Great Compression
Encyclopedia
The Great Compression refers to "a decade of extraordinary wage compression" in the United States in the early 1940s. During that time economic inequality
as shown by wealth distribution and income distribution
between the rich and poor became much smaller than it had been in preceding time periods. The term was reportedly coined by Claudia Goldin
and Robert Margo in a 1992 paper.
According to economist Emmanuel Saez
income tax analysis shows that the compression ended in the 1970s and has now reversed in the United States, Canada, and England where there is greater income inequality metrics
and wealth concentration
. In France and Japan, who have maintained progressive taxation there has not been an increase in inequality. In Switzerland, where progressive taxation was never implemented, it never occurred.
Economist Paul Krugman
gives credit to the policies of President Franklin Roosevelt as having deliberately caused the event and points out that its effects have lasted up until the 1980s. Decades of conservative economic policies beginning in the 1980s and beyond have slowly resulted in a re-emergence of the wealth inequality that had existed prior to the great compression. The end of the great compression has been called "the great divergence" in a Slate
article by Timothy Noah.
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...
as shown by wealth distribution and income distribution
Income distribution
In economics, income distribution is how a nation’s total economy is distributed amongst its population.Income distribution has always been a central concern of economic theory and economic policy...
between the rich and poor became much smaller than it had been in preceding time periods. The term was reportedly coined by Claudia Goldin
Claudia Goldin
Claudia Goldin is an American economist and Henry Lee Professor of Economics at Harvard University.Goldin is a director of the Development of the American Economy Program, and is a research associate at the National Bureau of Economic Research , located in Cambridge, Massachusetts...
and Robert Margo in a 1992 paper.
According to economist Emmanuel Saez
Emmanuel Saez
Emmanuel Saez is a French economist. Saez is Professor of Economics at the University of California, Berkeley...
income tax analysis shows that the compression ended in the 1970s and has now reversed in the United States, Canada, and England where there is greater income inequality metrics
Income inequality metrics
The concept of inequality is distinct from that of poverty and fairness. Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific...
and wealth concentration
Wealth concentration
Wealth Concentration, also known as wealth condensation, is a process by which, in certain conditions, newly created wealth tends to become concentrated in the possession of already-wealthy individuals or entities, a form of preferential attachment...
. In France and Japan, who have maintained progressive taxation there has not been an increase in inequality. In Switzerland, where progressive taxation was never implemented, it never occurred.
Economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
gives credit to the policies of President Franklin Roosevelt as having deliberately caused the event and points out that its effects have lasted up until the 1980s. Decades of conservative economic policies beginning in the 1980s and beyond have slowly resulted in a re-emergence of the wealth inequality that had existed prior to the great compression. The end of the great compression has been called "the great divergence" in a Slate
Slate (magazine)
Slate is a US-based English language online current affairs and culture magazine created in 1996 by former New Republic editor Michael Kinsley, initially under the ownership of Microsoft as part of MSN. On 21 December 2004 it was purchased by the Washington Post Company...
article by Timothy Noah.