Paul Krugman: The Conscience of a Liberal (2007, WW Norton)

The title consciously refers to Barry Goldwater's The Conscience of a Conservative, widely (although not necessarily accurately) regarded as an opening salvo in conservatism's march to political power. This is not a collection of columns. Rather, it is a narrowly focused piece of large scale economic history with a clear political agenda: to show that liberalism promotes economic equality, bringing the whole nation broader prosperity, security, and happiness, and to show that conservatism does exactly the opposite. The focus on equality may be a result of Krugman's consciousness first and foremost as an economist. He doesn't spend enough effort proving the virtues and linkages of equality, making his tract seem rather materialist. My own take is that it has to do mostly with one's sense of common purpose with the people around you, extending as far as the limits of the nation (and conceivably further). If those people seem to be only out for themselves, their greed undermines our unity. Krugman refers to how the shared sacrifices of both world wars brought about greater economic equality. In those cases policies consciously aimed at promoting unity also worked to reduce inequality; conversely, politics aimed at reducing inequality result in greater unity by giving us more in common.

Krugman also doesn't go far into why this matters. My own belief is that we are approaching, if not already sucked into, a vortex of crises occasioned largely by mankind butting up against limits in worldwide resources. Such crises can best be met by pulling us together to work cooperatively; failure to do so will make them far more intractable, as unwillingness to share sacrifices only compounds the crises.

One thing that Krugman mentions that I didn't pull a quote on is his belief that the key to the Republicans' success has been their ability to pick up white southern voters by coding issues in terms of race. It's one of those points that is obvious but rarely spoken of, especially in terms of its full ramifications, which basically involve the willingness of whites to undermine their own welfare in order to spite blacks. That conservative elites should be a party to this shouldn't surprise anyone. As long as they see any gains by the poor, either black or white, as coming at the expense of the rich, they'll stand up for the latter. Promoting the advantages of the rich what conservatism has always been about. All else is detail, subject to change to support their real purpose.

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Chapter 1: The Way We Were (pp. 3-4):

I was born in 1953. Like the rest of my generation, I took the America I grew up in for granted -- in fact, like many in my generation, I railed against the very real injustices of our society, marched against the bombing of Cambodia, went door to door for liberal political candidates. It's only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation's history.

Postwar America was, above all, a middle-class society. The great boom in wages that began with World War II had lifted tens of millions of Americans -- my parents among them - from urban slums and rural poverty to a life of home ownership and unprecedented comfort. The rich, on the other hand, had lost ground: They were few in number and, relative to the prosperous middle, not all that rich. The poor were more numerous than the rich, but they were still a relatively small minority. As a result, there was a striking sense of economic commonality: Most people in America lived recognizably similar and remarkably decent material lives.

I was born in 1950 and can attest to much of that. My parents both came off Depression-era farms that couldn't support their families and worked during the war in aircraft factories -- my father working his whole life in that factory, my mother becoming a housewife when I was born. They worked hard and saved, buying a small house which they later built onto, a series of new Fords (one in 1949, another in 1961, a lemon in 1973). We had a fairly complete set of appliances: stove, refrigerator, freezer, washing machine, dryer, telephone, television, window air conditioner, with infrequent replacements and occasional upgrades. I had no sense of ethnic or class divisions, and had little sense of what the fact that my neighborhood and schools were all white meant. I was religious, patriotic, one of the most successful kids in my class. I had a sense of unlimited opportunity, which due to various reasons fell apart completely in the mid-'60s, shattered by uncovering many hypocrisies -- the Vietnam war above all, but also by the realization that America's middle class concept was mostly romantic delusion. I'm less harsh about it now, no doubt because it's only gotten worse. So there were many exceptions to Krugman's outline, but there was also truth to it, and that truth certainly extended to my parents, who started pretty low down on the totem pole.

Chapter 2: The Long Gilded Age -- Krugman's term for the period in US history from 1870-1930 (pp. 15-16):

Pre-New Deal America, like America in the early twenty-first century, was a land of vast inequality in wealth and power, in which a nominally democratic political system failed to represent the economic interests of the majority. Moreover the factors that let a wealthy elite dominate political life have recognizable counterparts today: the overwhelming financial disadvantage at which populist political candidates operated; the division of Americans with common economic interests along racial, ethnic, and religious lines, the uncritical acceptance of a conservative ideology that warned that any attempt to help the less fortunate would head to economic disaster.

