Brink Lindsey has a piece in Reason called Nostalgianomics about liberal pinning for the 50s. Specifically, he’s speaking of Paul Krugman, income inequality and social progress. The last two graphs:
Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.
The rise in income inequality does raise issues of legitimate public concern. And reasonable people disagree hotly about what ought to be done to ensure that our prosperity is widely shared. But the caricature of postwar history put forward by Krugman and other purveyors of nostalgianomics won’t lead us anywhere. Reactionary fantasies never do.
Veronique de Rugy at The Corner
Brink goes on to argue that the political and social changes that have allowed growing inequality – and have in turn been reinforced by it – are good things, not bad things. These include greater freedom for women, acceptance of diversity and non-conformism and so on. I broadly agree with this diagnosis, though I think that Krugman paints too rosy a picture of the 1950s and Brink pays too rosy a picture of the current era. The trade-offs involved in policies that allow or encourage growing inequality are not nearly as one-sided as either Brink or Krugman asserts. They are uncomfortable.
But the United States didn’t just wake up in 1980 and decide to make a set of uncomfortable trade-offs through a process of abstract reasoning, or even entirely through organic social developments, we were pushed. What I think is missing from the debate as presented in Brink’s piece is international competition.
Manzi links to Jonah Goldberg, who writes about nostalgia for an even earlier time:
It seems to me that all of the new New Deal talk fails to grasp that the extent to which nostalgia drives our assumptions of “what works.” Even if you give the most charitable reading of the New Deal and the postwar period, the simple fact remains that those times aren’t like these times.
Goldberg is discussing the Niall Ferguson Financial Times article about Keynes and Krugman. Krugman had this blog post on Ferguson in early May. Here’s Paul Krugman‘s column on inflation, published a day before Ferguson. The New York Review of Books symposium with Krugman, Ferguson, Roubini, etc… Andrew Stuttaford excerpts part of the Ferguson piece at The Corner:
Of course, Mr Krugman knew what I meant. “The only thing that might drive up interest rates,” he acknowledged during our debate, “is that people may grow dubious about the financial solvency of governments.” Might? May? The fact is that people – not least the Chinese government – are already distinctly dubious. They understand that US fiscal policy implies big purchases of government bonds by the Fed this year, since neither foreign nor private domestic purchases will suffice to fund the deficit. This policy is known as printing money and it is what many governments tried in the 1970s, with inflationary consequences you do not need to be a historian to recall.
This fight between Ferguson and Krugman has gotten a lot of blog press.
Henry Blodget at Clusterstock
Noam Scheiber at TNR
Sheldon Filger at HuffPo
Gideon Rachman in FT
Cees Bruggemans in iAfrica sums it up:
But as history has shown, this may actually be very rational, demanding upfront that policymakers show it can work and thereby earning the compliance of bondholders rather than merely naively assume such compliance to be blindly forthcoming. Mr Ferguson goes wrong in claiming with the expectations crowd that governments are always wrong. In the present global crisis the Keynesian medication is needed and will work and to decry it merely suggests an inability to distinguish good from bad policy.
[…]So was this clash of titans useful? It most certainly helped in seeing where both gentlemen are going right, but also where they err. This aside of personal pettiness which suggests real big egos can’t have a normal conversation without completely missing the point of each other.
UPDATE: Daniel Gross in Slate