Krugman Then and Now on Trade

As Lambert put it, “A cheerleader that stops cheering when their own side loses… I’m sure there’s a word for that.” Needless to say, Krugman’s shift is a telling sign of the times.

From MS, via e-mail (emphasis his):

Krugman, today:

But it’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. I hope, by the way, that I haven’t done any of that; I think I’ve always been clear that the gains from globalization aren’t all that (here’s a back-of-the-envelope on the gains from hyperglobalization — only part of which can be attributed to policy — that is less than 5 percent of world GDP over a generation); and I think I’ve never assumed away the income distribution effects.

Krugman, in 1997:

But even if the global economy matters less than the sweeping assertions would have us believe, does this ”globaloney,” as the cognoscenti call it, do any real harm? Yes, in part because the public, misguided into believing that international trade is the source of all our problems, might turn protectionist — undermining the real good that globalization has done for most people here and abroad.

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55 comments

  1. Clive

    It’s not like he couldn’t even say (if he had any intellectual honesty) “when the facts change, I change my opinion”. We all do that, all the time. It’s the smart thing to do. But of course, you have to have the ability to get over your own ego and admit you were wrong, or only had a partial view of the situation or whatever excuse applies.

    (For example, I’m quite happy to ‘fess up and say I used to think that Thatcherism — which was the British version of Friedman-esque free market fundamentalism — was correct and the policy fall-out from it was an appropriate set of solutions. This was down to cultural influences, a fact-set obscured by mainstream media reporting, my own naivety and basic intellectual laziness. I’m not a public figure or Nobel prize winner, so I have no responsibility or causation to admit I was wrong then and no-one would know unless I tell them. But then I’ve no problem with telling anyone I was a dumb schmuck and I wised up. Krugman obviously does have a big problem doing this. We saw what you did there, Paul.)

    1. Gabriel

      Brad DeLong fairly indistinguishable from Krugman in policy positions, but at least he’s able now and again to admit rather handsomely when an argument he held dogmatically in the past turns out to be wrong.

      1. Yves Smith Post author

        Yes, DeLong is very good about that and sometimes he even goes on at great length about how wrong he was. He seems to be genuinely upset and repentant about his errors.

      2. Donald

        Is there a link at “admit rather handsomely”? Because it isn’t working for me and I would like to see that. DeLong used to rub me the wrong way when I read him–maybe I should give him another chance.

      3. jrs

        Krugman was probably PAID to be wrong. He was USEFUL whether or not he was an idiot or knew full well what he was doing. The powers that be got what they wanted from him which was TRADE POLICY which is more important by far in end results than whatever liberal whatever he might spew. The trade policy has gotten so extreme as to not only wreck the job market but to make public policy near irrelevant (the TPP – when trade policy dictates our laws – that’s why the liberal fig leaves don’t matter). As a reward Krugman got prominence. It’s not just a mistake, it’s whoring.

        Whereas ordinary lay(wo)men might just be wrong, but probably aren’t paid for doing so, they don’t receive either money or prestige for being wrong (what one’s buddies at the bar agree with one? so what, that’s not the kind of real tangible rewards a Krugman is getting).

        Good on you Clive for admitting you changed your mind.

        1. sgt_doom

          You are so right of course – – – Krugman has long been a lobbyist for the central bankers at his position with the Group of 30 (www.group30.org).

          Recommended Reading:

          Wealth, Power and the Crisis in Laissez-Faire Capitalism, by Donald Gibson

    2. fresno dan

      Clive
      March 10, 2016 at 3:34 am

      http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.2.html
      Krugman:
      In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.