Chapter 3: The Great Compression -- Krugman's term for the set of economic policies starting with the New Deal and the economic controls in force during World War II which led to significant narrowing of economic inequality and the formation of a middle class America (pp. 42-44):

On one side the majority of Americans were able, for the first time, to afford a decent standard of living. I know that "decent" isn't a well-defined term, but here's what I mean: In the twenties the technology to provide the major comforts and conveniences of modern life already existed. A modern American transported back to, say, the time of Abraham Lincoln would be horrified at the roughness of life, no matter how much money he had. But a modern American transported back to the late 1920s and given a high enough income would find life by and large tolerable. The problem was that most Americans in the twenties couldn't afford to live that tolerable life. To take the most basic comfort: Most rural Americans still didn't have indoor plumbing, and many urban Americans had to share facilities with other families. Washing machines existed, but weren't standard in the home. Private automobiles and private telephones existed, but most families didn't have them. In 1936 the Gallup organization predicted a landslide victory for Alf Landon, the Republican presidential candidate. How did Gallup get it so wrong? Well, the poll was based on a telephone survey, but at the time only about a third of U.S. residences had a home phone -- and those people who didn't have phones tended to be Roosevelt supporters. And so on down the line.

But by the fifties, although there were still rural Americans who relied on outhouses, and urban families living in tenements with toilets down the hall, they were a distinct minority. By 1955 a majority of American families owned a car. And 70 percent of residences had telephones.

On the other side F. Scott Fitzgerald's remark that the rich "are different from you and me" has never, before or since, been less true than it was in the generation that followed World War II. By the fifties, very few Americans were able to afford a lifestyle that put them in a different material universe from that occupied by the middle class. The rich might have had bigger houses than most people, but they could no longer afford to live in vast mansions -- in particular, they couldn't afford the servants necessary to maintain those mansions. The traditional differences in dress between the rich and everyone else had largely vanished, partly because ordinary workers could now afford to wear (and clean) good clothes, partly because the rich could no longer afford to dress in a style that required legions of servants to help them get into and out of their wardrobes. Even the traditional rich man's advantage in mobility -- to this day high-end stores are said to cater to the "carriage trade" -- had vanished now that most people had cars.

I don't think it's romanticizing to say that all this contributed to a new sense of dignity among ordinary Americans. Everything we know about America during the Long Gilded Age makes it clear that it was, despite the nation's democratic ideology, a very class-conscious society -- a place where the rich considered themselves the workers' "betters," and where workers lived in fear (and resentment) of the "bosses." But in postwar America -- and here I can speak from my personal memory of the society in which I grew up, as well as what we can learn from what people said and wrote -- much of that class consciousness was gone. Postwar American society had its poor, but the truly rich were rare and made little impact on society. A worker protected by a good union, as many were, had as secure a job and often nearly as high an income as a highly trained professional. And we all lived material lives that were no more different from one another than a Cadillac was from a Chevy: One life might be more luxurious than another, but there were no big differences in where people could go and what they could do.

(p. 48):

And one more thing: Not only did those who depended on income from capital find much of that income taxed away, they found it increasingly difficult to pass their wealth on to their children. The top estate tax rate rose from 20 percent to 45, then 60, then 70, and finally 77 percent. Partly as a result the ownership of wealth became significantly less concentrated: The richest 0.1 percent of Americans owned more than 20 percent of the nation's wealth in 1929, but only around 10 percent in the mid-1950s.

So what happened to the rich? Basically the New Deal taxed away much, perhaps most, of their income. No wonder FDR was viewed as a traitor to his class.

(pp. 55-56):

During the postwar boom the real income of the typical family roughly doubled, from about $22,000 in today's prices to $44,000. That's a growth rate of 2.7 percent per year. And incomes all through the income distribution grew at about the same rate, preserving the relatively equal distribution created by the Great Compression.

