In 1997, the Princeton economist Paul Krugman wrote an article entitled ‘In Praise of Cheap Labour’ in the online magazine Slate, suggesting that those concerned about conditions in Third World sweatshops ought to save their tears for a worthier cause. The greatest beneficiaries of free trade, Krugman declared, ‘are, yes, Third World workers’. A year earlier, in his book Pop Internationalism, he had given similar advice to those calling for the adoption of tougher standards on wages and working conditions in trade agreements, insisting that these amounted to ‘protectionism in the guise of humanitarian concern’.
These were not popular views among liberals at the time and they’re even less popular today. Yet Krugman has long since been forgiven: not only has the defender of cheap labour reinvented himself as a defender of the poor, he has become a fierce opponent of George W. Bush. In 2000, the year Bush first ran for president, Krugman became an op-ed columnist at the New York Times, and swiftly established himself as one of Bush’s most influential critics. Bush was campaigning as a ‘compassionate conservative’, Krugman wrote, but the rewards of the $1.6 trillion tax cut he was proposing would go overwhelmingly to the rich. At first, Krugman seemed amused by this, lampooning Bush’s ‘fuzzy math’, but his tone soon grew fiercer. There was Dick Cheney’s energy plan – ‘crony capitalism, American style’. There was Bush’s post 9/11 stimulus plan – ‘so tilted towards corporate interests that even many conservatives were startled’.
All this seems to have upset some at the Times, which had hired Krugman to provide centrist commentary on the vagaries of the international economy. According to the Washington Monthly, Howell Raines, the then editor of the op-ed page, forbade Krugman to use the word ‘lie’ to describe Bush’s policies during the 2000 campaign. By 2002, Krugman was using it all the time, and churning out column after column on what had unexpectedly become his beat: the fusion of money, patronage and special interests evident in almost everything the Bush administration did, from the subsidies to energy companies in the US to the profiteering by military contractors in Iraq. The more Krugman concentrated on this, the more passionate – and polarised – his following grew. Conservatives set up websites devoted to contesting his claims. Liberals hailed him as a hero. T-shirts were printed with the slogan ‘Let the Truth Be Told – Paul Krugman’s Army’. When a collection of Krugman’s columns, The Great Unravelling, was published in 2003, it became a runaway bestseller.
Krugman’s appeal had as much to do with what other journalists weren’t saying as with what he was. Conservatives love to claim that the American press is swarming with liberals. Yet as Bush’s grip on power tightened, these liberals were hard to find. Krugman filled the void. And at a time when the mood among Democrats was sullen and defensive, he was a partisan who wore his contempt for the Bush administration, and his rage, on his sleeve. Twice a week, he hammered away at Bush. Though not a great stylist, he had an intuitive sense of what makes a political column work: short, punchy sentences, a taste for combat, an ability to puncture the claims of opponents and to avoid sounding shrill while aiming (and landing) unforgiving blows.
Krugman’s targets hadn’t always, or even primarily, been conservatives. Back in 1992, it was rumoured that he might be made head of Bill Clinton’s Council of Economic Advisers. The job went instead to Laura D’Andrea Tyson, and in Pop Internationalism and Peddling Prosperity Krugman dismissed Tyson and other Clinton advisors, including the labour secretary Robert Reich, as mere ‘policy entrepreneurs’, not real economists. His writing from this period betrays the prickly tone of one who has been spurned. But, when compared with Bush, Clinton didn’t seem so bad.
The title of Krugman’s new book is a play on Barry Goldwater’s 1960 manifesto, The Conscience of a Conservative. Yet what’s striking are the differences between the books. Where Goldwater’s aims were utopian – roll back the New Deal, eliminate progressive taxation, allow the free market to flourish – Krugman’s are reformist: he wants to turn back the clock to the regulated capitalism of the 1950s, a decade he sees as a ‘paradise lost’, which might come as news to blacks in the South. Despite that, it’s true that millions of Americans might find some aspects of the 1950s quite appealing. A third of the private sector workforce was unionised in that decade – roughly three times the proportion today. The tax rate for those in the highest income bracket was 91 per cent, compared to 35 per cent now. The US was a prosperous, middle-class society, Krugman claims, without the stark income disparities the Bush administration has worked so hard to widen.
