In The Conscience of a Liberal, Paul Krugman provides a compelling explanation for the recent increase of inequality in the United States. In contrast to the widely believed idea that is was globalization that caused the increase in inequality, he argues that it is far more likely that changes in politics and institutions are responsible the recent resurgence of inequality in the United States. In order to underpin his argument, Paul Krugman offers a thorough historical review of the last 100 years. He argues that the highly progressive US tax scheme during World War II led to a wage and wealth compression and hence to a sudden stop of the high inequality that prevailed since the Gilded Age. He further argues that it was Frank D. Roosevelt’s New Deal and the rise of unions that ensured the endurance of low inequality until the 70s. Starting from the sixties, a slow but continuous swing to the right of the Republican Party steadily increased the polarization of US politics, slowly eroding the acquisitions of the New Deal.
The book is a must-read for every person interested in inequality. Even a person with no economics background will find the book easily accessible. Personally, I learnt a lot from the book’s intriguing view on the economic-political developments in the US over the last century. For instance, prior to reading The Conscience of a Liberal I was unaware of the difference between liberal and progressive, in fact I used both words interchangeably. Now I know better.