I provide a quote from Joseph Schumpeter’s seminal work “Capitalism, Socialism and Democracy” published in 1942. This quote is from a chapter added in July 1946, p381, First Harper Perennial Modern Thought Edition (2008)
“When discussing the English case, we have noticed that under modern conditions- to an extent undreamed of by nineteenth-century socialists- it is possible to extract from the bourgeois stratum, by taxation and wage policies, the bulk of what in Marxist terminology is called Surplus Value. The same observation applies to the Untied States. To an extent which is not generally appreciated, the New Deal was able to expropriate the upper income brackets even before the war. One indication will have to suffice, one that shows no more than the effects of the increase in the (personal) Income and Surtax and these only up to 1936: in 1929, when Total Income Paid Out was estimated at 80.6 billion dollars, the brackets above $50,000 (taxable income) retained 5.2 billion after income and surtax; in 1936, when the total of income paid out was estimated at 64.2 billion dollars, not quite 1.2 billions. Taxable income above $100,000 was even then wholly absorbed if account be taken of estate taxes. From the standpoint of naive radicalism, the only trouble with these and subsequent measures of confiscation is that they did not go far enough. But this does not alter the fact with which we are concerned for the moment, viz., that irrespective of the war, a tremendous transfer of wealth has actually been effected, a transfer that quantitatively is comparable with that effected by Lenin. The present distribution of disposable incomes compares well with the one actually prevailing in Russia, particularly in view of the further fact that owing to the greater importance in the upper-bracket budgets of personal services and of commodities that contain relatively much labor, the purchasing power of the upper-bracket dollar has in the United States fallen much more than has that of the lower-bracket dollar.”
Given what Paul Krugman called the “Great Compression” (in his “Conscience of a Liberal”, 2007), the period between the 1940s and 1970s when income inequality in the United States was lower than it is today, the New Deal effected a great transformation in the distribution of wealth. The only thing that could be critiqued about this time period, and Schumpeter would have confirmed with that statement, is that Roosevelt was too “bourgeois” in his policies, i.e. he taxes the rich at a high rate, but left the private business enterprises- that generated the wealth for the rich- untouched, merely aided them with stimulus investments and loans.
Roosevelt himself was a patrician, member of the old-money elite, and was highly class conscious. He tried to save American capitalism by controlling the excesses of the wealthy elites, but was careful not to upset societal expectations. There was only a brief time period of what could be called government “overreach”, and that was during World War II when all the major manufacturing corporations were steered by the government for war production purposes. After the war, his successor Harry Truman returned to business-as-usual, leaving the private businesses with a tiny elite in charge.
It took only 40 years, until Ronald Reagan, to dismantle the high tax rates for wealthy people, and it took another 20 years to deregulate the financial industry, and let the crooks on Wall Street determine the economic fate of all of us. They concentrate the wealth in the hands of the few, whereas the rest of us pays with austerity measures, higher cost of living, higher unemployment rates and lower wages. We are back to the Gilded Age, and need the restraints on the rich and the large corporations that Franklin Roosevelt once gave to us.