Ask Auntie Pinko
October 13, 2005
By Auntie Pinko
Didn't the American economy work better (fairly, productively)
in the '50s and '60s when there were some government restrictions
on major industries/services - such as the airlines, railroads,
trucking industry, oil production, and when the strong unions produced
a prosperous middle class?
Somewhere in America
The short answer is "yes and no." The American economy is an enormously
complex system with thousands of variables involved in its overall
health. Some parts of the economy worked much better forty years
ago, some didn't work as well - or at all. Overall, however, Auntie
tends to agree with you that the economy of the 1950s and '60s produced
a less lopsided distribution of wealth and greater economic stability
than the current economy.
However, just to establish some clarity, I need to note that some
nasty aspects of America's social structure that produced horrendous
inequities for certain population groups (African Americans, Latinos,
and Native Americans; unmarried women, etc.) were integral to the
functioning of the economy at the time. Severely limiting the workforce
opportunities for women and minorities reduced the size of the available
labor pool and increased labor's bargaining leverage. America's
trade protections locked many of the world's developing economies
into cycles of appalling poverty. America's effective economic hegemony
in the wake of WWII, combined with Cold War paranoia, proliferated
banana republics and puppet dictatorships in the southern hemisphere.
But it was possible then for one wage earner to support a family
with one 40-hour a week job. Even much of the unskilled and semi-skilled
work paid well enough for a family to have a decent roof over their
heads and food on the table. By the mid-1960s a full-time job was
more likely than not to include health benefits and some form of
retirement benefits. The economy of the 1950s and '60s opened up
higher education to the children of the working class in unprecedented
numbers. Home ownership soared.
While the peak level of unionization of the workforce contributed
to workers' ability to acquire education and assets, and to consume
at high levels, it would be a mistake to equate unionization and
productivity. While unions contributed to increased productivity
in some trades and industries through better training, higher retention
rates of skilled and experienced workers, etc., unions could also
inhibit productivity in some respects. And as unions grew into vast
conglomerates, some mirrored the worst traits of capital, becoming
tainted by corruption and strangled by bureaucracy and the inertia
Still, there is no denying that a highly unionized workforce contributed
strongly to an economy that distributed wealth more equitably between
labor and capital.
Auntie remembers very fondly the days when if you moved, you simply
called "the telephone company" and told them to transfer your service
to your new residence. If you moved far enough, this meant changing
your "exchange." Really far, and you acquired a new area
code. But regardless of exchange or area code, if you had one-line,
one-party service, you knew exactly what your basic bill would be
every month, and it would be the same as everyone else with the
There is much to be said for simplicity.
However, I have to acknowledge the downside to regulation. Highly
regulated industries - especially monopolies (real or effective)
don't have the same incentives to innovate, or the competitive pressures
on price as less-controlled industries. By keeping prices fairly
stable, and somewhat artificially low, regulation can inhibit growth
However, it can also prevent industries from engaging in orgies
of innovation and passing on huge retooling and product development
costs to the consumer. And while regulation can keep companies from
making stockholders wealthy, it can also prevent disasters like
Enron, WorldCom, etc. Too much competition can also destabilize
an industry's productivity and capacity for long-term profitability.
By keeping certain basic costs - water, electricity and heat,
basic phone service, etc., very stable through regulation, the economy
of the 1950s and 1960s also made "fixed" incomes more feasible and
realistic. Once retired, few workers needed to rejoin the workforce
just to make ends meet - which further reduced the size of the workforce,
and kept wages apace with costs.
Deregulation has decreased the prices of some goods and services,
and certainly it has vastly increased the array of goods and services
available to consumers. Some of the innovations produced by deregulation
are vital elements of our economy today. I don't know how long it
would have taken "Ma Bell" to develop the cell phone, but I think
it's safe to say that the mass communications available to the average
consumer today owe at least some of their existence to deregulation.
Some air travel is much cheaper since the airline industry deregulated
(if you compare it in fixed dollar values, most airfares today are
much cheaper than they were in the 1960s.) But some travel (especially
on low-traffic, unprofitable routes) is much more expensive, and
today we have a notoriously weak industry that is perforated with
bankruptcies and subsidies and public bailouts.
Auntie isn't an economist, thank heavens. I don't have to keep
track of all those variables, controllable and uncontrollable, and
try to guess how they will affect each other and how people will
respond to them. But I do think that if those who make policy decisions
about our economy would keep one simple rule in mind, we might end
up with a stronger, more viable economy:
Keep the rules loose enough for free upward movement, and
make decisions based on benefiting the middle three economic
I'm not suggesting we abandon the poor! Heavens, no. To prevent
poverty from becoming a drag on the economy as a whole, we must
ensure certain decent minimums for the bottom quintile, too. But
the vast majority of decisions about taxation, regulation, economic
subsidy, etc., should be targeted to benefit those in the middle.
The upper 20%, on the other hand, has plenty of resources to look
Thanks for asking Auntie Pinko, Fay!
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