September 19th,
September 19th,
2007
8:08 am
What an incredible article [and glory be, we didn’t have to pay to read it!] I feel certain that Paul Krugman is echoing the feelings of many Americans today. I see how my children must struggle to remain above water…hard working, smart, but always running on a treadmill.
Bravo to Krugman and his new series.
Carmen Noakes/Atlanta
— Posted by CM Noakes
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42.
September 19th,
2007
8:13 am
It is dissembling to say that middle class America was created “because strong unions, a high minimum wage, and a progressive tax system helped limit inequality” without saying that leaving the US economy on a war footing while it rebuilt the world under the Marshall Plan was a large contributor to American wellbeing. Its now a global economy and Mr. Krugman knows it. But he leaves out facts that don’t confirm his point. He is a liberal pundit, not an economist or an analyst.
— Posted by Robert
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43.
September 19th,
2007
8:15 am
I’m not a liberal. Take one look at the Duke faculties’ refusal to apologize for their vituperative attacks on the lacrosse team and you can see why. I lean a little toward social liberalism but I’m conservative fiscally. But I do agree 100% that the rise in inequality is an issue that needs correction. Personally I feel that in some ways we are entering the decline of our American western civilization similar to that of the Roman Empire or the British empire of the 1900’s. It seems that the powers that control our political and economic direction are intent on consolidating that power believing that once consolidated they can maintain it as a status quo. And I believe history has shown us many times that this doesn’t work. When the haves get so far above the have-nots that they stop considering their needs then the winds of change usually blow pretty hard. Just ask Marie Antoinette.
— Posted by Eff'n Higby
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44.
September 19th,
2007
8:18 am
I don’t have anything to add or say really (yet), since I agree with your views all the time. Heck, I don’t even agree with myself all of the time. I am just hoping to be the first comment on your new blog.
Anyway, I look forward to more graphs and tables related to your “dismal science” (just kidding).
It will give me even more ammunition when I start my rants about the dissolution of the America I also knew growing up (born in 1961).
I truly hope and am beginning to believe that as you said, “America is ready for a big change in direction.”
We desperately need to change.
Stay true. Stay strong. I love you man.
— Posted by bern futscher
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45.
September 19th,
2007
8:29 am
The saddest thing is that most people who vote for the “don’t tax the rich” party will never be rich and they are just taxing themselves more to make up for what was not paid by the rich.
— Posted by Frank Irvin
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46.
September 19th,
2007
8:31 am
I sent a copy of this article to both of my daughters, because while they have graduated from college,(one on her way to a PhD), the inequity in this country is one problem that cannot be solved by education. Only an explanation of history and political knowledge of a political nature can explain our present situation.
— Posted by Carol Doyle
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47.
September 19th,
2007
8:38 am
Paul, I will be looking for your book and will reserve my comments until then. I do have a pertinent question though. Why is it that most (if not all) opinion writers tend to overlook the massive effect WWII had on the economy and subsequent prosperity of our nation?
As a child of the depression, I know the impact the war had on my family and our ability to survive. Also usually overlooked is the impact that the GI bill had on the educational and income levels of the “average” American. First observation is that it moved a great number of people from the middle class into what is now considered “rich”. The term “Rich American” really needs to be redefined. All things considered, the income levels are set too low.
— Posted by Dick Jones
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48.
September 19th,
2007
8:41 am
I am a New Yorker living in Istanbul now. It is a paradigm of rapid economic and social change, operating against a struggle for balance between constitutionally mandated democratic values and the forces of Islamic fundamentalism. A more equitable distribution of wealth is also a key issue here and one that is essential to their future success as they sit on the threshold between Europe and the Middle East. I’ll be watching this blog with great interest.
— Posted by Walt Behnke
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49.
September 19th,
2007
8:48 am
Thank you, thank you for acting as a public, outspoken advocate for those of us who are not middle class and who face ever-increasing, insurmountable barriers to simply becoming financially viable. It is truly harrowing to watch with growing panic as the right wing wages merciless class warfare on us.
I was born in 1952. My parents stopped supporting me when I turned 18. I spent much of my adult life working my way toward a college education, and somehow managed to graduate magna cum laude in 2002 from an Ivy League university. At that time I developed a medical issue and was disabled with pain for the better part of five years. I have never collected any public assistance or disability benefits. I’m finally better physically, but I’ve lost everything financially. I’m now struggling to rebuild a completely destroyed life, but the resources and measures at my disposal to do so are meager.
It’s the most vile, hypocritical slap in the face to hear well-off conservatives preach about how my circumstances shouldn’t matter, that I need to “pull myself up by my bootstraps,” and that I should be a good sport about how unfair life is. I’m not sure when Americans came to lack a moral compass but we need urgently to reclaim it. I’m not a productive citizen. I do not contribute to the economy or to my community, or to the tax base. That ought to provide some incentive for us to lend a helping hand to people in my predicament. But even if it isn’t, can’t we address the immorality of treating us so harshly and with such willful callousness? Is this really what has become of the American character, and is it reversible?
— Posted by Patty Quinn
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50.
September 19th,
2007
8:53 am
For me the real mystery is how did folks of meager means, who benefitted greatly from the advantages of the rising middle class era, become enamoured with the conservative movement. The only clue I have is that for some of them, they went to college (the first in their families), join the professional class and worked for big corporations. Then these same folks who benefited from a strong public education and community services later vote to dismantle these very institutions that allowed them to suceed. This disturbs me greatly, and yet these are folks I must spend holiday dinners with, so I must tread lightly.
— Posted by Kristen Strand-Tibbitts
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51.
September 19th,
2007
8:58 am
If I want economic analysis, I’d prefer to get it from someone who is not a rigid partisan. There are plenty of good economists out there and choosng to heed the word of the liberal Sean Hannity seems silly.
Can the Times get publish the work of an economist who is not also a strident partisan?
— Posted by Mike
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52.
September 19th,
2007
9:02 am
Looking at the U.S. — I mean, looking around it — it still seems like the middle class is richer than the middle class in a lot of other places. Could this have something to do with its seeming passivity? How threatened are the living standards of the middle class? Is the seeming well-to-do-ness of suburban neighborhoods increasingly a stage set like the Pullman villages of yore? How many people are actually tracking down?
— Posted by Esther Buddenhagen
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53.
September 19th,
2007
9:07 am
Hi Paul,
Welcome to the blogosphere and congratulations on the freeing of your column from the Times Select shackles.
I’m a firm believer that the destruction of the American middle class is one of the most dangerous developments in the last 40 years. I also believe that if you add to your chart the rise and fall of the percentage of union members in the workforce, you’ll see that they are almost identical. Organized labor was the primary ticket into the middle class and the concerted effort to destroy unions is bringing back the age of the Robber Barons.
I hope you’ll spend a little time discussing labor in this blog and I’m sure no matter what you opine on will be interesting. I look forward to being a regular reader. Good luck!
— Posted by Not the senator
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54.
September 19th,
2007
9:09 am
Eric Hobsbawm, in his four-volume history of modern Europe and the world, has pointed to what he calls “the crisis of the liberal state,” by which he means those structural difficiences in liberalism itself that tend toward inegalitarianism. These tendencies (as analyzed by Jeremy Rifkin in The European Dream) are particularly marked in the USA, given our strong inheritance of a European Enlightenment liberalism combined with Puritanism, a religious tradition that emphasizes the importance of individual earthly success as a sign of coveted and rare election to heaven. We need to see that liberal individualism has distinct limits and must be balanced (e.g., in universal single-payer health insurance) by recognition that each human being has collective interests, origins, and obligations as well as being, in the words of Adam Smith, “committed by nature to his own care.”
— Posted by Geoffrey Cocks
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55.
September 19th,
2007
9:09 am
I am thrilled to see you doing this and wish there were a way to get teachers in high schools and colleges/universities to use this in their classes. I teach at Penn State and teach about economic inequality in all my classes. I know you are well aware (and have contributed greatly to my own understanding) of how tax politics are a significant part of this picture of rising inequality. (I wrote a book that came out last year aimed at reframing tax policy as an important women’s issue; in case you are interested it is Taxes are a Woman’s Issue by Mimi Abramovitz and Sandra Morgen).
I find, however, that it is hard to get young people (outside of economics classes) to take on tax politics as important. Whether it is because it seems too complex, too dry, or too distant from their lives it is tough. That is why I am trying to imagine a way for your blog to become part of secondary and post-secondary classes — both to get the information out and to inspire real conversation about taxes, and NOT the way Bush tries to lure the young to “the ownership society” by striking fear in their hearts about Social Security for the elderly taking too much out of their pockets. Anyhow thanks; I plan to be a “regular”, Sandra Morgen
— Posted by Sandra Morgen
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56.
