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?