Paul Krugman, professor of economics and international affairs at Princeton University and a New York Times columnist since 1999, traces his interest in economics to science fiction. “I loved Isaac Asimov in his foundation novels, where a social scientist with a mathematical model of humanity saved civilization,” he says. Economics seemed to him to be the closest match in the real world, and he latched onto it.
At first considering a history major at Yale, Krugman switched to economics, graduating in 1974 with a bachelor of arts in economics. “I always wanted to be a general social scientist,” he says, “but economics is the part where you have real discipline and method.” But he still clings to his love of history. Even now, he says, “There’s nothing I would rather do on a cold evening than curl up with my cats and a history book.” He earned a Ph.D. from MIT in 1977 and has taught at Yale, MIT, and Stanford.
He lives in Princeton along Stony Brook with his wife, Robin Wells, a researcher in economics who also teaches at Princeton, and their two cats.
In his new book, “Conscience of a Liberal” (Norton) — the title is a takeoff from a book by Barry Goldwater — his two academic interests dovetail to produce a commentary on the transition of America from the society Krugman grew up in, where the economic pie was widely shared, to an early 21st century America, where the economic reality is a vast inequality in income.
Krugman will speak about his book on Monday, December 10, at Barnes & Noble MarketFair.
Krugman was born in 1953 on Long Island, his father an insurance company executive and his mother a housewife. In his first chapter, titled “The Way We Were,” he recalls the rosy economy of his youth: “The great boom in wages that began with World War II had lifted tens of millions — my parents among them — from urban slums and rural poverty to a life of home ownership and unprecedented comfort. The rich, on the other hand, had lost ground: They were few in number and, relative to the prosperous middle, not all that rich. The poor were more numerous than the rich, but they were still a relatively small minority. As a result, there was a striking sense of economic commonality: Most people in America lived recognizably similar and remarkably decent material lives.”
As a young man, Krugman did engage in what he calls moderate liberal politics, for example, campaigning door to door for Allard Lowenstein, a one-term congressman representing the 5th District in Nassau County, New York from 1969 to 1971 and known widely for his work on civil rights and the antiwar movement. But politics was not what really moved him. About his marching against the bombing of Cambodia, for example, he says, “I walked along, but that was about it. I was not interested in politics at the time and not for quite some time afterward.”
What has been an academic passion of Krugman’s for at least 20 years, though, is economic inequality, a topic that has indeed pushed him in a more political direction, particularly since he started writing for the New York Times. “I have been very focused on current events,” he says. “In the last seven years I’ve been in a state of stunned disbelief: How did we get here? How can these things be happening in my country? How did these people get to be running things?”
As a Times columnist, Krugman feels he has been privileged to start to answer these questions — by viewing the political process through the fact-checking discipline of economics and raising the visibility of certain issues. “I think I played some role in pushing back Bush’s attempt to privatize Social Security and elevating healthcare as a political issue,” he says. “By having that visible real estate in the Times, I can get stuff that is widely known among policy wonks, but not known to the general public, out there in the public domain.”
The genesis of his new book is an attempt to place current politics in a historical context. To do so, he treats three historical periods.
First, the Long Gilded Age (he coined the name), stretching from the late 1870s to the coming of the New Deal in the 1930s, was a time of extreme inequality in income. The period that followed, dubbed by economic historians Claudia Goldin and Robert Margo as the Great Compression, saw a narrower income distribution. It resulted from New Deal policies that included increased taxes on the wealthy, Social Security and unemployment insurance, support for unions, and wage-price controls during World War II. The result was a broadly prosperous society.
Krugman calls the third period, at different points, the Age of Movement Conservatism, the Second Gilded Age, and the Great Divergence — a period of increasing income inequality extending to the present.
Two pieces of his research surprised Krugman. The first is how much politics seems to drive economics. “Before I started working on the book, I wasn’t really aware of the extent that the middle-class America I grew up in was a political creation.” What stands out is how quickly the policies of Franklin Roosevelt changed the income distribution in the United States, earning him the ire of the wealthy. Krugman quotes Roosevelt talking about the wealthy in a 1936 speech in Madison Square Garden:
“They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
“Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.”
