Paul Krugman's The Conscience of a Liberal

For those of you who are familiar with Paul Krugman, you likely have enjoyed reading his op-ed columns in The New York Times. While Krugman is seen by many as a pundit because of this type of work (some consider him a "shrill liberal" because of his steadfast criticism of dubya), he is actually a well-respected economist. I initially became familiar with him because my principles classes-both taught by heterodox folks-used his micro and macro textbooks, and I found them quite good. You can imagine that I awaited with bated breath, when, after reading his columns for a couple years, Amazon.com informed me that I could pre-order his new book, The Conscience of a Liberal. I received it on it's release date, and read it over fall break.

Now, Krugman would likely be characterized by many as a "mainstream economist" which might be (but shouldn't be) anathema in the circles of this blog. However, having read over 100 off his columns (available at pkarchive.org), I have found that he is very aware of the power relationships and importance of institutions that shape the real economy. While he may be somewhat beholden to mainstream measures of economic progress, he is very progressive in his vision of how that progress is achieved. And, further, he is respected as a very good economist (he teaches at Princeton and won the John Bates Clark medal for outstanding economists under the age of 40).

As for the book itself, it is essentially a look at the economy of 20th century America (with frequent comparisons to Western Europe) through a political lens. Ah- now you see why we should probably take a listen. Essentially, Krugman works against the idea that the success or failure of the economy drives politics and shows how politics in America have shaped the economy. Krugman ultimately espouses the various institutions that, coming out of the Great Depression, led to what he calls the Great Compression. Krugman touts the influences of FDR's New Deal in the 1940's, which he sees as three-fold: 1) the support of labor unions through a pro-labor NLRB; 2) higher taxes on the rich ultimately redistributed to the poor; and 3) war-time pressure from the government to increase working class wages. The result of these 3 reforms was the Great Compression, a period from 1944-1970 in which the middle-class became larger than ever, real wages were high, and there were fewer rich people than ever.

Naturally, because of the influence of money in politics, the elites would not have this arrangement for ever. Thus, the Great Divergence, a development that started in the 70's and has carried into the present day. Krugman points to the rise of movement conservatism, an amalgam of different interests, ultimately geared to reverse the egalitarian outcomes of the US economy. Now, there has been a lot written about how the Religious Right had turned otherwise liberals into conservatives, and thus allowed for the business Right to push its reforms. Krugman, however, points out that the key factor in the rise of movement conservatism, and thus the Great Divergence, is exploitation of racial bias. Piggybacking on the Democratic Party's support of Civil Rights, he argues that the Right used racial undertones to turn the solid South into a conservative region. This is ultimately his thesis: that the use of race has been the key component in the rise of the Right over the last 3 decades, and ultimately, of the rolling back of labor unions, high taxes, and fair minimum wages.

Krugman thus fingers the political economy of the US. The Right has exploited race to push its economic reforms, which have increased inequality. He believes, however, that there are signs for hope. As it turns out, the institutions of the New Deal have proved resilient enough to keep hope. Social Security is still around, the minimum wage has been raised again, and tax cuts will likely be rolled back (as for labor, it is hard to know what might happen). Krugman fingers health care reform as the next step in reaffirming that the state can be a force for economic equality. It seems clear at this point that no matter who comes out of the Democratic primary, health care will be a major issue on the table, and thus the time is ripe for universal health care to finally be a reality in the US.

In his conclusion, Krugman writes, "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." Thus, Krugman leaves us with a view of the economy, through institutions, as a force for good. While his calls for reform are not purely bottom-up, they are ultimately based around the idea that members of a democratic society can in some ways shape the results of their economy. While this sort of liberalism may be mainstream economics, and while many of the reforms called for, including unions and health care reform, still work through the markets, I have a hard time not liking what I read in this book. I recommend it as a good introduction to the political economy of the US in the last century. If anybody would like to read it, I would be perfectly willing to lend out my copy.

If you're looking for more Krugman, his columns appear in the NYT op-ed page on Mondays and Fridays. He also has a blog that he writes in pretty frequently at http://krugman.blogs.nytimes.com/. If you've made it all the way through this attempt at a book review, then thanks. If you would like to read a more extensive review that really captures Krugman's thesis, check this out.