      ============================================
      I certainly agree that we have to fess up when we are wrong – and it certainly is tough on the ego, but the mental energy in defending a wrong position, and the outrageous lying to say that one knew something when one most obviously didn’t, just isn’t worth it. As I got “free trade” and globalization wrong (in part from reading Krugman), I try to bend over backwards to give him the benefit of the doubt. And Yes, there are people who have Krugman derangement syndrome.
      But the more I have read of the man, the more I believe he is a snide, self righteous as*hole, thoroughly reprehensible and incapable of admitting that he didn’t see every single variable, consider it carefully, and pronounce the absolutely best possible policy prescription because of his GINORMOUS intellect. I really find it kind of amazing how other economists give him such a pass – I really get the impression they are afraid of his perch at the NYT and how he can belittle them with his giant megaphone.
      It would be easier to give the man the benefit of the doubt if he would give cites to when and where he put out all these caveats about free trade and globalization. In the zillions of things he writes, maybe he did – but in his most public pronouncements, I certainly don’t recall such an acknowledgement of ambivalence about free trade. I could give a zillion cites like the Slate article where there was no hedging what so ever about trade, and that those who opposed it Krugman characterized as not very smart or moral.

      So Krugman is either not nearly as far sighted as he imagines himself, or he runs in front of the parade, says he has always been there, and says he was never not there.
      Deep down, this incapability of admitting error reveals something very disturbing and very sad about the man – its like he never progressed from being 13 years old…

      1. Clive

        Yeah, I get the same vibe from watching Krugman — I saw him at work on a TV interview and got the “I wish I was as sure about anything as Paul Krugman is about everything” feeling.

        I also think that this is something that can only be learned in childhood or at least our formative years. Certainly, if it’s not been drummed into you by early adulthood, it’s tricky to get it into our (by then) pretty thick skulls later. Is it too late for someone to put Krugman over their knee and give him a good spanking?

        1. fresno dan

          “I wish I was as sure about anything as Paul Krugman is about everything”
          That is a wonderful line!
          I didn’t lose my cocksureitness until young adulthood. If I had been as smart as I thought I was, I would have been smart enough to see that holding on to bad ideas, bad conclusions, or bad facts makes one stupider – I’m pretty sure there is nothing in the world that is true merely because I believe it. There really is nothing that beats the freedom of being able to say, “I was wrong”

          1. jrs

            meh I may have been wrong in adolescence but I was also rebelling hard against my parents ideas, attempting regime change in what felt like a dictatorship, sometimes about as successful as Iraq but.

            Now since succession, I am merely wrong :).

        2. PlutoniumKun

          Its hard to think that Krugman and Trump could have something in common, but this absolute conviction that they are right about everything indicates i think the they were deprived a good spanking* sometime in their childhoods.

          *metaphorically speaking.

        3. Chauncey Gardiner

          Barry Ritholtz once mentioned a brief standard to which I (not always successfully) try to adhere: “Strong opinions, weakly held.” Similarly there is John Maynard Keynes’ reputed rejoinder to a critic about modifying his view when presented with new facts:
          …”When the facts change, I change my mind. What do you do, sir?”

        4. sgt_doom

          Now if only Paulie understood the fractional reserve banking system, or the concept of speculation as opposed to supply and demand or anything Thorstein Veblen had ever written?

      2. cnchal

        Deep down, this incapability of admitting error reveals something very disturbing and very sad about the man – its like he never progressed from being 13 years old…

        Narcissistic personality disorder explains most of it. Usually it’s a politician’s disease, but fatuous economists and journalists can be just as afflicted.

        1. NotTimothyGeithner

          Krugthullu went all in for Hillary early. He won’t be welcomed by Sanders supporters. The Boston Globe once fired Bob Ryan and JackieMac and kept Dan Shaughnessy because of that curse garbage. Anyone can be fired if they aren’t seen as relevant in an era of declining readership especially when future readers despise Krugman types.

          Krugthullu is an economist. He does know he needs to convince an employer he has value. Without Hillary, he is the voice of a declining readership without a President.

        2. jrs

          Speaking of youth and narcissism, versions of the DSMV (don’t know about the most recent) have said they don’t easily diagnose it in teenagers because teenagers in general are going through a naturally narcissistic period of life (so the 13 year olds are just that way).

