Friday, October 26, 2012

Paul Krugman's The Conscience of a Liberal 1

I started Paul Krugman's The Conscience of a Liberal.

According to Krugman, prior to the New Deal, particularly during the period after the Civil War through the 1920's, the United States had a significant amount of income inequality.  Granted, Krugman states on pages 19-20 that "Urban workers, in particular, saw a vast improvement in the quality of life over the course of the Long Gilded Age, as diets and health improved, indoor plumbing and electricity became standard even in tenements, and the emergence of urban mass transit systems enlarged personal horizons."  But Krugman also says on page 43 that most Americans in the 1920's lacked indoor plumbing, washing machines, private automobiles, and private telephones.

For Krugman, the government at that time was not part of the solution.  Taxes on the rich during the 1920's were not that high.  The government tended to side with management over unions.  And there was hardly any social safety net.  Moreover, Krugman narrates, it was hard to change that sort of set-up through the political process.  The Republicans from the post-Civil War days on largely sided with Big Business, which funded their campaigns.  About the only Democrats who could get anywhere politically were the Bourbon Democrats, who supported less government.  Elections were bought.  Any attempt to redistribute wealth or to set limits on businesses was labelled socialistic, in a time when Americans were especially afraid of Communism (but Krugman acknowledges that some states took steps to limit the excesses of businesses, as when they established worker's compensation and age-old pension systems, and yet some of these laws were struck down by courts).  Meanwhile, populists failed to create a broad coalition.  William Jennings Bryan, for example, focused his attention on farmers in his support for free-silver, which would lessen their debts.  And it was difficult to unite various immigrants, white farmers and workers, and African-Americans into a reform movement.

But things changed with President Franklin D. Roosevelt's New Deal, Krugman contends.  For the first time since Woodrow Wilson, the government now was on the side of unions.  Taxes went up on the rich.  The government for a time controlled wages and prices, and it used that power to elevate the wages of people who weren't paid that much.  There was Social Security, unemployment insurance, and farm programs.  According to Krugman, the reason that American society did not revert back to gross inequality after World War II was that Dwight Eisenhower chose to retain prominent elements of the New Deal.  And the result was not economic stagnation, which many conservatives warn would be the result of unions and high taxes on the rich.  Rather, the U.S. thrived economically.

Krugman seems to think that we can go back to that.  Can we really turn back time, though?  Krugman admits that there wasn't much foreign competition during the 1950's.  Well, there's a whole lot of it today!  And unions and taxes would arguably make us less competitive.  Would Krugman support protectionism to lessen that problem?

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