September 19th,
2007
9:10 am
The central concept explaining the return of gross inequality in American society is that of predation. A culture that values aggression of the strong against the weak inevitably becomes grossly unequal. It also becomes uncivilized. Predators control most American corporations and the American government. The evils of their predation have yet to be fully revealed. When the damage is fully understood, a new era of reform will commence.
— Posted by HH
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57.
September 19th,
2007
9:13 am
It appears to me that the Great Compression occurs about the time of Lend-Lease and the beginning of the War. Likewise, isn’t the time of middle-class America generally linked with the complete lack of competition from a developed world crushed by war damage. I won’t make any grand ideological claims, but I think the good ‘ol days of the 50’s and 60’s weren’t sustainable without the U.S. emerging as the only nearly unscathed developed nation.
— Posted by Joe
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58.
September 19th,
2007
9:13 am
I think part of the story of the great compression has to also include international factors. How much, for example, did the fear of international communism drive acquiescence by the elite in USA, allowing greater income equality? With the collapse of the international communist threat - we see more aggressive attempts by the elite to redistribute income to the wealthy.
— Posted by Eric Schwartz
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59.
September 19th,
2007
9:18 am
Your blog and book title immediately attracted my attention. As a liberal living in a very Republican area, my standard response to “How can you vote for …………?” has always been and continues to be, “It’s simple. I vote beyond myself.”
So I needed to read more about your catchy title, but with little luck. I hope your book (for the sake of sales) more clearly explains, to those of us economics-challenged individuals, terms like “movement conservative political dominance” and even the “safety net”. You lost me!
— Posted by Patricia Heidrich
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60.
September 19th,
2007
9:18 am
To make the graph more clear from a political perspective you might want to list who was president during the different time periods.
For example at the bottom of the graph indicate that Reagan was president from 1981 to 1989. From 1989 to 1993 it was Bush senior, from 1993 to 2001 it was Clinton and from 2001 until present Bush junior.
My question: Why did the divergence continue during Clinton’s presidency?
— Posted by Colleen
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61.
September 19th,
2007
9:21 am
Can’t say I’m all that convinced that “inequality” is back to 19th century levels. As the chart shows, in income perhaps (but with very different compositions: in the earlier period much more of it was to do with income from financial capital, rather than labour income, or human capital income if you prefer).
But other forms of inequality have shrunk dramatically: arguably, more important forms of inequality too. Of life spans, of calorie intake, of height (which reflect to a large extent greater equality of childhood nurtrition), of health care.
Concentrating solely upon income inequality does, I think, overstate the situation.
— Posted by Tim Worstall
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62.
September 19th,
2007
9:22 am
Mr. Krugman: Thank you so much for bringing these issues to the light of day in comprehensible language and with such passion. I am very much looking forward to these conversations.
It seems (finally) like it’s time to talk about “conscience”. It’s interesting that John W. Dean recently wrote a book called “Conservatives Without Conscience”. [For those who haven’t heard about it, he talks about it here: http://writ.news.findlaw.com/dean/20070905.html ].
Also, there was a piece in the NYT recently by Jeffrey Rosen, which also had “conscience” as a topic, [“Conscience of a Conservative”]. It’s about Jack L. Goldsmith, a conservative lawyer who did not go along with John Yoo’s ideas about the Geneva Conventions. http://www.nytimes.com/2007/09/09/magazine/09rosen.html ?
I, too, have the feeling that “America is ready for a big change in direction”, and your knowledge and vision can help us all travel that road with clear heads and compassionate hearts. Let’s go!
— Posted by Fran N.
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63.
September 19th,
2007
9:26 am
Thank you, Mr. Krugman. Finally someone started to address the real issue. And in the NYT too. I am not the US citizen, but have been following the “evolution” of the US society since 1967, when I first visited this great country, on the student-exchange scholarship. I was concerned, not only because of “what happens there affects the rest of the world”, but also because I always considered the US my home away from home. After twenty or so visits, during the period you’ve accurately described as “middle class America”, and “the great divergence”, I’ve noticed that the big change is taking place. I couldn’t articulate that change to my friends, except by saying that my feeling is that the big greed is taking over. Now, you expressed that feeling of mine, and gave the greed its real meaning.
— Posted by Milan Zivkovic
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64.
September 19th,
2007
9:31 am
Paul, it seems to me that if Thomas Frank’s book is even remotely correct — his thesis being that many working class Republicans vote as they do over social issues — the most efficient way to bring about the collapse of the Republican coalition would be to accept the overruling Roe v. Wade and jettison support for gay marriage and hostility to Christianity from the liberal agenda. But one assumes you’re not in favor of such changes, so the problem comes down to the real (and unremarkable) reason why politics is more fractious: not because of conspiracies or movements, but because large numbers of Americans disagree with one another about issues that are very important to them, issues which are mutually irreconcilable.
— Posted by Simon
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65.
September 19th,
2007
9:36 am
Welcome to the blogosphere Mr. Krugman. I enjoy your columns and look forward to the copious charts and graphs posted here!
— Posted by DanF
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66.
September 19th,
2007
9:42 am
I am curious about one aspect to your chart that I did not see addressed: when I look at a chart of immigration levels to the U.S., it shows a very similar pattern as your graph. How much of income inequality can be explained by immigration levels?
— Posted by Michael Bumgardner
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67.
September 19th,
2007
9:54 am
A key element of conservative thinking about inequality is the idea that in a modern economy with an extensive division of labor, it is possible (in a *non-arbitrary* way) to quantify the value contributed by each person.
From this idea (and a little sloppy thinking), it follows that if one person is paid a billion dollars a year while another person is paid a Wal-Mart wage, then each simply receives the money equivalent of what he/she contributed to the economy. People who complain about inequality are a bunch of whiners who want to deny the rich their just rewards while giving handouts to the undeserving poor.
Dr. Krugman, it might help a lot of people if you addressed that issue.
(By the way, I used your international economics textbook as a student and I enjoyed it a great deal.)
— Posted by Miles
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68.
September 19th,
2007
10:01 am
I would prefer a Conscious Liberal to the Conscience of a Liberal. To suggest that the ascendancy of Ronald Reagan and Newt Gingrich was due to a vast right-wing conspiracy is sheer lunacy. Undoubtedly there were institutions that were advocating for Reagan and Gingrich, but no consipiracy is capable of getting tens of millions of Americans to freely go to the polls on their own power and vote. I was born a Democrat but by the time I got to college, on Election Day, I put on my best suit and went to vote for Ronald Reagan. Ronald Reagan won 49 out of 50 states that year, and nearly two-thirds of the youth vote. I don’t mind that you hate conservatives. I just wish you could show some semblance of understanding of what we’re about. I am really shocked and dismayed how simplistic and self-serving your analysis is.
— Posted by Peter McFadden
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69.
September 19th,
2007
10:09 am
Wonderful! In the past one of the great virtues of America has been that when inequality grew large, something happened to reduce it. Your chart shows just one example. I hate to use this phrase, but the question today is whether we have reached the tipping point. Has inequality grow so much that the political power of the Rich and Super Rich will prevent the decline of inequality? Will inequality keep growing?
— Posted by Leonard S. Charlap
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70.
September 19th,
2007
10:15 am
While I agree that the America you grew up in was in most respects a better place than the one we inhabit today, your characterization of that time as “It was a society without extremes of wealth or poverty, a society of broadly shared prosperity” is likely to be attacked as overly sentimental.
My youth, spent about a decade before yours, was during a period of considerable poverty, especially among African Americans and those living in the rural south. Lyndon Johnson’s war on poverty may or may not have been an effective way of dealing with this problem, but the problem itself was real enough.
My guess is that your graph correctly illustrates a shifting of income between the rich and the middle class, but it does little to compare the relative position of the poor in these various eras.
Also, income is only part of the story. A similar graph showing distributions of net worth might reveal even greater disparities. It is wealth rather than income that creates the differences we see in privilege and it is privilege that accounts for such abominations as the rise of G. W. Bush all the way to the presidency.
These are minor points. I appreciate your insights on the state of our society and find you to be one of the very few in the press who speak without unreasonable deference to established ideas and conventional wisdom.
— Posted by George Mandeville
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71.
September 19th,
2007
10:16 am
Could you please explain how a rise in the top marginal tax rate would translate to a drop in the share of the richest 10 percent of the American population in total income? Plus, how do we know would that lower wages for the richest 10% would translate into higher wages for the rest of the country, as opposed to higher corporate profits?
— Posted by A
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72.
September 19th,
2007
10:17 am
Fair enough, but we need to discuss how the “more trade at all costs” mantra has contributed to the weakening of the middle class and especially the blue collar sector.
“Lose you job but shop at Wal-Mart” is not cutting it.
The mad rush to globalization may be helping the Chinese but is hurting Americans, despite the reassurances of (tenured) economists that we can build a prosperous service economy.
— Posted by save_the_rustbelt
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73.