          But a grown man like Trump with a full blown personality disorder running for President, yea it’s pretty bad.

  2. Skippy

    Globalization is – gu’d – cause less poor people…

    Anywho….

    Timothy Mitchell on Hernando de Soto (author of the Mystery of Capital and innovator of the concept of “dead capital“) and his attempt at formalizing informal land claims in urban Peru, which was framed at the time as a natural economic experiment*:

    “A natural experiment in economics is not an experiment carried out in nature. It is an establishing of facts carried out in a world that has been organized to make it possible for economic knowledge to be made. Latour refers to this organizing work as ‘metrology’, meaning ‘the gigantic enterprise to make of the outside a world inside which facts . . . can survive’… Experiments to establish the facts of economics depend on projects carried out in the wider world to create sites where economic knowledge can gain a purchase. These sites, though larger than an ordinary laboratory, are nevertheless quite closely defined spaces – specific neighborhoods in particular cities of Peru, the local offices of a development organization and a neoliberal think tank, the text of a survey questionnaire and its administrators, the offices of a parent organization in Washington that provides the funds…” (395)

    Mitchell, Timothy (2009) How neoliberalism makes its world: The Urban Property Rights Project in Peru. In The Road From Mont Pèlerin: The Making of the Neoliberal Thought Collective, Philip Mirowski and Dieter Plehwe, eds. Cambridge: Harvard UP.

    Skippy… excrement….

    1. digi_owl

      “Globalization is – gu’d – cause less poor people…”

      Because now they are dead people (either from starvation, or from explosives)…

  3. PlutoniumKun

    It really is a sign of either arrogance, or, more likely, some sort of strange inferiority complex that makes someone refuse ever to acknowledge they are wrong (one of the few things Krugman and Trump have in common). Any curious, intelligent person will get it wrong sometimes and will have evolving views – and will occasionally completely reverse them. An honest person will acknowledge their change – the mere fact of identifying where they have been wrong in the past is a powerful tool in improving anyones decision making.

    At least the advantage of the internet age is that you can usually find out when someone is being dishonest about their past publications. A very prominent Irish economist academic had a paper in 2005 which advocated the introduction of sub-prime mortgages to the Irish economy as a ‘solution’ to the housing problem. Mysteriously, this paper disappeared around about 2010 from all servers. Whenever I wanted a hollow laugh I used to go look at the ESRI* (Economic and Social Research Institute), website and look at their quarterly bulletins from the period 2006-2009. They were frequently quite hilariously wrong (no, really, even when the banks were collapsing around everyones ears they were predicting strong economic growth). The reports are still there (although noticeably, almost impossible to find directly on the site, you have to google directly), and the sunny press releases that accompanied them are dead links. Needless to say, they have never bothered answering the question as to why they should be trusted when they never saw the state of the banks and were in denial about the collapse of the economy at least 12 months after every construction worker and banker in the country could have told them otherwise.

    *the supposed ‘independent’ economic research institute providing such helpful advice to the Irish government.

  4. RabidGandhi

    I would say it’s not just a sign of the times (and definitely not a sign of the Times), it’s also a sign of a lot of excellent activism. From the Battle in Seattle to Occupy and now the Sanders campaign, there has been a concerted long-term effort to change the public debate on “free trade”. Obviously it helps that people can see the effects personally as their jobs disappear, but let’s give activism its due too.

    1. Mark Anderlik

      Thank you. Serious, persistent and widespread organizing on trade (and other political economy issues) can indeed help turn the tide. It’s more about being prepared for the next battle when it comes. “Revolutions are not made- they come.” William Lloyd Garrison. By those who are ready.

    2. hemeantwell

      Agreed, but I’m inclined to think that Krugman is responding as much to Trump as to Sanders, trying to grease the path for a shift in Demelite opinion to disarm populist fakery on the right.

  5. Robert Coutinho

    Simple: look to history.

