'Free Market' Fanatics Pave the Way For New Gilded Age in United States

SYNOPSIS: Interview of Paul Krugman by the Online Review of Books & Current Affairs

Paul Krugman, the unabashed liberal economist and award-winning newspaper columnist, skewers the Bush administration and the usual gang of right-wing desperados and free market scam artists in his latest book, The Great Unraveling: Losing Our Way in the New Century. Krugman's book is actually a compilation of his twice-weekly Op-Ed columns in the New York Times (plus a preface and introduction) that explains his dread and deep concern for the economic problems that lie ahead for the United States.

In his introduction, he warns that if the Bush administration's economic ideology, heavily influenced by right-wing think tanks like the Heritage Foundation, continues to its logical conclusion, America will lose all the New Deal and Great Society programs that have helped average citizens since the Great Depression. He goes on to say that "the people now in charge really don't like America as it is. If you combine their apparent agendas, the goal would seem to be something like this: a country that basically has no safety net at home, which relies mainly on military force to enforce its will abroad, in which schools don't teach evolution, but do teach religion and-possibly-in which elections are only a formality."

This past month, the Online Review managed to intercept the busy Princeton economics professor and discuss his book with him. We also talked about related political and economic issues currently in the news.

Paul Krugman Interview:

OR: In your book you discuss how the radical right wants to abolish all taxes on capital and only have taxes on labor. Does this mean that they would like to see a pre-New Deal America, like the Gilded Age where workers are routinely exploited and there is a huge disparity between the rich and poor?

PK: Well, they would reject that idea of what the Gilded Age was like. But if you ask the question, does the Heritage Foundation or Grover Norquist want to take us back to a period before the New Deal existed, the answer is yes. They are quite clear about that. In fact, when Norquist was asked about whether he wants to take us back to before the New Deal, he said, no, that he wanted to take us back to before the Progressive Era. Now, the Bush administration would deny that it wants anything like that, but people in his administration have advocated those views before they became members of the administration, and the people backing them are pretty clear that that is their goal.

OR: Speaking of Grover Norquist, in your book you also talk about how many members of the House of Representatives are "true believers in the miraculous powers of the free market-they are in effect members of a sect that believes that markets will work even when the businessmen actually involved say they won't." I suppose individuals like Grover Norquist would fall into this category as well.

PK: Yes, that's right.

OR: But here's what I don't understand. A lot of these zealots on the far right who espouse this type of philosophy, like Tom DeLay, for example, did not come from privileged backgrounds, yet they seem to look back to the late 1800s and early 1900s and think it was a great time for the average person in America. Don't they know their history? Don't they know how bad working conditions for most average Americans were in that era? Didn't they ever read books like The Jungle?

PK: They believe that is all left-wing propaganda. Of course they will say that the country was poorer then and that the average standard of living was lower, but they believe there was also good stuff happening during that era, like people taking more responsibility for their lives. In addition, they believe that anything good that evolved from that time was a result of the free market.

OR: What about individuals like Bush or Cheney? Are they really true believers, or are they just scam artists who use this right-wing free market philosophy to promote their own self-interests?

PK: I don't think they're really big believers in the free market; in fact, I know they're not. For example, when push comes to shove, and there's a question of subsidies for energy companies, or for other groups that they support, they're all for government intervention. So I don't think they're really free marketers. Actually, I'm not sure what is in the mind of somebody like Dick Cheney, but I do think he believes that people with the right connections should run things.

OR: In other words, he's an elitist.

PK: I would call him an oligarch.

OR: Which fits in with how he got to be CEO at Halliburton in the first place. After all, he had absolutely no previous business experience before he became the head of Halliburton. But the mainstream media never asked the question: Why would a major company like Halliburton make someone their CEO who had no business previous experience? Unless there were other reasons, of course.

PK: Yes, that's pretty obvious, or what Molly Ivins calls "bidness." There are free market ideologues that are backing the administration, and there are anti-tax ideologues backing the administration--they're not the same thing--but the core group that actually makes all the decisions are oligarchs.

