|
December 27, 2007
Michael Tomasky reviews Paul Krugman's The Conscience of a Liberal in The New York Review of Books. I came across Krugman in his 1994 book, Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations, which was about the relationship between economics and politics.
In this exercise in myth-debunking he introduced the distinction between academic economists, who write mainly for other economists, and "policy entrepreneurs" who write on policy proposals for the broader public and for politicians. The entrepreneurs preach simplistic solutions to perceived, sometimes non-existent problems. Krugman takes aim at nonsense from both conservative and liberal policy entrepreneurs. His main targets are supply-side economics and strategic trade doctrine (as opposed to free trade).
I reacted negatively to the nonsense bit. Tomasky says that:
Krugman had harsh words for liberal economists such as Robert Reich and Lester Thurow, who advocated se-lective protection from foreign competition, particularly from countries in which poor workers were harshly exploited. Reviewing Peddling Prosperity in these pages.... Benjamin M. Friedman took note of Krugman's disdain for such "strategic traders" and their attempts to exert influence within the Clinton administration in favor of protectionism and subsi-dies for selected domestic industries. If you were a radical economist in those days, or a labor movement intellectual, or a left-leaning social scientist, chances are you weren't a big fan of Paul Krugman.
Krugman gunned for the policy entreprenurs who had convinced key Republicans that the cause for slowing U.S. economic growth was high taxation and excessive regulation. Big government was the problem, and the cure required tax cuts, which would 1) bring back growth, 2) raise investment, and 3) enable deficit reduction. I reacted negatively because Krugman was blasting policy advocates who deviated from orthodox, neoclassical economic analysis. That analysis was the touchstone. Political economy was beyond the pale.
In The Conscience of a Liberal, Krugman chiefly sees economics through the lens of politics rather than the other way around---that economic changes drive political changes.Krugman says that:
I've become increasingly convinced that much of the causation runs the other way—that political change in the form of rising polarization has been a major cause of rising inequality. That is, I'd suggest an alternative story for the last thirty years that runs like this: Over the course of the 1970s, radicals of the right determined to roll back the achievements of the New Deal took over the Republican Party, opening a partisan gap with the Democrats.... The empowerment of the hard right emboldened business to launch an all-out attack on the union movement, drastically reducing workers' bargaining power; freed business executives from the political and social constraints that had previously placed limits on runaway executive paychecks; sharply reduced tax rates on high incomes; and in a variety of other ways promoted rising inequality.
So Krugman embraces political economy. It was the political choices made by President Roosevelt and his colleagues, and not impersonal economic forces, that lifted the US out of depression and poverty and built the middle class.
Similarly it is politics rather than economics has created our present-day inequality. And so we have the emergence of Krugman as the policy entrepreneur who advocates breathing new life to the New Deal idea that society should help its less fortunate members.
|
In Adelaide it's been hot for nearly a week, and you lose the appetite for heavy stuff that requires deep concentration. But this generalised stuff is therapeutic and interesting as to what it throws up on race v immmigration or the parallel ascendancy of the right in Australia.
Thanks for taking the time. The list on the philosophy looks sequential, so now off to the next thread.