    France (under Louis XIV) needed cash. His finance minister came up with the idea of Mercantilism. Tax imports, spam exports (more or less). Use colonies as sources of raw materials with which you have local businesses make…stuff.

    Global Free Trade: since the lowest-priced workers (counting in shipping costs) are likely to be the ones that will be making the stuff (see China); the places where there are higher-priced workers will only be able to supply raw materials (in this case it includes patents, apparently).

    So–the USA (and others)–which fought a war to end the limits of their productivity due to England’s mercantilism–signed “Free Trade” agreements–which turned them into the equivalent of–colonies under mercantilism.

    This was supposed to be good for the majority of US citizens…HOW???

    A further note: back in the 1980’s, Japan prohibited the import of items made of redwood. They imported lots and lots of redwood trees (Oregonians were adamantly pro cutting the buggers!), but prohibited the import of redwood cabinets, boards, and other items made from such wood. This was blatantly against the WTO rules. US policy: ho, hum, at least we get to employ a few woodcutters.

  6. DakotabornKansan

    Krugman is working overtime to marginalize Bernie Sanders.

    “Trump is trying to become America’s Mussolini, Sanders at worst America’s Michael Foot.”

    Michael Foot’s leadership of the Labour Party, and its 1983 manifesto, famously labelled the “longest suicide note in history,” is routinely blamed for its crushing defeat and Margaret Thatcher’s domination of the 1980s, and cited as proof of British voters repudiation of socialism.

    It is my understanding that Foot was defeated by Thatcher during the period of jingoism and militarism surrounding the Falklands War. Foot had led Thatcher by a wide margin in opinion polls until the Falklands War. Although he supported the war, Foot was demonized by Rupert Murdoch. Thatcher’s popularity, boosted by the success of the Falklands War and Murdoch’s media, ensured her victory regardless of what policies Michael Foot and Labour advocated.

    Krugman’s attempt to scare away the Sanders campaign with the corpse of Michael Foot is ridiculous.

    1. Clive

      Yep, Thatcher was dead in the water and listing badly until some lucky timing involving an Argentine military junta sticking its overstretched fingers into a long-forgotten colonial outpost allowed her to wrap herself in the Union Flag.

      Largely lost in the mists of time (and the fog of war) was that the UK military had warned at least six months before the Argentine invasion that it could not defend the territory due to — ta-dah! — budget cuts under Thatcher’s austerity programme. She kept that quite, later on.

      1. Left in Wisconsin

        I remember thinking at the time that success for both Thatcher and Reagan was a function of a media consternated by each’s PR approach to governance (relentlessly on message, even when the message is gibberish; limited access and refusal to answer questions; outright lying: etc.) that would fade, surely, once that notorious probing press had worked out the weak points. (Needless to say, I’m still waiting.)

        My recollection is that both Foot and Mondale (in 84) ran respectable campaigns.

  7. P

    From the archives circa 1996…

    http://www.pkarchive.org/theory/dialogue.html

    So one more time, this time in response to Galbraith’s list of areas where economists disagree (How shocking! Of course, in real sciences, there are never controversies.), let me offer a sample list (there are others) of six widespread doctrines that are simply wrong–not doctrines where I disagree with the assumptions, but where the arithmetic is simply, unambiguously wrong. And, as a counter to the “Moi?” defense, let me be rude and indicate, following each doctrine, some important writers or institutions (again there are others) whom I happened to notice endorsing these doctrines in print.

    1) Wages in America have stagnated because we have lost high-wage manufacturing jobs to imports. (Galbraith has carefully avoided responding to my previous mentions of this doctrine, tacitly pretending that the only example I offered involved the quotation from Lind.) Proponents: Barry Bluestone, Robert Kuttner, Lester Thurow.

    2) Workers are hurting because labor has failed to share in national productivity gains. Proponents: Michael Lind, of course, but also Robert Reich, Business Week.

    3) A country’s economic success depends on its ability to move into industries with high value added per worker. Proponents: Chalmers Johnson, Robert Kuttner, Ira Magaziner.

