The 1950s Economic Golden Age Is a Myth 2

Regrettably, progressives, social democrats, and Communists are just as “reactionary” and “backward” as anyone on the right. While social conservatives may want to turn black the clock to the social norms of the 1950s, the “left” wants to return to the economic policies of the 1950s (and, apparently, to revive the Cold War as well, with progressives taking the American side and Communists taking the Russian and Chinese side). Of course, I don’t agree with FEE’s “the 50s wasn’t so great so let’s go back to the 19th century instead” position. I’ve generally found that Libertarians are frequently right about microeconomics, wrong about macroeconomics, and Marxists are frequently right about macroeconomics, wrong about microeconomics. The most optimal economic positions seem to be the “libertarian socialists” on the left and the distributists on the right, if you assess their economic ideas independently of the other baggage they may bring with them. Non-state stakeholder partnerships would seem to be the best economic model for the present era.

By Daniel J. Mitchell

Foundation for Economic Education

In my decades of trying to educate policymakers about the downsides of class-warfare tax policy, I periodically get hit with the argument that high tax rates don’t matter since America enjoyed a golden period of prosperity in the 1950s and early 1960s when the top tax rate was more than 90 percent.

Here’s an example from Politico of what I’m talking about.

Well into the 1950s, the top marginal tax rate was above 90%. …both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s.

This comparison grates on me in part because both Bush and Obama imposed bad policy, so it’s no surprise that the economy did not grow very fast when they were in office.

But I also don’t like the comparison because the 1950s were not a halcyon era, as Brian Domitrovic explains.

…you may be thinking, “But wait a minute. The 1950s, that was the greatest economic era ever. That’s when everybody had a job. Those jobs were for life. People got to live in suburbia and go on vacation and do all sorts of amazing things. It was post-war prosperity, right?” Actually, all of these things are myths. In the 1950s, the United States suffered four recessions. There was one in 1949, 1953, 1957, 1960 – four recessions in 11 years. The rate of structural unemployment kept going up, all the way up to 8% in the severe recession of 1957-58. …there wasn’t significant economic growth in the 1950s. It only averaged 2.5 percent during the presidency of Dwight D. Eisenhower.

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2 comments

  1. What did happen is that the military devestation of the developed world allowed well positioned major industries to take advantage of the murder their government had helped to wreak on the world, and afterword Unions who had grown accustomed to existing jobs used tariffs to extend the life of industries that were no longer competitive and resulted in lots of Americans investing in, working for and moving into fields that no longer had an economic function. As efficiency overcame tarriffs those jobs disappeared. If not for war, cronyism and unions the whole issue could be avoided.

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