Paul Krugman on the Arc of Post-WWII Social Democracy in the North Altantic
Paul Krugman:
Down The Memory Hole : Read almost any conservative commentator on economic history, and you’ll find that the era of postwar prosperity — the gigantic rise in living standards after World War II — has been expunged from the record. You can see why: the facts are embarrassing. Here’s a rough-cut version. The blue line, left scale, shows median family income in 2008 dollars; the red line, right scale, shows the top marginal tax rate, a rough indicator of the overall stance of policy. Basically, US postwar economic history falls into two parts: an era of high taxes on the rich and extensive regulation, during which living standards experienced extraordinary growth; and an era of low taxes on the rich and deregulation, during which living standards for most Americans rose fitfully at best.
This does not, to say the least, make the case for free-market orthodoxy. So a large part of the right has invented an alternative history in which the good years came after, not before, the Reagan revolution. Hey, that’s what should have happened; who you gonna believe, the doctrine or your own lying eyes?
Now, here’s what I know I’m going to hear in comments: stagflation! Jimmy Carter! The 70s! You can sort of see the bad years of the late 70s in the figure; it’s that little downward wiggle in the middle. But that wiggle must be emphasized, lest the overwhelming success of the postwar economy be noticed.
