``And if you're looking for a progressive agenda, certainly from my point of view, a large part of that ought to be straightforward orthodox stuff, which is still very hard to do politically. It would be essentially restoring progressivity of the tax system, and using the revenue to improve social insurance and, above all, health care...'' Paul Krugman
-------
This was an excellent article, which sounded like it was a lecture. It was very simple, easy to understand, and could be used in just about any middle/working class forum as a kind of education in the current history of the US political economy.
I don't disagree with much of the piece. It used to be straight ahead Democratic Party platform material. But here's the problem. The last twenty plus years have dismantled the governmental controls and ability to manage the economy. It hardly has the legal means, agencies, or personnel to do any reform at all. I am talking about pro-active reform, not this passive crap playing with interest rates and tax tables. Although those definitely need to be included in any larger scale reform.
So, if K wants to start a reform movement it as to be from the top and within government where all the technical details of economic planning, development and control belong (assuming a truly representative government, that is). The rise in inequality, or the partitioning into a two class society is the direct result of abandoning governmental controls, and letting the `free market' run amok.
Of course `we' can't do anything about it, because there is no governmental organization infrastructure to manage, monitor, and directly manipulate the political economy to produce a better society for us. Remember central planning was turned into a crime similar to having sex with animals. That's what the neoliberalism crusade was all about.
``By the time World War II was over, we had become the middle-class..''
Yes, but a rather bare bones one. I grew up in that era and while it was middle class, it sure wasn't fancy. One plain used two door sedan with no extras, a lot of home cooking from scratch. Urban apartments. A couple of short radio programs in the evening after homework, then bedtime, period. T-shirts, jeans, and tennis shoes bought at big retail places like Penny's or Sears. Lunch in a brown bag, P&J or tuna salad, or egg salad smeared on white bread, an apple, maybe a few homemade cookies. There was always a milk program at school, as well as hot lunches made on site, provided you had the quarter to buy it. Milk was a nickel. You could go to the principal's office and get a lunch voucher with a note from your parents. Oh, yeah and mandatory vaccinations. Vaccination day was celebrated in one of my schools with a hefty slug in the arm by one of my school yard buddies with a mean streak.
The feel of it was pretty gritty by today's standards, just a few notches up from what I imagine school days were like in the 30s-40s. The point is that the reason there was a middle class after WWII was because of the social and economic reforms that had been built up from at least just before WWI. The 20s were a throw back or set back under which many mass movements were brewing. The whole FDR period from 1930s well into 1950s created the economic infrastructure that made a middle class possible. That was the period during which we developed the whole transportation, communications, public utilities, shipping, etc that supported the late stages of industrial development. And let's not forget the war years were under very tight governmental regulation---a regulatory system that didn't slacken very much under the Eisenhower administration.
``That high degree of equality began to go away -- depending on exactly which numbers you look at -- during the late 70's, maybe a little earlier than that. And at this point we're basically back to pre-tax and transfer to the levels of inequality that we had in 1929...''
I'd date it in the very early 70s when Nixon tried to install a few regulatory measures and completely failed because he and his administration didn't know what they were doing. All the central planning expertise was more or less gone from government by that time, many transferring their skills in federal management to developing corporations into mega-corporations capable of managing vast manufacturing, production, distribution and communication networks, or organizational infrastructure---mostly taken from governmental models of the central planning variety..
Getting back to Nixon, certainly the progressive social welfare people in federal agencies had been completely purged. Whole agencies had been shut down or re-organized out of existence. So when the stupid bastard needed them and the econ types to make the economy turn up, he discovered he had fired them all. Pretty typical repugnant stuff. (And, by the way the mass Nixon purge of the old HEW and its federal managers and planners has a direct connection to the development of the later privatization of the healthcare systems where many of these people migrated into upper management jobs and created a remarkably similar bureaucratic system.)
``..at this point we're basically back to pre-tax and transfer to the levels of inequality that we had in 1929.''
Yes. Except, now we are in a different kind of economy. And here is another whole aspect of conditions that need to be addressed. We've de-industrialized and don't have the material means immediately available to re-establish a skilled working class to move up into the middle the way we did in the 30-50s.
So, that's why I would start at the top. Re-gain government control over the economic system, and then begin the re-direction into some form of economic re-development that seriously addresses the vast underclass and their needs, as well as for the society as a whole. My preference is to begin with the old urban and industrial centers. Why? Because there were many material-historical reasons for their locations. They are the ports, transport, and communication hubs with the largest population centers---and the largest working classes. There are other system level reasons too. Locating, developing, or re-developing hubs makes it much easier to control, modify, and manage the environmental and climatic impacts. The very last thing we need to do is to industrialize the outlands of suburban sprawl. There were a lot of ecological studies on the idea of hubs with intensification of industry versus the sprawl models. The sprawl models produce the worst impacts.
``..historically it happened in an eye blink. In this Claudia Golden and Bob Margot classic paper, they call it the great compression. As late as the late 30s, the income distribution appears to be highly unequal... By the time you wake up in 1946 or so, it's highly equal.''
Two things. First, what I already said about government regulation of the economy during the war. The other is the war itself. Mass mobilization acted as a social mass induction into a certain level of equality. It would have been even more of a social equalization, if the damned military hadn't been segregated, and if the officer corps were not the product of military academies that privileged the near-rich. But never mind that for a moment.