September 19th,
2007
10:21 am
I share your concern regarding the rise of economic inequality in America, but I wonder if politics played as dominate a role as you imply regarding the great “compression”. Following WWII most of the world’s productive capacity lay in ruins, except America’s. Much of our capacity was directed, through mechanisms such as the Marshall Plan, to the rebuilding of European and Japanese industrial infrastructure. American industry had little competition in its role as key rebuilder of the western world and Japan. This allowed American workers to enjoy higher wages as American companies provided much of that capital equipment then would otherwise have been the case. I believe that dynamic was a major underlying factor in the “compression” shown in your graph. As other world economies recovered and became competitive in a more global economy, American wages came under pressure. Certainly, a better political response could have recognized this trend and reacted more effectively on behalf of the American worker, but political action is usually reactive not pro-active. So,the great “compression” owes much to the very rare and special physical and economic circumstances prevailing immediately following the War.
— Posted by David Tolwinski
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74.
September 19th,
2007
10:23 am
What is the significance of the share of income of the top 10%? The population in the US living below the poverty line is lower than that of Canada, Germany, the UK…(http://en.wikipedia.org/wiki/List_of_countries_by_p ercentage_of_population_living_in_poverty). Considering wealth and income are only a segment of what makes a society flourish the importance of this chart pales even further.
— Posted by Matt Johansen
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75.
September 19th,
2007
10:25 am
What roll did WW2 have in creating what you call Middle Class America? Just wondering. Didn’t increased military expenditure during and post-war create the manufacturing boom that employed so many Americans?
— Posted by David Zeeman
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76.
September 19th,
2007
10:29 am
Mr. Krugman,
Thanks for addressing this subject, I look forward to reading your book. I hope that you heard Alan Greenspan on NPR (9/17 interview) begrudgingly say that he finds you to be a good economist.
Back to inequality: I remember during the 1988 presidential campaign, telling someone from the younger generation that there was a time when a whole family could live well n one income! I was mystified about Reagan’s popularity then, and his beatification 20 years later. Why is it that liberal commentators are so reluctant to balance comments about his policies by reminding us that that Reagan was responsible for the creation of homelessness in America?
Keep up your brilliant commentary.
— Posted by Sara S.
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77.
September 19th,
2007
10:34 am
This is more of a question than comment.
The other day, on public radio, I listened to a discussion: pros and cons, regarding Bloombergs proposal to help people and students in poverty, by paying poor people for various things: taking their children to doctors, attending a PTA meeting, students attending class, etc. Objections, of course, included: why should we pay people to do what they are supposed to be doing anyway.
My question is, what is the difference in paying these people to do these things, and paying CEO’s a large bonus in stock options to do what they are already paid to do?
Thank you very much. I love your colums.
— Posted by Cynthia Carlson
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78.
September 19th,
2007
10:35 am
Not that I disagree with your theory that the “wealthiest of the wealthy” have been taking advantage of every opportunity, and effectively destroying the toe-hold the middle class had when it came to wealth and power distribution following the New Deal, but don’t you think the boomers might also hold responsibility for the “great divergence” you have identified, following the 70s?
Looking back, it would seem all the drug-induced partying, and even the self-satisfied let-it-all-hang-out “protest” movements of the 60s and 70s, has amounted to very little sense of personal responsibility among the boomer middle class as they moved forward through the decades.
Having left behind the 60s and early 70s, boomers began a programme of caring only about “me and mine” that would eventually lead to an incredible obliviousness and apathy when it came to the damage their self-absorbtion was wreaking on the body politic and any sense of citizenship. Indeed the short-lived environmental movement of the late 80s, fueled by the fires of the next generation’s middle class youth, was quickly swallowed up in the boomer’s taste for SUVs, luxury living, and big-box-store convenience… and wasn’t it the boomer’s investment decisions, “family values” movement (which again centred on me-and-mine political and social solutions), and calls for tax cuts that helped to drive the stock market excesses of the past two decades and put the current movement conservative governments in power?
With their 401Ks rising and falling with tides of the stock market, questions about global competition, or the concerns of anti-powerty and anti-war groups(again fueled in large part by the ideals of the current generation of middle class youth)are poo pooed as deluded, and the term liberalism, itself, has become a perjorative that few among the generation who evolved in its hay-day want to claim.
Yes, the rich have taken advantage of the melt-down of the left. But they could not have done as much damage to democracy or the dreams of equality as they have, without the help of the booomers, whose political, economic and social decisions over the past 30 years have wreaked their own havoc on the well-being of the national body politic, the prospect of global stability, the possibility of an environmentally sustainable future.
— Posted by Gayle Irwin
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79.
September 19th,
2007
10:39 am
Thank you for your much-needed voice of reason. A measure we don’t hear as much about is the poorest 10% and how its share of total income has changed over time. How does that chart look? Also, I would love to hear your take on relative poverty. How have living standards of the bottom 10% improved in terms of indicators such as purchasing power and life expectancy? [I am not implying that rampant income inequality is acceptable, but I do think it’s curious that we tend to compare our poorest people to our wealthiest people, rather than to the poor in other countries.]
— Posted by Nina
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80.
September 19th,
2007
10:40 am
Future issues of your blog should address some key statistics to faciliate a meaningful discussion. Was the compression caused by the rich getting poorer or the non-rich getting wealthier? How much movement is there between the top 10% and the rest? Is it the same folks and their descendents or is it a changing group of people? Once appropriate statistics are set forth, you can then begin to analyze whether the relative gap is actually bad and, if so, should the focus be on wealth redistribution or how to increase the actual earning power and wealth of the bottom 90%? But first we need the facts.
— Posted by David Morse
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81.
September 19th,
2007
10:44 am
Your “Great Middle Class” was formed by the tacit military threat of troops returning from WWII who, with nothing left to do, gave significant pause to the corporate “one percenter” economy that saw its demise in violent social revolution if depression conditions extended after the worldwide victory of the Allies. Just as the draft of 1/3rd the work force into the armed services secured the bailout from the Great Depression, the GI Bill making it possible for ex-GIs to go to school stabilized the effect of the returning influx of new labor. The GI Bill prevalence also extended to inexpensive tuition that made higher education a near-entitlement. The demise of free tuition and the concommitant rise of the student loan “industry” led to your next stage.
— Posted by Rick Goranowski
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82.
September 19th,
2007
10:45 am
The middle-class society which Krugman grew up in was, he writes, “a society of broadly shared prosperity”. In his next paragraph he laments that “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.” He clearly intends for these numbers to indicate that things are unfair.
But wait – this current middle class is enjoying a median income 13 percent greater than Krugman’s golden time of “broadly shared prosperity”. And, the poor – if their material goods can be taken as any indication — are infinitely better off than in the fifties.
As an artist whose year-to-year income has several times swung from being – according to our government’s definition – poor to wealthy and back, when I was “wealthy”, guess what I did with my wealth? I spent a great deal of it improving and maintaining my white-elephant of a house, and thereby helped provide a living for numerous carpenters, plumbers, painters, etc. It would greatly surprise me if that one-tenth-of-one-percent weren’t likewise spending much of their wealth and thus providing an income for a great many people further down the ladder. Perhaps this is what accounts for that thirteen percent increase in the median household income.
Regardless of how well we are doing, inevitably the Left wants more redistribution of wealth. In this they remind me of eager butchers, anxious to cleave open the goose and get directly at those golden eggs.
HP
— Posted by hugh prestwood
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83.
September 19th,
2007
10:56 am
Mr. Krugman, I’m looking forward to getting to read more of you on this blog!
What disturbs me more than anything in what you describe is the phenomenal set of circumstances that were required to allow the Great Compression to take place - a crippling depression, a strong and politically brilliant leader, mass organization, and a World War. There were people with the right ideas before then, but they were up against an overwhelming attitude of “that’s just the way things are.”
In reading your column, I thought about Polanyi’s classic “Great Transformation” about the creation of the market, and Mark Blyth’s “Great Transformations” about the creation of the great post-war compromise. Are we facing another, regressive transformation? Am I alone in noticing that while economic reformations geared towards equality and fairness are always advanced as humane policy, reformations towards laissez-faire markets is posed as being “the natural way?”
When can we get rid of this fallacy that every man for himself markets are natural, and social welfare is an artifrice?
— Posted by Dave Silverstone
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84.
September 19th,
2007
11:04 am
I’m looking forward to your book. I was born about ten years after you, and so I’ve experienced mostly the decline in our economic equality and civility. Indeed, the two seem to have come hand-in-hand; as if certain elements in our society stoked the fires of uncivil behavior as a distraction or justification for grabbing control over our national wealth.
