by Paul Krugman
W.W. Norton
2020/$39.95/416 pp.
Along with Joseph Stiglitz, fellow Nobel laureate Paul Krugman is a voice of reason in the sea of mainstream neoclassical economics. His latest book, Arguing with Zombies, is mainly based on his New York Times columns, but it helps make sense of the economic orientation in Alberta.
When the UCP came to power in 2019 it was extremely concerned about the previous NDP government having raised the minimum wage by more than $4 in less than three years. But the UCP showed no qualms about cutting corporate tax rates by 4 percentage points in less than two years. The UCP’s emphasis on renewing the “Alberta advantage” rests on lower taxes and less spending. The government slashed the post-secondary budget by 20 per cent over four years and proposed a 3 per cent wage rollback for overworked nurses in the midst of the pandemic. On the other hand, the government invested over a billion dollars in Keystone XL, a risky and unnecessary oil pipeline. This approach was pursued as Canada’s top 20 billionaires amassed $37-billion during the first six months of the pandemic even as millions of Canadians lost their jobs.
Krugman’s book helps us understand how our government’s pandering to corporate interests and harming the public interest arises from “zombie” ideas that are promoted by partisan think tanks. These zombies include the notions that higher deficits are due to higher spending, not lower taxes, and that raising taxes on the wealthy and corporations disincentivizes them to work hard or invest. Such an economic orientation is based on a fanatical free-market orthodoxy.
While the Fraser Institute—one of the UCP’s go-to think tanks—pushes the narrative that higher income taxes discourage entrepreneurship or reduce incentives to work, save or invest, Krugman argues that business decisions are less sensitive to tax cuts, and that corporations use tax cuts to buy back stocks instead of expanding or hiring. He also aims to correct the misperception that rising inequality is due to the highly educated doing better than the less educated. Instead, he shows that rising inequality is due to the huge income gains of the tiny elite instead of the modest gains of college graduates—and to the diminished bargaining power of labour unions. He argues that blaming workers, who face stagnating wages despite rising productivity and ever more work hours, distracts us from soaring corporate profits and bonuses.
Krugman helps readers in Alberta understand that it’s time to reject spending cuts on healthcare and education, to resist lower corporate taxes and push for wealth taxes, to support the carbon tax and reject funnelling billions into pipelines.
—Junaid Jahangir teaches economics at MacEwan University.
