From “The Upswing: How America Came Together a Century Ago and How We Can Do It Again” by Robert D. Putnam
In short, the long, inverted U-curve of economic equality and inequality that has so deeply affected Americans may in part be the product of global trends, but it was driven substantially by domestic factors, as well, and those factors are our focus here. To a remarkable degree domestic institutional and social reforms that had their origins in the first decade of the twentieth century turn out to explain both the rise and then the fall of economic equality, because those reforms themselves waxed and waned in precisely the same century-long rhythm as equality and inequality. The U-curve that describes the ups and downs of economic equality is paralleled by – and very likely caused at least in part by – the ups and downs of a set of institutional changes that were first sketched and implemented during the Progresive Era.
In other words, Progressive Era social innovations and institutional reforms put the US on a new path toward greater economic equality, laying the foundations for the Great Convergence that lasted until the 1970s. Progressive Era reformers, both dreamers and doers, created innovations such as the public high school, labor unions, the federal tax structure, anti-trust legislation, financial regulation, and more. Those creations did not immediately close the income gap, given the turbulence of the Twenties, but they were the necessary foundations for further development (especially during the New Deal, but not only then) that underpinned the Great Convergence.
Conversely, by the 1970s those earlier social innovations and institutional reforms had all begun to fade and even to be reversed. The growth of education “paused” around 1965, as we saw earlier in this chapter; unions had begun their long decline by 1958; in the mid-1960s tax cuts began to make the tax structure more regressive; after 1970, deregulation, especially of financial institutions, overturned the reforms begun in the Progressive Era; and most subtle, but also perhaps most important, the collective norm that “we are all in this together” was replaced by a libertarian (sometimes misleadingly called “neoliberal”) norm that we’re not.