Of course, none of that has anything to do with free market capitalism. In fact, so far as I can tell it’s the antithesis of the enlightened economics proposed by Adam Smith. But America as a whole seems mesmerized by the phrase “free market” to the point where we can’t challenge our current corrupted corporation-driven economy and government. The fact that people like George W. Bush, Dick Cheney, and Don Rumsfeld, who largely have been failures at actually doing the jobs they have held, can rise to high office on a platform of “equality of opportunity” and “free market capitalism” only underscores the irony of our time.
I especially have grown tired of hearing about “creative destruction” and Riccardo’s “comparative advantage” as excuses for the ever increasing gap in wealth that you have shown. I can understand how an economy needs to “destroy” in order to “create”; and that the idea of comparative advantage follows logically from certain economic structures. But I find that both concepts actually lead to the conclusion that we need *more* progressive taxation, not less, to keep our economy vibrant; because the winners have to pay something back to the losers to keep the game going. Simply uttering those two phrases as a way of rationalizing why Wall Street traders and hedge fund managers—who don’t really create or build anything—are entitled to millions of dollars in compensation is disingenuous. I suspect that if people really understood how many so-called experts in the business media have sold out to a right wing propaganda machine, there would be more calls for reform.
So, I hope that you will help set the record straight on what free markets and capitalism really mean, either in your book or on this blog.
Good luck. We need more people who have the courage to say the emperor is naked.
— Posted by David Lentini
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85.
September 19th,
2007
11:06 am
Did the Great Compression come from the New Deal or from the economic expansion beginning on the eve of WWII because of increased government military spending? The % going to the top 10% still seems very high in 1939-1940, when the New Deal had been going on for six or seven years.
— Posted by Hal
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86.
September 19th,
2007
11:15 am
America has paid and will continue to pay a high price for the inequality. The steady decrease in government investment (aka funding and support), for programs, organizations and institutions that serve and promote the factors that contribute to economic equality will lead to a decrease in our power in the world.
Statistics have shown that an increase in the availabilty of audio/visual media such as cable tv stations, have paralled a decrease in voter participation at the voting both and other voter related activities. Bearing this in mind, the lack of populist outcry is not surprising. It must be noted that media ownership is set squarely among that 0.1% of the country’s richest population.
Education systems are training young people to pass tests and lessons in critical thinking and civic participation have fallen by the wayside.
This situation is exacerbated by a decrease in funding for education, housing, job development, training, health care, small business assistance and many of the programs that existed during the sixties and 70s, and during the time of FDR, for the purpose of supporting and expanding of the middle class.
Our congressional representatives and Senators are increasing among some of the wealthiest people in America.
With the focus on wealth and the wealthy, we are constantly losing great contributions of talent, ideas and skills that could be used in creating the “great society”. People are forced to spend their time on survival. America and the world suffers.
Congratulations on this blog. I have never felt compelled to write on any blog before. It is exciting and somewhat comforting to know that this type of discussion can be held in a widely read forum. Perhaps the discussions and ideas here will help to contribute to an environment of change. I will be e-mailing the link to the many I know who work to correct these inequalities every day of their lives.
— Posted by Celeste Morris
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87.
September 19th,
2007
11:25 am
There is an old saying that Democratic economic policies turn people into Republicans and then Republican economic policies turn people back into Democrats. The silver lining of the Reagan-Bush-Bush presidencies is that things seem to be coming full circle.
But, I would add a couple other observations. The period of the “Great Compression” for the most part was a period of modest federal deficits (other than during WWII), a world financial system tied to gold rather than the dollar, and little or no employer-based health coverage. The rise of inequality over the last 27 years has been accompanied by enormous increases in America’s trade and federal government debt, and an explosion in the cost of health care under our employer-based private insurance system. Our biggest national exports are now manufacturing jobs and debt instruments rather than physical product.
So, my question for the learned professor is: is all this inequality illusory, an accounting trick pulled off by the people who effectively hold the nation’s checkbook? Is there a way “we the People” can take that checkbook back? Can we force those who have effectively written a check to themselves from the bank of our shared wealth to pay back what they have stolen? Or would it just be another fiasco? Is cannibalism just a fact of life, no matter what group of humans is in charge?
Perhaps disciplines other than just economics are involved.
— Posted by Gary
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88.
September 19th,
2007
11:31 am
A very insightful column, but missing that last crucial component which has enabled The Great Divergence: apathy.
There is no ‘Grapes of Wrath’ outrage for misery so profound it couldn’t be ignored, nor masses of protesters on The Mall in Washington burning draft cards against an unjust war.
You have a population today which has been carefully engineered into believing this is the best of all times and that -my- individual problems are somehow -not- the norm… that -my- difficulties were somehow caused by some deficiency of -my- work ethic. There is a low-level, but universal hopelessness stalking America today that springs directly from an unresponsive government.
“I can’t change things, so why try? We elected a new Congress in November, but nothing is happening. 70% of us hate the war, but nothing is happening.”
We need a Peter Finch “Network” moment when enough people begin to say “I’m mad as hell and I won’t take it anymore.”
— Posted by dpkesling
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89.
September 19th,
2007
11:38 am
Like you, I think that the country is in for a major shift politically, but I am not at all certain that it is one that will be along traditional party fault lines. Red America longs for a populist just as much, if not more than does the Democratic Party. It is important to note in your chart that the Clinton Presidency did nothing to turn back the tide of income disparity. Quite the contrary. And I doubt that a Hillary Presidency would be any different. About the only Democrat who clarifies the lines between rich and poor is John Edwards, and he languishes far behind in the polls.
— Posted by Michael Day
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90.
September 19th,
2007
11:45 am
Interesting view, but you forget a few items. The people in the top 10% are not static. With the exception of a few families, Kennedy, Rockefeller, etc. there is considerable change in the composition of the top 10%. The majority got there by providing products or services that the rest of us voluntarily purchased, few if any “stole” their way to the top.
According to the Tax Foundation and Congressional Budget Office, the percent of all income earned by the top 1% fell from 17.8% to 16.3% while their share of taxes increased from 36.5% to 36.7%. The bottom 80% of income earners saw their share of taxes fall from 18.7% to 14.7%. From http://www.taxfoundation.org/blog/show/2120.html
— Posted by Ron
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91.
September 19th,
2007
11:47 am
Fascinating. I’m curious as to whether this, the rise of inequality, is a global phenomenon? In the U.K., I suspect that the Thatcher government, breaking the consensus of the previous 40 years, paralleled the trends you display (thereby hamstringing New Labour).
— Posted by Peter Vince
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92.
September 19th,
2007
12:28 pm
Mr. Krugman: I am looking forward to future posts on this Blog. For the moment, I want only to put in a request that you help us simple minds out regarding some of the basic economic questions involved. For example, if wealth is created, then its distribution is not a zero-sum game. We cannot assume that if some have more wealth than others that injustice or unfairness are to blame. How can we spot the difference between economically and ethically legitimate inequality and economically and ethically illegitimate inequality? One last issue: the stock market. It seems to be a real creator of wealth for those who already have extra wealth to invest, and so a potential driver of inequality, but I am quite confused about its impact on the economy. As I understand it, most money invested in the stock market is purely speculative, it does not actually capitalize businesses after the Initial Public Offering, and, moreover, most businesses do not turn to Wall Street for capital, but rather only to cash out on shares of capital already created at a venture capital stage of the business. It would really help us economic neophytes who share many of your concerns if you were able shed light on such mysteries.
— Posted by Joe Pettit
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93.
September 19th,
2007
1:18 pm
What is it going to take to get the fact of “The Great Divergence” more widely known? Are there any honest conservative economists out there who recognize it? (And if they do, do they care?) Or do they use statistical smoke and mirrors to hide the fact?
— Posted by C. Duncan
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94.
September 19th,
2007
1:34 pm
Dear Paul,
I question your statement:
‘it (40’s - 80’s) was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.
Don’t forget that Southern Democrats blocked basic civil liberties for African Americans for years during much of this period, and that it took civil upheaval to achieve some degree of social justice.
The 40’s, 50’s, 60’s were pretty good for white middle class Americans. You might get a different reading from other ethnic groups.
— Posted by Jeremy Teitelbaum
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95.
September 19th,
2007
1:36 pm
What a pity that the graph starts in 1917! I’d love to know what effect the introduction of the income tax in 1913 had.
— Posted by Jane
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96.
September 19th,
2007
2:09 pm
The great exception to your rosy picture is African-Americans, who in 1953 were kept down by a combination of legal and practical segregation. Although the problem of racism has by no means been solved, there exists today a black middle class that cannot be compared to the few blacks with money in the era in which we grew up.
I would like to see you address how the great reforms of the New Deal and post-war eras were compromised in order to win the votes of Southern Democrats. Example: wage and hour laws applied to factory workers (white) but not agricultural or domestic workers (black), increasing inequality between the races.
In my view, racism is one of the biggest exceptions to “the good old days.”
It would make an interesting sidebar.
