May 25, 2012 · 1 Comments
By Marie Burns:
Imagine a world in which all is right at the New York Times Editorial Department. David Brooks is in the New York office reading the Right Wing News and trying to think of something nice to write about Mitt Romney. As much as he admires brilliant House budget guru Paul Ryan, Brooks is uneasy with Grover Norquist’s plan to make the future President Romney a Ryan puppet. Brooks doesn’t much care for House Speaker John Boehner’s threat, either, to set off another debt limit crisis just before the general election. Boehner can be careless, and his plan might backfire, causing trouble for Mitt. Why can’t Congress get along they way we do here at the Times? Brooks wonders. He is pleased with the news that Newark Mayor Cory Booker, a Democrat, is down with private equity and fond of Bain Capital, the private equity firm that made Mitt rich. Brooks takes a moment to sign the Republican National Committee’s “I Stand with Cory” petition before heading out to lunch. These thoughts are swirling in Brooks’ mind as he heads down the stairs. Suddenly, it comes to him. He knows just what to write. With some excitement, Brooks phones his buddy Paul Krugman.
Brooks (panting a bit from the excitement and exertion): Paulo, I’ve got a great idea for my next column! It’s about American history. I have a degree in history, you know. A.B., University of Chicago, ’83. But there’s a bit of business and economics and such in my story, and there’s where you’re the expert. Nobel Prize, etc. etc. Now, listen, here’s the lede. I think you’re gonna like this:
Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations. The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.
Krugman (sighs): “Dave, Dave, don’t write that. You’ll make a fool of yourself. You’ll make the paper look bad. That’s “a fairy tale”:
We’ve been hearing a lot [about it] from Wall Street and its reliable defenders – a tale in which the incredible damage runaway finance inflicted on the U.S. economy gets flushed down the memory hole, and financiers instead become the heroes who saved America. Once upon a time, this fairy tale tells us, America was a land of lazy managers and slacker workers. Productivity languished, and American industry was fading away in the face of foreign competition. Then square-jawed, tough-minded buyout kings like Mitt Romney and the fictional Gordon Gekko came to the rescue, imposing financial and work discipline. Sure, some people didn’t like it, and, sure, they made a lot of money for themselves along the way. But the result was a great economic revival, whose benefits trickled down to everyone…. ut none of it – except the bit about the Gekkos and the Romneys making lots of money – is true.
Brooks (in shocked disbelief): A fairy tale? Gordon Gekko? That can’t be. Why, I was just reading an article in the National Review by Reihan Salem. “It was a fair-minded review of the literature,” I assure you. Salem says that
… in any industry there is an astonishing difference in the productivity levels of leading companies and the lagging companies. Private equity firms like Bain acquire bad companies and often replace management, compel executives to own more stock in their own company and reform company operations. Most of the time they succeed.
Krugman (sighs more deeply): Dave, you mustn’t be so gullible. “The alleged productivity surge never actually happened. In fact, overall business productivity in America grew faster in the postwar generation, an era in which banks were tightly regulated and private equity barely existed, than it has since our political system decided that greed was good.” Look, I’ve got the figures on my blog. The numbers don’t lie. Take a look at that post “Was Greed Good?” You can call it up on your iPhone. See, Dave, that’s actual research. With charts! It’s what I do. Look at those charts. Trends didn’t change “after 1980 or so, when the underlying rules of American business (and politics) shifted.” There’s no “big acceleration…. Productivity growth has actually been slower since the rise of Bain-type operators.”
Brooks (his voice betrays a slight whine): But Paulo. Didn’t you get that part where I said, “Forty years ago, corporate America was … losing ground to competitors in Japan and beyond?” Here’s my whole thesis: “Private equity firms … forced a renaissance that revived American capitalism.” Mitt and the other titans of private equity saved American business just as it was losing international market share.
Krugman (as if talking to a child): Actually, no, Dave. That’s not correct. “From the 1950s through the 1970s, we generally had more or less balanced trade, exporting about as much as we imported. The big trade deficits only started in the Reagan years, that is, during the era of runaway finance.” You know, when Mitt and all the other wheeler-dealers came on the scene.
Brooks (who has composed himself): Seriously, Paul, you’ve gotta start reading Right Wing News. “Research from around the world clearly confirms that companies that have been acquired by private equity firms are more productive than comparable firms.”
Krugman (slightly irritated): That’s not quite right, Dave.
There have been significant productivity gains these past three decades, although not on the scale that Wall Street’s self-serving legend would have you believe. However, only a small part of those gains got passed on to American workers. So, no, financial wheeling and dealing did not do wonders for the American economy, and there are real questions about why, exactly, the wheeler-dealers have made so much money while generating such dubious results.
Brooks (his voice rising again): The workers? You’re worried about the workers?
There’s an enormous body of research showing that private equity firms increase American productivity without having a dramatic effect on American job levels. Back in the 18th century, Thomas Jefferson waged war on capital markets, but Alexander Hamilton understood that only vibrant capital markets would create enough creative destruction to allow poor boys and girls like him to rise and succeed. Otherwise the same established families would dominate society, generation upon generation.
That’s history, my friend. A.B., U.C., ’83. Friend of Bill Buckley.
