How opportune that I’m reading this book right on the heels of The Given Day. Early on Krugman mentions the Palmer Raids, which were an integral part of the The Given Day. Lehane used them to highlight a point in America’s history where tensions between the political establishment and those disenfranchised in society reached a fever pitch. Krugman uses them to highlight a similar point, which we’ll get to.
The timeliness of reading these two books back-to-back was dumb luck. I had just finished The Given Day (and Breaking the Slump) about a day earlier so I was between books. I had my Kindle in my hands and I heard my phone vibrate. Ah, a text message from a friend. He says something like “just finished Conscience of a Liberal by Paul Krugman, great book.” So I ordered it up on the spot. Sweetness.
You may not care a bit about how I came about this book, and I don’t blame you. Hey, I’m sorry. This is stuff I want to record though for my own sake, so thanks for listening. I also want it to be known that to get both sides of the story, I will read Liberty and Tyranny: A Conservative Manifesto, which as of today is the top seller in the Kindle Store’s category entitled “Politics & Current Events.” It just feels like something I should do. Reading two sides of the story back-to-back should put me in the best frame of mind to compare and contrast.
Okay, enough of the intro stuff. Let’s get down to what Krugman is talking about. He builds a case that this country is in a bad place, just about as bad as it was in the period leading up to the Great Depression, because of the high level of income inequality that exists. This, he says, is not unrelated to the high level of partisanship that also exists in our country. They feed off each other and to rectify the situation, a return to liberal ideals, like those embodied by the New Deal, is imperative.
In the first chapter he sets the table with this statement:
There have, then, been two great arcs in modern American history—an economic arc from high inequality to relative equality and back again, and a political arc from extreme polarization to bipartisanship and back again. These two arcs move in parallel: The golden age of economic equality roughly corresponded to the golden age of political bipartisanship.
This golden age he talks about is the period after the Great Depression until about the late 1960s; a period that had great economic growth, a thriving middle class, and relative agreement on most economic and political issues across both parties. But then the 70s came along:
Over the course of the 1970s, radicals of the right determined to roll back the achievements of the New Deal took over the Republican Party, opening a partisan gap with the Democrats, who became the true conservatives, defenders of the long-standing institutions of equality. The empowerment of the hard right emboldened business to launch an all-out attack on the union movement, drastically reducing workers’ bargaining power; freed business executives from the political and social constraints that had previously placed limits on runaway executive paychecks; sharply reduced tax rates on high incomes; and in a variety of other ways promoted rising inequality.
So now that this rising inequality has finally met it’s backlash in the form a near-sweep by the Democrats in the 2006 mid-term elections, what is the new liberal majority to do? Krugman tells the reader that answers are forthcoming, but we have to have a quick history refresher on modern America. Thus ends a rather rich chapter 1. It’s important to note that Krugman wrote this book in 2007 and correctly predicted that we would have a Democratic president and a Democratic Congress in 2009.
Krugman spends the next eight chapters talking about the economic and political climate from Reconstruction to George W. Bush’s second term. He has terms for them:
The Long Gilded Age (1870 to 1829)
The run-up to the Great Depression looks a fair amount like the last few years before this current economic crisis. There were divisive economic and political differences even worse than today’s. Krugman says in Chapter 2:
In short, during the Long Gilded Age—as in today’s America—cultural and racial divisions among those with shared common economic interests prevented the emergence of an effective political challenge to extreme economic inequality. The difference between then and now was that the divisions of the Long Gilded Age were significantly more extreme than they are today. At the same time there were fewer people, even among political leaders, with the vision to see beyond them. This, in turn, brings us to another feature of the Long Gilded Age: the intellectual dominance of conservative, antigovernment ideology.
There was not a foothold to be gained by unions and the post WWI red scare “had the incidental effect of discrediting or intimidating ordinary liberals.” This is where the Palmer Raids mentioned in the first paragraph are brought up by Krugman. He (like Lehane) paints a picture of society where the few in power make decisions detrimental to the economic health of the country.
The Great Depression (1929 to around 1940-some debate)
You know the story. Bad, really bad.
The Great Compression (after the Great Depression to roughly 1973-the end of the postwar boom)
Krugman calls it such because the gap between rich and poor shrunk to unheard of lows. And not coincidentally, the difference in beliefs between Democrats and Republicans was virtually indiscernible. It was a happy time of growth, but characterized by the blight of racism, which Krugman thinks proved to be part of the undoing. Here are Krugman’s exact words:
America in the 1950s was a middle-class society, to a far greater extent than it had been in the 1920s—or than it is today. Social injustice remained pervasive: Segregation still ruled in the South, and both overt racism and overt discrimination against women were the norm throughout the country. Yet ordinary workers and their families had good reason to feel that they were sharing in the nation’s prosperity as never before. And, on the other side, the rich were a lot less rich than they had been a generation earlier.
