Saturday, May 29, 2010
The Horror of More Widely Shared Prosperity
I've been catching up with the Krugmeister and have thoroughly enjoyed a series of posts where he attacks the conventional wisdom (dare we call it "economic correctness"?) that the US was some kind of economic basket case until Saint Reagan shredded that awful New Deal and its beastly regulations and let the light of liberty bloom and saved us from the bear that sh*ts in the woods or whatever. "Did the Postwar System Fail?" Hell, no:
Funny, isn’t it? The Ford-Carter years look no worse—in fact, somewhat better—than the Bush years, especially if you look from business cycle peak to business cycle peak. And that was in the face of two very severe oil shocks. So a question for all the people who say that the economic troubles under Jimmy Carter discredited postwar economic policies: why don’t the troubles under Bush similarly discredit post-Reagan policies? Funny how that works.Word. Emphases mine. Let's not get fooled again.
Here’s what I think: inflation did have to be brought down—and Paul Volcker, not Reagan, did what was necessary. But the rest—slashing taxes on the rich, breaking the unions, letting inflation erode the minimum wage—wasn’t necessary at all. We could have gone on with a more progressive tax system, a stronger labor movement, and so on.
In the modern vision, the old US economy is seen as an absurd, unworkable thing. Where were the incentives to grow super-rich? How did you manage with all those well-paid, organized workers? But I’m old enough to remember that system, and it was no more unworkable than what we have now. Radical change happened because a powerful political movement wanted it, not out of economic necessity.