The Twinkie manifesto

Nov 20 2012, 03:01 IST
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SummaryThe Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularised the brand by sponsoring “The Howdy Doody Show”.

Paul Krugman

The Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularised the brand by sponsoring “The Howdy Doody Show”. And the demise of Hostess has unleashed a wave of baby boomer nostalgia for a seemingly more innocent time.

Needless to say, it wasn’t really innocent. But the ‘50s—the Twinkie Era—do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged centre, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle”.

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91%, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01% of Americans paid an effective federal tax rate of more than 70%, twice what they pay today.

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labour force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labour bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.

Squeezed between high taxes and empowered workers, executives were relatively impoverished by the standards of either earlier or later generations. In 1955 Fortune magazine published an essay, “How top executives live”, which emphasised how modest their lifestyles had become compared with days of yore. The vast mansions, armies of servants, and huge yachts of the 1920s were no more; by 1955 the typical executive, Fortune claimed, lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat.

The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with

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