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Your Paul Krugman crib sheet
Posted By Daniel W. Drezner
Monday, November 16, 2009 - 2:28 PM
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In his New York Times column today, Paul Krugman writes about the problem of macroeconomic imbalances between China and the United States. Which is fine, except he wrote the exact same column last month. Just like last month's column, this one makes some good points and fails to mention some important dynamics. Beyond the inclusion of a useful footnote, however, there's nothing new here.
As part of an ongoing public service to busy readers of Foreignpolicy.com, the hard-working staff here at the blog is ready to help you bypass the chore of having to read the same Krugman column time and again with this handy-dandy crib sheet. My guess is that the next six months' worth of Krugman columns will boil down to the following assertions:
- The root of macroeconomic imbalances is the Chinese (undervalued) peg to the dollar;
- Obama and Geithner should be "tough" on China's dollar policy;
- Concerns about incipient U.S. inflation are... er... inflated;
- That goes double for long-term concerns about rising debt levels;
- The February 2009 stimulus was too small;
- The Republicans are blinkered;
- The Obama administration should act in a more partisan and progressive manner.
Now, let me stress that I agree with 1, 3, and 6 at this point, and I'm agnostic on 4 and 5, so it's not like Krugman is wrong in what he's saying. It's just that he's saying the same damn thing over and over again.
Maybe Krugman is sipping the Friedman one-globalization-column-per-month kool-aid.
thank you for calling out Prof. Krugman on this. I love a discussion about global imbalances as much as the next guy, but I'd appreciate some new insights from Krugman on the topic.
On the matter of the unmentioned "important dynamics", I was wondering if you've answered the question you posed on your last post on this topic matter. Why aren't the other Asia-Pacific countries causing a ruckus? I haven't read the APEC communique, but I haven't heard anything ASEAN or Korea complaining about the renminbi peg
Is it actually possible for the administration to act in a more partisan and progressive manner?
Given what we know about how humans learn, wouldn't it be very sensible to repeat something until maybe it sticks? http://www.wired.com/medtech/health/magazine/16-05/ff_wozniak?currentPage=all
Also: Since Daniel W. Drezner has a background from the University of Chicago. Wouldn't his beloved free market stop Krugman from publishing the same column all the time when people stop reading him if it was actually a problem?
I sense some hurt freshwater feelings.
It's not merely Mr. Krugman, it's basically any economist writing about Chinese/U.S trade. You could go to three different articles written at any point in the past three years and get many of the same points (though some might be a bit alarmist on inflation, hard to say).
Agree about Krugman's hackery, but this is expected, no?
Exit question: if the RMB peg is the main source of global trade imbalances, then why didn't China's 20% appreciation of the RMB against the US dollar between 2005 and 2008 alter - even slightly - the US-China trade deficit? Indeed, the bilateral deficit accelerated over that period.
This concern over the RMB being undervalued and the main source of global trade imbalance is not the real issue to be solely concerned with. The US-SINO trade imbalance is not the sole cause but just a part of the US's entire global trade imbalance problem. A much greater focus should be placed on the entire problem and not just China alone. This issue of solely worrying on US-China trade deficits is a red herring to America's entire global trade deficit it shares with the rest of the world. Proof of this is in the question you asked. If the appreciation didnt change the imbalance slightly, than the concern isnt the RMB but American consumption practices and the grand picture of global trade imbalance, as a whole.
If you havent already, look into this article expressing a much clearer point to the real reason. One Krugman left out.
http://www.cfr.org/publication/20758/confronting_the_chinaus_economic_imbalance.html#p3
Apart from rightly pointing lack of new insights in Krugman's work, which is so correct; what is surprising is how Prof. Drezner forgot about another Op-Ed in the same NYT issue; by Niall Fergusson. Prof. Fergusson had some controversial calls; but his that article offered the true insights which should be especially important to Prof. Drezner since those are all about the int. trade. Fergusson is pointing out the true possibility of how rest of the world can get pissed of market capture by China due to cheap Yuan as a result of devalued Dollar. WSJ.com has editorial in that.
What we need is insights from Prof. Dezner in telling us how far and in which form this building 'trade friction' will manifest and dangers in that.
You left out:
8. There are people who believe < insert straw man >. But the truth is < destroy straw man >. And if you don't agree with me, you are probably just a bad person with bad motivations who wants bad things. Shame on you.
umeshgeeta, were you referring to Prof. Fergusson's editorial
headlined "The Great Wallop"?
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.
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