To many economists, reversing inequality is about as likely as reopening shuttered factories in Ohio or putting a stop to technological change, long considered the main cause of the growing gap between rich and poor. Krugman once shared this view. In his 1990 book, The Age of Diminished Expectations, he described rising inequality as ‘arguably the central fact about economic life in America’, but cautioned that not much could be done about it, since the reasons for it had little to do with politics. Having spent eight years documenting the Bush administration’s efforts to redistribute wealth from the bottom to the top, Krugman has changed his mind. Every advanced country in the world has been subjected to technological change, he points out, but only in America do CEOs earn 367 times the pay of the average worker. Rather than the 1950s, contemporary America is reminiscent of a slightly earlier period: the Gilded Age. Krugman reports that the richest 10 per cent of Americans raked in 44.3 per cent of total income in 2005, slightly higher than the average in the 1920s. The share of the wealthiest 1 per cent was 17.4, also a sliver above the pre-New Deal average.
How did the Republicans get away with it? To conservatives, it’s clear: Americans don’t believe in equality. They believe in competition, even if it means the winners end up owning yachts and the losers end up homeless. There’s more truth in this than we might like to think, but it’s not quite true that most Americans want the federal government to allow a ruthless Darwinian struggle to unfold. Last year, a poll found that most Americans would like the government to provide universal health insurance, even if it meant paying higher taxes. According to a Pew Research Center study, 73 per cent of Americans agree with the statement ‘the rich just get richer while the poor get poorer.’ The drive to shrink the government ‘down to the size where I can drown it in the bathtub’, in the words of the right-wing anti-tax zealot Grover Norquist (a goal curiously compatible with ensuring that the government lavishes special care on needy corporations), isn’t one that commands anything like majority support.
So how did these true believers manage to pursue their agenda without provoking a populist backlash? Krugman’s answer is a familiar one: he chalks it up to the right’s ability to camouflage its true objectives and to take advantage of people’s fears and resentments, particularly their resentment of minorities. The Republican exploitation of racial tensions to court working-class voters has been successful enough for some Democrats – including both Bill and Hillary Clinton – to copy it. But there are other reasons for the failure of rising inequality to fuel a revolt among working-class Americans. One of them is that, at least until recently, Democrats haven’t even hinted that they would support it. When John Kerry ran for president in 2004 45 million Americans had no health insurance, the poverty rate had increased for three consecutive years, and two massive tax cuts had been handed to his opponents’ wealthiest supporters. Yet he refused to make much of these issues, sticking to the line agreed in the wake of the bruising losses the Democrats had suffered during the 1970s and 1980s and the sea change in popular attitudes these defeats appeared to confirm. As they watched Reagan win landslide victories on the promise to ‘get big government off our backs’, as they saw a tax revolt erupt in California and one losing candidate after another described as a ‘tax-and-spend liberal’, Democratic strategists came to believe that the old formula of appealing to class grievances and championing government was doomed. Better to promote balanced budgets and market-friendly measures designed to expand opportunity beyond the yacht-owning class.
The strategy had a certain logic to it (and brought few complaints from the party’s growing roster of corporate donors), but voters stopped knowing what the Democratic Party stood for. And just as the script was being rewritten, inequality began to widen, wages stagnated and insecurity became ever greater. Since the 1980s, the bankruptcy rate in America has hugely increased, housing foreclosures have rocketed, and ever more workers bounce around from job to job, losing benefits along the way, if they had any to begin with. The sub-prime mortgage crisis, fuelled by predatory lending and lax regulation of the financial sector, has pushed repossessions to record heights. In March the US government rushed to the rescue of Bear Stearns; there has been no help for low-income families who might lose their homes.
Krugman’s book is more persuasive in highlighting conservative deficiencies than liberal strengths. He argues uncontroversially that the Bush administration’s policies have been an abject failure; he notes that America is becoming more diverse and, according to various polls (and at the risk of contradicting his own thesis), ‘less racist’, which ought to play to the advantage of the Democrats. But if they are to achieve a lasting political realignment, liberals will have to put forward a bolder vision than Krugman’s dream of a return to an airbrushed version of the 1950s, with a less hourglass-shaped distribution of wealth. He writes wistfully about the so-called Treaty of Detroit – the postwar agreement which required employers such as General Motors to offer health and retirement benefits to their employees in exchange for good labour relations and productivity gains. Most US workers would leap at such a bargain today. But as Jennifer Klein shows in her book For All These Rights (2003), this agreement was based on the premise that management, and not workers or the federal government, should control the provision of social welfare. It emerged after the large corporations won a battle to become the main conduits for pensions and health insurance and then set up a system linking security to employment – a system that began to unravel when they decided the burdens were too great (and when the threat of socialism and the memory of the Great Depression had faded, leaving capitalists less interested in placating their workers).