— Posted by Deborah Leavy
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2007
8:08 am
What an incredible article [and glory be, we didn’t have to pay to read it!] I feel certain that Paul Krugman is echoing the feelings of many Americans today. I see how my children must struggle to remain above water…hard working, smart, but always running on a treadmill.
Bravo to Krugman and his new series.
Carmen Noakes/Atlanta
— Posted by CM Noakes
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42.
September 19th,
2007
8:13 am
It is dissembling to say that middle class America was created “because strong unions, a high minimum wage, and a progressive tax system helped limit inequality” without saying that leaving the US economy on a war footing while it rebuilt the world under the Marshall Plan was a large contributor to American wellbeing. Its now a global economy and Mr. Krugman knows it. But he leaves out facts that don’t confirm his point. He is a liberal pundit, not an economist or an analyst.
— Posted by Robert
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43.
September 19th,
2007
8:15 am
I’m not a liberal. Take one look at the Duke faculties’ refusal to apologize for their vituperative attacks on the lacrosse team and you can see why. I lean a little toward social liberalism but I’m conservative fiscally. But I do agree 100% that the rise in inequality is an issue that needs correction. Personally I feel that in some ways we are entering the decline of our American western civilization similar to that of the Roman Empire or the British empire of the 1900’s. It seems that the powers that control our political and economic direction are intent on consolidating that power believing that once consolidated they can maintain it as a status quo. And I believe history has shown us many times that this doesn’t work. When the haves get so far above the have-nots that they stop considering their needs then the winds of change usually blow pretty hard. Just ask Marie Antoinette.
— Posted by Eff'n Higby
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44.
September 19th,
2007
8:18 am
I don’t have anything to add or say really (yet), since I agree with your views all the time. Heck, I don’t even agree with myself all of the time. I am just hoping to be the first comment on your new blog.
Anyway, I look forward to more graphs and tables related to your “dismal science” (just kidding).
It will give me even more ammunition when I start my rants about the dissolution of the America I also knew growing up (born in 1961).
I truly hope and am beginning to believe that as you said, “America is ready for a big change in direction.”
We desperately need to change.
Stay true. Stay strong. I love you man.
— Posted by bern futscher
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45.
September 19th,
2007
8:29 am
The saddest thing is that most people who vote for the “don’t tax the rich” party will never be rich and they are just taxing themselves more to make up for what was not paid by the rich.
— Posted by Frank Irvin
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46.
September 19th,
2007
8:31 am
I sent a copy of this article to both of my daughters, because while they have graduated from college,(one on her way to a PhD), the inequity in this country is one problem that cannot be solved by education. Only an explanation of history and political knowledge of a political nature can explain our present situation.
— Posted by Carol Doyle
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47.
September 19th,
2007
8:38 am
Paul, I will be looking for your book and will reserve my comments until then. I do have a pertinent question though. Why is it that most (if not all) opinion writers tend to overlook the massive effect WWII had on the economy and subsequent prosperity of our nation?
As a child of the depression, I know the impact the war had on my family and our ability to survive. Also usually overlooked is the impact that the GI bill had on the educational and income levels of the “average” American. First observation is that it moved a great number of people from the middle class into what is now considered “rich”. The term “Rich American” really needs to be redefined. All things considered, the income levels are set too low.
— Posted by Dick Jones
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48.
September 19th,
2007
8:41 am
I am a New Yorker living in Istanbul now. It is a paradigm of rapid economic and social change, operating against a struggle for balance between constitutionally mandated democratic values and the forces of Islamic fundamentalism. A more equitable distribution of wealth is also a key issue here and one that is essential to their future success as they sit on the threshold between Europe and the Middle East. I’ll be watching this blog with great interest.
— Posted by Walt Behnke
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49.
September 19th,
2007
8:48 am
Thank you, thank you for acting as a public, outspoken advocate for those of us who are not middle class and who face ever-increasing, insurmountable barriers to simply becoming financially viable. It is truly harrowing to watch with growing panic as the right wing wages merciless class warfare on us.
I was born in 1952. My parents stopped supporting me when I turned 18. I spent much of my adult life working my way toward a college education, and somehow managed to graduate magna cum laude in 2002 from an Ivy League university. At that time I developed a medical issue and was disabled with pain for the better part of five years. I have never collected any public assistance or disability benefits. I’m finally better physically, but I’ve lost everything financially. I’m now struggling to rebuild a completely destroyed life, but the resources and measures at my disposal to do so are meager.
It’s the most vile, hypocritical slap in the face to hear well-off conservatives preach about how my circumstances shouldn’t matter, that I need to “pull myself up by my bootstraps,” and that I should be a good sport about how unfair life is. I’m not sure when Americans came to lack a moral compass but we need urgently to reclaim it. I’m not a productive citizen. I do not contribute to the economy or to my community, or to the tax base. That ought to provide some incentive for us to lend a helping hand to people in my predicament. But even if it isn’t, can’t we address the immorality of treating us so harshly and with such willful callousness? Is this really what has become of the American character, and is it reversible?
— Posted by Patty Quinn
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50.
September 19th,
2007
8:53 am
For me the real mystery is how did folks of meager means, who benefitted greatly from the advantages of the rising middle class era, become enamoured with the conservative movement. The only clue I have is that for some of them, they went to college (the first in their families), join the professional class and worked for big corporations. Then these same folks who benefited from a strong public education and community services later vote to dismantle these very institutions that allowed them to suceed. This disturbs me greatly, and yet these are folks I must spend holiday dinners with, so I must tread lightly.
— Posted by Kristen Strand-Tibbitts
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51.
September 19th,
2007
8:58 am
If I want economic analysis, I’d prefer to get it from someone who is not a rigid partisan. There are plenty of good economists out there and choosng to heed the word of the liberal Sean Hannity seems silly.
Can the Times get publish the work of an economist who is not also a strident partisan?
— Posted by Mike
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52.
September 19th,
2007
9:02 am
Looking at the U.S. — I mean, looking around it — it still seems like the middle class is richer than the middle class in a lot of other places. Could this have something to do with its seeming passivity? How threatened are the living standards of the middle class? Is the seeming well-to-do-ness of suburban neighborhoods increasingly a stage set like the Pullman villages of yore? How many people are actually tracking down?
— Posted by Esther Buddenhagen
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53.
September 19th,
2007
9:07 am
Hi Paul,
Welcome to the blogosphere and congratulations on the freeing of your column from the Times Select shackles.
I’m a firm believer that the destruction of the American middle class is one of the most dangerous developments in the last 40 years. I also believe that if you add to your chart the rise and fall of the percentage of union members in the workforce, you’ll see that they are almost identical. Organized labor was the primary ticket into the middle class and the concerted effort to destroy unions is bringing back the age of the Robber Barons.
I hope you’ll spend a little time discussing labor in this blog and I’m sure no matter what you opine on will be interesting. I look forward to being a regular reader. Good luck!
— Posted by Not the senator
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54.
September 19th,
2007
9:09 am
Eric Hobsbawm, in his four-volume history of modern Europe and the world, has pointed to what he calls “the crisis of the liberal state,” by which he means those structural difficiences in liberalism itself that tend toward inegalitarianism. These tendencies (as analyzed by Jeremy Rifkin in The European Dream) are particularly marked in the USA, given our strong inheritance of a European Enlightenment liberalism combined with Puritanism, a religious tradition that emphasizes the importance of individual earthly success as a sign of coveted and rare election to heaven. We need to see that liberal individualism has distinct limits and must be balanced (e.g., in universal single-payer health insurance) by recognition that each human being has collective interests, origins, and obligations as well as being, in the words of Adam Smith, “committed by nature to his own care.”
— Posted by Geoffrey Cocks
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55.
September 19th,
2007
9:09 am
I am thrilled to see you doing this and wish there were a way to get teachers in high schools and colleges/universities to use this in their classes. I teach at Penn State and teach about economic inequality in all my classes. I know you are well aware (and have contributed greatly to my own understanding) of how tax politics are a significant part of this picture of rising inequality. (I wrote a book that came out last year aimed at reframing tax policy as an important women’s issue; in case you are interested it is Taxes are a Woman’s Issue by Mimi Abramovitz and Sandra Morgen).
I find, however, that it is hard to get young people (outside of economics classes) to take on tax politics as important. Whether it is because it seems too complex, too dry, or too distant from their lives it is tough. That is why I am trying to imagine a way for your blog to become part of secondary and post-secondary classes — both to get the information out and to inspire real conversation about taxes, and NOT the way Bush tries to lure the young to “the ownership society” by striking fear in their hearts about Social Security for the elderly taking too much out of their pockets. Anyhow thanks; I plan to be a “regular”, Sandra Morgen
— Posted by Sandra Morgen
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56.
