To a modern observer the political mood in America after the 1928 election, when conservatives seemed everywhere triumphant and liberalism a lost cause, evokes more recent memories: the mood after the 2004 election, when commentators rushed to declare the death of liberalism and the birth of a permanent Republican majority. Actually, the commentators of 1928 seemed to have much greater justification: Herbert Hoover beat Al Smith in the popular vote by 58 to 41 percent. Even New York went for Hoover, although Franklin Delano Roosevelt managed to eke out a paper-thin victory in the gubernatorial race, winning by only 25,000 out of 2.2 million votes. It seemed as if the Long Gilded Age would go on forever.
What changed everything, of course, was the Great Depression, which made the New Deal possible. In retrospect, however, we can see that modest moves toward a more equal society were already under way before the depression struck—not at the federal but at the state level. As early as 1901 Maryland passed a workers’ compensation law, entitling workers injured on the job to payments financed by mandatory employer contributions, only to have it declared unconstitutional. New York’s 1910 law was similarly thrown out by the courts. But between 1911 and 1913 thirteen states managed to create basic workers’ compensation systems. Over the same period a number of states created basic aid programs for widowed mothers and children.
Old-age support followed. In 1923 Montana, Pennsylvania, and Nevada passed old-age-pension laws. In the latter two states the laws were swiftly struck down by the courts. Nonetheless, by 1928 eleven states had some kind of retirement program, that is, some form of precursor to Social Security. And at the end of the decade, as the depression began to be felt, there was a push for unemployment insurance, with Wisconsin creating the first program in 1932. These programs had modest funding and covered few people; nonetheless they did establish the principle of social insurance, and also generated experience on which the New Deal could draw.
What is remarkable, in a way, is how many years of depression it took before the federal government was prepared to take similar action. Herbert Hoover had made his name with postwar relief efforts in Europe, yet he dug in his heels against any major attempt to provide aid at home in the face of national crisis.
Eventually, however, there was both the political will and the leadership for a true liberal program. Where Bryan, whose last major career act was as denouncer of the theory of evolution at the Scopes trial, had been the wrong man to change Gilded Age America, Franklin Delano Roosevelt was very much the right man at the right time. And under his leadership the nature of American society changed vastly for the better.
3 THE GREAT COMPRESSION
In 1953 Time magazine, declaring that “the real news of the nation’s political future and its economic direction lies in people who seldom see a reporter,” sent one of its contributing editors, Alvin Josephy, 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 extremes, of vast wealth for a few but hard times for many, America in the fifties was all of a piece. “Even in the smallest towns and most isolated areas,” the Time report began, “the U.S. is wearing a very prosperous, middle-class suit of clothes…. People are not growing wealthy, but more of them than ever before 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 cheerfully told the man from Time that if farm subsidies were socialism, then they were socialists.[1]
Though the Time editor’s impression that America had become a middle-class, middle-of-the-road nation wasn’t based on hard evidence, many others shared the same impression. When John Kenneth Galbraith called his critique of postwar American values The Affluent Society, he was being sardonic; yet its starting point was the assertion that most Americans could afford the necessities of life. A few years later Michael Harrington wrote The Other America to remind people that not all Americans were, in fact, members of the middle class—but a large part of the reason he felt such a book was needed was because poverty was no longer a majority condition, and hence tended to disappear from view.
As we’ll see, the numbers bear out what all these observers thought they saw. America in the 1950s was a middle-class society, to a far greater extent than it had been in the 1920s—or than it is today. Social injustice remained pervasive: Segregation still ruled in the South, and both overt racism and overt discrimination against women were the norm throughout the country. Yet ordinary workers and their families had good reason to feel that they were sharing in the nation’s prosperity as never before. And, on the other side, the rich were a lot less rich than they had been a generation earlier.
The economic historians Claudia Goldin and Robert Margo call the narrowing of income gaps that took place in the United States between the twenties and the fifties—the sharp reduction in the gap between the rich and the working class, and the reduction in wage differentials among workers—“the Great Compression.” Their deliberate use of a phrase that echoes “the Great Depression” is appropriate: Like the depression, the narrowing of income gaps was a defining event in American history, something that transformed the nature of our society and politics. Yet where the Great Depression lives on in our memory, the Great Compression has been largely forgotten. The achievement of a middle-class society, which once seemed an impossible dream, came to be taken for granted.
Now we live in a second Gilded Age, as the middle-class society of the postwar era rapidly vanishes. The conventional wisdom of our time is that while this is a bad thing, it’s the result of forces beyond our control. But the story of the Great Compression is a powerful antidote to fatalism, a demonstration that political reform can create a more equitable distribution of income—and, in the process, create a healthier climate for democracy.
Let me expand on that a bit. In the thirties, as today, a key line of conservative defense against demands to do something about inequality was the claim that nothing can be done—that is, the claim that no policies can appreciably raise the share of national income going to working families, or at least that none can do so without wrecking the economy. Yet somehow Franklin Delano 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 wasn’t the economy wrecked by this redistribution, the Great Compression set the stage for a great generation-long economic boom. If they could do it then, we should be able to repeat their achievement.
But how did they do it? I’ll turn to possible explanations in a little while. But first let’s take a closer look at the American scene after the Great Compression, circa 1955.
By the mid-1950s, Long Island’s Gold Coast—the North Shore domain of the wealthy during the Long Gilded Age, and the financial hub of the Republican Party—was no more. Some of the mansions had been sold for a pittance, then either torn down to make room for middle-class tract housing or adapted for institutional use (country clubs, nursing homes, and religious retreats still occupy many of the great estates.) Others had been given away to nonprofit institutions or the government, to avoid estate tax.