Krugman (resolute): It is true that a tiny minority of poor white boys (no girls, no men of color) “rose and succeeded” in those “vibrant capital markets” of the 19th century. But income inequality was grotesque. The titans of industry exploited the American worker. The economy was a mess – subject to huge cyclical booms and busts. But that changed in the 20th century. And be sure of this – change
… didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal…. Income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history…. That’s the country I grew up in. It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality.
Brooks (surprised): Gee, Paul, I didn’t know you were into nostalgia, too. I thought only we conservatives looked back in fondness. Remember Reagan. Oh God, I can recite his farewell address by heart:
I’ve spoken of the shining city all my political life…. And how stands the city on this winter night? … After 200 years, two centuries, she still stands strong and true to the granite ridge, and her glow has held no matter what storm. And she’s still a beacon, still a magnet for all who must have freedom, for all the pilgrims from all the lost places who are hurtling through the darkness, toward home….
Krugman (interrupting): Oh, I remember Reagan all right. I remember voodoo economics: “that trickle-down? It never took place.”
Since the late 1970s the America I knew has unraveled. We’re no longer a middle-class society, in which the benefits of economic growth are widely shared: between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent…. Why did this happen? Well, that’s a long story – in fact, I’ve written a whole book about it…. For now, though, the important thing is to realize that the story of modern America is, in large part, the story of the fall and rise of inequality….
Income distribution became radically more unequal…. since the rise of Bain-type operators. And that, I think, explains why everyone on the right knows, that great things happened after the forces of greed were unleashed. Great things did indeed happen to their patrons. For ordinary Americans, not so much.
Brooks (defensive): Well, really. I thought we agreed I was the historian. A.B., U.C. ’83. But I’m not just an historian. You might have noticed I’ve become something of an expert on sociology, too. Call me an autodidact. Surely you East Coast liberal elites still hold the self-taught intellectual in some regard. In these hard economic times, not everyone can be like you with a Yale B.A. and an M.I.T. Ph.D. But really, Yale is good. M.I.T., too. Did I mention Mitt went to Harvard? He has two advanced degrees from Harvard. You’ve got just the one, right? Well, never mind. You’re trying. That’s the important thing. You’re not like all those self-destructive ordinary American workers. They’ve lost their moral rectitude. They’re having children out of wedlock and going to tractor pulls. Those people have to learn to be more like us East Coast elites. Industrious. Hard-working. (Have you seen the snaps of my new four-million-dollar pad? I can send them to you from my phone.) My friend Charles Murray wrote a book about that. And he quoted me liberally. Or conservatively. He quoted me. The sloth of the American worker is the reason there’s income inequality. People like Mitt with a solid education and a proper religious and cultural upbringing have the work ethic instilled in their moral fiber. Mitt’s no Gordon Gekko. He’s a hero. And now Obama is going negative on him. It’s beyond me. Obama is running ads about Mitt that are “blatantly false…. Blatant falsity is now seen as a sign that you are a true professional.” It’s ridiculous. “The Obama campaign seems to be … arguing that the pressures brought to bear by the capital markets over the past few decades were not a good thing.”
Krugman (exhausted): Dave, “President Obama has enacted some modest and obviously needed regulation; he has proposed closing a few outrageous tax loopholes.”
Brooks (defeated): I take your point. Still, “For a candidate like Obama, who successfully ran an unconventional campaign that embodied and promised change, I have no idea why he would want to run a campaign this time that regurgitates the exact same ads and repeats the exact same arguments as so many Democratic campaigns from the ancient past.” But maybe you’re right. Maybe I should write about something else. I could call Cory Booker. I signed his petition. “By the way I don’t know if you saw the crawlback video Booker released later in the day, but that was painful to watch. So humiliating to see someone collapse under a bit of pressure.”
Krugman (brightening, as the conversation seems to be winding down): Or you could do what Tom Friedman does all the time – just recycle one of your earlier columns. Or mash up something from your best-seller Boo-boos in Paradise. People liked the book, Dave.
Brooks (shouting): That’s Bobos! Bobos. But it’s a great idea. Tom has three Pulitzers! Not that a Nobel isn’t almost as good, Paul. It’s good. You’re great. And you’re a great pal. Thanks for the advice. You saved me from making a fool of myself.
Of course, we know that is not what happened. Brooks did not phone Krugman. He went ahead and made a fool of himself on Tuesday, claiming that “Private equity firms … forced a renaissance that revived American capitalism.” Instead of having a conversation with Krugman, Brooks had his usual “Conversation” with Gail Collins who is too nice to really argue with Brooks. So in today’s New York Times, Paul Krugman sets David Brooks straight.
Marie Burns blogs at RealityChex.com
Note: all of the cited materials in this article (except for the Reagan quotation) are from the following sources: David Brooks’ New York Times column of May 22, titled “How Change Happens”; Brooks’ Times “Conversation” with Gail Collins of May 23 titled “Going Negative”; Paul Krugman’s New York Times blogpost of May 23, titled “Was Greed Good?”; Krugman’s post introducing his blog, dated September 18, 2007; and from Krugman’s column in today’s New York Times, titled “Egos and Immorality.” Other material is original, some of it based on fact and some of it, well, not.