The Rise And Fall Of The Middle Class In America

The years from 1937 to 1973 marked the ?Great Convergence? in America.? Income inequality reached its lowest level in American history, with the upper class? share of America’s wealth dropping from over 40 percent to nine percent.? This set the stage for what became, from 1945 to 1973, the 28 years of the ?Golden Age of the American Middle Class.?? America became the first society to come even close to approximating the ?Aristotelian Diamond,? the ancient Greek philosopher’s conception of the ideal society: shaped like a four sided diamond, with a small class of very wealthy people at the very top, a small class of extremely poor people at the bottom, and the great mass of prosperous middle class people in between who were neither rich or poor.

middle class

There are several causes for the Great Convergence and the Golden Age of the American middle class: the reform legislation of the New Deal, such as Social Security, unemployment insurance, the Fair Labor Standards Act, the National Labor Relations Act, and significant reforms in the banking and finance sector, such as the Glass-Steagal Act, deposit insurance, and the Securities and Exchange Commission; the growth of a strong labor union movement, the GI Bill, and the federal government’s massive wartime spending during World War II.? These reforms brought about an unprecedented wave of prosperity once WWII was over and years of pent up and unfulfilled demand for housing, higher education, cars, and consumer goods was released.? Between 1946 and 1967 productivity in America grew 104 percent.? The labor unions saw to it that their members? incomes also grew 104 percent during this period in lockstep with higher productivity.

The Golden Age of the American middle class came screeching to a halt in 1973 with the first Arab oil embargo and the end of the era of cheap oil.? Overnight, oil prices quadrupled, throwing America and the rest of the industrialized world into a deep recession.? As the effects of the increased prices for gasoline and other petroleum products rippled through the American and world economies, inflation, already rising in America because of President Lyndon B. Johnson’s determination to have both guns and butter by launching his ?Great Society? anti-poverty programs at the same time that he was fighting the Vietnam War, really took off.? After adjusting for inflation, the average American worker has not seen a real pay increase since 1973.? With the end of the Golden Age of the American middle class began the ?Great Divergence? as once again the wealthy in America grew even richer and middle class incomes stagnated for the next 40 years.

Income inequality got another boost in 1981 with President Ronald Reagan’s income tax cuts.? After these tax cuts took effect the greatest transfer of wealth, not only in American history, but also in world history, began.? Not from the top down, but from the bottom up, from the middle class and poor to the rich.? The well off became wealthy and the wealthy became super wealthy.? Meanwhile, middle class incomes continued to stagnate, and the middle class? share of the American economic patrimony began to shrink.? Under ever increasing pressure to maintain their place in the middle class, many Americans turned to borrowing on credit cards and against the equity in their houses.? Middle class savings evaporated as middle class indebtedness grew.

In the meantime, with downsizing, out sourcing, and off shoring, millions of middle class jobs disappeared. ?Many prosperous companies were bought up by corporate raiders who ruthlessly plundered them, often costing many workers their jobs. ?With American businesses embrace of the personal computer and heavy pressure from management, productivity in America soared.? Unfortunately, 98 percent of the monetary gains that increased productivity created accrued to upper level corporate management and the shareholders.? The workers? share of this larger economic pie went up a measly two percent.

The Aristotelian Diamond of the post-WWII years has begun more and more to resemble a Third World economic pyramid, with a tiny elite of extremely wealthy people at the apex, a small ?retainer class? in the middle that provides goods and services to the elite and each other, and a large and growing lower class of unemployed, underemployed, sporadically employed, and part time workers at the bottom, a huge pool of surplus labor that keeps wages and salaries down and people constantly worried about their continued employment.


Edited/Published by: SB

I had a successful career actively working with at-risk youth, people struggling with poverty and unemployment, and disadvantaged and oppressed populations. In 2011, I made the decision to pursue my dreams and become a full-time writer. Connect with me on LinkedIn, Twitter, and Facebook.