Paul Krugman's recent long essay in the Sunday Times magazine criticized the economics profession for its failure to see the bursting of the housing bubble and the onset of the Great Recession. There are several factors which contributed to this failure, but one that Krugman focuses on is an ideological one: that over the past thirty years or so, economists were in thrall to the notion that markets are, essentially, always right, embracing anew a way of thinking about capitalism as a nearly perfect system that had, itself, been discredited by the Great Depression and the work of John Maynard Keynes.
This renewed embrace of the near-perfection of markets coincided with a period known as the Great Moderation, where intelligently applied monetary policy, administered by sage central bankers (notably Alan Greenspan), ensured a relative smoothing out of the business cycle, paving the way for steady growth that ensured continual economic progress:
As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn't sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.
Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets -- especially financial markets -- that can cause the economy's operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don't believe in regulation.
But there's another element here that Krugman largely overlooks, what one might call the Great Disconnect. The intellectual elites most influencing public debate about social policy (including the current health care debate) are, in no precise order, journalists (especially elite pundits), economists (economics being by far the most prestigious branch of academic social science) business leaders and, of course, lawmakers themselves. And all of those groups have one thing in common: they have prospered mightily over the past thirty years or so, while the typical American worker has not, with salary and benefits that place them, on average, at or near the top of the American income distribution.
Testifying in 2007 before the Senate HELP committee, Eileen Applebaum of the Center for Economic and Policy Research explained that:
The U.S. economy has experienced tremendous growth in the last 30 years. American workers today produce 70 percent more goods and services than they did at the end of the 1970s. There has been a dramatic increase in women's paid employment - especially in the employment of mothers of young children - as women have responded to both increased opportunities and increased financial pressures on families with greater attachment to the paid workforce. More women are working and working more hours than ever before. Workers have generated a huge increase in the size of the economic pie. As a country, America is much richer than it was a generation ago.
There is a problem with this picture, however. The overwhelming majority of American families haven't shared fairly in this bounty. Workers' pay and benefits have lagged far behind the increase in productivity. Families have struggled to make up the difference as wives' hours of work increased -- by about 500 hours since 1979 for middle income married couples with children. Family work hours have increased without benefit of affordable quality child care, paid sick days and family leave, or greater control over work schedules. The time squeeze on working families has grown sharper, especially now that baby boomers face the need to help aging parents as well as care for children. Despite working harder, America's families face greater stress and economic insecurity. The challenges are especially severe for single parent families, which today account for a quarter of all families with children.
As America has grown richer, inequality has increased. In 1979, the average income of the richest 5 percent of families was 11 times that of families in the bottom 20 percent. Today, the richest 5 percent of families enjoys an average income nearly 22 times that of families in the lowest quintile. Together, the top 5 percent of families receives more income than all of the families in the bottom 40 percent combined - 21 percent of total family income compared with 14 percent.
These realities have largely been lost in American political discourse, because the professional groups that most directly shape the national conversation over these issues are populated by people who live secure and often affluent lives that includes, among other things, rock-solid health insurance.
Thinking in sociological terms, it's not hard to understand how among these groups, ideas such as the "voluntary" nature of unemployment and lack of health insurance became fashionable and that, more broadly, their own experiences were extrapolable to the circumstances facing the typical American.
Once upon a time, the now hackish media critic Howard Kurtz wrote a pretty good book, Media Circus. Early on in the book, Kurtz explained some of the key failures of modern journalism. Central to Kurtz' analysis was a class-based explanation -- that journalism had been considered, at one time, a blue-collar profession, populated mostly by people from the working class, who saw as their job to "get city hall" and advocate on behalf of those who had the least access to the corridors of power. Kurtz argued that the professionalization of journalism, particularly from the 1970s forward (including the advent of journalism schools at elite institutions of higher education), had important implications for what journalists considered significant and urgent, as the economic distance between them and the public grew.
In sum, these professionals' own class interests (yes, I am generalizing) have militated against thinking in concrete terms about actual human suffering -- the devastation of losing a job, or how a factory shipped overseas could destroy a community, or a health catastrophe could engulf a family. Yes, we can read about such stories in the moving, affecting portraits that still appear in newspapers. But these stories tend to assume the tone of human interest pieces, often shorn of an analytical context and which bear increasingly little relationship to elite discourse about public policy. And this is due, at least in significant part, to the fact that the concerns and priorities that shape our national discourse overwhelmingly reflect the class position of the people who most influence that discourse. Hence, at a time of massive economic decline, resulting in concrete suffering for millions, much of our elite discourse is taken up with hectoring about deficit spending and inflation, despite the lack of evidence that these things really imperil our economy. This skewed perspective also persists in today's debate about health care reform, where the Sunday talk shows are filled with people who will never ever have to contemplate the consequences of a catastrophic health event on their family's economic well-being, talking in substance-free terms about things like the political viability of the public option, without ever stopping to explain why a public option might materially improve the lives of millions of ordinary people (and frequently without noting that, in spite of all the misinformation, a majority of the public still supports one).
Instead, we get the spectacle of people like Senator Olympia Snowe, the "moderate" Republican from Maine, enjoying the full benefits of government-funded health care -- and being treated with the utmost respect for her moderateness -- while insisting that only serious people such as herself realize that government-funded health insurance should not even be an option for the unwashed masses.
To borrow Christopher Lasch's phrase, what we've witnessed for thirty-odd years now is a revolt -- of the elites against the masses -- whether in journalism, or academia or in the corridors of political power. In this revolt, the elite professional strata most responsible for shaping our political and economic discourse have at once grown richer and, predictably, have increasingly articulated an ideological worldview justifying their privileged positions (Robert Frank's book, The Winner Take All Society, aptly captured many of these dynamics over a decade ago). The priorities they've articulated -- business-friendly economic policies (including a generally knee-jerk hostility to unionism and uncritical support for "free" trade), so-called moderation, centrism and prudence in addressing major social problems (with a tendency to focus on the necessity of individual behavioral changes and an aversion to significant government intervention in the economy except when it comes to bailing out major financial interests), a concern for bi-partisanship and civility in elite discourse -- make perfect sense for people who enjoy full material security and all of the perks associated with professional prestige and opportunity.
As for everybody else...
Jonathan Weiler's second book, Authoritarianism and Polarization in Contemporary American Politics, co-authored with Marc Hetherington, is just out from Cambridge University Press. He blogs daily about politics and sports at www.jonathanweiler.com
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