Malefactors of Megawealth

David Kennedy, reviews Paul Krugman’s book, “The Conscience of a Liberal” and doesn’t think much of it, but he concedes a few of Krugman’s points.

In our time, Krugman argues, the malefactors of megawealth have triumphed. He recites the now-familiar data that the wealthiest 0.01 percent of Americans are seven times richer than they were three decades ago, while the inflation-adjusted income of most American households has barely nudged upward. Chief executives who typically earned 30 times more than their average employee in the 1970s now take home more than 300 times as much. The American plutocracy, Krugman concludes, “have become rich enough to buy themselves a party” — and readers are left in no doubt which party we’re talking about.

But Krugman the anti-economist does not believe that growing economic inequality incubated modern political conservatism. In his view, the “arrow of causation” points the other way: political change, cunningly engineered by “radicals of the right,” has spawned egregious economic disparity, as well as a toxic level of partisanship. Ever the iconoclast, Krugman says “this strongly suggests that institutions, norms and the political environment matter a lot more for the distribution of income — and that the impersonal market forces matter less — than Economics 101 might lead you to believe.” In short, it’s the politics, stupid.

. . .

That assorted wing nuts have pretty much managed to hijack the Republican Party in recent years is scarcely in doubt. That the market is at least occasionally fallible is also not at issue. Nor is it deniable that the New Deal rendered the lives of millions of Americans more secure, and that they have become markedly less so in recent decades. A tidal wave of risk-shifting — from defined-benefit to defined-contribution retirement plans, and from employer-financed to individually-paid health care insurance, to cite but two examples — has set millions of American families anxiously adrift on a sea of uncertainty. Krugman’s chapter on the imperative need for health care reform is the best in this book, a rueful reminder of the kind of skilled and accessible economic analysis of which he is capable, and how little of it is on display here.