Lessons from the Great Compression

Learning from the Great Compression

Below is a summary.

In the 1950s, the pay gap between the CEO of a major corporation and a worker earning an average wage was 20 to 1. In 2021, the gap is 200 to 1. The 1950s were a more equal society (for white men). Of course, it had not always been this way going back into the distant past. The Gilded Age, before the Great Depression, was marked by severe inequality between rich and poor. But in the 1940s, during World War II, the world changed. The government controlled the economy and wages. Wage increases were permitted only in ways that gave a larger share to lower-income workers. This is called the Great Compression. This trend toward greater economic equality continued for decades after World War II. It was thanks to labor unions. A powerful union movement kept the wage gap from widening. This is connected to politics. It was due to the New Deal, the war, and an environment favorable to forming unions. The conclusions are as follows. First, high inequality is not inevitable. Political action can create a more equal society. Second, the New Deal and World War II were very special events. Can political action be carried out even without events that special? How far can it go? We are now at a moment when the Biden administration’s plan to spend 1% of GDP on infrastructure is called radical.