“The US, in short, was in a revolutionary situation, and many among the political and business elites realised it. They began to push through a remarkable series of reforms. In 1921 and 1924, Congress passed legislation that effectively shut down immigration into the US. Although much of the motivation behind these laws was to exclude ‘dangerous aliens’ such as Italian anarchists and Eastern European socialists, the broader effect was to reduce the labour surplus. Worker wages grew rapidly. At around the same time, federal income tax came in and the rate at which top incomes were taxed began to increase. Somewhat later, provoked by the Great Depression, other laws legalised collective bargaining through unions, introduced a minimum wage, and established Social Security.

The US elites entered into an unwritten compact with the working classes. This implicit contract included the promise that the fruits of economic growth would be distributed more equitably among both workers and owners. In return, the fundamentals of the political-economic system would not be challenged (no revolution).”