The Conscience of a Liberal
By Paul Krugman
W.W. Norton and Company, Inc.
New York, 2007
Back in the 1990's, Paul Krugman regularly irritated the crap out of me. In the profession of academic economics he was recognized as a major figure. He was awarded the John Bates Clark Medal, which goes to those adjudged to be the top American economist under the age of 40, and is often a precursor to the Nobel Prize in economics. Krugman appeared to be a liberal, and he was a gifted writer. But instead of using his prodigious gifts to help out liberals—or so it seemed to me back then—he appeared to most relish lampooning those he characterized as liberal "policy entrepreneurs" like Lester Thurow and Robert Riech, as he did in 1994's Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. Back then Krugman was bullish on international trade, and he was merciless in exposing what he thought was the shallowness of the "strategic trade" advocates who had a brief period of influence at the beginning of the Clinton administration.
Krugman was dismissive toward economists with "celebrity status," such as John Kenneth Galbraith, whom he used as his model of one of the first "policy entrepreneurs." Krugman wasn't dismissive of people who wrote for a general audience; John Maynard Keynes wrote for the popular press, and did so prolifically and brilliantly. When Keynes was writing, however, there really wasn't much of a "profession" of economics, and he wrote primarily about policy, not party politics. By the time Galbraith came along, economics had become an established academic discipline, and he was largely disdained by academic economists, in part because he did write about politics and didn't treat economics like it was separate from politics. In Peddling Prosperity, the best Krugman could say about him was that...
Galbraith broke important new ground in the relationship between politics and economics. He was the first celebrity economist (where the definition of a celebrity is the usual one: someone who is famous for being famous). His rise as a policy entrepreneur was one marker of the growing dominance of style (which he has in abundance) over substance in American political discourse, even among those who imagine themselves to be well-informed about public affairs.
Krugman wrote Peddling Prosperity early in the Clinton administration, before the Gingrich takeover of Congress. It was primarily a critique of popular economic policies. Krugman was being Keynes. But in the intervening years, seeing the radicalism of Gingrich and Movement Conservatism, the radicalism of the Bush administration, and the assaults on the New Deal and the American middle class, Krugman has realized that there is a time for policy, but that liberal policy requires a progressive movement. Much as Galbraith was a major liberal voice on economic matters in the post-war era, Krugman has decided he needs to be a liberal voice on economic matters in support of a progressive movement to defend and extend the New Deal. He still values rigorous economic theory, research and practice. But he now knows that liberal policy will get nowhere without the triumph of progressive politics. To that end, he has written The Conscience of a Liberal. This book which will endure as one of the fundamental political statements of our era, an era we hope, and have reason to believe, will become the next progressive era, when liberal ideals are achieved by a progressive political movement which elects more and better Democrats and then pushes those Democrats to complete the promises of the New Deal.
The argument of Krugman's book is simple yet audacious, coming as it does from someone at the heart of establishment academia and media:
I believe in a relatively equal society, supported by institutions that limit extremes of wealth and poverty. I believe in democracy, civil liberties, and the rule of law. That makes me a liberal, and I’m proud of it.
Being a liberal is not enough, however. To enact liberal policies and nurture American democracy, it is necessary to have a progressive movement, one which includes mainstays of the traditional liberal movement (such as a revitalized labor movement) with "novel entities like the 'netroots,' the virtual community held together by bloggers and progressive websites like Daily Kos, which now attracts regular postings from leading Democratic politicians." But unlike movement conservatism, which is a top-down phenomena, the progressive movement Krugman embraces is not centralized:
What makes progressive institutions in to a movement isn't money; It's self-perception. Many Americans with more or less liberal beliefs now consider themselves members of a common movement, with the shared goals of limiting inequality and defending democratic principles. The movement reserves it's greatest scorn for Democrats who won't make a stand against the right, who give in on Social Security privatization or escalation in Iraq.
These statements come near the end of the book, when any reasonably liberal person would realize the dire need for a progressive movement, and the tremendous opportunity available to tough, committed and idealistic progressives.
The Conscience of a Liberal reads like a story. In the beginning, there was the gilded age, when rapacious robber barons essentially did whatever they wanted. The Progressive Age curtailed their rapaciousness a bit, through the implementation of the income tax, some restrictions on trusts, and the promulgation of state-level wage and labor standards. But after WWI, when Wilson was succeeded by Republicans and labor was smacked down in the Red Scares, the largely unregulated market helped bring about the Great Depression.
The came what Krugman calls the Great Compression. In the span of less than 20 years—essentially the presidential terms of FDR and Truman—extremes of wage and wealth inequality were largely wiped out in America. We didn't achieve a full-fledged welfare state like most of the advanced countries of the West; it wasn't until the 1970's that the US provided the same amount of "after-market" government support such as TANF, HFA loans, student aid and the like for people under age 65 as most developed countries in Europe provided in 1937. But we had made tremendous progress at providing equality of opportunity and ameliorating inequality and poverty in the US. The result was the great American middle class, which Krugman explicitly attributes to the governmental policies of the New Deal.