OR: I've read a lot of statistics in the last several years about the growing inequities of wealth in the U.S., but there are three statistics that bother me the most. The first one is that one-half of one percent of the population owns over 35% of the wealth of the country. Is this statistic accurate?

PK: It's probably about right. The number that I've seen is that 1% of the population owns about 40% of the wealth.

OR: The second one is that the average CEO makes 530 times the average worker at his company. Does that sound right?

PK: Yes, that number is correct. It may have even gone up a bit more since it was first calculated.

OR: I don't have an exact statistic for the third one, but it's been reported that many multinational companies go offshore to operate their businesses and pay no tax at all.

PK: Well, what we know is that the nominal corporate tax rate is 35%, but the effective tax rate is about a third of that.

OR: But isn't it true that some large corporations pay no taxes at all?

PK: Yes, some pay none, but it's not just because they go offshore. There are many other ways for companies to avoid paying taxes. Going offshore is just one of the scams that captures the most attention.

OR: Would you say that if we analyze the Great Depression that one of the factors that caused it--not the only one, but a major one--was that the concentration of wealth in the country was in a too few hands?

PK: We don't know that for sure.

OR: Wouldn't common sense dictate that?

PK: No, the thing is that rich people actually do end up spending a lot of money. Let's put it this way: that statistic is a debatable point that you don't want to rest your entire case on. I think there are a number of other factors.

OR: But if the trend continues, and you project that in 10 or 20 years the number goes up from 1% of the population owning 40% of the wealth of the country to, say, 1% owning 60-70% of the wealth, wouldn't that be bad for the country--just from a common sense point of view?

PK: Yes, it's a bad thing, but I don't think you can say that it will lead to a depression. It's certainly bad for many other reasons. First of all, it's bad because there will be that much less left over for ordinary people. It's also bad because it distorts the shape of society, and it means that opportunities for achievement--like people who don't happen to have the right parents--are greatly diminished. And the last thing is, it distorts the political system.

OR: Which brings us to the question about campaign finance reform. For years our system has been set up so that special interest groups and PACs can buy and sell politicians. Recently, the McCain-Feingold Bill passed, which I guess will help, but obviously we need to do more. Would you say that public financing of political campaigns is the best way to go?

PK: I would say we need public financing. It's my understanding that McCain-Feingold will not work very well. There are too many ways to get around it, and possibly it may end up just reinforcing the advantage of the wealthy. I would also really like to see a return of the Fairness Doctrine to the media. And ultimately, I would like to see institutions that would provide rival power centers. I haven't fully figured out all my views on this yet, but you have to remember that the New Deal worked not just because of changes in government policy, but because it helped foster labor unions as a counterweight to the power of the wealthy.

OR: Of course labor union membership has gone down quite a bit in the past few decades, and unions are no longer the counter veiling force to management that they were in the 50s or 60s. But an even more troubling problem is that today most people get their news from the mainstream media and rarely read alternative news, even though there are plenty of populist publications online. So the question is, if the mainstream news media is primarily owned and controlled by some of the largest corporations in America to promote their own agendas, then how can a populist message or viewpoint ever get out to the mass public?

PK: That's a very good question. The thing is, it's not a 100%, but we all have a lot of complaints. I guess I'm part of the mainstream media now--

OR: But you're one of the exceptions.

PK: I know. (Sighs). And that's why I would like to see the Fairness Doctrine return. Beyond that, we need some organized pressure to demand actual fairness in the media. For whatever reason, talk radio, which has become a major force in American politics, is overwhelmingly and outrageously right wing, so we need a counterweight.

OR: Why has the left been so slow to respond to this unbalanced situation?

PK: Most of the people we're now calling 'the left' didn't think of themselves as 'the left.' They thought of themselves as center or left of center, and until very recently they imagined that they represented the mainstream. And some of them still do. Part of the problem that we have right now is that so many people are just treating the current state of affairs as politics as usual. They don't understand that America as they know it is under considerable threat. Even someone like myself did not understand until a few years ago how high the stakes are. So there was not enough of an attempt to counter this. In some ways, we had a lot of false security during the Clinton years.

OR: Have you personally received any threats from right-wing groups or corporate sponsors?

