'The returns to greed have gone way up': Paul Krugman explains how politicians unleashed the worst in corporate America

In a New York Times column over the weekend. David Leonhardt laid out the case that the idea of corporate responsibility has been in sharp decline since its pinnacle in the post-war era, leaving us in a place where politicians must reshape the landscape to demand more beneficial stewardship from business leaders. Economist Paul Krugman responded to this column Wednesday, agreeing with the basic idea but pointing out that politics had a significant role in the declining standards of corporate America.

Time was, Leonhardt argued, corporate leaders didn't see their own interests as completely at odds with workers. After World War II, with prosperity hardly guaranteed, these people spoke openly about the idea that creating a thriving middle class would be good for the country and good for business.

"Not every executive did, of course, and management and labor still had bitter disputes," he wrote. "But most executives behaved as if they cared about their workers and communities. C.E.O.s accepted pay packages that today look like a pittance. Middle-class incomes rose faster in the 1950s and 1960s than incomes at the top. Imagine that: declining income inequality."

He continued: "Things began to change in the 1970s. Facing more global competition and higher energy prices, and with Great Depression memories fading, executives became more aggressive. They decided that their sole mission was maximizing shareholder value. They fought for deregulation, reduced taxes, union-free workplaces, lower wages and much, much higher pay for themselves. They justified it all with promises of a wonderful new economic boom. That boom never arrived."

This is where Krugman's account of the story, explained in a Twitter thread, diverges from Leonhardt's. While Leonhardt merely writes that business leaders "decided that their sole mission was maximizing shareholder value," Krugman sees the influence of a pernicious trend in politics.

For example, the decline of unions, driven in large part by efforts to undermine organized labor as demanded by conservatism, has weakened the clout of workers, as Krugman explained:

And while conservative politics sought to crush unions, it also put most of its energy into giving rich people and corporations as much money as possible: 

"So yes, corporate leaders are different from the way they used to be," wrote Krugman. "But it was politicians who changed the environment."

Leonhardt notes that Sen. Elizabeth Warren (D-MA) is among those proposing ideas to redress this problem. She has put forward a bill in the Senate that would require corporate boards to have worker representation, thus pushing management to take labor's interests seriously.

"Is Warren’s plan the best way to rein in corporate greed?" he wrote. "I’m not yet sure. I want to see politicians and experts hash out her idea and others — much as they hashed out health care policy in the 2008 campaign."