``Obviously we want to be careful about the words. No one presumably in this room, and certainly not me, is advocating Cuba. We're not calling for a flat income distribution. But the relative equalization that seems to have taken place was engineered by a combination of top-down politics and grassroots organization that made people want a more equal society in the 30s and the 40s, and they got it...''
Why be so shy about mentioning Cuba? If we had governmental control or at least the means available as a threat, and we had comprehensive planning, and managed re-direction of the political economy established, there is no reason we couldn't have a highly mixed political economy. It doesn't have to be a monolithic system. Some regions, some classes, some aspects of localized economic system could be flat out Cuban, while others left on the neoliberal open range model. As far as I can tell, that's pretty much what the rest of the world is dealing with. For example, I don't want a state run mass media system. But I would support a state newspaper and tv station. Why not? Just as long as it wasn't the only one available. Let it compete with the rest of the circus. Isn't that what most of the rest of the world has?
The free market model has its uses. While I don't know what they are, I'd be willing to listen to a few suggestions. And, privatizing some aspects of the economy wasn't a total evil---although I can't think of any examples were it wasn't at the moment.
The way I see it, the real problem was the dissolving of government controls all across the board, which was essentially a singled minded and monolithic reaction.
``In "Murder on the Orient Express," there is an elaborate conspiracy that means that all 12 of the potential suspects were actually in collusion. It's a little hard to see how all of these factors and economics are in collusion..'' (A great metaphor.)
It's not at all hard to see how all of these factors and economics are in collusion. They are all mutually dependent. The transfer of labor cost to offshore is coupled as cause and effect of de-industrialization, while the shift to higher education and more sophisticated production facilities follows as the direct consequence of where capital investment was shifted in the domestic economy. Both of these exacerbate the division into a two class society, which with the insane cuts in social welfare support infrastructure, amplifies the effects of the other factors.
These are all in collusion because they all follow a monolithic ideology that we could just call the free market mantra. Abolish government and let the business crooks go wild. Viola. Where's mystery?
In terms of just a political view, the whole cold war anti-communist, anti-socialist propaganda machine promulgated this free market mantra under the guise of political `freedom' versus `tyranny' and the idiots in power and out of power believed this bullshit.
So, then the reason there was so little change at the top which just kept rising was that power elites and their political allies (due to the revolving door, they are essentially one and same group) in both the parties have made a critical mistake--to their benefit of course. They believe what is good for them is good for the country. In effect the power elite embody the social good. Their wants and needs are the society's wants and needs.
I also don't disagree with K's characterization of the collapse of unions. But there several critical details, he didn't mention.
On the point that the bulk of unionization declined in manufacturing leaves this detail out. This was a planned and direct result of manufacturing corporations and was accomplished by an internal shift of portable manufacturing, industries, and commerce from the Northeast and northern Mid-West which was heavily union to the South and Southwest. This move was accomplished exactly because the South and Southwest had very little unionization, plenty of `Right to Work' laws on the books, lots of local political corruption to leverage, cheaper land and labor forces to exploit and near zero business and environmental regulations on the books. This move or shift, proceeded the move offshore which was just a move in the same direction for the same reasons. And for many corporations, the next move was much shorter, to just across the Mexican border where all the same conditions of corruption, and free-for-all reigned in even greater supply. There were many union battles to keep jobs local and stop these developments and most of them were lost.
So, lets not forget that history, when we look at Walmart and the other service sector giants. Almost uniformly they all sprang up in the South or Southwest, precisely because there were no unions to battle. Their whole business model was built on the weak-worker cheap labor force of the South in that period. Walmart started in Rogers, Arkansas. Home Depot started in a suburb of Atlanta, Georgia. These were a direct consequence of moving US production south to avoid the old north unions, and helped to bring many areas of the South out of almost Depression era local economies. This economic re-development of the South in turn goes a long way toward explaining the rightwing shift of the Republicans, as they courted the old segregationist elites. I mean there was a reason WorldCom was located in Mississippi and Trent Lott is in the Senate. It explains how the old segregationist attitudes were magically reconstituted as the All American Values mantra of the right, and along with a newly economically risen population, just how the South was able to command enough poltiical power to help put us here.
Now to the other point, that unions stopped growing or failed to penetrate smaller companies and the higher tech sectors. Well these sectors are almost uniformly dominated by the free market and neoliberal true believers first of all. The old style union guy with a cigar, beefy face and hands the size of hams from his days on the assembly line was a complete anathema. He looked like the Mafia, probably because he was. Young entrepreneurial engineering majors fresh from academia would run like hell, the minute such a large, dark shadow fell across their bright little CAD station. Yikes! Visions of 19thC steel and iron works, mountains of slag, toxic sewage flowing from dark vast castles on the oily water fronts of rivers and bays, Lake Erie on fire and other such vision of hell probably amplified their horrors.
Well in any event. I liked this article. No so much because of the exact points Krugman made, but because he organized this talk very well. And that makes it a great armature for debate and discourse. A debate and discourse we should be having, instead of battling the endless bullshit that flows from the neoliberal and reactionary right think tank industry.
CG