PK: Not from corporate sponsors, but I get organized campaigns of hate mail and harassment all the time from right-wing groups. If you're going to take the kinds of positions I take, you'd better get used to it. That's just the way it is.

OR: In one of your articles you explain how Diebold, Inc., the company that is producing touch screen voting machines that have no paper trail, is closely aligned with the Bush administration. Are you confidant that in the upcoming presidential election all the voting machines will be legitimate?

PK: No, I'm not. I'm not making a specific charge, but given what we know about how easily the technology of these voting machines can be hacked into, and given the refusal in many places to provide any kind of backup or check, you have to say, look, I don't like the fact that I'm trusting the outcome of an election to the good intentions of those people alone.

OR: Beyond that, if the voting results in the next presidential election are suspect, wouldn't this be an absolute catastrophe? I mean if citizens think that all their elections from now on are rigged, what would that say about democracy? And wouldn't that precipitate mass protest and violence in the streets?

PK: Well, it's extremely unfashionable right now to bring this subject up, but the last poll I saw said that 38% of the public believes that Bush was illegitimately declared president in the last election. If something like that happens again in 2004, you have to say that this will be a very demoralized and cynical country.

OR: So what do you tell your students when they ask you whether we still live in a democracy? Do you tell them that we still do, or do you say that we live in a plutocracy? Or do you tell them that we've crossed the line and become a corporate fascist state?

PK: I don't think it's helpful to start using labels because it can make you sound way out there. We've always been a democracy in which money is very influential. And we are more so now. So the point is not to lay out a position to say that America is fascist. I know a little bit about fascism, and we ain't there yet.

OR: But corporate fascism is different than political fascism.

PK: (Groans) I don't know what that means. And it's not just corporate. In fact, if you ask me which group I think is the true fool here, I would say it's mainstream CEOs who think that the Republican Party is their friend. And if the Republican Party gets the real lock on power that it's seeking, the CEOs are going to discover that other groups that are not so genteel are actually going to have a lot more clout. When I hear Wall Street executives enthusing about Republicans or the Bush administration, I always wonder if they understand that in the end John Ashcroft is going to be running the place.

OR: One of the things that Howard Dean mentioned during his campaign is that the Bush administration got warnings about 9/11 before it actually happened. In fact, if you look online there are many Web sites that go into detail about how the Bush administration not only knew about what was going to happen on 9/11 in advance, but may have even had a hand in planning it. I've even read one article that claims that some heavyweight right-wing investors sold airline stock short right before 9/11. Have you heard about this?

PK: Yes, I've heard all these stories. First of all, Dean didn't say that. He said it was Bush's secrecy that caused these stories to flourish, and it was taken out of context by the right. Let's put it this way: I don't rule anything out, but what I think is the story--and it's bad enough--is that the outgoing Clinton people warned the incoming Bush people about Osama bin Laden. They told them bin Laden was a real threat, that they had drawn up some rough plans for an attack on his bases, and that they should make him a number one priority. But the Bush administration ignored their warnings, decided to work on missile defense instead, and essentially did nothing. That's a big enough scandal in itself.

OR: But you don't think the Bush family's business dealings with the bin Laden family in the past--

PK: I don't think there's a conspiracy, and it's not helpful to draw up one. But what is true is that the people who claim to be the "real Americans," the ones who chide the critics for not being patriotic, are, in fact, deeply enmeshed personally in their business relationships with Wahhabi fundamentalism. And that's the revelatory fact because it illustrates how different image is from reality.

OR: Let me finish by asking you this last question: What do you think the United States will be like, and what will we be talking about four or five years from now if George W. Bush becomes president for a second term?

PK: I don't know, but my worst fantasies go pretty deep. I'd say we will be talking about how the global investors, Wall Street, and the United States are undergoing a terrible credit crunch, and if they hadn't gerrymandered the Congressional districts up the wazoo, and if they hadn't sent word to any corporation who gives money to any Democrat that it will face severe consequences, it will be a surefire windstorm for any Democrat. At this point the sheer muscle of the Bush administration will be so powerful that it will make it very difficult to get them out, even if everything has gone wrong.

Originally published in the Online Review of Books & Current Affairs, 2.04