The Only Thing That's Curbed Inequality: Catastrophe

The Atlantic



Calls to make America great again hark back to a time when income inequality receded even as the economy boomed and the middle class expanded. Yet it is all too easy to forget just how deeply this newfound equality was rooted in the cataclysm of the world wars.



The pressures of total war became a uniquely powerful catalyst of equalizing reform, spurring unionization, extensions of voting rights, and the creation of the welfare state. During and after wartime, aggressive government intervention in the private sector and disruptions to capital holdings wiped out upper-class wealth and funneled resources to workers; even in countries that escaped physical devastation and crippling inflation, marginal tax rates surged upward. Concentrated for the most part between 1914 and 1945, this “Great Compression” (as economists call it) of inequality took several more decades to fully run its course across the developed world until the 1970s and 1980s, when it stalled and began to go into reverse.



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