Chapter 4: The Politics of the Welfare State (pp. 61-62):

Once in power -- and less inclined to dismiss radical ideas -- FDR was faced with the task of persuading the public to reject conventional wisdom and accept radically new policies. He was able to overcome voters' natural conservatism thanks largely to accidents of history. First, the economic catastrophe of 1929-33 shattered the credibility of the old elite and its ideology, and the recovery that began in 1933, incomplete though it was, lent credibility to New Deal reforms. "We have always known that heedless self-interest was bad morals; now we know that it is bad economics," declared FDR in his second inaugural address. Second, World War II created conditions under which large-scale government intervention in the economy was clearly necessary, sweeping aside skepticism about radical measures. So by the time Eisenhower wrote that letter to his brother, the New Deal institutions were no longer considered radical innovations; they were part of the normal fabric of American life.

Of course it wouldn't have played out that way if the pre-New Deal conventional wisdom had been right -- if taxing the rich, providing Social Security and unemployment benefits, and enhancing worker bargaining power had been disastrous for the economy. But the Great Compression was, in fact, followed by the greatest sustained economic boom in U.S. history. Moreover, the Roosevelt administration demonstrated that one of the standard arguments against large-scale intervention in the economy -- that it would inevitably lead to equally large-scale corruption -- wasn't true. 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. This division proved so effective that a later congressional investigation couldn't find a single serious irregularity it had overlooked.

This dedication to honest government wasn't a sign of Roosevelt's personal virtue; rather it reflected a political imperative. FDR's mission in office was to show that government activism works. To maintain that mission's credibility he needed to keep his administration's record clean. And he did.

This is in marked contrast to the expansion of government spending under the Reagan and second Bush administrations, where much of the rationale for spending has evidently been to create opportunities for corruption.

Chapter 5: The Sixties: A Troubled Prosperity (pp. 79-80):

It was an economy that seemingly provided jobs for everyone. What's more those abundant jobs came with wages that were higher than ever, and rising every year. At the bottom end, workers were much better off than they would ever be again: The minimum wage in 1966, at $1.25 an hour, was equivalent of more than $8.00 in today's dollars, far higher than today's minimum wage of $5.15. By 1966 the typical man in his thirties was earning as much as his modern equivalent; by the time the great boom ended, in the early seventies, men would be earning about 14 percent more than they do now. It's true that family incomes were a bit less than they are today, because fewer women worked and the gap between women's wages and men's wages was larger. And because incomes were a bit lower than they are now, middle-class families lived in smaller houses, were less likely to have two cars, and in general had a somewhat lower material standard of living than their counterparts today. Yet the standard of living felt high to most Americans, both because it was far higher than it had been for the previous generation, and because a more equal society offered fewer occasions to feel left out. As MIT economists Frank Levy and Peter Temin have pointed out, the broad-based rise in income meant that a blue-collar machine operator earned more, in real terms, than most managers had earned a generation earlier. As a result more Americans than ever before considered themselves middle class.

Economic security was also unprecedented. By 1966, 80 percent of the population had health insurance, up from only 30 percent at the end of World War II, and by 1970 the fraction of the population with health insurance surpassed today's 85 percent level. Workers who lost their jobs despite the low unemployment rate were much more likely to receive unemployment insurance than laid-off workers are today, and that insurance covered a larger fraction of their lost wages than does today's. And as Levy and Temin point out, rising wages across the board meant that even laid-off workers whose next job paid less than the one they lost found that within a few years they had recovered their previous standard of living.

Chapter 6: Movement Conservatism (pp. 101-102):

It's worth looking at early issues of the National Review, to get a sense of what movement conservatives sounded like before they learned to speak in code. Today leading figures on the American right are masters of what the British call "dog-whistle politics": They say things that appeal to certain groups in a way that only the targeted groups can hear -- and thereby avoid having the extremism of their positions become generally obvious. As we'll see later in this chapter, Ronald Reagan was able to signal sympathy for racism without ever saying anything overtly racist. As we'll see later in this book, George W. Bush consistently uses language that sounds at worst slightly stilted to most Americans, but is fraught with meaning to the most extreme, end-of-days religious extremists. But in the early days of the National Review positions were stated more openly.

This is followed by samples favoring segregation and disenfranchisement of blacks in the South and touting General Franco as "an authentic national hero."

