I am no fan of Krugman, but here are excerpts from a program on PBS, NOW with Bill Moyers. I have edited out most stuff except Krugman's comments.
http://www.pbs.org/now/transcript/transcript147_full.html ============================= KRUGMAN: We had a society 20 years ago, 30 years ago, in which the center of gravity was with the middle class. MYERS: Paul Krugman is a professor of economics at Princeton University and a columnist for the New York Times. Krugman recently caused a stir with this article "the end of middle class America." In it, he writes of the "tectonic shifts that have taken place in the distribution of wealth and income" in the U.S. He cites statistics which show most of the economic gain of recent years has gone not just to the wealthy, but to the very richest of the rich. >From 1979 to 1997, the after-tax income of the top 1% of families rose 157%. That's compared to only a 10% gain for families in the middle fifth. And that's not all. Within that top one percent, most of the gains went to top 1/100th of a percent...a mere 13,000 families now have almost as much income as the bottom 20 million American families combined. KRUGMAN: The pie is a certain size. You take a bigger slice for the people at the top, then there's less left over so yeah, I think the basic arithmetic is right. That if you ask ultimately why aren't middle class families doing better? The answer is, well, the growing economy is mainly going to the benefit of people who are not middle class. MYERS: How that economic pie is divided has real consequences, says Krugman. Not only do we have more poverty than many other industrialized nations, we're also seeing increased uncertainty in the lives of ordinary Americans. In fact, Krugman believes the broad middle class society we assume is the norm may have been just a temporary aberration of the '50's and the 60's. KRUGMAN: I guess the question you have to ask is, 'What kind of society do you want to live in?' Do you want to live in a society where most people are reasonably assured of a decent life? Or do you want to live in a society where bad luck can easily tumble someone who's worked hard and played by the rules into the economic abyss? snip..... MYERS (reporter): The cost of many family basics, like housing, has skyrocketed in recent years. From the late 70's to the late 90's, the median home price in the U.S. has increased about 120%. Yet during that same period, wages for families in the middle increased only 10%. MYERS: Since January of 2001, companies have cut over 3 million jobs, more than in the previous five years combined. And more and more, it's managers and professionals who are getting laid off-they're now the fastest growing segment of the unemployed, their numbers up 76% over the last two years. That's not the way it used to be. KRUGMAN: You know, I don't want to romanticize too much, but there was a sense that workers, particularly long-time workers, were part of what you cared about. They were stakeholders. You had some incentive to protect them. Now, there's none of that. Workers are like raw materials. You hire them, you fire them, whatever. And the idea of job security for anybody, blue-collar workers, but also white-collar workers, is pretty much gone. KRUGMAN: I think people are accepting as inevitable a harshening, a coarsening of our society that we just don't have to have. It doesn't have to be like this given the underlying wealth of the country. MYERS: Krugman says that coarsening of society is partially the result of corporate decisions that are shifting wealth away from the middle. MYERS: Like a lot of people, they had what's known as a "defined contribution" pension plan-along the lines of a 401K. Like a lot of people, they had a lot of stock. And like a lot of people, they lost a lot of money-about 30% of their nest egg. Pensioner: Everybody was advising you that if you planned, did it right, that you could live for, as long as you lived another 20 years, or whatever it was gonna be on the kind of income you were spending...and then all of a sudden, the same folks that said, 'You can do all of this,' are now looking us in the eye and saying 'You did it all wrong.' MYERS: Defined contribution accounts, like 401K's, have become the rage in retirement savings. 27% of Americans aged 50 to 61 now rely solely on plans like 401K's for pension coverage. That's twice the number of a decade ago. KRUGMAN: It was a major shift of risk away from companies to the employees. It was also, quite cynically, used to prop up company stock. Too many 401K plans invested heavily in their own company's stock. And of course, as we've seen, that it's lead to widespread personal tragedy. MYERS: If you're looking for a parable about inequality in America, look no further than scandals like Enron, says Krugman, where executives made millions while workers saw their life savings decimated. KRUGMAN: The income disparity gives rise to disproportionate political influence for the upper tail of the income distribution. And the policies pursued because of that political influence do reinforce the inequality. MYERS: So money buys not just boats and big homes and nice vacations, it buys political influence? KRUGMAN: Yeah, it's not, you know, it's not really arguable. MYERS: Remember that recent refusal by Congress to extend temporary unemployment benefits? A perfect example of the new mood in Washington, says Krugman. KRUGMAN: And all of the money now is on the side of policies that are, you know, that minimize middle class benefits, and maximize tax cuts and other benefits for people at the