The Oberlin Review
<< Front page News September 15, 2006

Times’ Paul Krugman Opens Convocation Series

Oberlin’s 2006-7 Convocation Series opened this Tuesday with a lecture by award winning economist and New York Times columnist Paul Krugman, delivered to a capacity crowd in Finney Chapel.

His lecture, titled “The Great Unraveling,” dealt with the increasing income disparity in America and its relation to the rising polarity found in American politics. “If I had to sum up very quickly what I’ve been working on,” he said, “the quick statement would be, ‘What the hell happened to us? How did our society become so bitterly divided?’”

Krugman focused most of his talk on what he noted as his first love: history.

Speaking briefly of the myth of American society as beginning with humble “yeomen farmers,” Krugman noted that, though America has always had some amount of wealth inequality, it has now reached unprecedented levels.

Krugman saw a large narrowing of the income gap between the top and bottom of our society between the late 1920s and the post-World War II period — a concept he referred to as “The Great Compression.” He said this less polarized society lasted for about 35 years after the end of World War II. At this point, according to Krugman, everything changed.

“Since around 1980 we’ve being living during the emergence of a New Guilded Age of enormous inequality,” he said.

Using General Motors and Wal-Mart as specific examples, Krugman compared the growth in the disparity of wages between CEOs and workers over the years. The average corporation in the late 1960s showed that the salary of a typical CEO was 30 to 40 times that of the average worker. Now, he said, CEOs are paid more on the order of 400 times the salary of an average worker for their company.

Further, Krugman noted that the size of the economic group that benefits from rising inequality is shrinking.

“All of the gains are in the top five percent,” he said. “Most of the gains are in the top one percent and a surprisingly large share — almost half of the benefits of this growing inequality — have gone to the top one tenth of one percent of society.”

Krugman cited a variety of factors for this change, including globalization, new technologies and a dramatic change in the tax structure.

“During the Eisenhower years the top marginal tax rate was actually 91 percent,” he said.  “Now the top tax rate is 35 percent.”

In the end, Krugman cited a change in social norms as one of the most important factors.

“All explanations always end up in a blaze of amateur sociology,” he said. As an example, he explained that general societal feeling toward giving disproportionately large paychecks to CEOs was, at one point, unacceptable. That no longer seems to be the case.

Krugman then posed the question, “Why does all this matter?”

His answer? Progress.

“Put it this way,” he continued, “If you asked in 1970, ‘Are we better off now then we were immediately after WWII?’ There would’ve been no question at all,” said Krugman. “That we even have to ask this question now shows a lack of progress.”

Krugman finished with what he claimed to be the most important effect of the income disparity — the corresponding division in politics.

“Having a highly unequal society economically, it ends up being a society in which people are not part of a community — socially or politically,” he said.

Citing this shift in the political spectrum, Krugman said, “The polarization has really been a case of one party being pulled to the right to defend the interests of the growing wealth of the wealthy.”

Krugman ended by suggesting solutions for the current fix: he urged a look back to the economic policies of the past in order to improve the future.

“We do really need another Franklin Delano Roosevelt,” he said, “And if you see one, please tell him to drop me a line.”


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