Skip navigation
College Quarterly
Spring 2012 - Volume 15 Number 2
End This Depression Now!
Paul Krugman
New York: W. W. Norton, 2012
Reviewed by Howard A. Doughty

Getting old is not just a matter of losing strength and dexterity, of recognizing more and more friends in the obituaries (and no longer being surprised), or of becoming increasingly hostile to contemporary popular culture and anyone under thirty (or is it forty?). It is much more forcefully demonstrated when you realize that the kids don’t remember where they were when John F. Kennedy was executed—in fact, most of them have no clear idea of who John F. Kennedy was and what he represented, especially to Americans at the time of “The New Frontier” and “Camelot.” They also don’t remember the hostilities in Vietnam or the “Cold War,” never mind Korea. Upon reflection, all this is obvious, but the journalist Rick Salutin gave me a shock (thankfully not a stroke) when he reminded me that, for people who are under 40 (born in 1972), “the only economic wisdom [they’ve] ever known is the nostrums of neoliberalism, which began in the Reagan-Thatcher 1980s and continues into the current round of austerity budgets everywhere.”

Young and, increasingly, middle-aged adults simply do not recall a time when progressive policies at least got a hearing at the decision-making tables of governance. Expanded public education, genuine health care reform, strategies for growing prosperity combined with equity, a deepening commitment to human rights, investment in pure science and a host of other domains were at least contested, and it was not a foregone conclusion that corporate interests would automatically prevail. In the United States, Lyndon Johnson’s “Great Society” was not immediately laughed off and its unnecessary demise in the jungles of South-East Asia was sincerely lamented. In Canada, Pierre Trudeau’s “Just Society” was not a cruel joke, at least until the invocation of the War Measures Act in 1970.

Economically, a simple survey of wage increases, a growing middle class, an expanding social safety net, an extended public commitment to building infrastructure and an authentic assumption of optimism about innovative technology were all available. Even social conflict over anything from Civil Rights in the American South to the early rise of the second wave of feminism show that, on balance, the ideals of progress had far more energy than the nervous and sometimes vicious forces of reaction.

This, I assure you, is no paean to “the sixties.” It is a lament that, since the 1960s, a couple of generations of North Americans have grown up, not “absurd” as Paul Goodman told us, but frightened, depressed and apparently lonely enough count people with access to their Facebook pages among their “friends.”

Getting old is also a matter of often unfounded nostalgia (“the older we get, the better we were), but even a cursory look at government, business and media accounts of the current economic agenda reveals that it isn’t just self-described “conservatives” who advocate getting education back to the basics, curbing health care costs, slashing welfare budgets, undermining trade unions, privatizing or eliminating public services and getting tough on crime—or, in fact, just getting tough! The mean and lean, increasingly competitive global economy has become the only conceivable environment for investment and employment. So, the “environment” (also known as where we live and what sustains our lives) must take second or third or … tenth place behind other immediately pressing priorities. So, too, we talk incessantly about “jobs, jobs, jobs” for the economy (no matter how ill-paid or insecure) and “drill, drill, drill” for energy (no matter how expensive or polluting).

Thanks to the honourable remnants of the trade union movement, the rise of alternative media on the Net, and a yeasty rebelliousness among that portion of the young who sense that something is profoundly wrong, though they may not completely understand what or why, there is some light in, if not yet at the end, of the tunnel. Not all the mineshaft canaries are dead. But where can we look for the understanding that must be forthcoming if anxiety is not to turn into despair and if anger is not to turn into violence?

One answer takes the unusual form of a Nobel laureate in Economics named Paul Krugman.

Paul Krugman is an eminent scholar and academician whose theoretical work on international trade left the Nobel Committee more than marginally impressed. He is also a polemicist whose columns appear regularly in the New York Times and elsewhere. I have neither the expertise nor the inclination to discuss the scholarship; the polemics are more approachable. In Stop This Depression Now! Paul Krugman discusses vital questions. He supplies thoughtful and straightforward answers. He is a public intellectual in the best sense of the word.

In his public role, Krugman must certainly be on to something. For most intents and practical purposes, he is a fairly orthodox Keynesian, which is to say that he thinks that consumer demand is very important to the maintenance of a comfortable capitalism, and that it is government’s job to stimulate the economy in tough times. Whether that comes in the form of welfare payments, grants and other transfers to individual citizens, investment in public works or occasional “bail-outs” of collapsing private sector firms is a matter of assessing specific policies in particular circumstances. Generally, however, Keynesians encourage public spending when workers lack the money to be efficient consumers and corporations sit on their cash assets, refusing to invest in new technology, expansion of their enterprises or much of anything else except perhaps the growing salaries and bonuses of their failed executives. Krugman, in particular, is willing to put up with government deficits and to accept modest rates of inflation, provided that neither gets out of hand. He calls the urgency with which neoliberals obsess over deficits “hysterical.”