    4) Manufacturing has a multiplier effect on living standards because countries with high manufacturing productivity also have high wages in the service sector. Proponents: Lawrence Chimerine, Clyde Prestowitz.

    5) Because of their low wages, developing countries will simultaneously attract large capital inflows and run large trade surpluses. Proponents: World Economic Forum, James Goldsmith.

    6) There are some industries in which Third World countries have achieved near-Western productivity, yet wages in those industries remain far below Western levels; therefore, rising productivity will not lead to higher wages in the developing world. Proponents: Edward Luttwak, Walter Russell Mead, William Milberg.

    All of these arguments are just plain wrong–you don’t have to believe that markets are perfect, or that orthodox economics explains everything, to discover that they just cannot be made to hang together. (But you do have to be willing to do a little algebra; I have deliberately chosen statements that sound extremely plausible to most people, including ones who are very intelligent and well read. I am not retracting my claim that the lack of a mathematical sensibility among intellectuals is the central reason why doctrines like these flourish).

    Now we all make mistakes. But the peculiar thing here is that in each of these cases, the proponents imagine themselves to have achieved a higher level of understanding, to have transcended the narrowness of conventional economics. Somebody needs to point out to them and to their audiences that, on the contrary, they are simply misunderstanding basic arithmetic.

    I often regret the feeling of obligation that led me to take on that unpopular role. For one thing, there is no better way to make a man hate you than to tell him that while he was walking around priding himself on being at the intellectual cutting edge, in fact he was merely insisting that two and two must add up to at least 25. And I would much rather have interesting arguments with people who might be right than spend my time trying to explain freshman-level concepts to unwilling listeners.

    And a little more heated “insider” rhetoric if you care for it:

    http://web.mit.edu/krugman/www/ricardo.htm

    At the deepest level, opposition to comparative advantage – like opposition to the theory of evolution – reflects the aversion of many intellectuals to an essentially mathematical way of understanding the world. Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models – simple models that can be stated without actually writing down any equations, but mathematical models all the same. The hostility that both evolutionary theorists and economists encounter from humanists arises from the fact that both fields lie on the front line of the war between C.P. Snow’s two cultures: territory that humanists feel is rightfully theirs, but which has been invaded by aliens armed with equations and computers.

    1. fresno dan

      Thank you for that.
      Irrefutable evidence that Krugman is a d*ck.

      Krugman is a simpleton who believes if your feet are at -120 degrees, and your head is 192 degrees, you are fine at 72 degrees (and yes, I know human body temperature 98.6 – this is about Krugman)

    2. allan

      I am not retracting my claim that the lack of a mathematical sensibility among intellectuals is the central reason why doctrines like these flourish.

      When physicists have math envy, the worst that can happen is unverifiable theories.
      When economists have math envy, the worst that can happen is people’s lives destroyed.

  8. Donald

    One thing Krugman has done consistently over the decades is to claim that his opponents to his left are irrational and have no legitimate points backed by facts. It is his reflexive response and it seems to fool a lot of people– over the past several weeks I keep seeing people repeat his claims about Sanders supporters and Sanders policies and Friedman as though they are established truths. It’s a good example of why one shouldn’t put too much faith in gurus of any sort.

  9. Benedict@Large

    I had always wondered why the free trade model I learned in college, which predicted nothing but benefits regardless of the input, differed so much from what we actually saw in the real world. Somehow the model must have omitted something. I didn’t know what until one day Krugman, ever the advocate for free trade, added to the model the caveat “as long as the government had access to the levers of full employment.”

    A light went off. The “levers of full employment”, of course, are fiscal spending, and right when we started off on free trade, monetarism came in and took away fiscal policy. We broke the free trade model at the very same time we began to use it. No wonder we had had such crappy results.

    Of course, that left the problem of Krugman. If he knew all along why free trade wasn’t working, and yet was an advocate for it anyways, shouldn’t it have been incumbent upon him to always add the fiscal policy caveat whenever he pushed free trade? And yet I had only seen him do that ONCE, and even at that, it was hidden deep down in his blog.

