Paul Krugman. Arguing with Zombies: Economics, Politics, and the Fight for a Better Future. W. W. Norton, 2020.
This book is a collection of essays previously published by economist Paul Krugman, many of them in the New York Times. They cover a wide range of issues, including the debates over Social Security and Obamacare, the response to the financial crisis, problems with the European Union, trade wars, climate change, and the Trump phenomenon. The book ranges too widely to be easily summarized, but I will concentrate on the main connections between Krugman’s economics and his contributions to domestic policy debates. Although no one essay lays out his economic perspective very systematically, the main points of his largely Keynesian perspective become clear over the course of the book.
Krugman uses the term “zombies” to refer to “ideas that should have been killed by contrary evidence, but instead keep shambling along, eating people’s brains.” Apparently, he’s not calling his adversaries zombies, just some of their ideas. What he calls the “ultimate zombie” is the idea that taxes on the wealthy are bad for the economy, and that tax cuts for the wealthy are remarkably good for the economy. This idea thrives not because the evidence supports it, but because billionaires can spend a lot of money to support politicians, think tanks and partisan media that promote it.
This example show how easily economic questions are politicized, and how hard it is to have a honest economic debate in a politically polarized society. Nevertheless, Krugman believes that many economists—including himself—really do want such a debate, and really care about distinguishing fact from self-serving fiction.
Zombies in politics
Krugman introduces his collection of essays by saying that “in 21st-century America, everything is political.” The main issue still dividing people is the role of public policy in influencing market outcomes. Do we want a society like America in the Gilded Age, when government did little to alleviate the risks and inequalities of the market economy? Or do we want to become more like Denmark and other social democracies, paying the taxes necessary to support a stronger safety net and more worker protections?
One thing that keeps this from being an honest debate among people who just have different values and opinions is that the people who stand to gain the most from Gilded Age policies are themselves rather gilded. The rich have a vested interest in pushing the argument that what’s good for them is good for everyone. Their views are represented out of all proportion to their numbers—and to the economic merits of their arguments.
Krugman also observes that our two major parties are very differently organized. While the Democratic Party is a “loose coalition of interest groups,” the modern Republican Party is part of a much more organized movement that he and others call “movement conservatism.” In a 2018 essay, he described this as:
a monolithic structure held together by big money—often deployed stealthily—and the closed intellectual ecosystem of Fox News and other partisan media. And the people within this movement are, to a far greater degree than those on the other side, apparatchiks, political loyalists who can be counted on not to stray from the party line.
The word “stealthily” is significant here. On the one hand, it refers to the shroud of secrecy surrounding the political donations of rich people and the uses to which those donations are put. But it can also refer to the need to disguise self-serving economic proposals as policies for the general good. When Republicans cut taxes for corporations and the wealthy, they exaggerate the benefits of tax cuts to the economy and dismiss concerns about budget deficits. When they oppose government spending to help the disadvantaged, they ignore the benefits and warn of a deficit apocalypse. They also describe such spending as “socialist,” in order to confuse social-democratic programs that millions of Americans support with Venezuelan-style state socialism that few Americans would support. Meanwhile, the Democratic Party increasingly embraces social-democratic measures like universal access to health insurance, measures that Krugman regards as fully compatible with a thriving capitalist economy.
Since Krugman regards the Republican economic agenda as essentially elitist, he is not surprised that movement conservatism often appeals to racial and cultural anxieties in order to win working-class votes. He sees the Trump presidency as the culmination of this trend, as I myself have argued. Judging by his political appointments and his tax, health and labor policies, Trump is not really a populist but simply a fraud. He claims to be for the working class, but his economic policies belie that claim. Krugman considers Trump’s tax cut “the biggest tax scam in history.” Economic elitism also goes hand-in-hand with paranoia and authoritarianism. If you can’t win political arguments by showing that what you propose is good for the majority, then you will likely resort to demonizing your opponents as agents of sinister conspiracies against “the people.” In an essay entitled “The Paranoid Style in G.O.P. Politics,” Krugman says that the Republican Party has become “an authoritarian regime in waiting.” He wrote that essay two years before Trump claimed that he was cheated out of reelection and his supporters stormed the Capitol.
