Deifying the 50's is Incredibly Stupid

One of the most persistent obfuscations in American politics is the continued misrepresentation of the historical phenomenon that lead to the economic and social booms of the 1950's and 60's. Republicans look back on that era and laud the stable family structure, wholesome family values and relative success of the economy. Democrats look back at the social activism, the high tax rates and powerful government and rhapsodize. Both parties refer to this era for their current political purposes and appeal to our success as a nation back then as some sort of proof of concept. The problem is that both views mischaracterize the era. This makes their analogies at best unpersuasive, at worst, down right misleading.

So let us harken back to the America of the 50's. It was a time of great prosperity, at least for white America. For blacks and immigrants from other countries, it was still a very unfriendly place. The civil rights movement was in full swing though. Martin Luther King, Jr. was advocating for minority and black rights and white America was finally taking notice and allowing the underclasses the freedom to join in the prosperity of white America. But such social progress was fitful and was often times underscored by violence. Also, America was indeed prospering economically, but the reason for this has as much to do with the end of World War II than it did any virtue of the politics of the era. After all, at the end of World War II, Europe was a bombed out mess, Japan had been nuked, and the cold war between the two largest economies that were not destroyed by the war (the USA and the USSR) was just heating up. This meant that, in the western world, only the USA was left as a provider and manufacturer of goods for a rapidly rebuilding and healing Europe. Once the 60's were over and Europe and Japan were beginning to reach parity with the USA in manufacturing and business, the economy tanked. There were a variety of reasons, the 1973 oil crisis, the failure of the Bretton Woods method of monetary management; but overlooked among these reasons usually is the fact that the USA suddenly had competition from the rest of the world in manufacturing. This competition put strong downward pressure on wages. Manufacturers started to fail all over the USA, unable to compete with the new competition from abroad. It was not till the Reagan era and the Thatcher era that the old system was junked, that taxes were lowered, that capital markets were opened up, that the economy really turned around.

So now let us deal with the Republican's vision of the 50's. As I said above, they laud the 50's for its stable families, prosperity and family values. But as I point out above, this safety and stability only existed if you were white (and since most Republicans are white, it gives them a skewed perspective on events). Also worth noting was the divorce system of that era was a fault based system. You had to have a real demonstrable reason to divorce someone, not liking the person anymore just wouldn't cut the mustard. While courts would rarely force two people to stay together if they no longer wanted to, they did not make it easy for them either. The end result is that, under the veneer of the happy family and lower divorce rate, was a seedier reality. Realities like couples staying together because they couldn't afford a lawyer to gin up a proper at fault reason for them to divorce, or spousal abuse and spousal rapes going unreported because a paternalistic society tended to ignore the complaints made by women. The family may have looked happy from the outside, but the reality was often much grimmer. Regardless, holding the 50's up as some paragon of family values misses the point entirely. The society of the time was just very good at hiding its problems.

The Democrats' view of this era is equally specious. They laud the powerful unions, the high tax rates on the rich and the prosperity of the nation at that time. Presumably, they use it as a model for their current tax and spend agenda. What they ignore is that it was only because of the unique properties of that era that expensive labor, high taxes and unionization didn't bankrupt the nation. As I said above, after WWII, the USA was the only first world nation (other than the USSR) that still had a manufacturing base and healthy economy. The result was that we provided the goods that allowed Europe and Japan to rebuild. Once they had rebuilt, and our industries had to compete on the open market, many of them failed. When they failed, the confiscatory tax rates on the wealthy overly burdened the economy and slowed our recovery. The reality was then, and still is now, that high taxes, organized labor and statist policies bankrupt the nation and make our products uncompetitive on the world market. They only were able to flourish because we had no competition. A reality that no longer exists.

So, in short, let us stop harkening back to the 50's as some sort of model for modern America. Except as a cautionary tale, it has absolutely no relevance on current political and economic problems. Also, do not let yourself be convinced by references to the 50's and the ensuing arguments from analogy to it. Arguments by analogy are formal logic fallacies and the reality of the 50's renders the comparison unpersuasive (even if you accept arguments by analogy as persuasive).

Thatcher, and the Beauty of Smaller Government

This week a legend in British Politics passed away. Margaret Thatcher died on April 8th from a stroke after a long decline in health that limited her public appearances in the last years of her life. Perhaps second only to Winston Churchill in modern British Politics, Mrs. Thatcher's influence and impact is unquestionable. She took office in 1979, during a time of great political unrest in Britain. Unions had taken over, the top tax rate was a confiscatory 83%, inflation had reached double digits, public expenditures were 42% of British GDP and the British government accounted for 30% of the work force. The previous two Labour governments lead By Messrs. Heath and Wilson had tipped political power so far towards the unions that the popular consensus of the time was that Britain was ungovernable.

To right the proverbial sinking ship, Mrs. Thatcher took on the unions, lowered taxes (from the above mentioned 83% to 40%), privatized loss leading government run industries and tightly controlled the monetary supply to battle inflation. Her actions likely saved Britain from bankruptcy, and certainly turned the economy around. Under her care, Britain moved from being the 6th largest world economy to 4th largest; and this during a time when most economies were expanding (in most cases, because they followed a similar small government approach).

While this is interesting from a historical perspective, it serves as a good example and a good reminder to current world governments that the path to economic expansion is well known. We may live in different times than Mrs. Thatcher governed, but there are certain undeniable parallels. First, governments have expanded markedly, so has government debt, and the entire banking system has become a ward of the various states. Unions' pay packages, benefits and pensions have grown beyond what most Americans earn in the free market. More over, those pensions are beginning to bankrupt state governments (at least here in America). Instead of raising taxes, we have resorted to deficit spending and printing money to finance the excesses of our governments. This has lead us to a period of persistent unemployment, the lowest labor participation rate since 1979 (the year Mrs. Thatcher took office) and high levels of underemployment. Meanwhile current governments are flailing around unable, or unwilling, to do what is needed to right the ship.

The modern era could well use a Margaret Thatcher. We need a charismatic leader to step in, be the adult in the room, and give our economies and politics the medicine they need. We need someone to take on the public employee unions that are bankrupting us and draining money away from infrastructure projects that would better grow our economy in the long run. We need someone to take on the tax and spend cultures that have invaded the modern first world. Someone to come in and let the citizens keep more of their paychecks to stimulate the economy with. We need someone to instill tighter fiscal policies on our various central banks so that we stop debasing our currencies and penalizing savers. We need someone to privatize the banking system again, cutting off access to the central banks' borrowing windows to investment firms (reinacting Glass-Steagall here in the US would be a good way to do this, ditto ending too big to fail). In short, we could use a dose of Thatcherism in the modern era.

Here is a clip of the Iron Lady lambasting Labour for harping on a wage gap while ignoring the increase in welfare of the poorest members of Britain.

http://youtu.be/okHGCz6xxiw

Here is a bonus quote from the Iron Lady on the profligacy of Socialist governments: "Socialist governments traditionally do make a financial mess. They always run out of other people's money."