    So yes, Krugman has known all along that free trade wasn’t working, and he has known why. He just hasn’t tried to use his knowledge, position, and forum to correct the problem.

    And Krugman’s area of specialization? How he’s put bread on the table, and what he got his Nobel Prize in? Why, free trade of course.

      1. fresno dan

        sd
        March 10, 2016 at 12:58 pm
        Thank you for that – so these are the incantations from the fabled Necronomicon – – kind of disappointing – I was expecting expressions of fealty to Satan…
        Not being an economist, what I get out of this, is an awful lot of “suppose” and “imagine” in the paper. I have never done the experiment of going through hundreds of economic papers and seeing how much “imagination” and “supposition” (or synonyms for those words) is used…but I think you can hypothesize that I don’t have a high opinion of it…

        And the fact that they acknowledge that different imaginings or suppositions of this or that in the FORMULA gives them different results. Imagine if Newton had said that his Formulas for weights falling to earth had to change because of the temperature, or day of the week, or the material the weights were composed of…
        Well, you can’t because you would never have heard of Newtons theory, because someone who started with facts and developed a theory of gravitation that fit the facts would be known for describing gravity.

        I have to say with all the years I have been interested in economics, I have never actually seen where these models are USED with real data. Does that actually ever happen? ? ?

        It strikes me with the broad and nebulous definitions used, that one could get very wide ranging results with regard to something like “real wages” – I see graphs with sloping lines, but numbers that can not possibly correspond to American wages in dollars. Are these theories good forever, a few decades, or do they become obsolete in a few years?

        Finally, the paper ends with so many caveats, and acknowledgements of what is not included but should be, that one wonders of what use, other than justifying a paycheck for the two authors, is the point of the exercise.

        A cynic might suppose that these are just the king’s necromancers, who rationalize whatever the king had done, is doing, and will do….
        but don’t be like that! respect our wizards…uh, I mean economists.

      2. sgt_doom

        I will read it, as little as I enjoy reading any further propaganda, but what truth has ever come out of the NBER — where Martin Feldstein*** is an emeritus stooge?

        ***director at HCA when they were involved in the largest Medicaid fraud in history; director at Eli Lilly when they were fined the largest penalty at that time in history; director at AIG/Financial Products when they wrote that $460 billion in credit default swaps, necessitating a government bailout (with the potential payout on those CDSes amounting to over $4 trillion).

  10. washunate

    I get the dissatisfaction with Krugman, but part of that is because he’s one of the few not completely rightist minds that has actually put himself out there in the mainstream media. We wish he was more liberal because so few actual liberals put actual writings out there that are subjected to constructive criticism. Wray and Mosler and others have been writing for many years on a JG, yet they still don’t have a concrete plan for the wages, working conditions, and job duties of what they propose. Firestone has written countless articles in general about budgeting, yet he refuses to advocate a specific budget proposal.

    At any rate, Krugman’s writings have actually been fairly nuanced, centrist always (he’s not a radical, just like most people aren’t radicals), but not so black-and-white wrong. Even in that 1997 article, he explains the terrain quite well in this snippet:

    Such oratory has become so pervasive that many observers seem determined to blame global markets for a host of economic and social ills in their countries, even when the facts point unmistakably to mainly domestic — and usually political — causes.

    That is precisely the dynamic we have witnessed. Trade is not what causes the major ills of our time (and note, most corporate trade pacts are restrictions on trade). The problems, especially in the American context, are caused almost exclusively by either restrictions on trade (try taking pot or prescription drugs through customs, or avoiding the mess that IP law has become) or how we distribute resources within our domestic economy. We could have a higher minimum wage. We could have a more cost effective healthcare system. We could have a better passenger rail system. We could have more wind turbines and solar panels. We could pay school cooks the same wages we pay law professors. We could have universal unemployment insurance. We could have a smaller, fairer justice system. We could have walkable communities instead of car-dependent McMansion sprawl. We could try diplomacy with our friends abroad rather than sanctions, bombs, and regime change. These are all political choices that have nothing to do with the flow of goods, people, capital, and ideas across international borders. In fact, warmongering and the national security state usually runs directly counter to the idea of exchanging with one’s global neighbors rather than dominating them.

