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Was the 90 percent tax rate responsible for the postwar economic boom of the 1950's

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Noblegas87 posted on Sat, Oct 9 2010 9:58 AM

Malcolm Gladwell seems to think so.

Gladwell thinks that if the top one percent were taxed at 90 percent like they were in the 1950's , the american economy will be more productive and prosperous than it is now; If the 90 percent marginal tax rate in the 1950's was responsible for the economic boom of that decade, similar economic booms that occured in in the late 1990's like the celtic tiger would not have transformed ireland from one of the poorest countries in europe to one of the richest countries in europe because they did not have a 90 percent income marginal tax rate. What do you guys think?http://www.youtube.com/watch?v=uskJWrOQ97I

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Was there a postwar economic boom at all? In any western nation?

There were high rates of GDP growth rate, yes, but government spending as a proportion of GDP was tripling across a decade. Meaning that it is a case of broken window fallacy. Has anybody looked at increase in private products across the decade? Also, has anybody looked at increase in savings and investment? That is more important than short-term consumption.

If the postwar economic boom is so great, why was it marked by the notorious Nixon-era inflation, the rapid diminishing of American gold reserves as it was shipped to West Germany and Japan, the sudden and immediate end of the Smithsonian agreement, the huge losses of banks that had to be regularly covered by deposit insurance, and a gazillion other problems that are by no means minor?

All these stories of "economic miracles" are stupid. There has never been an "economic miracle" in the face of this planet. On our ten millenia on this planet, all our gains have been built over long, slow, painful periods. Whatever the Chicago School likes to claim, there was no Chilean economic miracle. Pinochet never liberalized Chile, and he depressed one part of the country to subsidise industries he favoured. Chile never made much rise in people's standard of living until the late 1980s - that's your economic miracle! If the Asian economic miracle was so great, why were they so devastated by the Asian crisis? Why was South Korea the most corrupt nation in the world where five families ran the entire nation and had the government bail out all their conglomerates to the point of bankrupting the country and leaving behind mass suicides when everything was ruined? If there was a German economic miracle, why has Germany had such high unemployment rates for such long times? All of it is as much fiction as the postwar economic boom.

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Suggested by djussila

 A Simple case of correlation does not mean causation. If certain people are less rich, how does that make us all better? It makes zero sense. There was a boom because the economy was transitioning from an economy that produced things that the government wanted (tanks, guns, ships) to an economy that produced what consumers wanted.  

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