It’s been half a century since Richard Nixon (or was it Milton Friedman?) said (possibly tongue-in-cheek) that “we’re all Keynesian now!” Whoever the speaker and whatever the rhetorical intent, the statement seems to have been at least premature. Few in the highest ranks of the political or economic elite are apt to repeat it now.

I say that Krugman must be on to something not because he is seriously challenging the well-established neoliberal ideology, but because he is challenging it at all. Neoliberals, lest anyone forget, are morally outraged that poor and working people deem themselves entitled to a “free lunch,” subsidized (or “socialized”) medicine and a dignified pension after decades of hard work. They believe that public services including cultural institutions, education, transportation, post offices, garbage collection, parking lots and prisons should be sold off and run by private companies for profit. Some are even offended by government bail-outs—at least in theory, and unless they are the ones getting the funds for their “too big to fail” enterprises. Until recently, however, they have at least given a nod to free speech. Their major mantras concern “free enterprise,” “free markets,” and “free trade”; so, it was logically consistent for them to endorse a tolerable measure of “diversity of opinion” in what J. S. Mill called “the free market of ideas” as well. At the moment, no one is urging that Krugman should be forcibly silenced, but there is a growing hostility in ripostes to his regular attempts to inform and embolden the reading public.

Writing in The Economist—not exactly a bastion of Marxism, “neo” or otherwise—Matthew Bishop took Krugman to task for the “preachy” tone of his latest book. He criticized him for “bashing anyone who doesn’t share his conclusions,” a fault which he says “is not merely stylistically irritating; it is flawed in substance.” In response, I’d just say that the purpose of a polemic is to persuade. That doesn’t permit a writer to lie, but it does allow a standard slightly more flexible that expected in scholarly writing. So, to say that Krugman makes a forceful case and sometimes deploys a sly humour when mocking his right-wing opponents is merely to acknowledge the book for what it is—the translation of difficult economic theory about important issues into language accessible to intelligent and attentive readers, and to do so in a way designed to put Krugman’s opinion in the best light.

Bishop also speaks about Krugman’s alleged opinion that the cause of the current depression (a term Krugman thinks is more accurate than the more reassuring “recession”). In my view, however, he misrepresents Krugman by suggesting that he believes the depression is exclusively the result of inadequate consumer demand. While not denying that reduced demand may be largely responsible for current high rates of unemployment, Bishop insists that “structural changes like the substitution of cheap foreign workers” for higher-priced domestic labour plays a role as well. The problem is that Krugman doesn’t say that soft consumer demand is the only problem for Western economies. In fact, Krugman has been a vocal free trader, who still credits the lowering of tariff barriers for growing prosperity of some former “third-world” countries, especially on the Pacific Rim (e.g., Korea, Taiwan, Singapore), and for keeping others (notably Bangla Desh) from total collapse. He understands that both domestic and global influences affect North American, European and all other economies. So, by putting style over substance himself, Bishop takes attention away from more compelling criticisms of Krugman. Bishop emphasizes, for example, the fact that “inflation imposes real costs, for instance on retired baby boomers reliant on fixed dollar annuities …” and that is a fair point; but, there are ways in which the plight of people on fixed incomes can be relieved, although those methods are predismissed by Bishop and anyone not already in the Keynesian camp.

Much less temperate is a screed from Sal Bommarito in Business Budget …who begins by saying that he had read an article by Decca Aitkenhead in The Guardian that praised End This Depression Now! and thereby saved himself the price of the book. In a perfect display of the arrogance of ignorance, he explains: “I would not invest the money or the time to read Krugman’s work so Aitkenhead’s piece has afforded me another chance to critically analyze Krugman’s philosophy cost-free.” He then goes on to use phrases such as “spews his warped perspectives,” to call Krugman “naïve and absurd,” and says about one (distorted) point attributed to Krugman, that he “will not discuss this aspect of Krugman’s philosophy because it has no standing in my mind.” Toward the end, he claims that “Krugman adds mightily to class warfare,” and that “comparing the top .01% to the other 99.99% … is a ridiculous comparison. Of course the former earns more than the latter, but so what?” Such vehemence can, perhaps, be understood if not excused in an angry and anonymous blogpost. That it appears in a purportedly serious business publication is … well, a further indication that Krugman is on to something.

What is it that has the knickers of corporate apologists in such a twist? By my reckoning, it is the sheer simplicity of Krugman’s theses. Apart from the substitution of the irksome concept of “depression” for the standard euphemism of “recession,” Krugman makes the following claims:

  • the current depression is unnecessary;
  • the current depression is easily remedied;
  • the neoliberal therapy of austerity is making, and will continue to make, matters worse.

In Krugman’s own words, his line of reasoning is as follows: “The depression we’re in is essentially gratuitous: we don’t need to be suffering so much pain and destroying so many lives. We could end it both more easily and more quickly than anyone imagines … The truth is that recovery would be almost ridiculously easy to achieve: all we need to do is to reverse the austerity policies of the past couple of years and temporarily boost spending.”