Much of the progress made in the 1930's and 1940's came from the rise of organized labor. Economic equality was also achieved, to be blunt, because the New Deal soaked the ultra-rich, through tax rates of 70% (compared to a maximum tax rate today of 37%). Wage pattern bargaining, where major union contracts set industry-wide norms, maintained the gains throughout the 50's and 60's, and CEO salaries were kept to an average of 40 times the earnings of the company's average worker.
The New Deal wasn't completed, however. Truman tried pass a national health plan after WWII, and there was great public support. However, it was scuttled in large part because Northern Republicans were joined in opposition by Southern Democrats who were afraid that a national health care system would force the desegregation of hospitals in the Jim Crow South.
The causes and limits of the New Deal are at the heart of the attack on the New Deal since the 1960's. Krugman—drawing heavily on the work of Rick Perlstein and Lisa McGirr--describes the evolution of movement conservatism as arising straight out of McCarthyite red-baiting, mixed with a rabid hatred of organized labor and civil rights for African-American, cultural revanchism, and the financial support of a handful of ultra-rich families. Movement conservatism helped nominate Barry Goldwater in 1964, which led to the Johnson landslide. But movement conservatism has at its heart a "Leninist strategy" of unrelenting pursuit of its primary goal: the repeal of the New Deal.
Richard Nixon was a transitional figure, a Republican whose policies were consistent with Eisenhower's accommodation with the New Deal. But Nixon "showed how the dark side of America—cultural and social resentments, anxieties over security at home and abroad, and, above all, race—could be exploited to win elections." In the early 1970's corporate money helped create major institutions of the right such as the Heritage Foundation and the Business Roundtable. Ronald Reagan and the advertising people (such as Roger Ailes) who helped create him honed an affable image for radical rightwing policies, even while they shamelessly exploited racism and viciously attacked organized labor.
Krugman compellingly describes the economic carnage wrought by movement conservatism and the realization of it's policies in the Reagan/Gingrich/George W Bush era. Much of the inequality wiped out in the Great Compression was restored by the Republican-created "great divergence." Today a tiny sliver of the population--mostly CEO's and the next rung or two of major corporate executives, financial speculators and sports and media celebrities--have received almost all of income gains of the last 35 years. Labor unions have been under assault for 30 years. We expect Krugman to shine when translating economic research for laymen, and in The Conscience of a Liberal he shines.
What makes the book invaluable, however, is how he ties together economics and politics. Whereas 15 years ago he tepidly complimented Galbraith for "breaking new ground in the relationship between politics and economics," politics is now at the heart of Krugman's economic explanations for what's happened with inequality in the US since the 1970's. He rejects the idea that skill-based technological change explains the growing income and wealth disparity in the US since 1973. If trade or technology caused the disparity, it would be observed in other industrialized countries, but only in post-Thatcher Britain has there been much growth in income disparity. No, Krugman makes clear, theories that are predominately economic can't explain the rise of inequality since 1973. It's the rise of movement conservatism and the policies pursued by the radicals in the GOP since the rise of Ronald Reagan. Krugman may be an economist, but unlike most in his field—indeed, unlike the Krugman of the early 90's—he now sees the source of our economic malaise rooted in the politics and governance of movement conservatism.
Much as Republicanism-run-amok provided the tremendous opportunity given to the Democrats with the election of FDR in 1932—an election, by the way, in which Roosevelt campaigned on little more than platitudes and conservative nostrums like balancing the federal budget, and gave little indication of how progressive he would be as president—Krugman believes public disgust with Republicans and a growing acceptance of the role of government could lead to major Democratic gains in November. The tempering of racism and the huge growth in immigration make it harder for Republicans to demagogue on race. Demographic changes favor Democrats, and the Republicans have run out of ideas.
Roosevelt and his allies seized their opportunity after 1932, locking in a generation's electoral and political support by passing the New Deal, modernizing the country, extending the rights and opportunities of citizenship to the previously disposed masses (many of them first or second generation Americans), and leading the fight against fascism. This time, it's incumbent on Democrats to enact a national health care plan, something he thinks will be much easier to do this time than it was in 1993-1994.
The era of liberal dominance led, somewhat paradoxically, to the "great era" of bipartisanship. But Krugman is explicit that bipartisanship failed not because of failures by subsequent generations of Democrats in being "too partisan," but because the GOP rejected Eisenhower and the acceptance of the New Deal, and veered off in to radical extremism.
In August I argued that we can't wait for bipartisan solutions. Around the same time Krugman was finishing his book with the same conclusion:
To be a progressive, then, means to be a partisan—at least for now. The only way a progressive agenda can be enacted is if Democrats have both the presidency and a large enough majority in Congress to overcome Republican opposition. And achieving that kind of political preponderance will require leadership that makes opponents of the progressive agenda pay a political price for their obstructionism—leadership that, like FDR, welcomes the hatred of the groups trying to prevent us from making our society better.
[...]
For now, being an active liberal means being a progressive, and being a progressive means being partisan. But the end goal isn't one-party rule. It's the reestablishment of a truly vital, competitive democracy. Because in the end, democracy is what being a liberal is all about.