    1. different clue

      How do “corporate restrictions on trade” explain the mass jobicide and the bonfire of the industries in this country AFter the adoption of Free Trade Agreements?

      1. washunate

        Mass jobicide? 158 million people had earned wages in the social security system last year. That doesn’t count nonwage income, like interest, dividends, and capital gains. And it doesn’t count work in the informal economy, like the illicit drug trade and parenting.

        There is plenty of both work and income in our country. The problem is the distribution thereof.

        1. different clue

          There is much less good-paying well-benefited thingmaking work here than there used to be, because Free Trade Agreements were used to move millions of those jobs overseas. There is plenty of low paying zero-benefits work and meager income in our country but that is a poor replacement for the good paying work with good benefits which has been sent abroad.

          1. washunate

            1) They aren’t free trade agreements. They are corporate trade agreements.
            2) Even then, the transition from manufacturing to services began long before NAFTA.
            3) The low paying jobs in the US are due to income inequality, the distribution of wealth within the domestic US economy, not aggregate income being shipped overseas. It’s not foreigners that have taken away income. It’s higher income Americans that have taken that income.

            The concept of free trade does not require us to run the most bloated, wasteful, and predatory healthcare/FIRE/prison/military systems on the planet. Public policy choices do that. The concept of free trade does not require us to socialize the losses of fraudulent gamblers. Public policy choices do that.

    2. sd

      That’s a bit like arguing guns don’t shoot people, people shoot people when, fact is, without the gun, there would be no shooting.

      So saying Trade Agreements don’t hurt people, politics hurts people, ignores the mechanism that got the hurt rolling.

      1. washunate

        Agreed, it is very much like that. I am fine with people who say there should be no cross-border trade at all. Run a completely closed society, something akin to what North Korea does, although even there the benefits of international trade outweigh completely isolation. Just like I’m fine with people who say guns should be completely banned. No hunting. No armed police officers. No military. Or no abortions, period, even for rape or incest or health of the mother. I think all of those positions are minority opinions that would never gain a majority perspective in a democratic society.

        It’s the people who pretend to be against guns/trade/abortion/whatever when it’s fashionable but don’t actually advocate the principle (in this case, a closed border) I find to be the most hypocritical and self-serving. The corporate trade pacts are not about promoting trade. They are about restricting it, limiting trade in ways that benefit connected insiders over average citizens.

        Should Yves block Clive from posting at NC because he’s across the pond? That’s international trade. Should customs stop people at the Canadian border importing lifesaving medicines? That’s international trade. Should Cuban baseball players be denied work visas in MLB? That’s international trade.

    3. Left in Wisconsin

      Trade is not what causes the major ills of our time (and note, most corporate trade pacts are restrictions on trade).

      While certainly not the sole cause, I think you are incorrect here. The early trade pacts (in particular NAFTA and the granting of most favored nation trading status to China) were clearly about assisting US corporations in relocating manufacturing work from the US to lower wage countries. (NAFTA was also about helping US corporate agriculture take over Mexico.) And while you could argue, a la Krugman, that good fiscal policy could ensure that the “benefits” to “free” trade are equitably shared, even that view rests on the fallacy that the jobs replacing the lost manufacturing jobs are higher skilled and higher productivity jobs, which they mostly aren’t.

      1. sgt_doom

        If you re-read NAFTA you will clearly see that a major goal was the takeover of the Mexican banking system (had a clause allowing for foreign ownership of Mexican banks) and within one year after the passage of NAFTA under Bill Clinton, over 90% of Mexican banks were foreign owned either by American or Euro banksters.