Why, then, have presidents and prime ministers in the US and elsewhere not adopted Krugman’s view? Why have leaders in Washington, Ottawa, London and Berlin chosen to speak and to act in support of austerity if is so obviously the wrong choice. If matters were truly as clear-cut as Krugman claims, and if the solution to our economic woes is truly that easy, what has prevented those in authority from making the just, sensible and truly pragmatic choice?

For Krugman and concurring reformers, the answer is largely that we have forgotten the mistakes of the past, and now seem condemned to repeat them. Neoliberal ideology is not just a false set of beliefs. It is a false set of beliefs that has explained and justified the extreme and possibly obscene growth in the gap between the rich and the poor. What we in the rich nations have witnessed and endured is the largest redistribution of wealth from poor, working and middle-class citizens to the already wealthy in my and many other people’s memory. I’d say that it’s been the largest such redistribution of wealth in human history, but I will refrain from doing sopartly on the off-chance that I might be wrong, but mostly because such grandiose and exaggerated statements add nothing to the conversation. It is enough to say that it is the biggest movement of money from the “99%” to the “1%” since World War II, and it came immediately upon (and, in the process, largely destroyed) the gains in relative prosperity enjoyed by the majority of people under the terms of the informal postwar consensus.

This is to say that class conflict within many wealthy societies had been reduced by a combination of social benefits, trade union collective agreements and tax regimens which permitted capitalism to flourish while spreading the results of growth more equitably among the middle and working classes—though not necessarily as generously to the very poor. Unionization, especially in the manufacturing and trades sectors, led to better pay for both organized and unorganized workers. In return, it provided business and industry with guaranteed labour discipline—predictable labour relations under collective agreements that all but eliminated unanticipated or “wildcat” work action. The rich stayed rich, the middle class (including more skilled “blue-collar” employees) thrived and the majority of people could say that their lives were improving.

Since the early 1980s, however, governmental authorities have undermined that consensus by executive, legislative judicial as well as rhetorical assaults in which the majority of the people have been blamed for the felonious mismanagement of the economy by those who have profited most from their malfeasance. These assaults have involved attacks on trade unions (especially public sector unions) and the evisceration of social programs from so-called “entitlements” to education, health care and environmental, food, water and industrial health and safety protection.

More than some others, Krugman maintains that, despite the constant ideological offensive in which the victims of class warfare are blamed for protesting against it, the bulk of American and other citizens of wealthy societies are not as fully duped as the pundits in the print and broadcast media pretend (or are themselves). Ordinary people are tremendously disappointed by the behaviour in office of politicians who had been elected on the promise of hope and change. In the health insurance debate in the USA, for example, a sizable proportion of the electorate urged the adoption of a universal single-payer system akin to that available in one form or another in every other industrial country. Instead, President Obama allowed himself to be swayed (perhaps more willingly than some suspect) into a token reform that did some good, but that mainly ensured insurance companies of tens millions of subsidized customers. The preferred government-administered systems that already function well and much less expensively in what Americans call Medicare, Medicaid and the Veterans Health Administration was jettisoned by Mr. Obama before discussions began.

In Krugman’s view, matters such as holding Wall Street to account for its failures, ensuring that money given to financial institutions was not simply hoarded but loaned out in order to stimulate demand, making or enforcing laws that would keep investment funds under tighter regulations (including the restoration of the main elements of the Glass-Steagall Act are deeply popular within the American electorate. Unfortunately, in his first term, President Obama surrounded himself with economic advisors who had been insiders in the collapse of 2008 and political strategists who urged him to back off any genuinely progressive policies on the grounds that failure to get his programs through Congress would make him look weak.

The fact is, however, that he didn’t even try and therefore looked worse than weak, he looked timid and uncertain. Now that the stagnant economy has replaced health care as the dominant issue, Krugman feels happy that the Obama administration has attempted and succeeded in getting at least a portion of its job creation package through the House of Representatives and the Senate. As a result, with his faith that the average voter will take the economy more seriously than the “wedge issues” around immigration, “traditional family values,” and identity politics and his hope that the majority of Americans will exercise their votes rationally and stop electing governments that act counter to their material interests, Paul Krugman believes not only that it is possible to “stop this depression now,” but that there is some small chance of doing so. If that happens, then Paul Krugman’s book will have had an influence.

In the alternative, as Felix Salmon wrote in the New York Times, Krugman’s “pleas will fall on deaf ears, as long as the rich remain well fed and in charge of the levers of power in Washington.” Salmon then delivers what he thinks is the coup de grâce: “This is now a country run by he rich for the rich. And nothing in [this book] gives me reason to believe that there’s any hope of changing that.”

Howard A. Doughty teaches political economy at Seneca College in Toronto. He can be reached at