The Long Exception: Rethinking the Place of the New Deal in American History. By Jefferson Cowie and Nick Salvatore. International Labor and Working-Class History, Fall 2008.
For Richer: How the Permissive Capitalism of the Boom Destroyed American Equality. By Paul Krugman. New York Times, October 20, 2012. Also find it here.
Also see: The Rise of the New Global Plutocratic Elite and the Crisis of the Middle Class.
Tomasky:
I was born three weeks before Kennedy was elected. To pick two other progressives in positions of somewhat greater prominence, Rahm Emanuel was born a few months before me, and Barack Obama, a few months after. People my age now run things; whatever liberalism exists today is in no small part a creation of my generation’s experience and imagination.
We grew up with a set of assumptions. If you were born in the United States between, say, 1945 and 1965, you were raised in a basically liberal political culture when liberalism was the default position. You studied the New Deal, or were instructed in it by your parents and grandparents, as I was (neither of my grandmothers could even say “Hoover” without spitting the name out like a mouthful of turpentine), and you thought: This is how it is. This is America. We were once a conservative country. But that was then. We’ve put it away. Progress–progressive progress, if you don’t mind the redundancy–was inevitable.
When Reagan came, you thought: aberration. Maybe we did go a bit overboard here and there, and, let’s face it, Jimmy Carter was not an effective president. So this is a corrective. Temporary. Things will sort themselves out. That was how it looked in August 1988, when Michael Dukakis was 17 points ahead of George H.W. Bush, and when many hoped that President Dukakis’s tenure would be followed by President Cuomo’s. In the America in which we were raised, that was how things would have gone and were fated to go.
Thirty years later–actually, about 27 years later, or three or so years ago–I started to ask myself: What if all these presumptions I grew up with were wrong? What if Reagan wasn’t an aberration? What if Roosevelt and Johnson were the aberrations? True, we had Bill Clinton in the meantime. Poor Clinton never plays a central role in these narratives, and I think today we’re gaining enough historical distance that he is starting to deserve better: His presidency may not have constituted a golden age of progressivism in the way selected Roosevelt and Johnson years did, which remains the reason we focus more on those two, but it was certainly a comparative golden age for the country. Still, as we know, the right marched onward during the Clinton years. And then of course came Bush. The idea we young people of the 1980s once entertained–the idea that the Age of Reagan was somehow false, anomalous, a torn page in an otherwise seamless development of plot–had now to be reexamined, in light of the speed with which Bush and Dick Cheney and Karl Rove undid so many (thankfully not all) of the ideas and policies we had been raised to believe were inviolate.
The historians Nick Salvatore and Jefferson Cowie of Cornell University published a brilliant paper in 2008 in the journal International Labor and Working-Class History called “The Long Exception: Rethinking the Place of the New Deal in American History.” In their Abstract, they write:
Salvatore and Cowie argue that on three crucial fronts–labor, race, and religion–the New Deal and the Great Society both represented abnormal (and extremely fleeting) moments of commonality in an arc of American history that otherwise bent strongly away from any notion of a common good and toward the primacy of the individual. Of the Reagan era, they wrote that “it might be more accurate to think of the ‘Reagan revolution’ as the ‘Reagan restoration,’ a return to a more sharply conservative, individualistic reading of constitutional rights and liberties prevalent before the New Deal.”The New Deal was more of an historical aberration–a byproduct of the massive crisis of the Great Depression–than the linear triumph of the welfare state. The depth of the Depression undoubtedly forced the realignment of American politics and class relations for decades, but, it is argued, there is more continuity in American politics between the periods before the New Deal order and those after its decline than there is between the postwar era and the rest of American history. Indeed, by the early seventies the arc of American history had fallen back upon itself. While liberals of the seventies and eighties waited for a return to what they regarded as the normality of the New Deal order, they were actually living in the final days of what Paul Krugman later called the “interregnum between Gilded Ages.”
Cowie and Salvatore:
Given the intense brevity of the “fragile juggernaut,” it might be more accurate to think of the “Reagan revolution” as the “Reagan restoration,” a return to a more sharply conservative, individualistic reading of constitutional rights and liberties prevalent before the New Deal. That this restoration included a society more sharply stratified by economic distinctions and racial divides, a significantly less liberal interpretation of a host of social and cultural issues, an enhanced fragmentation of working people’s political voice, and a reuniting of religious and conservative activists in civic life is due to many factors. But prominent among them in driving this return to a new Gilded Age was the profound fragility of New Deal liberalism itself. Even so, this was not a restoration in the sense of a return to small government as Reagan so forcefully advertised. As David Stockman’s lament about the Reagan administration’s inability to truly roll back government suggests, a Hamiltonian structure—contra Louis Hartz—was the true vital center of twentieth century American politics. Akin to post-CivilWar America, the political discourse of the Reagan Era celebrated the self-made man while denigrating the encroaching powers of government—all the while enlarging those federal powers to new heights. The issue was never really whether that government was large or small as political rhetoric might have us believe, but toward what ends and whose interest those massive institutions would be driven.
