Review of Paul Krugman, Conscience of a Liberal
Norton (2007)
Herbert Gintis
"Being progressive,'' says Paul Krugman in the concluding pages of The Conscience of a
Liberal, "means being partisan." Like Krugman, my training lies in economics, but unlike
Krugman, I am not partisan. Rather, I take a policy orientation to social issues: there are
problems to be solved in order to enhance the lives of citizens, and it is our job to discover and
publicize solutions to these problems. Krugman's partisan stance only clouds the issues. For
Krugman there is a "union movement" rather than a "bureaucratic labor aristocracy," critics of
the welfare states want to "turn back the clock," rather than streamline and curb the inequities
of the welfare state, conservatives have won by "exploiting cultural backlash" rather than by
mounting a principled opposition to the explosion of crime, drug abuse, and single-headed
households in a manner that resonates with the voting public. Critics of the wealth tax are
"financed by a handful of [super-rich] families," with the public being ignorant dupes of the
slick politicians. This book epitomizes what is wrong with American liberalism. Krugman
was a fine, perceptive international trade theorist, but he compromises his capacity to help
non-economists to understand complex technical issues by professing himself as "partisan."
Krugman is drawing down his well-deserved scientific stature by presenting partisan ideas as
though there are no other credible positions on economic policy.
There is one problem as far as Krugman is concerned: inequality. But inequality is an
intellectual abstraction, not a politically motivating issue. People hated the Robber Barons
because they were robbers and barons, not because they were rich. Oprah Winfrey and Bill
Gates do not send the Pinkerton men out to protect their ill-gotten gains; nor to the other
super-rich. Socialists' ringing political slogans dealt with fairness, social progress, and power
to the people, not "inequality." Moreover, a truly progressive movement must built on
technical progress that is impeded by the reigning powers that be (Sam Bowles and I call this
efficiency-enhancing egalitarian redistribution), not the beggar-thy-neighbor, zero-sum-game
sort of redistribution favored by Krugman.
I suspect Krugman is correct in saying that the degree of inequality in the USA today is the
product of politics, not economic necessity. This is because some advanced industrial
countries have more equal distributions of income and wealth that the USA. But, these
countries are plagued by labor market inefficiency and deeply threatened by the "lean and
mean" up-and-coming countries like Poland, the Baltic States, Romania, India, et al. The USA
has purchased a thriving economy and full employment at the cost of having a bunch of
super-rich families. Not a bad deal, after all. Krugman's vision for the future has three key
premises, all wrong. First, he believes progressives can win on a platform of redistributing
from the rich. However, no one cares about inequality.
People care about injustice, unfairness, poverty, sexual predators, family values, gay marriage,
terrorism, and many other problems of everyday life. People don't care about Gini
distributions and other abstractions. Moreover, Krugman should know that if the wealth were
redistributed to the middle class, the US investment rate would fall, since the rich save their
money and it is translated into investment, whereas the middle classes would spend their gains
on consumption, thus driving out investment. A "soak the rich" policy simply cannot work to
the advantage of the middle classes.
Second, Krugman would strengthen the labor unions, which he credits for their egalitarian
effects. However, unions were strong only when industry was highly non-competitive in such
areas as automobiles and steel. The oligopolistic character of mid-twentieth century industry,
with a few countries in the lead, made fighting over the excess profits highly rewarding. With
globalization, there are no excess profits to be fought over. Thus, it is not surprising that most
successful unions in the USA are public service, not private (e.g., teachers, government
employees). There is no future in unionism, period.
Third, Krugman believes that liberalism can be restored to its 1950's health without the need
for any new policies. However, 1950's liberalism was based on southern white racism and
solid support from the unions, neither of which exists any more. There is no future in pure
redistributional policies in the USA for this reason. There are very serious social problems to
be addressed.
I am adding the following remarks on December 19, 2007 in response to some of the personal
and public comments on my remarks. These should be seen as clarifications. Many
commentators consider my remarks on Krugman's partisanship as unwarranted because
Krugman has always spoken his own mind, and has never toed the (ever-changing)
Democratic "party line". For instance, it is widely thought that Krugman was passed over by
Bill Clinton for heading the Council of Economic Advisors (in favor of Laura Tyson) because
of Krugman's opposition to "industrial policy." Now, thankfully Clinton did not follow the
"industrial policy" suggestions of Robert Reich, Robert Kuttner and others, but we must
thank the forceful interventions of Krugman (and others) for exposing "industrial policy" for
what it is---mainly an unsupported set of statements that would likely have weakened the
American economy considerably.
Partially because of the adamant opposition of key Democratic economists, including
Krugman, Clinton opted for a sound economic policy---one of the strongest points of his
administration. But now, industrial policy is not fashionable, and protectionism has not been a
major part of Democratic political philosophy, pace Robert Kuttner. Indeed, as far as I can tell
there are no issues of fact that separate Republic and Democratic policy thinkers concerning
the running of the economy. More broadly, burning political issues of domestic social policy
today revolve around values and not facts, and around the personal characteristics of
politicians rather than the economic models that they embrace to deal with setting a policy
agenda for the country. In this setting, it is not surprising that Krugman would become a
partisan political actor, as I have suggested has happened. At any rate, I am virtually certain
that should really stupid economic ideas pop up as the Presidential race heats up, Krugman
would come out fighting, at the cost of his credibility with some Democrats, in favor of
economic realities. Some have asked me what Krugman should be stressing, if not
redistribution of wealth and income. Here are some suggestions.
First, a vision of national health insurance that answers the (legitimate) objections of its
critics. For instance, instead of single-payer, perhaps state-by-state regulation of universal
care, much as current welfare and automobile insurance. Second, he should come out in favor
of school vouchers and charters, and otherwise suggest how to make the educational system
more competitive. Third, he should embrace faith-based interventions into community service,
especially as concerns the urban poor. Fourth, he should propose a national system of
apprenticeship skill acquisition, whereby firms are subsidized when they train their workers
(government intervention is needed here because once trained, the worker can simply leave the
firm for higher wages). Fifth, he should propose a plan for promoting minority
entrepreneurship. This is of course a land mine, because it is so subject to corruption and
unfairness. However, there are some degrees of freedom in this area, such as promoting
minority business networks, specialized vocational training for minority entrepreneurs, and the
like. Sixth, he should propose a precise way forward in dealing with environmental issues
(nuclear, solar, coal, oil, endagered species, etc.)
There are many people working hard on these issues whose ideas never get beyond the
scientific conference and the pages of the Proceedings of the National Academy of Sciences,
and their ideas are often very sound. Seventh, promote the labor market and educational
policies of Nobel prize winner James Heckman and others who have a good take on the
numbers and what forms of intervention are likely to be fruitful. But most of all, Progressives
need a vision of what real contributions we can make to improving the lives of Americans and
the citizens of the world. Income redistribution away from the very rich may (or may not)
necessary to achieve this vision, but Krugman's beggar thy neighbor ideas do not contribute to
this vision.