Paul Krugman in the NYT

With a column on trade and globalization in the New York Times of January 2 ("Once And Again"), MIT economist Paul Krugman announces his new status as a Times columnist under the heading "Reckonings." Krugman is a Times natural, and had appeared frequently in the past with Op Ed columns. What makes him a natural is that he is fluent, even glib, and though (or perhaps because) a liberal accepts the institutional and policy status quo as a given. This was dramatically illustrated in his 1990 book on The Age of Diminished Expectations, where he acknowledged that we were in the midst of a "simultaneous growth in wealth and poverty unprecedented in the twentieth century," but found that we couldn't do anything about this because the problem of poverty has "exhausted the patience of the general public" and reversing this trend is "politically out of bounds." That political practicality reflects power, and that it might be the responsibility of an intellectual to challenge this, escaped him.

This "pragmatic" and opportunistic tendency was also apparent in his attachment to the "natural rate of unemployment" concept, a Friedmanite and Chicago School construction that focuses on tight labor markets as the cause of inflation and hence as the proper target of macro policy. Apart from its focus on inflation control as the policy end, and its mystical and unmeasurable properties, the natural rate approach assumes that institutions cannot be changed to alter the tradeoff between wages and inflation (e.g., via price controls, incomes policies, antitrust actions). But Krugman bought the concept, and in a NYT Magazine article of February 2, 1996 he assured readers that the natural rate was 5.5-6 percent and that in consequence an expansionary macro policy was unworkable. Well, the unemployment rate is down to 4.2 percent without inflation, so the intellectual basis for Krugman's earlier support of a higher unemployment rate has proven untenable (and Krugman and his mainstream colleagues have been exceedingly quiet on the subject).

In his first NYT column, Krugman leaps to the defense of trade and globalization. And the modalities of his defense are standard establishment stuff. First, there is the obligatory mention of "rising living standards" in the 1990s, the "decade of globalization." But the rates of growth in the 1990s, both here and globally, though rising toward the decade's end, were not as high as they were in the pre-globalization years (1950-1973). Second, there is the failure to mention income distribution, which tells us about WHOSE living standards rose, and how the average gains were shared. Krugman knows very well that income polarization both within and between countries increased in the 1990s, but he bypasses the issue.

Krugman then supplies a brief history of globalization, featuring the collapse of the old global system in the Great Depression and its postwar reestablishment on the foundation of "American leadership," which put humpty-dumpty back together again. This foundation is stronger than the old as "we have gotten better at making the distinction between commerce and conquest--trade no longer follows the flag and blatant imperialism is out of style." There is "less sabre-rattling imperialism." But the global idea is "still a minority persuasion all too easily portrayed as an ideology of and for a rootless cosmopolitan elite that is out of touch with ordinary people." In truth, says Krugman, it is a cause that should have won over the protesters attacking the WTO at Seattle, as their oppositional cause is "denying opportunity to the third-world workers." The big question for the next century is can this beneficial "Second Global Revolution" build a mass constituency?

Krugman is wildly off the mark in asserting the end of "sabre-rattling imperialism" and trade following the flag. I guess he thinks that the immense U.S. military budget is aimed at human rights service and that our military protectorate over Saudi Arabia--and Clinton's successful lobbying for the sale of arms and communications equipment in that country--and our long and intimate relation with the Indonesian military have nothing to do with trade interests. And our war against Nicaragua in the 1980s and military support of a score of military and other gangster regimes over the past several decades was presumably just "anticommunism" and was unconnected with any drive for economic advantage and a world with a favorable climate for investment.

Krugman also seems unware of, or naive about, the coercive power of trade, investment, and money lending even without sabres. A classic article on "The Imperialism of Free Trade" (Gallagher and Robinson, Economic History Review, 1953) showed that even imperial England had depended primarily on economic coercion rather than sabres. The U.S. has also been adept at using such coercion. What is more, since the 1950s the World Bank, IMF, GATT and its successor WTO have provided powerful new international agencies for forcing weaker countries to follow international trade and investment policies that serve mainly U.S. interests. These Krugman doesn't even bother to mention, because "free trade" is obviously such a global bonanza to everybody--and the political institutions that help shape and control it are presumably "noneconomic."

It is amazing that with such allegedly widely diffused benefits working people so generally oppose "free trade" and the WTO, and that a tiny elite of businesspeople, journalists, and economists love it. Krugman and company would have us believe that the workers are misled. But they are not. They are not opposed to trade, they are opposed to putting corporate rights ahead of everything else. "Free trade" is not free: it includes protection of monopoly patent rights and it "frees" foreign investors at the expense of the democratic rights of domestic voters. And its trickle-down process often doesn't reach down very far before the foreign investors leave for better investment climates. Contrary to Krugman and the New York Times, what's good for General Motors isn't good for the non-elite world.

Krugman and even some people on the left miss a fundamental consideration: namely, that the drive toward "free trade" and the workings of its institutional apparatus steadily reduce the power of countries, especially those of the Third World, to choose their own development path and to serve their own people. Workers may get opportunities offered by foreign investors, but they get these under a system that forecloses public investment and work options that might better serve domestic needs. Entering into and increasingly caught in the web of global finance, trade, investment and trade agreements, their leaders can no longer provide for food supplies and maintain a strong safety net. They are constrained by international rules, international financial obligations, and budgetary restraints imposed by external interests. In this crucial sense, the "free trade" drive is anti-people and anti-democratic, and it is completely rational for those interested in the general welfare to struggle to enlarge the constituency that opposes it.