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The United States is known for having higher degrees of class inequality than many other industrialized countries in the West. Till the early 1970s individual family income in the country remained stable and equally distributed due to economic recession and wars. Family income began to grow more unequal since the early 1970s; for instance, the income of middle class families stagnated towards the late 1970s as against the growth following the Vietnam War. Most importantly, during the 1970s America’s bigger than life image among the developed countries of the world as an unchallenged capitalistic economy received a critical setback due to external pressure from various directions. International competition from other growing economies, increased energy prices, decreasing productivity, failure to adapt to changes and modernize, towering inflation and unemployment were commonly attributed to the economic turmoil in the country. Subsequently, the declining value of the dollar resulted in the depletion of the nations’ gold reserves.
Meanwhile, income of the affluent and the upper class began to grow dramatically even as the middle and lower rungs of the nation’s labor market got squeezed more than ever. Although the income of the poor too showed an increasing trend, they were affected by unemployment and spells of recurring recessions. The oil embargo enforced by the Arab countries during the 1970s stopped forever cheap oil getting into the country; as a result, the middle class vehicle owners and businesses enterprises experienced a severe blow. The Iran-Iraq war made the inequality still worse. Besides, President Reagan’s conservative policies that insisted on spending less for social causes led to the decline of the American middle class. Similarly, corporate tax cuts and outsourcing of labor overseas led to the decline of middle class and growth of upper class thus promoting more class inequality.