September 19th,
2007
9:10 am
The central concept explaining the return of gross inequality in American society is that of predation. A culture that values aggression of the strong against the weak inevitably becomes grossly unequal. It also becomes uncivilized. Predators control most American corporations and the American government. The evils of their predation have yet to be fully revealed. When the damage is fully understood, a new era of reform will commence.
— Posted by HH
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57.
September 19th,
2007
9:13 am
It appears to me that the Great Compression occurs about the time of Lend-Lease and the beginning of the War. Likewise, isn’t the time of middle-class America generally linked with the complete lack of competition from a developed world crushed by war damage. I won’t make any grand ideological claims, but I think the good ‘ol days of the 50’s and 60’s weren’t sustainable without the U.S. emerging as the only nearly unscathed developed nation.
— Posted by Joe
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58.
September 19th,
2007
9:13 am
I think part of the story of the great compression has to also include international factors. How much, for example, did the fear of international communism drive acquiescence by the elite in USA, allowing greater income equality? With the collapse of the international communist threat - we see more aggressive attempts by the elite to redistribute income to the wealthy.
— Posted by Eric Schwartz
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59.
September 19th,
2007
9:18 am
Your blog and book title immediately attracted my attention. As a liberal living in a very Republican area, my standard response to “How can you vote for …………?” has always been and continues to be, “It’s simple. I vote beyond myself.”
So I needed to read more about your catchy title, but with little luck. I hope your book (for the sake of sales) more clearly explains, to those of us economics-challenged individuals, terms like “movement conservative political dominance” and even the “safety net”. You lost me!
— Posted by Patricia Heidrich
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60.
September 19th,
2007
9:18 am
To make the graph more clear from a political perspective you might want to list who was president during the different time periods.
For example at the bottom of the graph indicate that Reagan was president from 1981 to 1989. From 1989 to 1993 it was Bush senior, from 1993 to 2001 it was Clinton and from 2001 until present Bush junior.
My question: Why did the divergence continue during Clinton’s presidency?
— Posted by Colleen
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61.
September 19th,
2007
9:21 am
Can’t say I’m all that convinced that “inequality” is back to 19th century levels. As the chart shows, in income perhaps (but with very different compositions: in the earlier period much more of it was to do with income from financial capital, rather than labour income, or human capital income if you prefer).
But other forms of inequality have shrunk dramatically: arguably, more important forms of inequality too. Of life spans, of calorie intake, of height (which reflect to a large extent greater equality of childhood nurtrition), of health care.
Concentrating solely upon income inequality does, I think, overstate the situation.
— Posted by Tim Worstall
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62.
September 19th,
2007
9:22 am
Mr. Krugman: Thank you so much for bringing these issues to the light of day in comprehensible language and with such passion. I am very much looking forward to these conversations.
It seems (finally) like it’s time to talk about “conscience”. It’s interesting that John W. Dean recently wrote a book called “Conservatives Without Conscience”. [For those who haven’t heard about it, he talks about it here: http://writ.news.findlaw.com/dean/20070905.html ].
Also, there was a piece in the NYT recently by Jeffrey Rosen, which also had “conscience” as a topic, [“Conscience of a Conservative”]. It’s about Jack L. Goldsmith, a conservative lawyer who did not go along with John Yoo’s ideas about the Geneva Conventions. http://www.nytimes.com/2007/09/09/magazine/09rosen.html ?
I, too, have the feeling that “America is ready for a big change in direction”, and your knowledge and vision can help us all travel that road with clear heads and compassionate hearts. Let’s go!
— Posted by Fran N.
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63.
September 19th,
2007
9:26 am
Thank you, Mr. Krugman. Finally someone started to address the real issue. And in the NYT too. I am not the US citizen, but have been following the “evolution” of the US society since 1967, when I first visited this great country, on the student-exchange scholarship. I was concerned, not only because of “what happens there affects the rest of the world”, but also because I always considered the US my home away from home. After twenty or so visits, during the period you’ve accurately described as “middle class America”, and “the great divergence”, I’ve noticed that the big change is taking place. I couldn’t articulate that change to my friends, except by saying that my feeling is that the big greed is taking over. Now, you expressed that feeling of mine, and gave the greed its real meaning.
— Posted by Milan Zivkovic
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64.
September 19th,
2007
9:31 am
Paul, it seems to me that if Thomas Frank’s book is even remotely correct — his thesis being that many working class Republicans vote as they do over social issues — the most efficient way to bring about the collapse of the Republican coalition would be to accept the overruling Roe v. Wade and jettison support for gay marriage and hostility to Christianity from the liberal agenda. But one assumes you’re not in favor of such changes, so the problem comes down to the real (and unremarkable) reason why politics is more fractious: not because of conspiracies or movements, but because large numbers of Americans disagree with one another about issues that are very important to them, issues which are mutually irreconcilable.
— Posted by Simon
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65.
September 19th,
2007
9:36 am
Welcome to the blogosphere Mr. Krugman. I enjoy your columns and look forward to the copious charts and graphs posted here!
— Posted by DanF
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66.
September 19th,
2007
9:42 am
I am curious about one aspect to your chart that I did not see addressed: when I look at a chart of immigration levels to the U.S., it shows a very similar pattern as your graph. How much of income inequality can be explained by immigration levels?
— Posted by Michael Bumgardner
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67.
September 19th,
2007
9:54 am
A key element of conservative thinking about inequality is the idea that in a modern economy with an extensive division of labor, it is possible (in a *non-arbitrary* way) to quantify the value contributed by each person.
From this idea (and a little sloppy thinking), it follows that if one person is paid a billion dollars a year while another person is paid a Wal-Mart wage, then each simply receives the money equivalent of what he/she contributed to the economy. People who complain about inequality are a bunch of whiners who want to deny the rich their just rewards while giving handouts to the undeserving poor.
Dr. Krugman, it might help a lot of people if you addressed that issue.
(By the way, I used your international economics textbook as a student and I enjoyed it a great deal.)
— Posted by Miles
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68.
September 19th,
2007
10:01 am
I would prefer a Conscious Liberal to the Conscience of a Liberal. To suggest that the ascendancy of Ronald Reagan and Newt Gingrich was due to a vast right-wing conspiracy is sheer lunacy. Undoubtedly there were institutions that were advocating for Reagan and Gingrich, but no consipiracy is capable of getting tens of millions of Americans to freely go to the polls on their own power and vote. I was born a Democrat but by the time I got to college, on Election Day, I put on my best suit and went to vote for Ronald Reagan. Ronald Reagan won 49 out of 50 states that year, and nearly two-thirds of the youth vote. I don’t mind that you hate conservatives. I just wish you could show some semblance of understanding of what we’re about. I am really shocked and dismayed how simplistic and self-serving your analysis is.
— Posted by Peter McFadden
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69.
September 19th,
2007
10:09 am
Wonderful! In the past one of the great virtues of America has been that when inequality grew large, something happened to reduce it. Your chart shows just one example. I hate to use this phrase, but the question today is whether we have reached the tipping point. Has inequality grow so much that the political power of the Rich and Super Rich will prevent the decline of inequality? Will inequality keep growing?
— Posted by Leonard S. Charlap
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70.
September 19th,
2007
10:15 am
While I agree that the America you grew up in was in most respects a better place than the one we inhabit today, your characterization of that time as “It was a society without extremes of wealth or poverty, a society of broadly shared prosperity” is likely to be attacked as overly sentimental.
My youth, spent about a decade before yours, was during a period of considerable poverty, especially among African Americans and those living in the rural south. Lyndon Johnson’s war on poverty may or may not have been an effective way of dealing with this problem, but the problem itself was real enough.
My guess is that your graph correctly illustrates a shifting of income between the rich and the middle class, but it does little to compare the relative position of the poor in these various eras.
Also, income is only part of the story. A similar graph showing distributions of net worth might reveal even greater disparities. It is wealth rather than income that creates the differences we see in privilege and it is privilege that accounts for such abominations as the rise of G. W. Bush all the way to the presidency.
These are minor points. I appreciate your insights on the state of our society and find you to be one of the very few in the press who speak without unreasonable deference to established ideas and conventional wisdom.
— Posted by George Mandeville
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71.
September 19th,
2007
10:16 am
Could you please explain how a rise in the top marginal tax rate would translate to a drop in the share of the richest 10 percent of the American population in total income? Plus, how do we know would that lower wages for the richest 10% would translate into higher wages for the rest of the country, as opposed to higher corporate profits?
— Posted by A
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72.
September 19th,
2007
10:17 am
Fair enough, but we need to discuss how the “more trade at all costs” mantra has contributed to the weakening of the middle class and especially the blue collar sector.
“Lose you job but shop at Wal-Mart” is not cutting it.
The mad rush to globalization may be helping the Chinese but is hurting Americans, despite the reassurances of (tenured) economists that we can build a prosperous service economy.
— Posted by save_the_rustbelt
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73.