        That allowed for the entry of Big Agra which, incollusion with the Mexican government, privatized the lands of subsistence Mexican farmers, forcing them off their lands, to seek employment in either the relocated factories there, or failing that, traveling north for cheap American labor!

        Similar situation in British history when they threw the farmers off their lands in England to force them into the factories there (see Michael Perelman’s outstanding book, The Invention of Capitalism).

      2. washunate

        Sorry WI, I had a thoughtful reply typed out but seem to have messed up the database! Here’s a summary for consideration. I think these touch upon long-running subjects.

        1) NAFTA and other corporate trade pacts are designed to limit trade, not free it. From agribusiness to healthcare, from financial services to computer services, US authoritarians like to centralize control rather than let Americans make their own decisions about how to work with our global neighbors. Why should we view international borders as being that much different from state, county, or municipal ones?

        2) The US shifted away from manufacturing decades ago.

        3) I would say that good fiscal policy isn’t simply sufficient; it is necessary. There is no natural economic equilibrium that fairly distributes resources. If there was, government itself wouldn’t be needed. Indeed, you’re sounding rather anarchist on that front!

        4) Manufacturing jobs are not intrinsically better than service jobs (or agriculture), either in terms of working conditions or in terms of output. The notion that an auto assembly line worker or defense contractor making bombs is more productive than a preschool teacher or a nurse strikes me as so odd I don’t think you intend to advocate that?

        5) The notion of skills strikes a particularly strong chord with me. That is a neoliberal tool of victim bashing. Skills are a tiny variable; they do not determine the bulk of wage level differentials. Rather, they are something invented after the fact trying to justify inequality that cannot be justified. There is no substantive reason that the top 20% – and especially the top 10% – of workers should make so much more than the median worker. It is simply a political choice to entrench inequality, to favor connected insiders, not a market outcome based on the skills of the individual workers in a competitive marketplace.

    4. sgt_doom

      Your first sentence is completely incorrect! There are only a select few the CorporateMcMedia always call up, those stooges from the stink tanks and Krugman.

      Try finding a Michael Hudson, Michael Perelman, Samir Amin, etc., ever given the chance to appear!

      1. washunate

        Agreed. The main issue is the MSM and academia at a systemic level. Krugman, if anything, stands out in that context for not being a completely rightist nutcase.

    5. JustAnObserver

      Which is, of course, why it used to be called “Political Economy” before it caught a lethal dose of physics/math envy … and even that divergence had a heavily political motivation.

      No one could possibly accept the ludicrous contortions your brain has to go through to defend the Walrasian (?) idea of a general equilibrium unless they were (mostly still are) pushing some other agenda. IMHO it was (is) an attempt to reimpose or reassert a secular version of the medieval “Great Chain of Being” under which every person’s position in society is fixed at birth, immutable, `cos God (or Pete Peterson) says so …

  11. JRoth

    Gee, I wonder if Krugman’s written anything on trade in the last 20 years? Nah, probably not. Probably the most accurate way to look at what he says today is to compare it with what he said two decades ago. Goodness knows he’s never admitted fault about anything over the past 15 years or so.

    Meanwhile, the death of the US steel industry predates NAFTA by over a decade; is there a time travel effect there, or is trade really not as big a deal as you want it to be? Carnegie’s very first steel mill is still working, producing 10x the steel with 10% of the workforce it once had. Is that the fault of China or Mexico? Oh wait. How stupid of me; it’s obviously Paul Krugman’s fault.

    1. Unlearning

      Except that when someone uses the word “never”, their claim extends back more than 20 years.

      And NAFTA isn’t all there is to globalisation/free trade.

  12. ChrisPacific

    I love how Krugman condemns hand-waving justifications, follows it with:

    I hope, by the way, that I haven’t done any of that

    and then follows it with a hand-waving justification of his own that is contradicted by any number of specific examples. I’ve noticed that Krugman is quite fond of this sort of faux intellectual honesty.

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