Great Divergence (inequality)

The Great Divergence is a term given to a period, starting in the late 1970s, during which income differences drastically increased in the United States and, to a lesser extent, in other countries.

The term originated with the Nobel laureate, Princeton economist and The New York Times columnist Paul Krugman,[1] and is a reference to the "Great Compression", an earlier era in the 1930s and the 1940s when incomes became more equal in the US and elsewhere.

[6] The Great Divergence contrasts with the "Great Prosperity" or Golden Age of Capitalism, where from the late 1940s to mid 1970s, at least for workers in the advanced economies, economic growth had delivered benefits broadly shared across the earnings spectrums, with inequality falling as the poorest sections of society increased their incomes at a faster rate than the richest.

For instance, the journalist James Surowiecki pointed out in a 2013 article for The New Yorker how in 50 years "big business" had changed from high-paying manufacturers to low-paying retailers In 1960, the country's biggest employer, General Motors, was also its most profitable company and one of its best-paying.

And it was not alone: firms like Ford, Standard Oil, and Bethlehem Steel employed huge numbers of well-paid workers while earning big profits.