September 19th,
2007
10:21 am
I share your concern regarding the rise of economic inequality in America, but I wonder if politics played as dominate a role as you imply regarding the great “compression”. Following WWII most of the world’s productive capacity lay in ruins, except America’s. Much of our capacity was directed, through mechanisms such as the Marshall Plan, to the rebuilding of European and Japanese industrial infrastructure. American industry had little competition in its role as key rebuilder of the western world and Japan. This allowed American workers to enjoy higher wages as American companies provided much of that capital equipment then would otherwise have been the case. I believe that dynamic was a major underlying factor in the “compression” shown in your graph. As other world economies recovered and became competitive in a more global economy, American wages came under pressure. Certainly, a better political response could have recognized this trend and reacted more effectively on behalf of the American worker, but political action is usually reactive not pro-active. So,the great “compression” owes much to the very rare and special physical and economic circumstances prevailing immediately following the War.
— Posted by David Tolwinski
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74.
September 19th,
2007
10:23 am
What is the significance of the share of income of the top 10%? The population in the US living below the poverty line is lower than that of Canada, Germany, the UK…(http://en.wikipedia.org/wiki/List_of_countries_by_p ercentage_of_population_living_in_poverty). Considering wealth and income are only a segment of what makes a society flourish the importance of this chart pales even further.
— Posted by Matt Johansen
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75.
September 19th,
2007
10:25 am
What roll did WW2 have in creating what you call Middle Class America? Just wondering. Didn’t increased military expenditure during and post-war create the manufacturing boom that employed so many Americans?
— Posted by David Zeeman
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76.
September 19th,
2007
10:29 am
Mr. Krugman,
Thanks for addressing this subject, I look forward to reading your book. I hope that you heard Alan Greenspan on NPR (9/17 interview) begrudgingly say that he finds you to be a good economist.
Back to inequality: I remember during the 1988 presidential campaign, telling someone from the younger generation that there was a time when a whole family could live well n one income! I was mystified about Reagan’s popularity then, and his beatification 20 years later. Why is it that liberal commentators are so reluctant to balance comments about his policies by reminding us that that Reagan was responsible for the creation of homelessness in America?
Keep up your brilliant commentary.
— Posted by Sara S.
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77.
September 19th,
2007
10:34 am
This is more of a question than comment.
The other day, on public radio, I listened to a discussion: pros and cons, regarding Bloombergs proposal to help people and students in poverty, by paying poor people for various things: taking their children to doctors, attending a PTA meeting, students attending class, etc. Objections, of course, included: why should we pay people to do what they are supposed to be doing anyway.
My question is, what is the difference in paying these people to do these things, and paying CEO’s a large bonus in stock options to do what they are already paid to do?
Thank you very much. I love your colums.
— Posted by Cynthia Carlson
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78.
September 19th,
2007
10:35 am
Not that I disagree with your theory that the “wealthiest of the wealthy” have been taking advantage of every opportunity, and effectively destroying the toe-hold the middle class had when it came to wealth and power distribution following the New Deal, but don’t you think the boomers might also hold responsibility for the “great divergence” you have identified, following the 70s?
Looking back, it would seem all the drug-induced partying, and even the self-satisfied let-it-all-hang-out “protest” movements of the 60s and 70s, has amounted to very little sense of personal responsibility among the boomer middle class as they moved forward through the decades.
Having left behind the 60s and early 70s, boomers began a programme of caring only about “me and mine” that would eventually lead to an incredible obliviousness and apathy when it came to the damage their self-absorbtion was wreaking on the body politic and any sense of citizenship. Indeed the short-lived environmental movement of the late 80s, fueled by the fires of the next generation’s middle class youth, was quickly swallowed up in the boomer’s taste for SUVs, luxury living, and big-box-store convenience… and wasn’t it the boomer’s investment decisions, “family values” movement (which again centred on me-and-mine political and social solutions), and calls for tax cuts that helped to drive the stock market excesses of the past two decades and put the current movement conservative governments in power?
With their 401Ks rising and falling with tides of the stock market, questions about global competition, or the concerns of anti-powerty and anti-war groups(again fueled in large part by the ideals of the current generation of middle class youth)are poo pooed as deluded, and the term liberalism, itself, has become a perjorative that few among the generation who evolved in its hay-day want to claim.
Yes, the rich have taken advantage of the melt-down of the left. But they could not have done as much damage to democracy or the dreams of equality as they have, without the help of the booomers, whose political, economic and social decisions over the past 30 years have wreaked their own havoc on the well-being of the national body politic, the prospect of global stability, the possibility of an environmentally sustainable future.
— Posted by Gayle Irwin
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79.
September 19th,
2007
10:39 am
Thank you for your much-needed voice of reason. A measure we don’t hear as much about is the poorest 10% and how its share of total income has changed over time. How does that chart look? Also, I would love to hear your take on relative poverty. How have living standards of the bottom 10% improved in terms of indicators such as purchasing power and life expectancy? [I am not implying that rampant income inequality is acceptable, but I do think it’s curious that we tend to compare our poorest people to our wealthiest people, rather than to the poor in other countries.]
— Posted by Nina
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80.
September 19th,
2007
10:40 am
Future issues of your blog should address some key statistics to faciliate a meaningful discussion. Was the compression caused by the rich getting poorer or the non-rich getting wealthier? How much movement is there between the top 10% and the rest? Is it the same folks and their descendents or is it a changing group of people? Once appropriate statistics are set forth, you can then begin to analyze whether the relative gap is actually bad and, if so, should the focus be on wealth redistribution or how to increase the actual earning power and wealth of the bottom 90%? But first we need the facts.
— Posted by David Morse
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81.
September 19th,
2007
10:44 am
Your “Great Middle Class” was formed by the tacit military threat of troops returning from WWII who, with nothing left to do, gave significant pause to the corporate “one percenter” economy that saw its demise in violent social revolution if depression conditions extended after the worldwide victory of the Allies. Just as the draft of 1/3rd the work force into the armed services secured the bailout from the Great Depression, the GI Bill making it possible for ex-GIs to go to school stabilized the effect of the returning influx of new labor. The GI Bill prevalence also extended to inexpensive tuition that made higher education a near-entitlement. The demise of free tuition and the concommitant rise of the student loan “industry” led to your next stage.
— Posted by Rick Goranowski
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82.
September 19th,
2007
10:45 am
The middle-class society which Krugman grew up in was, he writes, “a society of broadly shared prosperity”. In his next paragraph he laments that “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.” He clearly intends for these numbers to indicate that things are unfair.
But wait – this current middle class is enjoying a median income 13 percent greater than Krugman’s golden time of “broadly shared prosperity”. And, the poor – if their material goods can be taken as any indication — are infinitely better off than in the fifties.
As an artist whose year-to-year income has several times swung from being – according to our government’s definition – poor to wealthy and back, when I was “wealthy”, guess what I did with my wealth? I spent a great deal of it improving and maintaining my white-elephant of a house, and thereby helped provide a living for numerous carpenters, plumbers, painters, etc. It would greatly surprise me if that one-tenth-of-one-percent weren’t likewise spending much of their wealth and thus providing an income for a great many people further down the ladder. Perhaps this is what accounts for that thirteen percent increase in the median household income.
Regardless of how well we are doing, inevitably the Left wants more redistribution of wealth. In this they remind me of eager butchers, anxious to cleave open the goose and get directly at those golden eggs.
HP
— Posted by hugh prestwood
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83.
September 19th,
2007
10:56 am
Mr. Krugman, I’m looking forward to getting to read more of you on this blog!
What disturbs me more than anything in what you describe is the phenomenal set of circumstances that were required to allow the Great Compression to take place - a crippling depression, a strong and politically brilliant leader, mass organization, and a World War. There were people with the right ideas before then, but they were up against an overwhelming attitude of “that’s just the way things are.”
In reading your column, I thought about Polanyi’s classic “Great Transformation” about the creation of the market, and Mark Blyth’s “Great Transformations” about the creation of the great post-war compromise. Are we facing another, regressive transformation? Am I alone in noticing that while economic reformations geared towards equality and fairness are always advanced as humane policy, reformations towards laissez-faire markets is posed as being “the natural way?”
When can we get rid of this fallacy that every man for himself markets are natural, and social welfare is an artifrice?
— Posted by Dave Silverstone
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84.
September 19th,
2007
11:04 am
I’m looking forward to your book. I was born about ten years after you, and so I’ve experienced mostly the decline in our economic equality and civility. Indeed, the two seem to have come hand-in-hand; as if certain elements in our society stoked the fires of uncivil behavior as a distraction or justification for grabbing control over our national wealth.
