Responding to my puzzlement over why libertarians so enjoy pointing out the relative deprivation of villagers living in 1862, Larry writes:
I think you're missing the point of the pre-1920 argument. The point is that the system generating the rise in conditions over time is the same one that produces the inequality and that it has in a material way enriched the poor over time. It's a defense of a system including inequality by implicitly stating that to correct the inequality is to impede the overall progress. I don't think that's a winning argument, but it is an argument. There are a number of roads to counter this argument, I'll leave them to those with a better knowledge of history of the economic structure in the Western world. But, I'd wager that it is this concept that many who make this argument hold very dear. And if you want to change their minds, you have to puncture it explicitly.
That's more plausible. And, thankfully, it's actually an argument. So let's argue it: The Libertarian choice of pre-1920s America is quite helpful to our case, because that's right about the time inequality in this country peaked and the American economy entered a long and fruitful corrective process. Here's the Saez-Pikkity data showing the income-share held by the top 1 percent:
Indeed, what you see in post-1930s America is an economic system explicitly attempting to reduce income inequality and distribute growth gains more broadly. The theory behind it, Keynesian economics, held that government could positively intervene in the economy. And so we saw the construction of the welfare state, the rise of unions, a massive drop in inequality, and an array of other policies and outcomes traditionally associated with economic progressivism. It was also a period of roaring growth and advancement, which is why folks tie themselves to its end and not its beginning. So as a general point, if Libertarians want to argue that laissez-faire economics and their resultant Gilded Ages are fundamentally problematic and we should move towards a more New Deal/Great Society style approach I'm with them. I don't think that's what they are arguing, but it would appear to be what the time period would prove.
