Friday, June 11, 2010

The World in Decession, con.

. Friday, June 11, 2010

Krugman forgets everything Kindleberger ever taught (or maybe never learned it in the first place)...

You know the answer, don’t you? Yep: everyone is counting on the US to become the consumer of last resort, sucking in imports thanks to a weak euro and a manipulated renminbi. Oh, and while they rely on US demand to make up for their own contractionary policies, they’ll lecture us on how irresponsible we’re being, running those budget and current account deficits.

... and ramps up the beggar-thy-neighborisms, like that's always worked before:

This is not going to work — and the United States has to take steps to protect itself.

For someone who claims to know a lot about the 1930s, or Bretton Woods, or the 1990s for that matter, this is an unbelievably stupid statement to make. Like, "Fail your first-year students" stupid. WAY stupider statement than a Nobel prize winner should ever, ever, ever, ever make, even if it's well beyond their area of expertise, which it is not. It is stupid whether you are thinking about economics or politics or both. Etc.

Quickly: when the world is in depression/decession, it is a really bad thing for national governments to pursue nationalist/isolationist policies. That is true for all, but it is especially true for those in position of global leadership, as the U.S. still undoubtedly is. This may seem obvious, but as Orwell said (reviewing Betrand Russell), "We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men."

Anybody want to make a bet whether or not Brad DeLong -- recent commenter on international politics -- gives Krugman the same "we learned these lessons in the Great Depression and you're wrong" treatment that he gives every dissenting economist not named "Brad DeLong", "Paul Krugman", or "Mark Thoma"?

No? Too bad.

I'd step into the breach, but I'm busy re-orienting my schedule to Johannesburg time for the World Cup (work in progress), and working on several other projects, and am exhausted. But it does strike me that no one is reminding others of basic macro international political economy theory, and that this is a needed corrective to this sort of silliness coming from many corners of the blogosphere/punditry. Even from relatively intelligent folks who should really know better. I guess this blog is somewhat well-placed to do that, even though few read it except on those days when bigger fish link to it. So maybe over the coming days/weeks/months I'll discuss some of these basic fallacies, how they come about, why they are wrong, and how we can think better about the global political economy. And if it turns out well, maybe some of the bigger fish will link to it.

ADDENDUM: I am serious about every substantive point made in this post. As to the tone/hyperbole... I'm aping some of those in the blogosphere who are SHOCKED! SHOCKED! to discover that other intelligent people disagree with them. I hope to spend my time more on the substance than the tone in the future, but as they say: what goes around comes around.


brad said...

You really don't want me to take you seriously, do you?

Brad DeLong

Kindred Winecoff said...

I'd love for you to, but every comment you leave here is like that one, rather than something substantive, so I have very little doubt that you will.

In case you cruise by again, I know that you know your Kindleberger, and therefore I know that you know that Krugman is wrong: it would be really bad for the US to play chicken with "Chermany" at a time when Europe is on the brink, the UK is schizo, and China is nervous as well. It would also be really bad for the US to piss off its debt-buyers in Europe and Asia in the midst of a major ongoing slump. That might lead to the dread interest-rate spike that we have so far avoided.

In other words, retaliation (for what, exactly?) against Germany and China is a wrong-headed policy. Completely counter-productive in every way, and likely to lead to greater economic and political instability. So why advocate it? And, when it's being advocated, why not correct it?

If sycophancy is what is required to be taken seriously, then I'd rather not be.

Anonymous said...

i think this person "kindred" (that's a first name?) needs to get some sleep. i don't think krugman is saying that the US should pass another Smoot-Hawley bill. i think he's saying that we should put pressure on china and germany to change their monetary, fiscal, and currency policies, like the US did in the 1980s with Japan and Germany. i don't think he's saying anything about massive US trade protectionism, which would lead to beggar-thy-neighbor policies. a little pressure here and there would not lead to such policies. also, i think these other countries are creating a beggar-thy-neighbor dynamic by preventing US imports (by keeping their currencies excessively low). so if anything, the US should pressure them to stop doing this. if not, maybe tariffs on a few goods might work, but not like Smoot-Hawley. I think there's a middle ground that can be taken without slipping into major protectionism - it's not either the free market or mercantalism; there is middle ground.

Kindred Winecoff said...

No, it's not a first name. It's a second name (in tribute to my grandfather Charles Kindred Winecoff; he was known as "Kenny", but I am not), just as "Bradford" is the second name of "J. Bradford DeLong". Which part of your name is "Anonymous"?