(p. 107):

Ironically, one problem with being a superpower is that it's hard to explain to its citizens the limits of that power. Canadians don't wonder why their government is unable to impose its will on the world. Americans, however, are all too easily convinced that those who threaten the nation can simply be eliminated by force -- and that anyone who urges restraint is weak at best, treasonous at worst.

(p. 121):

It's almost impossible to overstate Nixon's impact on the way American politics is conducted. Nixon, after all, showed how you could exploit racial divisions, anxiety about social change, and paranoia about foreign threats to peel working-class whites away from the New Deal coalition. He introduced the art of media manipulation: Roger Ailes, the president of Fox News, was Nixon's media consultant, and is a central figure in Joe McGinniss's 1969 book The Selling of the President. Later, Nixon pioneered the media intimidation that so successfully suppressed dissent for much of the Bush administration, as well as the tactic of blaming the news media for reporting bad news.

It was during the Nixon years that the successful execution of dirty tricks became a passport to advancement in the Republican Party. In 1970 a young Karl Rove printed fake leaflets advertising free beer on campaign stationery stolen from a Democratic candidate, disrupting a campaign rally; the next year Rove dropped out of college to become the paid executive director of the College Republican National Committee. Two years later, when Rove ran for chairman of the College Republicans, he cheated his way to victory -- with the blessing of the then chairman of the Republican National Committee, one George H.W. Bush.

Movement conservatives applauded these tactics. What they didn't like were Nixon's policies. When Rick Perlstein, the author of Before the Storm, gave a talk (to a group of conservatives) about the conservative role in the Nixon administration's dirty tricks, one of the other panelists protested that Nixon hadn't been a conservative, adding, "I didn't like Nixon until Watergate."

Chapter 7: The Great Divergence (p. 125):

Yet average income -- the total income of the nation, divided by the number of people -- has gone up substantially since 1973, the last year of the great boom. We are, after all, a much more productive nation than we were when the boom ended, and hence a richer nation as well. Think of all the technological advances in our lives since 1973: personal computers and fax machines, cell phones and bar-code scanners. Other major productivity-enhancing technologies, like freight containers that can be lifted directly from ship decks onto trucks and trains, existed in 1973 but weren't yet in widespread use. All these changes have greatly increased the amount the average worker produces in a normal working day, and correspondingly raised U.S. average income substantially.

He then follows with a lesson on the difference between average income and median. Average income is up; median isn't (pp. 125-126):

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.

This not just because blue collar workers have taken a hit (p. 136):

For example, the median college-educated man has seen his real income rise only 17 percent since 1973.

That's because the big gains in income have gone not to a broad group of well-paid workers but a narrow group of extremely well-paid people. In general those who receive enormous incomes are also well educated, but their gains aren't representative of the gains of educated workers as a whole. CEOs and schoolteachers both typically have master's degrees, but schoolteachers have seen only modest gains since 1973, while CEOs have seen their income rise from about thirty times that of the average worker in 1970 to more than 300 hundred times as much today.

(p. 163):

The nature of the hold movement conservatism has on the Republican Party may be summed up very simply: Yes, Virginia, there is a vast right-wing conspiracy. That is, there is an interlocking set of institutions ultimately answering to a small group of people that collectively reward loyalists and punish dissenters. These institutions provide obedient politicians with the resources to win elections, safe havens in the event of defeat, and lucrative career opportunities after they leave office. They guarantee favorable news coverage to politicians who follow the party line, while harassing and undermining opponents. And they support a large standing army of party intellectuals and activists.

Chapter 9: Weapons of Mass Distraction (p. 189):

What's more, movement conservatism and major war efforts don't mix. Any major military mobilization prompts calls for equal sacrifice, which means tax increases, a crackdown on perceived profiteering, and more. Both world wars led to a rise in union membership, an increase in tax progressivity, and a reduction in income inequality -- all anathema to conservatives. Much has been written about the disastrous lack of planning for post-invasion Iraq. What isn't emphasized enough is that the Bush administration had to believe that the war could be waged on the cheap, because a realistic assessment of the war's cost and requirements would have posed a direct challenge to the administration's tax-cutting agenda. Add to this the closed-mindedness and inflexibility that come from the bubble in which movement conservatives live, the cronyism and corruption inherent in movement conservative governance, and the Iraq venture was doomed from the start.

