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Erosion of Protection for Working Class Wealth and Small Businesses

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Beginning in the late 1960s and accelerating in the 1970s , enforcement of protections on working class wealth and small businesses was reduced.

While no single law marks the change, there was a gradual but significant retreat from New Deal-style policies that had supported labor, working-class wealth, and small business competitiveness.

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Background: The Postwar Economic Model (1945–1970)

From the end of WWII through the 1960s, U.S. economic policy was heavily shaped by the New Deal consensus, which emphasized:

  • Strong labor protections (via the National Labor Relations Act)
  • Progressive taxation
  • Financial regulation (e.g., Glass-Steagall)
  • Antitrust enforcement
  • Support for small business and local banking
  • Expanding public investments in housing, education, and infrastructure

This period saw widespread prosperity, low inequality, and a growing middle class.

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The Shift Around 1970

Starting in the late 1960s and through the 1970s, there was a slow but deliberate shift in policy priorities, with several clear dimensions:

1. 🛠️ 

Weakened Labor Law Enforcement

Union power and labor protections declined due to lax enforcement and changing political will:

  • The National Labor Relations Board (NLRB) became less aggressive in protecting union organizing rights.
  • Employers increasingly engaged in anti-union practices with fewer penalties.
  • The 1970s saw the beginning of a decades-long decline in union density.

📄 Economic Policy Institute – How today’s unions help working people:

🔗 https://www.epi.org/publication/how-todays-unions-help-working-people-giving-workers-the-power-to-improve-their-jobs-and-unrig-the-economy/

📄 NLRB & Anti-Union Trends:

🔗 https://www.nlrb.gov/news-outreach/news-story/union-membership-and-the-nlrb-decline

2. 💰 

Tax Policy Shifted Away from Progressivity

The 1970s laid the groundwork for major tax cuts in the 1980s:

  • Capital gains taxes were reduced in 1978.
  • Top income tax rates began to decline, reducing the redistributive effect of the tax code.
  • These moves shifted the tax burden away from wealth and capital and toward labor.

📄 CBPP – Historical Tax Trends:

🔗 https://www.cbpp.org/research/federal-tax/historical-trends-in-income-inequality

3. 🏦 

Decline in Antitrust Enforcement

After 1970, antitrust enforcement became less aggressive, allowing for:

  • Corporate consolidation (especially in retail, banking, and telecom).
  • Market power accumulation by large firms that squeezed out small competitors.
  • The influence of Chicago School economics led to a narrower view of antitrust focused only on “consumer prices,” ignoring long-term structural power.

📄 Brookings – Antitrust Enforcement Decline:

🔗 https://www.brookings.edu/articles/the-decline-of-antitrust-enforcement/

📄 The Atlantic – How Antitrust Was Lost:

🔗 https://www.theatlantic.com/ideas/archive/2019/07/how-america-lost-its-antitrust-enforcement/593686/

4. 🧯 

Regulatory Rollbacks and Deregulation

  • Beginning with Nixon and continuing under Carter and Reagan, key industries like transportation, telecommunications, and finance were deregulated.
  • This was often done in the name of efficiency, but large firms gained an edge over small businesses lacking scale and lobbying influence.

📄 ProPublica – A Deregulation Timeline:

🔗 https://www.propublica.org/article/the-history-of-deregulation-in-the-united-states

📄 Harvard Business Review – How Deregulation Helped Monopolies:

🔗 https://hbr.org/2018/12/why-we-need-to-bring-back-antitrust

5. 📉 

Decline in Support for Small Businesses

  • Federal programs (e.g., the Small Business Administration) became less central to policy.
  • Credit access shifted toward large banks and corporations.
  • Chains and big-box stores (e.g., Walmart) expanded without regulatory pushback, displacing many local businesses.

📄 Institute for Local Self-Reliance – Decline of Small Business:

🔗 https://ilsr.org/why-small-businesses-are-dying/

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Cumulative Effects

By the end of the 1970s:

  • Union membership was declining rapidly.
  • Small businesses were being outcompeted by larger, consolidated firms.
  • Wealth inequality began to rise, reversing decades of progress.

“Starting in the 1970s, the U.S. economy shifted toward favoring capital over labor, deregulation over regulation, and consolidation over decentralization.”

📄 Piketty, Saez, Zucman – Inequality Trends:

🔗 https://gabriel-zucman.eu/files/PSZ2018.pdf

📄 Opportunity Insights – Decline of Upward Mobility:

🔗 https://opportunityinsights.org/paper/the-fading-american-dream/

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Conclusion

While not the result of a single decision, starting around 1970, the U.S. government began reducing enforcement and commitment to protections that had supported working-class wealth and small business competitiveness for decades. This shift—driven by changes in ideology, economic theory, and political lobbying—paved the way for the inequality and consolidation we see today.

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