Are We Better Off? Wrong Debate, Says Krugman

As Paul Krugman writes this morning, whether or not the "typical American family better off than it was a generation ago" has become the subject "of an intense debate these days, as commentators try to understand the sour mood of the American public." Its been a fascinating debate to watch unfold over the last month or two, much of it happening online (and being summed up publically in Krugman's collumns) . The catalyst was the updating of a landmark academic study during the summer, complete with stark new figures on income concentration. This debate is particularily germaine here in America because the same trends simply don't show up in lots of other countries. Simply put: the French trade more than the US, have more mobile phones, use the internet just as much, and have plenty of immigration. But their society has got no more unequal over the last 20 years.

Krugman references an ongoing debate about the middle class, a pretty clear not to this ongoing scrap at The American Prospect, in which Steven Rose of 3rd Way and Larry Mishel of EPI go statistical toe to statistical toe over the fullness of America's middle class glass. The gist of the debate is this. We know incomes and wages haven't risen much since the mid 1970s, with the exception of the late 1990s, with the last few years especially bad. On the way we gained iPods and the internet, which is nice. But our parents took all the good beach front property, and our commute got longer. Are we better off? Krugman says this is "the wrong debate" - instead we should be trying to find out why all the iPod and internet goodness (meaning productivity and technological advancement) hasn't made us even better off. This is an odd argument, on the face of it. The question of whether we actually are better off would seem to me prior to whether we ought to be better off than we are. Nonetheless, the argument is well put:

The United States economy is far richer and more productive than it was a generation ago.... In 1973, there were no personal computers, let alone the Internet. Even fax machines were rare, expensive items, and there were no bar-code scanners at checkout counters.....Yet in spite of all this technological progress, which has allowed the average American worker to produce much more, we're not sure whether there was any rise in the typical worker's pay.

That's why the debate over whether the middle class is a bit better off or a bit worse off now than a generation ago misses the point. What we should be debating is why technological and economic progress has done so little for most Americans, and what changes in government policies would spread the benefits of progress more widely.