Wow, sounds alright huh. Taxes were through the roof on the rich, listen to this:
But with the coming of the New Deal, the rich started to face taxes that were not only vastly higher than those of the twenties, but high by today’s standards. The top income tax rate (currently only 35 percent) rose to 63 percent during the first Roosevelt administration, and 79 percent in the second. By the mid-fifties, as the United States faced the expenses of the Cold War, it had risen to 91 percent.
But people were still happy. Union participation skyrocketed, government spending was massive, and the South was voting democrat. Can you believe that? And government corruption was virtually nonexistent:
In retrospect it’s startling just how clean the New Deal’s record was. FDR presided over a huge expansion of federal spending, including highly discretionary spending by the Works Progress Administration. Yet the popular image of public relief, widely regarded as corrupt before the New Deal, actually improved markedly.
The New Deal’s probity wasn’t an accident. New Deal officials made almost a fetish out of policing their programs against potential corruption. In particular FDR created a powerful “division of progress investigation” to investigate complaints of malfeasance in the WPA.
As things go however, it came to an end. The undoing being the 1960’s. Despite continued economic growth through 1973, the political views of the country began to diverge in the early 60’s.
The Great Divergence (1973 to about 2006, the Dems victory in the mid-term elections)
This period is described by Krugman as basically the undoing of the New Deal. Unions shrunk and tax rates plummeted, and in turn the gap between the haves and have-nots increased markedly. He brings up the interesting analogy of “Bill Gates walking into a bar”:
As it turns out, Bill Gates walking into a bar is a pretty good metaphor for what has actually happened in the United States over the past generation: Average income has risen substantially, but that’s mainly because a few people have gotten much, much richer. Median income, depending on which definition you use, has either risen modestly or actually declined.
The middle class has stagnated. He goes on:
A rough estimate is that about half of the wage income of this superelite comes from the earnings of top executives—not just CEOs but those a few ranks below—at major companies. Much of the rest of the wage income of the top 0.01 percent appears to represent the incomes of sports and entertainment celebrities. So a large part of the overall increase in inequality is, in a direct sense, the result of a change in the way society pays its allegedly best and brightest. They were always paid well, but now they’re paid incredibly well.
So the rich got richer because the barriers to it happening in society were torn down. Ronald Reagan came along and put the nail in the income equality coffin by beating unions to a pulp and decreasing taxes, among other things. Additionally, technological change allowed the best and brightest to separate themselves from the rest of society. Krugman summarizes:
As I explained in chapter 1, I began working on this book with that view, which goes something like this: Money buys influence, and as the richest few percent of Americans have grown richer thanks to unequalizing forces like technical change, they have become rich enough to buy themselves a party. In this view, the rise of movement conservatism is a by-product of rising inequality.
He implicates movement conservatism even more than what I’ve quoted thus far. He includes racism as one of the many forces driving movement conservatism and he also seems to say that Republicans have lied and cheated their way to the top. And the American people have let it happen, for various reasons, until they made the stand in the 2006 mid-term elections.
What’s next?
So here we are, a Democrat in the White House, a Democratic Congress, and, according to Krugman, an economy in ruin brought about by the same forces that resulted in the Great Depression. What does Krugman think they should do?
Liberals need to “seize the opportunity” and basically roll back the roll-back, as I understand it. Remember, he referred to the Great Divergence as a reversal of the New Deal. Well, he wants to reverse that reversal and institute measures akin to the New Deal. The most important of which, he says, is universal health care. He spends a detailed chapter on this issue and starts it out with this:
So how does the U.S. health care system, with its unique reliance on private insurance, stack up against the systems of other advanced countries? Table 7 tells the story. It shows how much different countries spend per person on health care, and compares that spending with average life expectancy, the simplest measure of how well the health care system is functioning. The United States spends almost twice as much on health care per person as Canada, France, and Germany, almost two and a half times as much as Britain—yet our life expectancy is at the bottom of the pack.
He refutes the traditional Republican view that we have the best health care in the world, tears down Bill Clinton’s attempt to institute universal health care, and provides data on the why’s and how’s it would work, including a plan that comes at zero incremental cost. I don’t understand all of it, but it comes through savings in administrative costs and a realignment of incentives by converting to a single payer system. He rounds it out with this:
The principal reason to reform American health care is simply that it would improve the quality of life for most Americans. Under our current system tens of millions lack adequate health care, millions more have had their lives destroyed by the financial burden of medical costs, and many more who haven’t yet gone without insurance or been bankrupted by health costs live in fear that they may be next. And it’s all unnecessary: Every other wealthy country has universal coverage. Reducing the risks Americans face would be worth it even if it had a substantial cost—but in this case there would be no cost at all. Universal health care would be cheaper and better than our current fragmented system.
Then, once this is done, they can move on to addressing other areas of inequality, by increasing taxes and revitalizing unions. Sounds liberal to me.
He spends the last few moments talking about being a progressive. I’m not sure I completely understand this. He seems to feel that the progressive route is the only route to getting the liberal agenda passed. That most liberals look back and progressives look forward. That, I need to look into. It’s an interesting book and I’m ready to jump on the bandwagon, but I’m going to get the other side first.