Progressive Versus Conservative Economics

Economics professor and New York Times columnist Paul Krugman took a moment to belabor the obvious yesterday in his blog:

Let me start with a puzzle: why did faith in the wonders of financial deregulation persist so long?

After all, if you step back from the record, deregulation began producing disasters from early on. Early deregulatory moves helped bring on the Latin American debt crisis of the early 1980s; Garn-St. Germain produced the savings and loan debacle; freed-up capital flows produced the Asian crisis and LTCM; and now we have the great bust. So why were Very Serious People so convinced that it was a good thing?
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these are pure fantasies on the part of the right. The true age of spectacular growth in the United States and other advanced economies was the generation after World War II, with post-Reagan growth nowhere near comparable. So why do these people imagine otherwise?

And the answer, once you think about it, is obvious: growth for whom? There’s only one way in which the post-deregulation boom was exceptional, and that’s in terms of the growth in incomes at the top of the scale.

Here’s a comparison of the postwar boom with the deregulation alleged boom, using real average family income from the Census and real average income for the top 1 percent from Piketty and Saez:

If you’re looking at the average, the last generation is a poor shadow of the postwar boom. But if you’re talking about the 1 percent, wonderful things have happened.

Boom For Whom

Obvious, because in fact I've mentioned it myself once or twice. When you consider that most of the people who package and recite today's television news are included in the red bars, it's all the more reason to understand that we've been sold a bill of goods. Our economic growth since Reagan has averaged less than it did in the preceding years since the end of World War II, as the calculator at Measuring Worth helpfully shows in table form:

US	1945 to 1979	1980 to 2010
Real GDP	3.19%	2.73%
Real GDP per capita	1.76%	1.68%

See NOTE 1

Not only has the general growth of the U.S. economy been slower since the conservatives took over, but, as both Krugman's chart and a whole host of other charts have shown, the income distribution has been far worse for the vast majority of Americans as well.

Why did I pick those particular periods? They roughly represent the times when first progressives, and then conservatives were in charge of the American economy. There were good times within both periods, as well as bad. We've conducted a seventy year-long experiment in the power of these two differing economic philosophies. To conclude that the conservatives did better requires a lot of mental contortions that I'd just as soon avoid.


NOTE 1: I created this chart by putting those parameters into Measuring Worth's handy annualized growth calculator page. Then I just copied and pasted the HTML source for the resulting table.

Here is the suggested credit note from that site:

Lawrence H. Officer and Samuel H. Williamson
"Annualized Growth Rate and Graphs of Various Historical Economic Series," MeasuringWorth, 2011.

URL: www.measuringworth.com/growth