Chapter 10: The New Politics of Equality (pp. 205-206):

Ideally the public will conclude from the debacle that if you want to win a war, don't hire a movement conservative. Hire a liberal, or at least an Eisenhower-type Republican. Failure in Iraq may have been inevitable, but whatever slim chances of success the United States might have had were dissipated by errors that were inherent to movement conservatism. In particular the Bush administration's overoptimism and its attempt to fight a war on the cheap, with minimal numbers of ground troops, flowed naturally from its commitment to cutting taxes. A frank admission that war is a risky, expensive business would have prompted calls for shared sacrifice; remember, taxes on the rich went up and inequality declined during both world wars. But the Bush administration planned to use the war to further its inequality-enhancing domestic agenda. The script called for a blitzkrieg, a victory parade, and then another round of tax cuts. This required assuming that everything would be easy, and dismissing warnings from military experts that it probably wouldn't work out that way.

Beyond that,t he cronyism that is an essential part of movement conservatism played a key role in the failure of Iraqi reconstruction. Key jobs were given to inexperienced partisan loyalists. Shoddy work by politically connected contractors, like the construction of a new police training center in which excrement drips from the ceiling, went unpunished. And outright corruption flourished. These failures weren't accidental: The systematic use of political power to hand out favors to partisan allies is part of the glue holding movement conservatism together. To have run the Iraq War with efficiency and honesty, the way FDR ran World War II, would have meant behaving at least a little bit like the New Deal -- and that would have been anathema to the people in charge.

Chapter 11: The Health Care Imperative (p. 232):

But in the end HMOs failed to deliver sustained savings for one simple reason: People don't trust them. Patients in Britain's National Health Service are, on the whole, willing to accept some rationing of health care because they understand that the national health system has a limited budget and is run by doctors trying to make the most of that budget. American HMO members are much less willing to accept rationing because they know it's driven by accountants who are trying to maximize a corporate bottom line. Because of this distrust and dissatisfaction, HMO enrollment as a share of the total peaked in the mid-1990s, although other, milder forms of managed care continued to grow. Moreover, a public outcry and congressional hearings have forced insurers to back away from aggressive attempts to hold down costs. As a result U.S. medical costs are once again rising rapidly, and employer-based insurance is again in decline.

(pp. 242-243):

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.

There is, however, another important reason for health care reform. It's the same reason movement conservatives were so anxious to kill Clinton's plan. That plan's success, said Kristol, "would signal the rebirth of centralized welfare-state policy" -- by which he really meant that universal health care would give new life to the New Deal idea that society should help its less fortunate members. Indeed it would -- and that's a big argument in its favor.

Chapter 12: Confronting Inequality (p. 247):

Elizabeth Warren, a Harvard Law School expert in bankruptcy, and Amelia Warren Tyagi, a business consultant, have studied the rise of bankruptcy in the United States. By 2005, just before a new law making it much harder for individuals to declare bankruptcy took effect, the number of families filing for bankruptcy each year was five times its level in the early 1980s. The proximate reason for this surge in bankruptcies was that families were taking on more debt -- and this led to moralistic pronouncements about people spending too much on luxuries they can't afford. What Warren and Tyagi found, however, was that middle-class families were actually spending less on luxuries than they had in the 1970s. Instead the rise in debt mainly reflected increased spending on housing, largely driven by competition to get into good school districts. Middle-class Americans have been caught up in a rat race not because they're greedy or foolish but because they're trying to give their children a chance in an increasingly unequal society. And they're right to be worried: A bad start can ruin a child's chances for life.

Chapter 13: The Conscience of a Liberal (p. 265):

One of the seeming paradoxes of America in the early twenty-first century is that those of us who call ourselves liberal are, in an important sense, conservative, while those who call themselves conservative are for the most part deeply radical. Liberals want to restore the middle-class society I grew up in; those who call themselves conservative want to take us back to the Gilded Age, undoing a century of history. Liberals defend longstanding institutions like Social Security and Medicare; those who call themselves conservative want to privatize or undermine those institutions. Liberals want to honor our democratic principles and the rule of law; those who call themselves conservative want the president to have dictatorial powers and have applauded the Bush administration as it imprisons people without charges and subjects them to torture.