The era of strong unions, high minimum wages, high top marginal tax rates, etc.
was also a period of rapid growth and rising living standards. That doesn’t
prove causation; it does disprove the widespread dogma that these things are
always economically devastating. And it’s telling that so many on the right have
airbrushed the whole postwar generation out of history.
This post reminded me of an article I recently read and suggested as optional reading for my Econ 362, American Economic History class which has a similar thesis but that it pertains to the long run: the history of the U.S. economy is built on laissez-faire government, so any modern attempt to regulate, say, the financial system, is to turn back on historical principles of American democratic capitalism. The article is here. A good excerpt:
American capitalism also developed at a time when government involvement in theBut as I hinted at in an earlier post, one can extend Krugman's argument against the conservative commentary of Reagan back to the early nineteenth century at least: government has, through various channels throughout history, substantially altered the growth trajectory of the economy across crucial dimensions such as labor market "policy" and property development.
economy was quite weak. At the beginning of the 20th century, when modern
American capitalism was taking shape, U.S. government spending was only 6.8% of
gross domestic product. After World War II, when modern capitalism really took
shape in Western European countries, government spending in those countries was,
on average, 30% of GDP. Until World War I, the United States had a tiny federal
government compared to national governments in other countries. This was due in
part to the fact that the U.S. faced no significant military threat to its
existence, which allowed the government to spend a relatively small proportion
of its budget on the military. The federalist nature of the American regime also
did its part to limit the size of the national government.
So in summary, Krugman praises regulation and general state policy in the economy as eliciting the strongest combination of successful capitalism and redistribution to counter the evil effects of inequality. Conservatives, on the other hand, either want to say such redistribution coupled with capitalism's success never happened or is a "deviation from optimal performance" (as in the case of the long run view of history), or simply ignore the success altogether (as with the "Golden Age" story). Something is seriously wrong with conservatives when they can't even develop a consistent critique.
If I were conservative and I wanted to critique the policies of the U.S. over the course of the last 200 years, I might as well become an anti-modern country bumpkin. Don't get me wrong, there's nothing wrong with that at all! -- in fact, I would say it's the most faithful type of conservatism there is. But that's for a later post!
Keeping with a common theme on this blog lately, how best to drive this point of institutionally contingent markets on the popular front?
Still waiting to hear suggestions!