No stomach in the US for Krugman's painful prescription
- Source: Global Times
- [23:23 January 10 2010]
- Comments
By Liu Ge
Paul Krugman, the Nobel laureate in economics in 2008, is one of the US' few star economists, known for brashly speaking out on many topics.
Whether his reputation will last has yet to be seen, but his New York Times opinion column gives him a powerful platform to speak from.
On the last day of 2009, he used his column to harshly criticize China's economic policies and call for the US to be more confrontational.
Krugman accuses China of pursuing "a beggar-thy-neighbor policy – or, more accurately, a beggar-everyone but yourself policy – when the world's major economies are in a liquidity trap."
He also claims that Chinese actions have had "a negative impact on gross world product of around 1.4 percent" which has cost the US around 1.4 million jobs.
Even if China responds by using its biggest economic weapon and dumping a large amount of US treasury bonds, Krugman believes that this will help increase the US' competitiveness and employment.
Some domestic scholars have taken Krugman's column as an endorsement of anti-Chinese political forces in the Congress, and the declaration of a new round of trade war.
I don't think this is true. Krugman's column is more rooted in his own discontent with the state of the US, and he is lashing out at someone to blame.
In his column on February 13, 2006, Krugman said that Americans spent 57 percent more than they earned, and large amounts of borrowed money were used to buy houses and unnecessary goods, and predicted economic crisis as a result.
He was undoubtedly right, which contributed to his winning of the Nobel Prize in 2008.
The prescription that he provided for the US is a trade war in order to anger China into selling bonds.
Krugman claims that the depreciation of the dollar will restore the competitiveness of US products in the international market and revitalize the manufacturing sector, thus bringing employment opportunities.
Pushing Americans back to the factory to produce footwear, clothing, and television sets, so that the shelves of Wal-Mart could be re-fi lled with US-made products may sound like a good recipe to solve the employment issue.