Krugman hasn't said exactly what he means, but in the past he's advocated for general 'currency manipulation' tariffs on China, in this post he advocates an "anti-dumping duty", and uses such Dubya-esque language as "time to get tough" and "doing nothing is not an acceptable option" and "the United States has to take steps to protect itself". He's sabre-rattling, and either he isn't serious (and should therefore be scoffed at) or he is serious and has forgotten all of the lessons of the past century in international political economy (and should therefore be scoffed at).

Let me ask you this, Anon: how is "a little pressure" supposed to induce Germany and China to change policy? If it doesn't hurt them much, they have no incentive to change course. And if it does hurt them, then it is the definition of a "beggar-thy-neighbor" policy.

This isn't complicated.

Anonymous said...

pressure worked at various points in the post-WWII era, without major protectionism and another Depression, so why not put some pressure on them now? you love to criticize, which is easy to do, but what is your solution? a sign of a good thinker is someone willing to offer solutions to today's major problems. the status quo is unsustainable. so, what's your solution?

Anonymous said...

Just because it's an overall suboptimal equilibrium doesn't mean it isn't in the US' interest to adopt protectionist measures.

Anonymous said...

kindred: under what conditions would you support minor forms of protectionism? i think Krugman supports free trade in general, but feels that under some conditions it might good to use relatively minor forms of protectionism, or at least threaten to do so, especially if other countries are not playing by the rules or not carrying their fair share with helping readjust global imbalances. i don't think you should be ideological about this (i.e. never implementing minor forms of protectionist policies or threatening to use them).

Kindred Winecoff said...

Anon@9:50, i'll try to have a post explaining my suggestions in the next day or two. needless to say, "eschew global leadership role" is not on the list, nor is "antagonize the people you want to buy your debt" or "piss off your major trading partners".

Anon@10:39, neither does it mean that it is. why would it be? do you *really* think if the US bluffs with a small threat that China is going to just do whatever we want? have you been paying any attention in the past 10 years?

Anon@11:04, that is not Krugman's argument or his rhetoric. under what conditions might I support minor forms of protectionism? it's difficult to think of any that apply in the current situation, but "because other countries are trying to balance their budgets" is certainly not one of them. neither is "because other countries are trying to sell us products at very low prices" or "other countries are doing things we don't like, so we'll shoot ourselves in the foot". can you imagine something more persuasive? if so, i'm all ears.

Anonymous said...

This is a worthless blog. The point seems to be more about shock value: using an inappropriate tone and simply trying to destroy ideas in the blog posts of Paul Krugman and other noted economists. First, it's easy to find some problems in an idea tied to a short Krugman blog post. Try to do that in one of Krugman's papers or books. Second, the tone is totally off-putting. This is not the norm for the blogosphere and definitely not the norm among academics critiquing each other's work either in person or via the written review process. Maybe its because kindred is a nobody (what has he published?, and I had never heard of/seen this blog before tonight, after searching for some of oatley's materials) or maybe it's a matter of age (graduate student who is not yet socialized into the discipline). Kindred, if we crossed paths at a conference or a jobtalk, I would be the biggest asshole to you (I wouldn't be surprised if my colleagues did the same thing after reading these blogposts). Anyways, i'd rather go read the blogposts on the marginal revolution, the monkeycage, etc., where the contributors are both more intelligent and not rude to other academics.

Anonymous said...

I do agree with the previous poster that the tone is "totally off-putting". First the ad hominen attack on Krugman; then the abuse on your commenters. This is quite the post Mr. Winecoff!

I would not go as far as the previous poster (maybe I haven't been thoroughly "socialized" yet), but I certainly don't think that this is the type of contribution Drew Conway had in mind when he wrote his "Why Grad Students Should Blog"-post:

This really doesn't make you look good.

Anonymous said...

I am very disappointed with that person "Kindred." He likes soccer and does not like America.

Anonymous said...

I agree that Kindred's tone is distractingly abrasive, but I can't say I have a problem with the point he is making. Furthermore, some of the comments are ridiculous.

Anonymous on June 12th says:
- "This is a worthless blog."
- "kindred is a nobody"
- "Kindred, if we crossed paths at a conference or a jobtalk, I would be the biggest asshole to you" (to my mind this one says more about the commenter than Kindred)
- "i'd rather go read the blogposts on the marginal revolution, the monkeycage, etc., where the contributors are both more intelligent and NOT RUDE TO OTHER ACADEMICS." (emphasis added)

Pot. Kettle. Black.

Andrew said...

I think what Krugman is advocating, though vague, is out of touch with the current balance of international affairs - totally out of the question for the obama admin to support: more here:

The World in Decession, con.
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