Krugman:
As the story about Despont suggests, it’s not fair to say that the fact of widening inequality in America has gone unreported. Yet glimpses of the lifestyles of the rich and tasteless don’t necessarily add up in people’s minds to a clear picture of the tectonic shifts that have taken place in the distribution of income and wealth in this country. My sense is that few people are aware of just how much the gap between the very rich and the rest has widened over a relatively short period of time. In fact, even bringing up the subject exposes you to charges of “class warfare,” the “'politics of envy” and so on. And very few people indeed are willing to talk about the profound effects – economic, social and political -- of that widening gap.
Yet you can't understand what’s happening in America today without understanding the extent, causes and consequences of the vast increase in inequality that has taken place over the last three decades, and in particular the astonishing concentration of income and wealth in just a few hands. To make sense of the current wave of corporate scandal, you need to understand how the man in the gray flannel suit has been replaced by the imperial C.E.O. The concentration of income at the top is a key reason that the United States, for all its economic achievements, has more poverty and lower life expectancy than any other major advanced nation. Above all, the growing concentration of wealth has reshaped our political system: it is at the root both of a general shift to the right and of an extreme polarization of our politics.
. . . . . . . . . .
The concerted effort to deny that inequality is increasing is itself a symptom of the growing influence of our emerging plutocracy (more on this later). So is the fierce defense of the backup position, that inequality doesn’t matter – or maybe even that, to use Martha Stewart’s signature phrase, it’s a good thing. Meanwhile, politically motivated smoke screens aside, the reality of increasing inequality is not in doubt. In fact, the census data understate the case, because for technical reasons those data tend to undercount very high incomes – for example, it’s unlikely that they reflect the explosion in C.E.O. compensation. And other evidence makes it clear not only that inequality is increasing but that the action gets bigger the closer you get to the top. That is, it’s not simply that the top 20 percent of families have had bigger percentage gains than families near the middle: the top 5 percent have done better than the next 15, the top 1 percent better than the next 4, and so on up to Bill Gates.
Studies that try to do a better job of tracking high incomes have found startling results. For example, a recent study by the nonpartisan Congressional Budget Office used income tax data and other sources to improve on the census estimates. The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution. Even more startling results come from a new study by Thomas Piketty, at the French research institute Cepremap, and Emmanuel Saez, who is now at the University of California at Berkeley. Using income tax data, Piketty and Saez have produced estimates of the incomes of the well-to-do, the rich and the very rich back to 1913.
The first point you learn from these new estimates is that the middle-class America of my youth is best thought of not as the normal state of our society, but as an interregnum between Gilded Ages. America before 1930 was a society in which a small number of very rich people controlled a large share of the nation's wealth. We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II. The economic historians Claudia Goldin and Robert Margo have dubbed the narrowing of income gaps during those years the Great Compression. Incomes then stayed fairly equally distributed until the 1970’s: the rapid rise in incomes during the first postwar generation was very evenly spread across the population.
Since the 1970’s, however, income gaps have been rapidly widening. Piketty and Saez confirm what I suspected: by most measures we are, in fact, back to the days of “The Great Gatsby.” After 30 years in which the income shares of the top 10 percent of taxpayers, the top 1 percent and so on were far below their levels in the 1920's, all are very nearly back where they were.
And the big winners are the very, very rich. One ploy often used to play down growing inequality is to rely on rather coarse statistical breakdowns – dividing the population into five “quintiles,” each containing 20 percent of families, or at most 10 “deciles.” Indeed, Greenspan’s speech at Jackson Hole relied mainly on decile data. From there it’s a short step to denying that we’re really talking about the rich at all. For example, a conservative commentator might concede, grudgingly, that there has been some increase in the share of national income going to the top 10 percent of taxpayers, but then point out that anyone with an income over $81,000 is in that top 10 percent. So we’re just talking about shifts within the middle class, right?
Wrong: the top 10 percent contains a lot of people whom we would still consider middle class, but they weren’t the big winners. Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million.
A stickler for detail might point out that the Piketty-Saez estimates end in 1998 and that the C.B.O. numbers end a year earlier. Have the trends shown in the data reversed? Almost surely not. In fact, all indications are that the explosion of incomes at the top continued through 2000. Since then the plunge in stock prices must have put some crimp in high incomes – but census data show inequality continuing to increase in 2001, mainly because of the severe effects of the recession on the working poor and near poor. When the recession ends, we can be sure that we will find ourselves a society in which income inequality is even higher than it was in the late 90’s.
So claims that we've entered a second Gilded Age aren’t exaggerated. In America’s middle-class era, the mansion-building, yacht-owning classes had pretty much disappeared. According to Piketty and Saez, in 1970 the top 0.01 percent of taxpayers had 0.7 percent of total income – that is, they earned “only” 70 times as much as the average, not enough to buy or maintain a mega-residence. But in 1998 the top 0.01 percent received more than 3 percent of all income. That meant that the 13,000 richest families in America had almost as much income as the 20 million poorest households; those 13,000 families had incomes 300 times that of average families.
And let me repeat: this transformation has happened very quickly, and it is still going on. You might think that 1987, the year Tom Wolfe published his novel “The Bonfire of the Vanities” and Oliver Stone released his movie ''Wall Street,'' marked the high tide of America's new money culture. But in 1987 the top 0.01 percent earned only about 40 percent of what they do today, and top executives less than a fifth as much. The America of “Wall Street” and “The Bonfire of the Vanities” was positively egalitarian compared with the country we live in today.
