For many Americans, the 1950s were the golden age of American history. When asked when America was great, Donald Trump pointed to the post-war era of the 1940s and 1950s. America was the world’s unquestioned economic, political, and military power. The business of America was business. The American economy was humming as never before. The result was a degree of prosperity unequalled in the history of the world. A man with no formal education could buy a house and a car, support his family, send his kids to college, and enjoy an occasional vacation.
Often absent, though, is any examination of why the 1950s were so great. In fact, the economic policies underlying this golden age were in striking contrast to today’s economic orthodoxy.
- Taxes. In 1956, the heart of the decade, individual tax rates ranged from 20% to a breathtaking 91% for incomes over $200,000. The top corporate tax rate was 52%, while the maximum tax rate on capital gains was 25%.
- Regulation. Major sectors of the economy, including energy, agriculture, trucking, railroads, and airlines, were heavily regulated.
- Union membership. Nearly a third – 31.3% — of non-agricultural employees belonged to a union.
- Education. Many public universities were practically or literally free, while unions maintained apprenticeship programs providing training for and entry into manufacturing jobs in particular.
As it turns out, the United States followed economic policies in the 1950s that are very much out of favor today. In fact, it is possible to identify how these policies affected the economy (and society) positively. High taxes funded massive infrastructure projects, like the interstate highway system, as well as public higher education. High individual and corporate tax rates also reduced the incentive to pay high executive salaries. Strong unions were able to bargain for better pay and benefits, so that income was more evenly distributed between capital, management, and labor. This had positive economic effects, as workers used higher pay to buy bigger houses, faster cars, and fancier vacations. Access to public higher education laid the foundation for the scientific, technical and managerial explosions of the 1960s. While some sectors of the economy, especially energy and transportation, were overregulated, regulation was obviously not an insurmountable barrier to prosperity.
Is it possible that the United States was so prosperous in the 1950s, not in spite of these policies, but because of them?