What’s the best year of your life? Ours is this year. Don’t judge. Talking from an economic perspective, then the period in history to have lived, worked, or open up a business in the United States was between the 1940s through the 1960s. However, racism, gender inequality, and anti-communism were significant social issues that were prevailing, income equality was higher than at any time in US history. This period is known as the Great Compression; not to be confused with the Great Depression which led to this momentous period in history.
Related media: Was ‘The Great Compression’ The Best Time To Be Alive?
The Golden Economic Age
The Great Compression was a period in history considered as the golden age of economics. The top 0.01 percent of income earners in the United States held a significant one percent of the nation’s wealth. In comparison, this same earnings were more than five percent of America’s total wealth in 2015. Since the 1960s, the top one percent of the wealthiest have come to earn more and even more of the overall wealth.
Today, the income gap of the 0.01 percent is at a whopping 200 times the wealth as much as the bottom 90 percent; growing rapidly at an accelerated rate — showing no significant signs of stopping by all major statistical measures. (Gaps in earnings between America’s most affluent and the rest of the country continues to grow year after year).
Whence Cometh The Compression?
You might be wondering: how on Earth in the financial name of the economy did income growth became even? Good thought! We’ll explain! The 1940s through to the late 60s was very special in the economic history of the United States all because of a few critical factors in the world at the time. The first was a massive government expenditure known as “World War II,” and the second was the increased demand for labor during (and immediately after) the war.
What has a war to do with income equality? Good questioning. Short answer: Everything! The war suddenly spurred economic growth in the United States: the military increased since more troops were needed for battle, the production of ammunition, tanks, aircraft, and virtually every artillery that was used during the war, which was a really “Big Deal” for the economy. It strengthened newly created trade unions, and the residual effects of a highly progressive wartime taxation rate. But there’s more to the story than that.
World War II left almost every country in the world indebted to the United States as a result of the Lend-Lease Act of 1941. The solution? As a result every nation had to peg the value of its currency to the US Dollar. And at the same time, American goods were in hot demand on the global market, and most of these nations had to buy American goods — cars, food, clothes and other consumer products — because their own economies were destroyed by the war. Who says war is (not) a business?
Where’s The Income Equality Today?
However, some economists do not agree with the primary cause of income inequality today. One clear theory is that, the United States is now in competition with most nation. Europe has recovered decades after the war, China rose during Mao’s Social and Cultural Revolution, and the end of the Cold War has kept a step on the brakes on America today. American workers during the Great Compression lived and worked in a bubble of economic safety that doesn’t exist today.
Today, American firms hiring unskilled labor could search abroad, startup remote businesses, and earn much higher margins than pastime companies. There are a few American unions today, and those who do, don’t hold the same leverage that they used to. But here’s the multi-billion-dollar question. Could we ever experience a compression again? That’s a question economists can’t answer; but its important to note that economies do rise and fall, considering the current economy, it’d be hard to predict just yet.
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Written by: Nana Kwadwo, Tue, Jun 11, 2019.