Krugman also discovered the crucial importance of race in the American story. Discounting the prevalent view that Americans voted Republican because of national security, he says: “Once you start looking at the voting data, once you take account of what is clearly white backlash voting and the swing against the Democrats because they were the party of civil rights, the centrality of racial politics is startling.”
But in racial politics also lies some good news, he adds. “We have become a less white country, with a growing share of Latinos and Asians, so the old racial politics doesn’t work as it used to. You can try anti-immigration policies, but it ends up being a losing strategy.” As minorities have participated more in American life, attitudes have changed. “We’re certainly not race blind, but we’re much less racist than we used to be,” he says.
Krugman cites California, which once elected Ronald Reagan as governor and was home to the John Birch Society, as an example of conservatism starting to break down as attitudes changed and the population grew more diverse. “In 1994 Pete Wilson, a Republican governor, was able to win the election with an anti-immigrant campaign, but just barely,” says Krugman. “The effect was to drive Latin voters into the arms of the Democrats, and now it is a solidly Democratic, liberal state. I’m arguing that that is the future of America, and those same forces are operating on the national level.”
Similar changes, he says, are taking place in Virginia, particularly in the area near Washington, DC. “What I consider the mean-spirited, exploitative politics hasn’t lost its force entirely but it’s weaker than it used to be,” says Krugman.
Even the cultural wars are not working the way they used to. The politics initiated by Richard Nixon, which exploit racial divisions, anxiety about social change, and paranoia about foreign threats in order to peel working-class whites away from the New Deal coalition is starting to backfire. Take Kansas, for example. “Large numbers of Kansas Republicans are quitting the party because they are sick of having to deal with crazies trying to make elections about the theory of evolution,” says Krugman.
All in all, people are becoming increasingly aware of economic inequality, and they are angry about it. Krugman cites a recent poll, administered after his book was published, where people who said the country was headed in the wrong direction were asked to choose from a list of phrases. Krugman says he would have thought Iraq would be at the top, but the top two were “big business gets everything it wants” and “politicians don’t care about the middle class.”
“It’s starting to look as if in next year’s elections, economic issues will play a bigger role than Iraq,” he says. “We can say that people have not voted in their own economic interests as much as they should have, but they have not been completely duped.”
To regain the economic Eden of his youth, Krugman would like to see the Democrats push a few issues, but the central one is healthcare, which, if adopted, he believes can push other elements of a progressive agenda. The Republicans, he says, want people to think that tax cuts are going to be the solution to economic woes, so the Democrats must prove that the real issue is covering the uninsured and giving people a sense of security. “They need to have a real pro-middle-class economic agenda and make clear that’s what they really stand for,” he says.
Krugman would also like to see the unionization of employees in the service sector to counter the overall decrease in union activity because of tacit political support for businesses that have illegally fired union supporters. During the Great Compression unions reduced income inequality by raising average wages for their members and indirectly for similar nonunionized workers. Unions also tended to narrow income gaps among blue-collar workers by negotiating bigger wage increases for their worst-paid members.
Krugman worked on this book for a year and a half, although more intensely in the last six months. “At the final stages, FedEx wasn’t fast enough,” he says, “and I had Norton employees who lived locally stop by my house and take the latest copyedited versions. They wanted it to come out as we are coming in for the election, where it can hopefully shape ideas.”
In some important ways Krugman believes that the Democrats will be good for business. First of all, universal healthcare would be a boon. “For companies that provide health insurance (to their employees), it is a huge burden,” he says, as it is for people who would like to become entrepreneurs.
Another issue where Democrats are likely to affect business for the good, Krugman believes, is by addressing issues of corporate governance. More effective enforcement of honest accounting, for example, might have avoided the Enron/ Worldcom problems and perhaps better oversight would have limited the predatory lending that caused the subprime crisis. “A number of people saw it coming,” says Krugman, “but ideology and the political environment were such that nothing was done.”
As for reducing income inequality, Krugman admits that a successful business person will be paying higher taxes if the Democrats gain the presidency and Congress. “But with some luck,” he says, “they will end up in a healthier society all around and probably a more successful economy.”
Author Event, Monday, December 10, 7 p.m. Barnes & Noble, MarketFair, West Windsor. Princeton University professor and New York Times columnist Paul Krugman discusses his new book “Conscience of a Liberal.” 609-716-1570.