top of the distribution. MYERS: And that, he says, has left the middle class scrambling for solutions. -----Original Message----- From: Keith Hudson [mailto:[EMAIL PROTECTED]] Sent: Tuesday, December 17, 2002 2:47 AM To: Ray Evans Harrell Cc: [EMAIL PROTECTED] Subject: Lucky Duckies Ray, I don't know precisely where you got Paul Krugman's article ("For Richer") from but it's a substantial essay for which, many thanks for posting to us. Harry's quite right. Krugman points the finger but makes no attempt to understand, least of all, explain, the phenomenon of inequality. This is why Krugman is an economic journalist only -- albeit an excellent one -- but not an economist. Indeed, in my view, most present-day "economists" are not economists at all, but only econometricists. They attempt to describe and measure the economy but not to understand it in any fundamental way. All the "economists" we can think of during, roughly, the last century have been either econometricists or economic journalists of greater or lesser brilliance, and have given insights of greater or lesser relevance. None of them actually got to the root of the matter, least of all Keynes who was merely a Bloomsbury, quasi-Fabian elitist. For real economists, we still have to go back to the geniuses of the subject, to those who grappled with economics within the context of the other big issues of the human condition -- of demographics, politics, trade, disease, cultural differences and so on. They were polymaths more than merely economists. We have to skip over many "economists" of the last century who dwelt on, and burnished, one or two facets of the subject and go back to Marx, Ricardo, Malthus, Smith, Say . . . all the way to Aristotle (though there must have been a few before him who have gone unrecorded). Even though some of the true economists of the past may have gone wildly wrongly -- wholly or partially -- it is only these, with both a wide and deep view of economics within the whole field of human activity who can be called true economists. Harry calls the pretenders of the last century "neo-classical economists". He also has his own hero, George. However, none of these seem to be interested in the other great human sciences which have also been advancing during the course of the last century. Or, if they are aware of them, they haven't made any attempt to enfold their subject within the larger view as the geniuses of the past would have done. None of them has considered evolution, for example. Certainly no current "economist" wants to talk about anthropology, of the relative productivities of the three great economic systems so far (hunter-gathering, agriculture, industrialisation), of the genetic motivations within all of us, etc. Just as the subject of economics in its heyday was not called economics, but "political philosophy", so I think that the "economics" of the future will actually emerge via another subject, and another discipline. A more balanced and deeper view of economics might well be supplied by a future anthropologist or a geneticist, for example, or some brand new discipline. You might well say: "But what has this got to do with the inequalities that Krugman describes?". I would suggest that a relevant theory of economics would involve more than a passing reference to the similarity of our genes. Or, in simple, terms, let's not demonize rich people (even though some of them may not be attractive specimens) because anyone of us would readily accept the opportunity to be very rich. Instead, we need a deep enquiry into the way that inequality has waxed and waned throughout the history and pre-history of man. It's not a new phenomenon at all. I get the impression that inequality rises steeply whenever there's a surge in productivity due to new energy sources or significant innovations, but declines in-between times. This hypothesis needs much more analysis than I can possibly give it here but I could illustrate this briefly in terms of the period Krugman describes by suggesting that the extremes of inequality in America at around the 1880 -- the robber baron era -- was caused by the immense strides in industrial productivity that were brought about by rapid expansion of coal mining and railway transportation. The more recent increase in inequality can be explained, in my mind, by the vast expansion in access to cheap oil, and more recently gas, since the 1950/60s. The intriguing question to ask, of course, is what will happen to equality/inequality when oil and gas start giving out during the next 20/30 years? It think we can't possibly answer that until we know what the next energy technology is going to be. If civilisation is going to continue in some form or other, the new technology will have to be a huge one in order to replace the enormous role of oil and gas at present. I think it's going to depend very much on what sort of investment is going to be required. Is it going to need finance in the main (as needed today in, say, in developing an oil field), or will it be a mixture of finance and a high level of intellectual know-how? If the former, then the new energy technology will throw up yet another surge in inequality, I'm sure; if the latter, then there's a chance that the new prosperity will be more evenly dispersed (so long as the already-rich don't monopolise access to knowledge by means of intellectual copyright). Keith ---------------------------------------------------------------------------- ------------ Keith Hudson, General Editor, Handlo Music, http://www.handlo.com 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
