of a piece. Even in the smallest towns and most isolated areas the Time report began "the US is wearing a prosperous, middle class suit of clothes " People are not growing wealthy but more of them than ever are getting along. And where the America of the twenties had been a land of political polarization, of sharp divides between the dominant right and the embattled left.
America in the fifties was a place of political compromise " Republicans and Democrats have a surprising sameness of outlook and political thinking. " Unions had become staid establishment institutions. Farmers told the man from Time that if farm subsidies were socialism, then they were socialists. Poverty was no longer a majority condition. By the mid 50's the rich was significantly poorer than they had been in the twenties their incomes were 20 to 30 percent lower and the incomes of the really rich the top tenth of one percent --were less than half of that of the twenties. Meanwhile the real income of the median family had more or less doubled from 1929. And most families didn’t just have more income they had more security too. Employers offered health ins. retirement plans, and the federal government backed it up with unemployment ins. Social Security, and employees with formal education, like lawyers and engineers were paid less of a premium over manual laborers than they received in the twenties --or than they receive today. These statistics tell a human tale, that of a vast economic democratization of American society. By 1955 a majority of Americans owned a car and 70 % had a telephone. The rich might have had bigger houses but they could no longer afford to live in vast mansions and in particular, they couldn’t afford the servants necessary to maintain those mansions. The differences in dress had largely vanished, partly because ordinary workers could afford to wear good clean clothes, and partly because the rich could no longer afford to dress in a style that required legions of servants to help them to get in and out of their wardrobes. but how did that democratic society come into being??????????????
It did not happen by chance, This sudden decline in the fortunes of the wealthy can be explained in large part with just one word; taxes Where todays wealthy receive much of their income from employment (think CEOS and their stock options grants) in the twenties matters were simpler; The rich were rich because of the return on the capital they owned. The division of after tax income changed radically . In the twenties taxes had been a minor factor for the rich. The top rate was only 24 % and because the inheritance tax was only 20 % wealthy dynasties had little difficulty maintaining themselves but with the coming of the new deal the rich began to face taxes that were not only vastly higher than those of the twenties but high by today’s standards. The top rate rose to 63 % during FDRs first term 79 % in his second and during the cold war of the 50’s to 91 %. The average tax on corporate profits rose to more than 45 % by 1955. The top inheritance tax rose from 20 % to 45-60-70 and finally 77 % . While the rich were the biggest victims of the great compression, blue collar workers were the biggest beneficiaries.
Interestingly the economy did not collapse, and the wealthy did not substantially change their investing habits. The three decades from the mid 40’s to mid 70’s were the golden age of manual labor. In fact by the end of the 1950’s American men with a high school degree but no college were earning about as much, adjusted for inflation as workers with similar qualifications make to day. And their relative status was of course much higher. Blue collar workers with especially good jobs often made as much or more than many college-educated professionals. Why was this the case ? To some extent they were helped by the state of the world economy. US manufacturers could pay more because they faced little foreign competition. They were also helped by a scarcity of labor created by the severe immigration restrictions imposed by the Immigration Act of 1924. But if there was a single reason blue collar workers did so much better in the fifties than they had in the twenties it was the rise of unions. By the end of the twenties, American union movement was in retreat.
Major organizing attempts failed, partly because employers successfully broke strikes and partly because government consistently came down on the side of employers, arresting union organizers and deporting them if , as was often the case they were foreign born, by 1930 a bit more than 10 percent of workers were organized roughly the same share as public and private sector workers today. But under the new deal the Wagner Act was passed in 1935 and by 1947 more than a third of non farm workers were members of unions---and many others were paid wages that were, explicitly or implicitly, were set either to match union wages or to keep workers happy enough to forestall union organizers. Why did membership surge? Until the new deal the federal government was a reliable ally of o employers seeking to suppress union organizing or crush existing unions. Under FDR it became instead a protector of workers right to organize. Unions have two main effects relevant to the great compression. First unions raise average wages for their members and indirectly and to a lesser extent lift the wages of those that aren’t represented by unions as non union employers try to diminish the appeal of union drives by their employees to their workers. But still the full transformation needed WW-ll. For almost four years in the 1940’s important parts of the economy was more or less directly controlled by the government, as part of the war effort. And the government used its influence to produce a major equalization of income.
The war produced huge inflationary pressures, leading to government price controls on many key commodities, wages in many key industries were also placed under government controls.
Not surprisingly given FDR’s values the rules established by the NWLB tended to raise the wages of low paid workers more than those of highly paid employees. Following a directive by FDR that substandard wages should be raised. So during the brief period of time when the US government was in position to determine many workers wages more or less directly, it used that power to make America a more equal society. And the amazing thing is the change stuck. In 1948, the fear of change named Harry Truman the 33rd President of the United States. Americans had watched a Republican controlled Congress diminish the progress of the New Deal, and feared the outcome of a Republican White House. Political progress was at a standstill throughout the Long Gilded Age, but an increasingly privileged lower-economic class embraced liberal ideals. By the early 1950's, policies and programs associated with the New Deal were enduring and conventional.
Most people know of the great depression but few a... (
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The whole thing is very complex. There is often an "unseen hand" in the affairs of men. It is a mistake to place the value on one side or another. These things are all controlled by a 'hidden hand." The corporations went to far and so did the unions, yet they each had their own role to play. A very good movie that is fictional, yet based on actual circumstances was, "Once upon a time in America." Both sides were controlled by criminals. To simply apply the success of the U.S. to liberal policies is a mistake, an oversimplification you might say.
And finally, the liberal left at the time is not the same as the liberal left of today. As I said, there are some good things about the liberal position. The problem is it has been taken over by New World Order people, and they do not care about the U.S. or democracy. They care about world control. Nothing more, nothing less.