A few years ago, at some long-forgotten conference, I was on a panel with Paul Krugman about the future of trade openness. I was in a pretty gloomy mood at the time because of all of the protectionist rhetoric coming out of world capitals. Krugman was more optimistic; he thought that the postwar trade institutions could withstand a little protectionist rhetoric.
I bring this up because
Krugman is the one in a gloomy mood today:
[C]an things fall apart again? Yes, they can.
Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes’s “projects and politics” of “restrictions and exclusion” made a comeback: many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits.
And now comes “militarism and imperialism.” By itself, as I said, the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.
Most obviously, Europe’s dependence on Russian energy, especially natural gas, now looks very dangerous — more dangerous, arguably, than its dependence on Middle Eastern oil. After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices.
And if Russia is willing and able to use force to assert control over its self-declared sphere of influence, won’t others do the same? Just think about the global economic disruption that would follow if China — which is about to surpass the United States as the world’s largest manufacturing nation — were to forcibly assert its claim to Taiwan.
I can understand Krugman's concerns, and if
George W. Bush keeps demanding things that Russia ain't going to do, then the official
Drezner Protectionism Advisory System will shift from Edge of the Cliff to Crossed the Rubicon.*
It's that last paragraph where the slippery slope problem creeps up, however. I know it's cool and hip to lump all non-democratic states together right now, but it's worth pointing out that China is not Russia. Oh, and Taiwan is not Georgia. The last thing the Chinese want right now is a major disruption of the system. And, thankfully, in the last Taiwanese elections,
the Saakashvili-type candidate lost. Even before he lost, the Bush administration had sided with China more than Taiwan.
The point is, while I'm not thrilled with recent developments, I'm not as gloomy as Paul Krugman.
*
Based on this post, the five advisory levels of the Drezner System are, in ascending order of worry:
- Mounting Concern
- Edge of the Cliff
- Crossing the Rubicon
- Point of No Return
- Smoot-Hawley Lives!!! Run for Your Lives!!!!!!
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