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on November 8, 2007
"Being progressive,'' says Paul Krugman in the concluding pages of The Conscience of a Liberal, "means being partisan." Like Krugman, my training lies in economics, but unlike Krugman, I am not partisan. Rather, I take a policy orientation to social issues: there are problems to be solved in order to enhance the lives of citizens, and it is our job to discover and publicize solutions to these problems. Krugman's partisan stance only clouds the issues. For Krugman there is a "union movement" rather than a "bureaucratic labor aristocracy," critics of the welfare states want to "turn back the clock," rather than streamline and curb the inequities of the welfare state, conservatives have won by "exploiting cultural backlash" rather than by mounting a principled opposition to the explosion of crime, drug abuse, and single-headed households in a manner that resonates with the voting public. Critics of the wealth tax are "financed by a handful of [super-rich] families," with the public being ignorant dupes of the slick politicians.

This book epitomizes what is wrong with American liberalism. Krugman was a fine, perceptive international trade theorist, but he compromises his capacity to help non-economists to understand complex technical issues by professing himself as "partisan." Krugman is drawing down his well-deserved scientific stature by presenting partisan ideas as though there are no other credible positions on economic policy.

There is one problem as far as Krugman is concerned: inequality. But inequality is an intellectual abstraction, not a politically motivating issue. People hated the Robber Barons because they were robbers and barons, not because they were rich. Oprah Winfrey and Bill Gates do not send the Pinkerton men out to protect their ill-gotten gains; nor to the other super-rich. Socialists' ringing political slogans dealt with fairness, social progress, and power to the people, not "inequality." Moreover, a truly progressive movement must built on technical progress that is impeded by the reigning powers that be (Sam Bowles and I call this efficiency-enhancing egalitarian redistribution), not the beggar-thy-neighbor, zero-sum-game sort of redistribution favored by Krugman.

I suspect Krugman is correct in saying that the degree of inequality in the USA today is the product of politics, not economic necessity. This is because some advanced industrial countries have more equal distributions of income and wealth that the USA. But, these countries are plagued by labor market inefficiency and deeply threatened by the "lean and mean" up-and-coming countries like Poland, the Baltic States, Romania, India, et al. The USA has purchased a thriving economy and full employment at the cost of having a bunch of super-rich families. Not a bad deal, after all.

Krugman's vision for the future has three key premises, all wrong.
First, he believes progressives can win on a platform of redistributing from the rich. However, no one cares about inequality. People care about injustice, unfairness, poverty, sexual predators, family values, gay marriage, terrorism, and many other problems of everyday life. People don't care about Gini distributions and other abstractions. Moreover, Krugman should know that if the wealth were redistributed to the middle class, the US investment rate would fall, since the rich save their money and it is translated into investment, whereas the middle classes would spend their gains on consumption, thus driving out investment. A "soak the rich" policy simply cannot work to the advantage of the middle classes.

Second, Krugman would strengthen the labor unions, which he credits for their egalitarian effects. However, unions were strong only when industry was highly non-competitive in such areas as automobiles and steel. The oligopolistic character of mid-twentieth century industry, with a few countries in the lead, made fighting over the excess profits highly rewarding. With globalization, there are no excess profits to be fought over. Thus, it is not surprising that most successful unions in the USA are public service, not private (e.g., teachers, government employees). There is no future in unionism, period.

Third, Krugman believes that liberalism can be restored to its 1950's health without the need for any new policies. However, 1950's liberalism was based on southern white racism and solid support from the unions, neither of which exists any more. There is no future in pure redistributional policies in the USA for this reason. There are very serious social problems to be addressed.

I am adding the following remarks on December 19, 2007 in response to some of the personal and public comments on my remarks. These should be seen as clarifications.

Many commentators consider my remarks on Krugman's partisanship as unwarranted because Krugman has always spoken his own mind, and has never toed the (ever-changing) Democratic "party line". For instance, it is widely thought that Krugman was passed over by Bill Clinton for heading the Council of Economic Advisors (in favor of Laura Tyson) because of Krugman's opposition to "industrial policy." Now, thankfully Clinton did not follow the "industrial policy" suggestions of Robert Reich, Robert Kuttner and others, but we must thank the forceful interventions of Krugman (and others) for exposing "industrial policy" for what it is---mainly an unsupported set of statements that would likely have weakened the American economy considerably.

Partially because of the adament opposition of key Democratic economists, including Krugman, Clinton opted for a sound economic policy---one of the strongest points of his adminstration. But now, industrial policy is not fashionable, and protectionism has not been a major part of Democratic political philosophy, pace Robert Kuttner. Indeed, as far as I can tell there are no issues of fact that separate Republic and Democratic policy thinkers concerning the running of the economy. More broadly, burning political issues of domestic social policy today revolve around values and not facts, and around the personal characteristics of politicians rather than the economic models that they embrace to deal with setting a policy agenda for the country. In this setting, it is not surprising that Krugman would become a partisan political actor, as I have suggested has happened. At any rate, I am virtually certain that should really stupid economic ideas pop up as the Presidential race heats up, Krugman would come out fighting, at the cost of his credibility with some Democrats, in favor of economic realities.

Some have asked me what Krugman should be stressing, if not redistribution of wealth and income. Here are some suggestions. First, a vision of national health insurance that answers the (legitimate) objections of its critics. For instance, instead of single-payer, perhaps state-by-state regulation of universal care, much as current welfare and automobile insurance. Second, he should come out in favor of school vouchers and charters, and otherwise suggest how to make the educational system more competitive. Third, he should embrace faith-based interventions into community service, especially as concerns the urban poor. Fourth, he should propose a national system of apprenticeship skill acquisition, whereby firms are subsidized when they train their workers (government intervention is needed here because once trained, the worker can simply leave the firm for higher wages). Fifth, he should propose a plan for promoting minority entrepreneurship. This is of course a land mine, because it is so subject to corruption and unfairness. However, there are some degrees of freedom in this area, such as promoting minority business networks, specialized vocational training for minority entrepreneurs, and the like. Sixth, he should propose a precise way forward in dealing with environmental issues (nuclear, solar, coal, oil, endagered species, etc.) There are many people working hard on these issues whose ideas never get beyond the scientific conference and the pages of the Proceedings of the National Academy of Sciences, and their ideas are often very sound. Seventh, promote the labor market and educational policies of Nobel prize winner James Heckman and others who have a good take on the numbers and what forms of intervention are likely to be fruitful.

But most of all, Progressives need a vision of what real contributions we can make to improving the lives of Americans and the citizens of the world. Income redistribution away from the very rich may (or may not) necessary to achieve this vision, but Krugman's beggar thy neighbor ideas do not contribute to this vision.
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