Barack Obama has promised to bring in universal health insurance, and Krugman identifies this as the priority for any Democratic president. But neither Obama nor Hillary Clinton has proposed the solution that every other advanced industrial country has embraced: a single-payer system run by the government. This is a nod to political reality, since such a plan would be attacked as ‘socialised medicine’. But it is also a sign of how constrained the discussion of such issues remains in the US. Krugman is aware of this. At one point, he acknowledges that a single-payer system would make sense if not for the political barriers; at another, he notes that on issues from taxes to welfare Clinton governed ‘not just to the right of Jimmy Carter, but to the right of Richard Nixon’. Against Clinton’s declaration that the era of big government is over, Krugman calls for ‘an unabashedly liberal programme of expanding the social safety net and reducing inequality – a new New Deal’.
There are indeed some Democrats, most notably the former senator and presidential candidate John Edwards, who have begun to embrace such talk. Against two candidates with far more star power, Edwards didn’t stand much chance of winning his party’s nomination, but before he left the race he did succeed in getting Clinton and Obama to address inequality more robustly. But even Edwards skirted discussion of some other features of American life that are curiously absent from the liberal agenda. The disastrous ‘war on drugs’, the ever expanding prison-industrial complex, the gargantuan Pentagon budget: none of these things stirs much outrage among Democrats these days. Krugman doesn’t pay much attention to them either. And though he was an early opponent of the Iraq war he is no more expansive on the subject of foreign policy, perhaps out of recognition that the debate remains bound by a set of assumptions – that the world wants and needs American leadership, that the extension of US power is a good thing – which few Democrats openly question. Obama may want to withdraw from Iraq, but it isn’t at all clear that he’ll be able to if he becomes president.
This is not to suggest that there are no differences between Republicans and Democrats. The Age of Bush has made this contention difficult for even the most ardent critics of the two-party system to sustain. But reviving liberalism won’t be quite as easy as The Conscience of a Liberal makes it out to be, not least because of the baggage the term itself has acquired. Liberalism no longer makes people think of Franklin Roosevelt’s fireside chats, but of a cultural elite that looks down on people who own guns, salute the flag and attend church – which happens to be much of America. Obama stumbled into this trap when, at a fundraiser in San Francisco, he said that working-class voters ‘get bitter, they cling to guns or religion or antipathy towards people who aren’t like them, or anti-immigrant sentiment’. Conservatives (and the Clintons) immediately pounced on this as proof that Obama holds working-class people in contempt (a complaint few voiced about the much more privileged Bush). Obama and the Democrats are in a difficult position here: if they address economic grievances, they’re accused of inciting class warfare (as if there weren’t a class war being waged from above); if they suggest that issues like gay marriage and abortion distract working-class voters from more pressing concerns, they’re pilloried as elitists.
Krugman, normally sensitive to this predicament, has been notably unsympathetic in Obama’s case. In a series of scathing columns, he dismissed the ‘cult of personality’ surrounding Obama and took him to task for reaching out to disgruntled Republicans and independents, while in column after column he depicted Hillary Clinton as the better, more liberal candidate, even after she went on television to promote the idea of a gas tax holiday, something no economist supports. Krugman doesn’t seem to see Obama’s remark in San Francisco as a version of his own argument about the way working-class voters can be diverted from concentrating on their own economic interests. He is a partisan who wants Democrats to stop trying to meet Republicans halfway, but who appears not to appreciate how shot through with negative associations liberalism has become, even among voters who would welcome higher wages and affordable healthcare. It’s not only the manipulative skills of the right that are to blame here, but the Democrats themselves, who have failed to make clear to voters what they have to gain from electing liberals. During the Bush era American liberals have become far more adept at explaining what’s wrong with Republicans than at articulating what’s right about their beliefs. It’s a flaw Krugman shares.