Zombies in economics
While zombie ideas are alive and well in what passes for political debate, they are not entirely absent from the field of economics itself. Here Krugman is concerned about the most extreme forms of “neoclassical” or “laissez-faire” economics, which should have been laid to rest after the Great Depression and the turn toward “Keynesian” ideas. The Depression discredited the idea that economies are entirely self-regulating, and market outcomes are always the best outcomes. In the 1930s, John Maynard Keynes argued that government could help stabilize the economy, especially by spending more when productive resources are underutilized and less when the economy is running at full capacity. Although conservatives tried to suppress the teaching of Keynesian ideas in some places, they became part of mainstream economics in the postwar era. A rough consensus emerged around what Krugman describes as a “moderate economic policy regime…that by and large lets markets work, but in which the government is ready both to rein in excesses and fight slumps….” The Paul Samuelson text that many of my generation studied in college represented that consensus.
It didn’t last very long. When government appeared unable to combat “stagflation”, a combination of both high unemployment and high inflation in the 1970s, the consensus broke down, sending economists back to the drawing board. Conservative opponents of an active economic role for government came to the forefront, attacking Keynesianism and reviving neoclassicism. Under the leadership of Milton Friedman, “monetarists” argued for limiting government intervention to central bank management of the money supply.
Part of the appeal of neoclassical economics was that it made simple assumptions about how economies work, and economists could formulate the logical implications of those assumptions in elegant mathematical models. “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….” Economists could easily mistake a useful simplification of reality for the actual reality, especially if they left out important factors like power relations. The simple assumption that workers get paid as much as they contribute to production fails to mention that workers who are prevented from organizing may get less than their productivity would justify.
More recent events reveal the retreat from Keynesianism to have been something of an overreaction. The great housing bubble and financial crisis of 2008 showed that deregulated financial markets were not as self-stabilizing as the neoclassicists made them out to be. The failure of monetary policy to provide sufficient stimulus once interest rates approached zero showed that government spending was important after all. Krugman concludes that Friedman was largely wrong, and that “Keynesian economics remains the best framework we have for making sense of recessions and depressions.”
As with political disagreements, the economic disagreements here are not just honest differences of opinion among economists who are doing their best to follow the evidence. Krugman accuses some economists of “engaging in whatever intellectual contortions it takes to preserve the free-market faith.” In an article entitled “Bad Faith, Pathos, and G.O.P. Economics,” he identifies a group he calls “professional conservative economists,” who are really economists in name only:
They’re people who even center-right professionals consider charlatans and cranks; they make a living by pretending to do actual economics—often incompetently—but are actually just propagandists. And no, there isn’t really a corresponding category on the other side, in part because the billionaires who finance such propaganda are much more likely to be on the right than on the left.
Krugman charges that the modern Republican Party would rather listen to such people than to serious economists.
Zombies and the media
Krugman’s critique of the mainstream media is very different from what we hear from the right side of the political spectrum. He does not describe the mainstream media as “fake news,” or as suffering from a “liberal bias.” He sees conservative economic views well represented, often better represented than the evidence warrants. He was, for example, dismayed to see how quickly the mainstream media lost interest in economic stimulus in the aftermath of the Great Recession of 2008. With unemployment still very high, most media discussion turned to the dangers of deficits, the potential for as-yet nonexistent inflation, and the need for government austerity. In the “Myths of Austerity” (2010), Krugman explains why cutting spending is counterproductive during a recession. (See also my review of Mark Blyth’s Austerity: The History of a Dangerous Idea.) The media took Paul Ryan’s so-called “deficit reduction plan” far too seriously, considering that it was “basically a trade-off of reduced aid to the poor for reduced taxes on the rich, with the net effect of the specific proposals being to increase, not reduce, the deficit.”
When the media are not being taken in by weak economic arguments and half-baked proposals, they are professing neutrality, seeing a false equivalence even between ideas of unequal merit. Krugman likens this to a headline saying, “Views differ on shape of planet,” when one side is declaring the earth to be flat. Too many in the media avoid doing the work necessary to distinguish a position that is well-founded from one that is merely well-funded.
For all these reasons, fact-based economic ideas get overlooked, while zombies walk the land. My next post will discuss Krugman’s economic positions in a little more detail.