Thoughts on Comparing the 1950s to Today

by Don Boudreaux on November 27, 2012

in Growth, Standard of Living, The Economy

In a soon-to-come future post I’ll offer some additional information from my Fall/Winter 1956 Sears catalog.

But before I get to that, bear with me as I address three objections to my analysis.

One objection is to claim that (as a correspondent e-mailed to me this morning) the cost-reductions that I identify are the result of “technological innovations” – the implication being that economic institutions had little or nothing to contribute to the corresponding improvements in Americans’ standard of living.  This claim is false.  Not only must the economy be such as to encourage and allow technological innovation, it must also encourage and allow those innovations to be translated into actual improved and lower-priced consumer goods.  If technological innovation operated independently of economic institutions, it would be very difficult to explain differences in standards of living between the United States and, say, Poland or Greece or India or North Korea.

A second objection is that I’m slaying a straw man – that no one claims that the 1950s were better for Americans, economically, than is today.  I linked in my earlier post to Paul Krugman’s Twinkie article, and while that isn’t the only item I had in mind – Harold Meyerson, for example, frequently extols the wonders that the 1950s bestowed on ordinary Americans – I’m happy to focus on Krugman’s essay.  I just re-read it, and it seems clear to me that he’s arguing that economically the 1950s were a better and fairer time economically for ordinary Americans (at least those who were white and straight) than is today.  (If all he is saying is that some finite period of high rates of marginal income taxation and labor-unionization don’t necessarily kill widely shared economic growth, then one must agree with him.  But one can then also ask critically if such high taxation and, especially, labor-unionization really are, as Mr. Krugman suggests, sources of such growth.  It would appear - in light of the sort of evidence that I’m presenting in my ‘catalog’ analyses - that lower top marginal tax rates and lower rates of labor unionization if fact do not prevent ordinary workers from enjoying the fruits of economic growth.)

I agree with Mr. Krugman that

We are, morally, a much better nation than we were. Oh, and the food has improved a lot, too.

But the fact that he singles out genuine improvement in our morals (such as our greater acceptance of gays and lesbians) and in our food gives (to me, at any rate) the powerful impression – fueled by the entire essay – that middle-class Americans are clearly enduring today unnecessary hardships on the larger economic front.  Ruling elites today are (according to Mr. Krugman) “demeaning workers and coddling the rich.”  What impression is such language meant to convey if not that workers today are suffering economically compared to their fate in the 1950s, while only “the rich” today are enjoying significant improvements in their material standards of living?

Mr. Krugman goes on by noting that Americans in the 1950s were blessed with

a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.

Again, what impression is this language intended to convey if not that of an American workforce today, unlike in the 1950s, being robbed of much of what is due to it – robbed by an alleged lack of bargaining power now for workers and “stakeholders”?

Further, writes Mr. Krugman, workers in the 1950s were “empowered” – again suggesting that today workers are not “empowered.”

Mr. Krugman once more:

And the high-tax, strong-union decades after World War II were in fact marked by spectacular, widely shared economic growth: nothing before or since has matched the doubling of median family income between 1947 and 1973.

Is not this passage meant to suggest that today the benefits of economic growth are not widely shared?  Seems so to me.  My pointing out – having stolen a procedure from Mike Cox and Richard Alm – just how much less work time is today required by ordinary American workers to purchase many of the ordinary accoutrements of a middle-class lifestyle is therefore meant to call Mr. Krugman’s suggestion into question – not to prove it wrong (such is impossible), but to offer serious reasons for why such a suggestion might be misleading.

As for the doubling of median family income between 1947 and 1973 having neither before nor since been matched, that claim might well be true.  But difficult-to-measure improvements in product quality and a large expansion in the range of product offerings, shrinkage in the size and changes in the composition of families, changes in the composition of employee compensation, and an influx of immigrants might well render even this claim of Mr. Krugman questionable – a rendering that I admit I intend to promote with my ‘catalog’ analyses.  (How do you compare a high-def t.v. today to even the finest model that some high-salaried union worker bought in 1956?  With divorce rates higher today than in the 1950s, how does one control for measured reductions in family incomes caused by the dividing up of households as opposed to those reductions caused by any alleged diminution in the growth of real income?  This latter theme is one that Russ often, and appropriately, strikes.  Also, my dueling videos ‘debate’ last year with Robert Reich is relevant.)

Mr. Krugman ends his column with this assertion:

America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.

(Overlook the “fair share” assertion: I have no idea what ethical or economic theory Mr. Krugman uses to determine that the share of income paid in taxes by “the rich” in the 1950s was more “fair” than is the share that the rich pay today in taxes.)  Mr. Krugman here again, by repeating that workers in the 1950s had “the power to bargain for decent wages and benefits,” suggests that workers today don’t have such power – a suggestion that plausibly leads the reader to believe that Mr. Krugman thinks that workers today are having an unusually difficult go of things, especially as compared to their counterparts in the 1950s.  But I believe that Mr. Krugman is wrong on this score.

The third objection to address is one that I’ve addressed before, namely, that I must be blinded by ideology to believe that ordinary Americans’ standard of living today isn’t ‘unfairly’ low.  Because this post is already too long, I’ll point interested readers to the link just above.

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: