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http://krugman.blogs.nytimes.com/2007/09/18/introducing-this-blog/
September 18, 2007, 11:45 pm
“I was born in 1953. Like the rest of my generation, I took the America I grew up in for granted – in fact, like many in my generation I railed against the very real injustices of our society, marched against the bombing of Cambodia, went door to door for liberal candidates. It’s only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation’s history.”
That’s the opening paragraph of my new book, The Conscience of a Liberal. It’s a book about what has happened to the America I grew up in and why, a story that I argue revolves around the politics and economics of inequality.
I’ve given this New York Times blog the same name, because the politics and economics of inequality will, I expect, be central to many of the blog posts – although I also expect to be posting on a lot of other issues, from health care to high-speed Internet access, from productivity to poll analysis. Many of the posts will be supplements to my regular columns; I’ll be using this space to present the kind of information I can’t provide on the printed page – especially charts and tables, which are crucial to the way I think about most of the issues I write about.
In fact, let me start this blog off with a chart that’s central to how I think about the big picture, the underlying story of what’s really going on in this country. The chart shows the share of the richest 10 percent of the American population in total income – an indicator that closely tracks many other measures of economic inequality – over the past 90 years, as estimated by the economists Thomas Piketty and Emmanuel Saez. I’ve added labels indicating four key periods. These are:
http://graphics8.nytimes.com/images/2007/09/19/opinion/19krugman2.533.jpg
The Long Gilded Age: Historians generally say that the Gilded Age gave way to the Progressive Era around 1900. In many important ways, though, the Gilded Age continued right through to the New Deal. As far as we can tell, income remained about as unequally distributed as it had been the late 19th century – or as it is today. Public policy did little to limit extremes of wealth and poverty, mainly because the political dominance of the elite remained intact; the politics of the era, in which working Americans were divided by racial, religious, and cultural issues, have recognizable parallels with modern politics.
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The Great Compression: The middle-class society I grew up in didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal. As the chart shows, income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history.
Middle class America: That’s the country I grew up in. It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality. It was also a society in which political bipartisanship meant something: in spite of all the turmoil of Vietnam and the civil rights movement, in spite of the sinister machinations of Nixon and his henchmen, it was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.
The great divergence: Since the late 1970s the America I knew has unraveled. We’re no longer a middle-class society, in which the benefits of economic growth are widely shared: between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent.
Most people assume that this rise in inequality was the result of impersonal forces, like technological change and globalization. But the great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change; I believe that politics has also played an important role in rising inequality since the 1970s. It’s important to know that no other advanced economy has seen a comparable surge in inequality – even the rising inequality of Thatcherite Britain was a faint echo of trends here.
On the political side, you might have expected rising inequality to produce a populist backlash. Instead, however, the era of rising inequality has also been the era of “movement conservatism,” the term both supporters and opponents use for the highly cohesive set of interlocking institutions that brought Ronald Reagan and Newt Gingrich to power, and reached its culmination, taking control of all three branches of the federal government, under George W. Bush. (Yes, Virginia, there is a vast right-wing conspiracy.)
Because of movement conservative political dominance, taxes on the rich have fallen, and the holes in the safety net have gotten bigger, even as inequality has soared. And the rise of movement conservatism is also at the heart of the bitter partisanship that characterizes politics today.
Why did this happen? Well, that’s a long story – in fact, I’ve written a whole book about it, and also about why I believe America is ready for a big change in direction.
For now, though, the important thing is to realize that the story of modern America is, in large part, the story of the fall and rise of inequality.
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Krugman is entirely correct in writing
“It’s only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation’s history.””
Indeed, he may well be understating his case. Edward Rubenstein (see National Data) has shown that Median Household Income has fallen for all groups since 2000. The fall for blacks is astounding, -8.0%. This will almost certainly be the first modern economic expansion where median incomes failed to reach their prior peak…
However, he has not made any attempt to explain why this period of growth has failed the American people so badly. The words immigration, trade, and outsourcing, are conspicuous by their absence.
It is a sad day when the American people can learn a lot more about what is wrong the economy by listening to Lou Dobbs than someone with a Ph.D. in economics.
— Posted by Peter Schaeffer
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3.
September 19th,
2007
1:52 am
wow.
yay!
congratulations on your blog!
— Posted by me
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4.
September 19th,
2007
1:55 am
“the great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change”
The chart shows most of the fall occurring in the 1940-1942 period. The political change of the time was war. Domestic social reform was put on hold to win the war.
Why inequality didn’t decline under the New Deal and then crashed as war production ramped up is unclear. My guess is that slack labor markets yield high inequality and very tight markets even out the income distribution. However, the fall in inequality is so sharp and fast that even WWII may not suffice as an explanation. Perhaps the combination of war production and price/wage controls may be correct.
I have seen some claims that income inequality declined sharply during WWI. The Piketty/Saez data support this assertion.
— Posted by Peter Schaeffer
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5.
September 19th,
2007
2:07 am
Mr. Krugman,
This is great news that you’ll be posting your keen insights in a free forum.That said,I’ll still buy your book.
From the start of this administration you’ve called it as you’ve seen it,whether it was popular at the time or not. No opinion poll based columns, which has become increasingly rare in this age of the timid(at best)media.
And by printing the truth as you saw it,you’ve been right and have done your country a great service.Many peope who may have still been silent are speaking out now.
You and the late,great Molly Ivins have spoken out more strongly about the abuses of this administration than anyone with a wide newspaper readership that I can think of.
That’s pretty good company to be in.
— Posted by G. Stover
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6.
September 19th,
2007
2:14 am
Dear Dr. Krugman,
Thank you very much for the voice you have raised. I am looking forward to the perspective you bring to these important issues at this pivotal point in time.
— Posted by Ed Guerrant
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7.
September 19th,
2007
2:41 am
What I do not understand is why the majority of Americans have been voting time and time again for a party which would hurt them. Is it because preventing abortion and same sex marriage is more important to the Americans than a good meal, access to free health services and the perception of respect from the rest of the world? Is it religion then? Or is it that only the news that shape that worldview are allowed to be spread by the media corporations? Is it the private ownership of media corporations and the cynical use that owners make of them?
— Posted by Carlo Geneletti
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8.
September 19th,
2007
3:08 am
What about a world like the great compression that also let the rich gain ground? or is that just an oxymoron by your thinking? -aliberal tinker
— Posted by Andrew Sturgill
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9.
September 19th,
2007
3:38 am
Fasten your seat belts folks, this is going to be fun.
— Posted by SamEllison
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10.
September 19th,
2007
3:53 am
You seem to assume that inequality is bad. Why?
— Posted by Realist
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11.
September 19th,
2007
4:16 am
The most chickenhawked war in U.S. history unravels before us in Iraq. That’s “the other defeat” for the Ba$e Elite Wealth run amok. It’s not just treasure but blood. “Papertrail Fighters” …”Deathstar Ye$men” …”Private Sectoroids”. And then insult to injury–that they’ve managed to stake an abjectly phony claim of moral high ground, thanks to the reigning Democracy Surrender Monkeys that define status quo Fourth Estate.
— Posted by Artist General
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12.
September 19th,
2007
4:20 am
I really think everything can be simplified. When all elected officials are wealthy, how do you think policy making will favor the poor?
— Posted by Arthur R. Besemer HMC USN (Ret.
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13.
September 19th,
2007
4:21 am
Excluding capital gains! What a joke!
— Posted by JoeJoe
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14.
September 19th,
2007
5:37 am
I appreciate your analysis of inequality, and I think it is the source of many problems. However, two things jump out at me from your interesting chart. First, when the top 10% income group drops from the mid 40% range to the lower 30% range, that is still a hugely unequal! 10% of the population getting 32% of the income leaves 90% of the population to share 68% of the income; the top ten have, per capita, something over 4 times the income per capita compared to the rest.
Second, as you note in the text, the biggest recent change is the tilt not to the top 10% but to the top 10; or, to be more expansive, to the top 0.1% (296% increase in income since 1979). Indeed, it would be interesting to see a similar graph, showing the distribution of the top 0.1% as opposed to the rest of the top 10%. My guess is it would look like a rocket taking of at Cape Canaveral.
And now we aren’t talking about people with 4 times as much income but maybe something like 10,000 times as much income. Anyone who has ever fantasized about winning $25,000,000 in the PowerBall lottery knows how it would transform his life. But there are people out there routinely making (er, taking home) that much money each month. One of those 20 and 2 guys making a billion a year is making 10,000 times as much as someone making $100,000 (and I think she would be way up in the top 10%!!)
Now THAT’S inequality!
I enjoy your column, and this is fun %^)
dan
— Posted by Dan Moerman
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15.
September 19th,
2007
5:43 am
Dear Mr Krugman,
You have well made the point that just as fall in inequality was CREATED & not evolved, the rise too has been CREATED. The belief in tax cutting could well be out of a genuine conviction that overall economy grows fastest by this and the poorer too benefit even if not in the same scale, even while acknowledging that greed of the wealthy is the contributor. The ‘Thatcherites’ must be considering themselves pragmatists believing that curbing wealth accumulation could inhibit investments that fuel growth of overall economy. If public spirited economists could educate them and the society through an intense campaign with facts and figures [your chart being one example] to reveal the horrendous skewing that extremes of their strategy have wrought, I think political compulsions will veer policies towards a fairer sharing and a better quality of life of the less fortunate segments of society.
— Posted by SS Natarajan
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16.
September 19th,
2007
5:46 am
I am so delighted to see this new blog. It will be on my constant reading list along with whatever columns Paul writes. A voice of sanity in a swirling world of obfuscation and spin. Thank you and I plan to buy your new book as soon as it’s released.
Our country is getting to a very sorry state of caring for others, our own as well as others. Sad.
— Posted by Mary Kenaston
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17.
September 19th,
2007
5:50 am
The US needs more columnists like you who make a stand for the middle class! Thanks for this fine story, Mr. Krugman, and it’s fantastic that the wall finally was brought down, so that now more readers can hear your important voice! Again, thank you and keep up the great work!
— Posted by Gray
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18.
September 19th,
2007
5:55 am
Dear Paul:
I guess the Times editors and financial people caught on to reality. Welcome back. I have missed your column terribly. Mark
— Posted by Mark Gary Blumenthal, MD, MPH
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19.
September 19th,
2007
6:13 am
This is a great article. It summarizes what real liberals are all about. I was in graduate school when Paul Krugman was born. America was full of hope, promise, and good will then.
— Posted by Sheine
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20.
September 19th,
2007
6:32 am
I have almost always agreed with Dr. Krugman except when he speaks of globalization. He always speaks of it as he would like it to be implemented instead of the way corporate America has crafted it.
I love this graph and almost everything he says about it. But I don’t know why he won’t admit that globalization is responsible for exporting American jobs and American capital that was built on the backs of American labor. It is the main driver of the impoverishment of the middle class.
BTW, I was born in 1937.
— Posted by Jerry Lobdill
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21.
September 19th,
2007
6:32 am
Inequality is indeed a key (negative) feature of our time, and I am thankful to Professor Krugman for concentrating on this issue. The richest 1% in the US (and other countries) is accumulating an unjustified amount of economic resources and thus political power. I also agree that this has been running by political decisions. Yet I am always surprised by Krugman’s claim that globalization does not have anything to do (it is clearly the neoclassical economist in him!). The liberalization of trade and, especially, financial flows (both political decisions) have both contributed to shift economic and political power, no? Let me give just two examples:
1. By creating a threat of outsourcing (used by firms and governments all over the world), globalization has weakness the political power of trade unions;
2. More importantly, financial deregulation and liberalization has contributed to consolidate a “winner takes all” society and expand the operations of hedge funds. It has also facilitated speculation in all kinds of assets—something that is mainly possible for the rich.
I wonder if any new political agenda should not include a careful rethinking of the national and international in the current economic environment. I look forward to reading Krugman’s book for an answer.
— Posted by Diego Sanchez Ancochea
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22.
September 19th,
2007
6:34 am
Bill McKibbin at a recent lecture in Vermont asserted that the most important election in the past 50 years was Carter vs. Reagan. He believess that in that election America was given a choice between community and individualism. The “hyper-individualism” that evolved following that election led not only to the economic disparity you describe so well in your columns, but to the wasteful use of energy as “rugged individuals” bought ever bigger cars and ever biggger houses that werre further and further from the places they worked…. Both political parties implicitly endorse this consumerism that results from hyper-individualism by feeding the idea that if inequality was eliminated everyone would be able to afford Hummers and McMansions instead of urging us consume less. I don’t hear any Democrats getting the notion of sacrifice into the political conversation— be in by raising taxes on the rich or taxing gasoline like they do in the rest of the world— because they’ve been cowed into submission.
— Posted by Wayne Gersen
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23.
September 19th,
2007
6:34 am
I am so happy you are “free” again (although I will pay for your book without complaints). Your insights are the reason I log on to the NYT as they provide some sense of the “real” US for someone living outside the US.
I grew up in the US during the 60s and remember attending civil rights marches with my father and being aware of social justice issues, the idea being that all Americans should live in dignity–and my father was a Republican! I know it wasn´t perfect then (my parent´s work in inner city Philly or the Appalachian mountains showed that), but I still think that things are so much worse now–perhaps the most disturbing observation is that there does not even appear to be a mainstream dream or goal of a more just and equitable society. With the rise of both religious fundamentalism and market ideology it appears that if one is “poor” or suffers any sort of injustice it is for one of two reasons or both: 1)one did something in the eyes of god to deserve being poor, 2)one did something that was not market efficient and since we are all rational choice “units”, thus it is one´s fault too.
We need a return of some public ethical language grounded in some intelligent economic policy and political analysis, whereby we take collective responsibility at least for the laws that we pass and people we vote into place.
— Posted by Cynthia
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24.
September 19th,
2007
6:43 am
As always, a good read from Mr. Krugman. The impressive feature of our current era is that those in the lower economic range have become cheerleaders of their own demise–kind of like “What’s The Matter With Kansas”.
— Posted by Bill Hargiss
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25.
September 19th,
2007
6:58 am
Another chart I often contemplate is the pie-shaped representation of corporate tax in relation to individual tax as share of the total. Used to be 20% corporate, now down to about 14%. While these same corporate interests rely on our purchasing power for their profits. What’s wrong with this picture?
— Posted by Ruth
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26.
September 19th,
2007
7:06 am
This is not only the story of America, but of the human race. Life is not fair, and the best we can do is study history, and abuse, and try to make a system of government that addresses criminal acts, not Darwinism. We will only become frustrated if we try to redistribute ability. Fair opportunity will never guarantee fair outcome. I can have all the golf lesson on earth and I will never be fit to caddy for Tiger. So far the only system of government that tries to keep a level table is America. We have room for improvement, but we are free to seek it…try keeping that in mind when condemning America to the junk heap.. our immigration crunch proves what the underpriveleged people see in America.
— Posted by roneida
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27.
September 19th,
2007
7:07 am
I too grew up in middle class America in the 50’s. My father went from the farm to steel worker then to WWII Army pilot. When he returned in ‘46 he began selling Cadillacs — the symbol that one had “arrived” at the top of “new heap”. He began driving a Cadillac too, and my family entered the then upper middle class. Yet, my friends at school and in the neighborhood were from all levels of the middle: blue collar to country club. I agree there wasn’t the disparity of socialization that we see today (but there were some extremely poor — mostly people marginalized in low paying jobs by ethnicity or race).
At 18 in 1966, I went to a retail junior college in Boston, and worked for high end specialty stores until 1992. At Saks and Neimans, we catered to the 1% who never let us down. They were spenders during inflation and recessions — even 1989 — not a sales blip downward at the finer stores.
Trouble was that I wasn’t going anywhere salary-wise vs. cost of living in San Francisco or gaining any satisfaction from serving those who had to have $1,000 dresses. Disgusted, I returned to college (liberal arts undergrad and graduate) and eventually became a social worker (MSW) and now work in Philadelphia to serve those at the other side of the Neiman/Saks coin.
Unlike my former 1% clients, the future the lower 1/5 living in poverty, psychiatrically disabled, addicted or homeless are held in the balance daily by politicians — the conservatives who want to abandon them.
In preparation for the days of real trickle, I’ve added fundraiser to my skills. Now, the 1% realize that they aren’t not taking it with them and it’s like a fire sale. Alas, with 280 billion dollars of charity flying around, their conservative financial advisors are telling them to give to Africa and other countries of potential golbal labor, or egotistally they’re self directing their giving to religious institutions and colleges to have a building named after them. Their last and least choice: giving to those with mental health issues and poverty in the US.
Quickly, where is the next FDR?
— Posted by Dixie Palmer
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28.
September 19th,
2007
7:11 am
Hooray for Paul Krugman! Please continue to tell the story, again and again, in as many ways as you can. Help stoke the backlash, for Lord knows why it has not yet happened. As for me, I’m ready…
— Posted by bobinkc
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29.
September 19th,
2007
7:13 am
Bless you, Paul Krugman. I was raised in Dallas and Lubbock, Texas, son of a Goldwater Republican but with a recessive Democratic gene. I grew up around the religious right (before they were so-named), the libertarians, and the John Birchers, who along with the neo-cons, now run the country. I even had a dose of Dick Armey’s economics in college. I was active in Texas democratic politics for years. I know these people inside and out. Of all the analysts of this administration I read, you have them nailed the best. The cynicism required to prolong this war in order to set up a Democratic president for evisceration through a who-lost-Iraq debate is by no means beyond them. For them it is all about power. The war on terror is simply a device for sustaining and expanding a 70-year war to roll-back the New Deal, the Fair Deal, and the progressive civil rights and environmental policies of the 60s. I’m looking forward to reading your blog.
— Posted by Philip Diehl, Florence, Italy
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30.
September 19th,
2007
7:14 am
Excellent start! I believe there are NO problems facing our 231 year-old experiment in ‘Liberty and Justice For All’ that cannot be fixed, but people have to hear more voices like yours, and start being heard: the organized radial right does orchestrated ‘letter-to-the-local editor’ campaigns to drum home their neo-con idiocy, and make their numbers look artificially larger: the progressives must do likewise. I look forward to more of your stuff!
— Posted by Martin Bakken Jr.
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31.
September 19th,
2007
7:14 am
I think Professor Krugman has completely lost his mind. His black and white view of American history - with all Republicans as evil and FDR as the Saviour - would put most Marxists to shame. Maybe he wants to get back at the world because hs is such a short man. He has become the modern version of Marat. Charlotte Corday where are you?
— Posted by Peter Schneider
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32.
September 19th,
2007
7:17 am
Something we must do in this country: To try to get the American public, most of them not being wealthy, to vote in their best interests.
Like health, economic survival ranks at the top of the list. Without either one, people will sink into the depths of despair, losing whatever potential we have left to improve the the quality of life of the individual and of the nation.
— Posted by James Cook
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33.
September 19th,
2007
7:22 am
Delighted, absolutely delighted, to see you free from the firewall at last, Dr. Krugman.
Agree with you about America yesterday and today. Looking forward to reading your book.
— Posted by clio
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34.
September 19th,
2007
7:35 am
Mr. Krugman:
I was born in Minnesota in 1954, raised on the knees of Humphrey and Eugene McCarthey. When Reagan told middle America that the tax money belonged to them and not some government, they bought into this idea of “looking out for me”. Before that, most of us had very little, so it was beneficial to stick together with unions, churches, and government. We know Watergate was the crack the broke our trust in institutions.
I remember in my youth how we had money to build schools, now we don’t even have money to finance music and other after-school activities.
Of course, we’re talking white-bread middle class here and things have gotten so much worse for black people. We now have many of them quarantined in deep pockets of blight that is a world without hope. They like Iraqi’s, have no sense of security in there homes, or opportunity for education. I don’t know how long it’s been since you’ve been in one of these areas. but I promise you, it is no exageration to say, they don’t look much different than the bombed out neighborhoods of Baghdad. There is so much lawlessness that cops are afraid to go into these neighborhoods. Only the strong survive - many don’t as there are almost 300 murders in these Philly areas. Or we put them in cages. One in ten are in the “legal system”.
So what have I been doing about it? Nothing. I’ve been looking out for me and my family. I was a union member for 15 years and went to night school for 13 years to get my undergraduate degree. My two sons are on their own now, but I’m still looking out for me by focusing on saving for retirement. I feel guilty that I haven’t done much to be a part of the answer. But I’m glad I now have a voice in you Mr. Krugman. Please speak LOUDLY.
thanks
Gary Krause
— Posted by gary krause
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35.
September 19th,
2007
7:37 am
The chart is very informative. How about another one, comparing the U.S. with other G-8 countries or the OECD average?
— Posted by Jim Lane
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36.
September 19th,
2007
7:41 am
I too have the conscience of a Liberal. I also enjoyed the “golden” age of middle class America as I was growing up (and protested Vietnam and racial injustice in the 60s).
I agree that America is ready for change, but the conditions are not right for a BIG change yet. I think it will take a great depression to create a great COMPRESSION. Also factor in the threat of communism to our American economic system, back in the 30s and 40s. We HAD to prove that capitalism can work for the good of all, back then. There is no such need now.
I enjoy your work immensely, having “met” you on a Fresh Air interview back in 2001 or so.
— Posted by Randy Zercher
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37.
September 19th,
2007
7:41 am
Paul, an exception piece that is as accurate as it is somber. The rise of the authoritarians and neoconservatives - and their manifest drive to create oligarchies for business and a plutocratic society – should generate immense concern and desire for a seminal change, but will it?
As a progressive research writer and author of four years now, I find a vast majority of Americans apathetic, dejected and complacent, rather than galvanized and poised to affect desperately needed change. Among other causes, “distracted consumerism” may be, in my judgment, a core cause.
When O.J. Simpson’s arrest garners the lion’s share of media coverage, while the restoration of a keystone of democracy, habeas corpus, receives only a cursory glance, I find myself disturbed and worried that Americans have truly lost our way and our roots as an egalitarian society.
As contemporaries of it, are we too myopic to see we are living through another gilded age and only history, long after this era has ended, will correctly narrate the events of the first part of the 21st century?
- Frank J Ranelli, Associate Editor, Op Ed News
— Posted by Frank J Ranelli
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38.
September 19th,
2007
7:42 am
yeah, I grew up in the 1950s and remember that great middle class you are talking about…where we were all equally poor. And I remember the 60s very well when the Federal government led by liberals decided that they could just take it from those who were trying to get ahead and give it to those who were not thus trying to bring everyone down another notch.
This is not a ‘liberal’ blog unless you think that liberal is a synonym for socialist. Income redistribution is a great idea unless you happen to be the one whose income is being redistributed…
— Posted by GUYK
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39.
September 19th,
2007
8:01 am
America’s cultural DNA as a nation, thanks to our Founding Fathers, is to be secular, centrist, and anti-authoritarian. The conservatives badly misread the country and grossly over-estimated their ability to change it. The “populist backlash” you looked for earlier is now happenning, perhaps a bit late for some of us, but is happening just the same.
— Posted by Dave Ramacitti
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40.
September 19th,
2007
8:02 am
I look forward to reading more. I have certainly wondered at the relatively passive demeanor of the disappearing middle class, as one who struggles to equal her middle class family income. Out of the myriad of possible causes, one strikes me as significant: the myth of “technology”, i.e., the ownership and networking of devices that allow us to “penetrate the secrets” of the financial world,and/or the information world - virtual participation Have we not mistaken the computer, the iphone, DSL, podcasts, overnight delivery to Asia,and the like,these possessions, and their potential, for what they signify to only a few - rising disposable income?
Have we come to settle for the “having”, as in indicator of status, rather than the insisting on hard gain?
— Posted by Julianne La Fond Hammond
http://krugman.blogs.nytimes.com/2007/09/18/introducing-this-blog/
September 18, 2007, 11:45 pm
“I was born in 1953. Like the rest of my generation, I took the America I grew up in for granted – in fact, like many in my generation I railed against the very real injustices of our society, marched against the bombing of Cambodia, went door to door for liberal candidates. It’s only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation’s history.”
That’s the opening paragraph of my new book, The Conscience of a Liberal. It’s a book about what has happened to the America I grew up in and why, a story that I argue revolves around the politics and economics of inequality.
I’ve given this New York Times blog the same name, because the politics and economics of inequality will, I expect, be central to many of the blog posts – although I also expect to be posting on a lot of other issues, from health care to high-speed Internet access, from productivity to poll analysis. Many of the posts will be supplements to my regular columns; I’ll be using this space to present the kind of information I can’t provide on the printed page – especially charts and tables, which are crucial to the way I think about most of the issues I write about.
In fact, let me start this blog off with a chart that’s central to how I think about the big picture, the underlying story of what’s really going on in this country. The chart shows the share of the richest 10 percent of the American population in total income – an indicator that closely tracks many other measures of economic inequality – over the past 90 years, as estimated by the economists Thomas Piketty and Emmanuel Saez. I’ve added labels indicating four key periods. These are:
http://graphics8.nytimes.com/images/2007/09/19/opinion/19krugman2.533.jpg
The Long Gilded Age: Historians generally say that the Gilded Age gave way to the Progressive Era around 1900. In many important ways, though, the Gilded Age continued right through to the New Deal. As far as we can tell, income remained about as unequally distributed as it had been the late 19th century – or as it is today. Public policy did little to limit extremes of wealth and poverty, mainly because the political dominance of the elite remained intact; the politics of the era, in which working Americans were divided by racial, religious, and cultural issues, have recognizable parallels with modern politics.
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The Great Compression: The middle-class society I grew up in didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal. As the chart shows, income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history.
Middle class America: That’s the country I grew up in. It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality. It was also a society in which political bipartisanship meant something: in spite of all the turmoil of Vietnam and the civil rights movement, in spite of the sinister machinations of Nixon and his henchmen, it was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.
The great divergence: Since the late 1970s the America I knew has unraveled. We’re no longer a middle-class society, in which the benefits of economic growth are widely shared: between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent.
Most people assume that this rise in inequality was the result of impersonal forces, like technological change and globalization. But the great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change; I believe that politics has also played an important role in rising inequality since the 1970s. It’s important to know that no other advanced economy has seen a comparable surge in inequality – even the rising inequality of Thatcherite Britain was a faint echo of trends here.
On the political side, you might have expected rising inequality to produce a populist backlash. Instead, however, the era of rising inequality has also been the era of “movement conservatism,” the term both supporters and opponents use for the highly cohesive set of interlocking institutions that brought Ronald Reagan and Newt Gingrich to power, and reached its culmination, taking control of all three branches of the federal government, under George W. Bush. (Yes, Virginia, there is a vast right-wing conspiracy.)
Because of movement conservative political dominance, taxes on the rich have fallen, and the holes in the safety net have gotten bigger, even as inequality has soared. And the rise of movement conservatism is also at the heart of the bitter partisanship that characterizes politics today.
Why did this happen? Well, that’s a long story – in fact, I’ve written a whole book about it, and also about why I believe America is ready for a big change in direction.
For now, though, the important thing is to realize that the story of modern America is, in large part, the story of the fall and rise of inequality.
> > >
Krugman is entirely correct in writing
“It’s only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation’s history.””
Indeed, he may well be understating his case. Edward Rubenstein (see National Data) has shown that Median Household Income has fallen for all groups since 2000. The fall for blacks is astounding, -8.0%. This will almost certainly be the first modern economic expansion where median incomes failed to reach their prior peak…
However, he has not made any attempt to explain why this period of growth has failed the American people so badly. The words immigration, trade, and outsourcing, are conspicuous by their absence.
It is a sad day when the American people can learn a lot more about what is wrong the economy by listening to Lou Dobbs than someone with a Ph.D. in economics.
— Posted by Peter Schaeffer
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3.
September 19th,
2007
1:52 am
wow.
yay!
congratulations on your blog!
— Posted by me
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4.
September 19th,
2007
1:55 am
“the great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change”
The chart shows most of the fall occurring in the 1940-1942 period. The political change of the time was war. Domestic social reform was put on hold to win the war.
Why inequality didn’t decline under the New Deal and then crashed as war production ramped up is unclear. My guess is that slack labor markets yield high inequality and very tight markets even out the income distribution. However, the fall in inequality is so sharp and fast that even WWII may not suffice as an explanation. Perhaps the combination of war production and price/wage controls may be correct.
I have seen some claims that income inequality declined sharply during WWI. The Piketty/Saez data support this assertion.
— Posted by Peter Schaeffer
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5.
September 19th,
2007
2:07 am
Mr. Krugman,
This is great news that you’ll be posting your keen insights in a free forum.That said,I’ll still buy your book.
From the start of this administration you’ve called it as you’ve seen it,whether it was popular at the time or not. No opinion poll based columns, which has become increasingly rare in this age of the timid(at best)media.
And by printing the truth as you saw it,you’ve been right and have done your country a great service.Many peope who may have still been silent are speaking out now.
You and the late,great Molly Ivins have spoken out more strongly about the abuses of this administration than anyone with a wide newspaper readership that I can think of.
That’s pretty good company to be in.
— Posted by G. Stover
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6.
September 19th,
2007
2:14 am
Dear Dr. Krugman,
Thank you very much for the voice you have raised. I am looking forward to the perspective you bring to these important issues at this pivotal point in time.
— Posted by Ed Guerrant
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7.
September 19th,
2007
2:41 am
What I do not understand is why the majority of Americans have been voting time and time again for a party which would hurt them. Is it because preventing abortion and same sex marriage is more important to the Americans than a good meal, access to free health services and the perception of respect from the rest of the world? Is it religion then? Or is it that only the news that shape that worldview are allowed to be spread by the media corporations? Is it the private ownership of media corporations and the cynical use that owners make of them?
— Posted by Carlo Geneletti
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8.
September 19th,
2007
3:08 am
What about a world like the great compression that also let the rich gain ground? or is that just an oxymoron by your thinking? -aliberal tinker
— Posted by Andrew Sturgill
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9.
September 19th,
2007
3:38 am
Fasten your seat belts folks, this is going to be fun.
— Posted by SamEllison
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10.
September 19th,
2007
3:53 am
You seem to assume that inequality is bad. Why?
— Posted by Realist
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11.
September 19th,
2007
4:16 am
The most chickenhawked war in U.S. history unravels before us in Iraq. That’s “the other defeat” for the Ba$e Elite Wealth run amok. It’s not just treasure but blood. “Papertrail Fighters” …”Deathstar Ye$men” …”Private Sectoroids”. And then insult to injury–that they’ve managed to stake an abjectly phony claim of moral high ground, thanks to the reigning Democracy Surrender Monkeys that define status quo Fourth Estate.
— Posted by Artist General
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12.
September 19th,
2007
4:20 am
I really think everything can be simplified. When all elected officials are wealthy, how do you think policy making will favor the poor?
— Posted by Arthur R. Besemer HMC USN (Ret.
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13.
September 19th,
2007
4:21 am
Excluding capital gains! What a joke!
— Posted by JoeJoe
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14.
September 19th,
2007
5:37 am
I appreciate your analysis of inequality, and I think it is the source of many problems. However, two things jump out at me from your interesting chart. First, when the top 10% income group drops from the mid 40% range to the lower 30% range, that is still a hugely unequal! 10% of the population getting 32% of the income leaves 90% of the population to share 68% of the income; the top ten have, per capita, something over 4 times the income per capita compared to the rest.
Second, as you note in the text, the biggest recent change is the tilt not to the top 10% but to the top 10; or, to be more expansive, to the top 0.1% (296% increase in income since 1979). Indeed, it would be interesting to see a similar graph, showing the distribution of the top 0.1% as opposed to the rest of the top 10%. My guess is it would look like a rocket taking of at Cape Canaveral.
And now we aren’t talking about people with 4 times as much income but maybe something like 10,000 times as much income. Anyone who has ever fantasized about winning $25,000,000 in the PowerBall lottery knows how it would transform his life. But there are people out there routinely making (er, taking home) that much money each month. One of those 20 and 2 guys making a billion a year is making 10,000 times as much as someone making $100,000 (and I think she would be way up in the top 10%!!)
Now THAT’S inequality!
I enjoy your column, and this is fun %^)
dan
— Posted by Dan Moerman
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15.
September 19th,
2007
5:43 am
Dear Mr Krugman,
You have well made the point that just as fall in inequality was CREATED & not evolved, the rise too has been CREATED. The belief in tax cutting could well be out of a genuine conviction that overall economy grows fastest by this and the poorer too benefit even if not in the same scale, even while acknowledging that greed of the wealthy is the contributor. The ‘Thatcherites’ must be considering themselves pragmatists believing that curbing wealth accumulation could inhibit investments that fuel growth of overall economy. If public spirited economists could educate them and the society through an intense campaign with facts and figures [your chart being one example] to reveal the horrendous skewing that extremes of their strategy have wrought, I think political compulsions will veer policies towards a fairer sharing and a better quality of life of the less fortunate segments of society.
— Posted by SS Natarajan
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16.
September 19th,
2007
5:46 am
I am so delighted to see this new blog. It will be on my constant reading list along with whatever columns Paul writes. A voice of sanity in a swirling world of obfuscation and spin. Thank you and I plan to buy your new book as soon as it’s released.
Our country is getting to a very sorry state of caring for others, our own as well as others. Sad.
— Posted by Mary Kenaston
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17.
September 19th,
2007
5:50 am
The US needs more columnists like you who make a stand for the middle class! Thanks for this fine story, Mr. Krugman, and it’s fantastic that the wall finally was brought down, so that now more readers can hear your important voice! Again, thank you and keep up the great work!
— Posted by Gray
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18.
September 19th,
2007
5:55 am
Dear Paul:
I guess the Times editors and financial people caught on to reality. Welcome back. I have missed your column terribly. Mark
— Posted by Mark Gary Blumenthal, MD, MPH
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19.
September 19th,
2007
6:13 am
This is a great article. It summarizes what real liberals are all about. I was in graduate school when Paul Krugman was born. America was full of hope, promise, and good will then.
— Posted by Sheine
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20.
September 19th,
2007
6:32 am
I have almost always agreed with Dr. Krugman except when he speaks of globalization. He always speaks of it as he would like it to be implemented instead of the way corporate America has crafted it.
I love this graph and almost everything he says about it. But I don’t know why he won’t admit that globalization is responsible for exporting American jobs and American capital that was built on the backs of American labor. It is the main driver of the impoverishment of the middle class.
BTW, I was born in 1937.
— Posted by Jerry Lobdill
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21.
September 19th,
2007
6:32 am
Inequality is indeed a key (negative) feature of our time, and I am thankful to Professor Krugman for concentrating on this issue. The richest 1% in the US (and other countries) is accumulating an unjustified amount of economic resources and thus political power. I also agree that this has been running by political decisions. Yet I am always surprised by Krugman’s claim that globalization does not have anything to do (it is clearly the neoclassical economist in him!). The liberalization of trade and, especially, financial flows (both political decisions) have both contributed to shift economic and political power, no? Let me give just two examples:
1. By creating a threat of outsourcing (used by firms and governments all over the world), globalization has weakness the political power of trade unions;
2. More importantly, financial deregulation and liberalization has contributed to consolidate a “winner takes all” society and expand the operations of hedge funds. It has also facilitated speculation in all kinds of assets—something that is mainly possible for the rich.
I wonder if any new political agenda should not include a careful rethinking of the national and international in the current economic environment. I look forward to reading Krugman’s book for an answer.
— Posted by Diego Sanchez Ancochea
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22.
September 19th,
2007
6:34 am
Bill McKibbin at a recent lecture in Vermont asserted that the most important election in the past 50 years was Carter vs. Reagan. He believess that in that election America was given a choice between community and individualism. The “hyper-individualism” that evolved following that election led not only to the economic disparity you describe so well in your columns, but to the wasteful use of energy as “rugged individuals” bought ever bigger cars and ever biggger houses that werre further and further from the places they worked…. Both political parties implicitly endorse this consumerism that results from hyper-individualism by feeding the idea that if inequality was eliminated everyone would be able to afford Hummers and McMansions instead of urging us consume less. I don’t hear any Democrats getting the notion of sacrifice into the political conversation— be in by raising taxes on the rich or taxing gasoline like they do in the rest of the world— because they’ve been cowed into submission.
— Posted by Wayne Gersen
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23.
September 19th,
2007
6:34 am
I am so happy you are “free” again (although I will pay for your book without complaints). Your insights are the reason I log on to the NYT as they provide some sense of the “real” US for someone living outside the US.
I grew up in the US during the 60s and remember attending civil rights marches with my father and being aware of social justice issues, the idea being that all Americans should live in dignity–and my father was a Republican! I know it wasn´t perfect then (my parent´s work in inner city Philly or the Appalachian mountains showed that), but I still think that things are so much worse now–perhaps the most disturbing observation is that there does not even appear to be a mainstream dream or goal of a more just and equitable society. With the rise of both religious fundamentalism and market ideology it appears that if one is “poor” or suffers any sort of injustice it is for one of two reasons or both: 1)one did something in the eyes of god to deserve being poor, 2)one did something that was not market efficient and since we are all rational choice “units”, thus it is one´s fault too.
We need a return of some public ethical language grounded in some intelligent economic policy and political analysis, whereby we take collective responsibility at least for the laws that we pass and people we vote into place.
— Posted by Cynthia
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24.
September 19th,
2007
6:43 am
As always, a good read from Mr. Krugman. The impressive feature of our current era is that those in the lower economic range have become cheerleaders of their own demise–kind of like “What’s The Matter With Kansas”.
— Posted by Bill Hargiss
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25.
September 19th,
2007
6:58 am
Another chart I often contemplate is the pie-shaped representation of corporate tax in relation to individual tax as share of the total. Used to be 20% corporate, now down to about 14%. While these same corporate interests rely on our purchasing power for their profits. What’s wrong with this picture?
— Posted by Ruth
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26.
September 19th,
2007
7:06 am
This is not only the story of America, but of the human race. Life is not fair, and the best we can do is study history, and abuse, and try to make a system of government that addresses criminal acts, not Darwinism. We will only become frustrated if we try to redistribute ability. Fair opportunity will never guarantee fair outcome. I can have all the golf lesson on earth and I will never be fit to caddy for Tiger. So far the only system of government that tries to keep a level table is America. We have room for improvement, but we are free to seek it…try keeping that in mind when condemning America to the junk heap.. our immigration crunch proves what the underpriveleged people see in America.
— Posted by roneida
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27.
September 19th,
2007
7:07 am
I too grew up in middle class America in the 50’s. My father went from the farm to steel worker then to WWII Army pilot. When he returned in ‘46 he began selling Cadillacs — the symbol that one had “arrived” at the top of “new heap”. He began driving a Cadillac too, and my family entered the then upper middle class. Yet, my friends at school and in the neighborhood were from all levels of the middle: blue collar to country club. I agree there wasn’t the disparity of socialization that we see today (but there were some extremely poor — mostly people marginalized in low paying jobs by ethnicity or race).
At 18 in 1966, I went to a retail junior college in Boston, and worked for high end specialty stores until 1992. At Saks and Neimans, we catered to the 1% who never let us down. They were spenders during inflation and recessions — even 1989 — not a sales blip downward at the finer stores.
Trouble was that I wasn’t going anywhere salary-wise vs. cost of living in San Francisco or gaining any satisfaction from serving those who had to have $1,000 dresses. Disgusted, I returned to college (liberal arts undergrad and graduate) and eventually became a social worker (MSW) and now work in Philadelphia to serve those at the other side of the Neiman/Saks coin.
Unlike my former 1% clients, the future the lower 1/5 living in poverty, psychiatrically disabled, addicted or homeless are held in the balance daily by politicians — the conservatives who want to abandon them.
In preparation for the days of real trickle, I’ve added fundraiser to my skills. Now, the 1% realize that they aren’t not taking it with them and it’s like a fire sale. Alas, with 280 billion dollars of charity flying around, their conservative financial advisors are telling them to give to Africa and other countries of potential golbal labor, or egotistally they’re self directing their giving to religious institutions and colleges to have a building named after them. Their last and least choice: giving to those with mental health issues and poverty in the US.
Quickly, where is the next FDR?
— Posted by Dixie Palmer
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28.
September 19th,
2007
7:11 am
Hooray for Paul Krugman! Please continue to tell the story, again and again, in as many ways as you can. Help stoke the backlash, for Lord knows why it has not yet happened. As for me, I’m ready…
— Posted by bobinkc
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29.
September 19th,
2007
7:13 am
Bless you, Paul Krugman. I was raised in Dallas and Lubbock, Texas, son of a Goldwater Republican but with a recessive Democratic gene. I grew up around the religious right (before they were so-named), the libertarians, and the John Birchers, who along with the neo-cons, now run the country. I even had a dose of Dick Armey’s economics in college. I was active in Texas democratic politics for years. I know these people inside and out. Of all the analysts of this administration I read, you have them nailed the best. The cynicism required to prolong this war in order to set up a Democratic president for evisceration through a who-lost-Iraq debate is by no means beyond them. For them it is all about power. The war on terror is simply a device for sustaining and expanding a 70-year war to roll-back the New Deal, the Fair Deal, and the progressive civil rights and environmental policies of the 60s. I’m looking forward to reading your blog.
— Posted by Philip Diehl, Florence, Italy
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30.
September 19th,
2007
7:14 am
Excellent start! I believe there are NO problems facing our 231 year-old experiment in ‘Liberty and Justice For All’ that cannot be fixed, but people have to hear more voices like yours, and start being heard: the organized radial right does orchestrated ‘letter-to-the-local editor’ campaigns to drum home their neo-con idiocy, and make their numbers look artificially larger: the progressives must do likewise. I look forward to more of your stuff!
— Posted by Martin Bakken Jr.
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31.
September 19th,
2007
7:14 am
I think Professor Krugman has completely lost his mind. His black and white view of American history - with all Republicans as evil and FDR as the Saviour - would put most Marxists to shame. Maybe he wants to get back at the world because hs is such a short man. He has become the modern version of Marat. Charlotte Corday where are you?
— Posted by Peter Schneider
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32.
September 19th,
2007
7:17 am
Something we must do in this country: To try to get the American public, most of them not being wealthy, to vote in their best interests.
Like health, economic survival ranks at the top of the list. Without either one, people will sink into the depths of despair, losing whatever potential we have left to improve the the quality of life of the individual and of the nation.
— Posted by James Cook
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33.
September 19th,
2007
7:22 am
Delighted, absolutely delighted, to see you free from the firewall at last, Dr. Krugman.
Agree with you about America yesterday and today. Looking forward to reading your book.
— Posted by clio
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34.
September 19th,
2007
7:35 am
Mr. Krugman:
I was born in Minnesota in 1954, raised on the knees of Humphrey and Eugene McCarthey. When Reagan told middle America that the tax money belonged to them and not some government, they bought into this idea of “looking out for me”. Before that, most of us had very little, so it was beneficial to stick together with unions, churches, and government. We know Watergate was the crack the broke our trust in institutions.
I remember in my youth how we had money to build schools, now we don’t even have money to finance music and other after-school activities.
Of course, we’re talking white-bread middle class here and things have gotten so much worse for black people. We now have many of them quarantined in deep pockets of blight that is a world without hope. They like Iraqi’s, have no sense of security in there homes, or opportunity for education. I don’t know how long it’s been since you’ve been in one of these areas. but I promise you, it is no exageration to say, they don’t look much different than the bombed out neighborhoods of Baghdad. There is so much lawlessness that cops are afraid to go into these neighborhoods. Only the strong survive - many don’t as there are almost 300 murders in these Philly areas. Or we put them in cages. One in ten are in the “legal system”.
So what have I been doing about it? Nothing. I’ve been looking out for me and my family. I was a union member for 15 years and went to night school for 13 years to get my undergraduate degree. My two sons are on their own now, but I’m still looking out for me by focusing on saving for retirement. I feel guilty that I haven’t done much to be a part of the answer. But I’m glad I now have a voice in you Mr. Krugman. Please speak LOUDLY.
thanks
Gary Krause
— Posted by gary krause
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35.
September 19th,
2007
7:37 am
The chart is very informative. How about another one, comparing the U.S. with other G-8 countries or the OECD average?
— Posted by Jim Lane
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36.
September 19th,
2007
7:41 am
I too have the conscience of a Liberal. I also enjoyed the “golden” age of middle class America as I was growing up (and protested Vietnam and racial injustice in the 60s).
I agree that America is ready for change, but the conditions are not right for a BIG change yet. I think it will take a great depression to create a great COMPRESSION. Also factor in the threat of communism to our American economic system, back in the 30s and 40s. We HAD to prove that capitalism can work for the good of all, back then. There is no such need now.
I enjoy your work immensely, having “met” you on a Fresh Air interview back in 2001 or so.
— Posted by Randy Zercher
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37.
September 19th,
2007
7:41 am
Paul, an exception piece that is as accurate as it is somber. The rise of the authoritarians and neoconservatives - and their manifest drive to create oligarchies for business and a plutocratic society – should generate immense concern and desire for a seminal change, but will it?
As a progressive research writer and author of four years now, I find a vast majority of Americans apathetic, dejected and complacent, rather than galvanized and poised to affect desperately needed change. Among other causes, “distracted consumerism” may be, in my judgment, a core cause.
When O.J. Simpson’s arrest garners the lion’s share of media coverage, while the restoration of a keystone of democracy, habeas corpus, receives only a cursory glance, I find myself disturbed and worried that Americans have truly lost our way and our roots as an egalitarian society.
As contemporaries of it, are we too myopic to see we are living through another gilded age and only history, long after this era has ended, will correctly narrate the events of the first part of the 21st century?
- Frank J Ranelli, Associate Editor, Op Ed News
— Posted by Frank J Ranelli
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38.
September 19th,
2007
7:42 am
yeah, I grew up in the 1950s and remember that great middle class you are talking about…where we were all equally poor. And I remember the 60s very well when the Federal government led by liberals decided that they could just take it from those who were trying to get ahead and give it to those who were not thus trying to bring everyone down another notch.
This is not a ‘liberal’ blog unless you think that liberal is a synonym for socialist. Income redistribution is a great idea unless you happen to be the one whose income is being redistributed…
— Posted by GUYK
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39.
September 19th,
2007
8:01 am
America’s cultural DNA as a nation, thanks to our Founding Fathers, is to be secular, centrist, and anti-authoritarian. The conservatives badly misread the country and grossly over-estimated their ability to change it. The “populist backlash” you looked for earlier is now happenning, perhaps a bit late for some of us, but is happening just the same.
— Posted by Dave Ramacitti
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40.
September 19th,
2007
8:02 am
I look forward to reading more. I have certainly wondered at the relatively passive demeanor of the disappearing middle class, as one who struggles to equal her middle class family income. Out of the myriad of possible causes, one strikes me as significant: the myth of “technology”, i.e., the ownership and networking of devices that allow us to “penetrate the secrets” of the financial world,and/or the information world - virtual participation Have we not mistaken the computer, the iphone, DSL, podcasts, overnight delivery to Asia,and the like,these possessions, and their potential, for what they signify to only a few - rising disposable income?
Have we come to settle for the “having”, as in indicator of status, rather than the insisting on hard gain?
— Posted by Julianne La Fond Hammond
posted by LUXXXCORP at 10:24 PM
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