Of course, none of that has anything to do with free market capitalism. In fact, so far as I can tell it’s the antithesis of the enlightened economics proposed by Adam Smith. But America as a whole seems mesmerized by the phrase “free market” to the point where we can’t challenge our current corrupted corporation-driven economy and government. The fact that people like George W. Bush, Dick Cheney, and Don Rumsfeld, who largely have been failures at actually doing the jobs they have held, can rise to high office on a platform of “equality of opportunity” and “free market capitalism” only underscores the irony of our time.
I especially have grown tired of hearing about “creative destruction” and Riccardo’s “comparative advantage” as excuses for the ever increasing gap in wealth that you have shown. I can understand how an economy needs to “destroy” in order to “create”; and that the idea of comparative advantage follows logically from certain economic structures. But I find that both concepts actually lead to the conclusion that we need *more* progressive taxation, not less, to keep our economy vibrant; because the winners have to pay something back to the losers to keep the game going. Simply uttering those two phrases as a way of rationalizing why Wall Street traders and hedge fund managers—who don’t really create or build anything—are entitled to millions of dollars in compensation is disingenuous. I suspect that if people really understood how many so-called experts in the business media have sold out to a right wing propaganda machine, there would be more calls for reform.
So, I hope that you will help set the record straight on what free markets and capitalism really mean, either in your book or on this blog.
Good luck. We need more people who have the courage to say the emperor is naked.
— Posted by David Lentini
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85.
September 19th,
2007
11:06 am
Did the Great Compression come from the New Deal or from the economic expansion beginning on the eve of WWII because of increased government military spending? The % going to the top 10% still seems very high in 1939-1940, when the New Deal had been going on for six or seven years.
— Posted by Hal
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86.
September 19th,
2007
11:15 am
America has paid and will continue to pay a high price for the inequality. The steady decrease in government investment (aka funding and support), for programs, organizations and institutions that serve and promote the factors that contribute to economic equality will lead to a decrease in our power in the world.
Statistics have shown that an increase in the availabilty of audio/visual media such as cable tv stations, have paralled a decrease in voter participation at the voting both and other voter related activities. Bearing this in mind, the lack of populist outcry is not surprising. It must be noted that media ownership is set squarely among that 0.1% of the country’s richest population.
Education systems are training young people to pass tests and lessons in critical thinking and civic participation have fallen by the wayside.
This situation is exacerbated by a decrease in funding for education, housing, job development, training, health care, small business assistance and many of the programs that existed during the sixties and 70s, and during the time of FDR, for the purpose of supporting and expanding of the middle class.
Our congressional representatives and Senators are increasing among some of the wealthiest people in America.
With the focus on wealth and the wealthy, we are constantly losing great contributions of talent, ideas and skills that could be used in creating the “great society”. People are forced to spend their time on survival. America and the world suffers.
Congratulations on this blog. I have never felt compelled to write on any blog before. It is exciting and somewhat comforting to know that this type of discussion can be held in a widely read forum. Perhaps the discussions and ideas here will help to contribute to an environment of change. I will be e-mailing the link to the many I know who work to correct these inequalities every day of their lives.
— Posted by Celeste Morris
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87.
September 19th,
2007
11:25 am
There is an old saying that Democratic economic policies turn people into Republicans and then Republican economic policies turn people back into Democrats. The silver lining of the Reagan-Bush-Bush presidencies is that things seem to be coming full circle.
But, I would add a couple other observations. The period of the “Great Compression” for the most part was a period of modest federal deficits (other than during WWII), a world financial system tied to gold rather than the dollar, and little or no employer-based health coverage. The rise of inequality over the last 27 years has been accompanied by enormous increases in America’s trade and federal government debt, and an explosion in the cost of health care under our employer-based private insurance system. Our biggest national exports are now manufacturing jobs and debt instruments rather than physical product.
So, my question for the learned professor is: is all this inequality illusory, an accounting trick pulled off by the people who effectively hold the nation’s checkbook? Is there a way “we the People” can take that checkbook back? Can we force those who have effectively written a check to themselves from the bank of our shared wealth to pay back what they have stolen? Or would it just be another fiasco? Is cannibalism just a fact of life, no matter what group of humans is in charge?
Perhaps disciplines other than just economics are involved.
— Posted by Gary
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88.
September 19th,
2007
11:31 am
A very insightful column, but missing that last crucial component which has enabled The Great Divergence: apathy.
There is no ‘Grapes of Wrath’ outrage for misery so profound it couldn’t be ignored, nor masses of protesters on The Mall in Washington burning draft cards against an unjust war.
You have a population today which has been carefully engineered into believing this is the best of all times and that -my- individual problems are somehow -not- the norm… that -my- difficulties were somehow caused by some deficiency of -my- work ethic. There is a low-level, but universal hopelessness stalking America today that springs directly from an unresponsive government.
“I can’t change things, so why try? We elected a new Congress in November, but nothing is happening. 70% of us hate the war, but nothing is happening.”
We need a Peter Finch “Network” moment when enough people begin to say “I’m mad as hell and I won’t take it anymore.”
— Posted by dpkesling
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89.
September 19th,
2007
11:38 am
Like you, I think that the country is in for a major shift politically, but I am not at all certain that it is one that will be along traditional party fault lines. Red America longs for a populist just as much, if not more than does the Democratic Party. It is important to note in your chart that the Clinton Presidency did nothing to turn back the tide of income disparity. Quite the contrary. And I doubt that a Hillary Presidency would be any different. About the only Democrat who clarifies the lines between rich and poor is John Edwards, and he languishes far behind in the polls.
— Posted by Michael Day
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90.
September 19th,
2007
11:45 am
Interesting view, but you forget a few items. The people in the top 10% are not static. With the exception of a few families, Kennedy, Rockefeller, etc. there is considerable change in the composition of the top 10%. The majority got there by providing products or services that the rest of us voluntarily purchased, few if any “stole” their way to the top.
According to the Tax Foundation and Congressional Budget Office, the percent of all income earned by the top 1% fell from 17.8% to 16.3% while their share of taxes increased from 36.5% to 36.7%. The bottom 80% of income earners saw their share of taxes fall from 18.7% to 14.7%. From http://www.taxfoundation.org/blog/show/2120.html
— Posted by Ron
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91.
September 19th,
2007
11:47 am
Fascinating. I’m curious as to whether this, the rise of inequality, is a global phenomenon? In the U.K., I suspect that the Thatcher government, breaking the consensus of the previous 40 years, paralleled the trends you display (thereby hamstringing New Labour).
— Posted by Peter Vince
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92.
September 19th,
2007
12:28 pm
Mr. Krugman: I am looking forward to future posts on this Blog. For the moment, I want only to put in a request that you help us simple minds out regarding some of the basic economic questions involved. For example, if wealth is created, then its distribution is not a zero-sum game. We cannot assume that if some have more wealth than others that injustice or unfairness are to blame. How can we spot the difference between economically and ethically legitimate inequality and economically and ethically illegitimate inequality? One last issue: the stock market. It seems to be a real creator of wealth for those who already have extra wealth to invest, and so a potential driver of inequality, but I am quite confused about its impact on the economy. As I understand it, most money invested in the stock market is purely speculative, it does not actually capitalize businesses after the Initial Public Offering, and, moreover, most businesses do not turn to Wall Street for capital, but rather only to cash out on shares of capital already created at a venture capital stage of the business. It would really help us economic neophytes who share many of your concerns if you were able shed light on such mysteries.
— Posted by Joe Pettit
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93.
September 19th,
2007
1:18 pm
What is it going to take to get the fact of “The Great Divergence” more widely known? Are there any honest conservative economists out there who recognize it? (And if they do, do they care?) Or do they use statistical smoke and mirrors to hide the fact?
— Posted by C. Duncan
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94.
September 19th,
2007
1:34 pm
Dear Paul,
I question your statement:
‘it (40’s - 80’s) was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.
Don’t forget that Southern Democrats blocked basic civil liberties for African Americans for years during much of this period, and that it took civil upheaval to achieve some degree of social justice.
The 40’s, 50’s, 60’s were pretty good for white middle class Americans. You might get a different reading from other ethnic groups.
— Posted by Jeremy Teitelbaum
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95.
September 19th,
2007
1:36 pm
What a pity that the graph starts in 1917! I’d love to know what effect the introduction of the income tax in 1913 had.
— Posted by Jane
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96.
September 19th,
2007
2:09 pm
The great exception to your rosy picture is African-Americans, who in 1953 were kept down by a combination of legal and practical segregation. Although the problem of racism has by no means been solved, there exists today a black middle class that cannot be compared to the few blacks with money in the era in which we grew up.
I would like to see you address how the great reforms of the New Deal and post-war eras were compromised in order to win the votes of Southern Democrats. Example: wage and hour laws applied to factory workers (white) but not agricultural or domestic workers (black), increasing inequality between the races.
In my view, racism is one of the biggest exceptions to “the good old days.”
It would make an interesting sidebar.
— Posted by Deborah Leavy
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