America’s Forgotten Generation (of Prosperity)

How and why the postwar boom got memory-holed

So the don’t-know-much-about-history gang are at it again, asserting that the Gilded Age was an era of unique prosperity. I wasn’t planning on another post today, but this really needs addressing in a short note.

This isn’t a new claim; Milton Friedman used to say the same thing all the time. What’s different now is that the, um, gilding of the Gilded Age is being used as an argument for tariffs; in the past it was used as an argument against progressive taxation and regulation.

What all such arguments require is that we memory-hole the era in which America actually achieved its most rapid progress: the astonishing boom that followed World War II.

The comparison isn’t even close. Here (using data from Historical Statistics of the United States, Millennial Edition) are growth rates of real GDP per capita and real wages during the Gilded Age and the postwar generation:

But here’s the thing: from the point of view of either a conventional conservative or a Trumpist the great postwar boom shouldn’t, maybe even couldn’t have happened. If you believe that progressive taxation destroys incentives, you can’t understand how the economy could have done so well during a period when the top marginal tax rate never fell below 70 percent. If you believe unions are bad for the economy, you can’t understand how we prospered when a quarter or more of U.S. workers were unionized:

And if you believe that tariffs are the key to prosperity, you can’t understand how we did so well over a period when successive rounds of trade negotiations were bringing tariffs steadily down.

So if you’re either an old-school conservative or a Trumpist, how do you deal with the challenge the great postwar boom poses to your economic doctrine?

Simple: you pretend it never happened.