Paul Krugman’s slow demise.
He was my hero once.
But now, in order to prove himself
right and by sticking to a general position he took years ago, he skirts obvious
truth about China. This is a truth that desperately needs to be said. Because people still listen
to him, what he does now – or rather what he stubbornly refuses to do – harms the
US .
In ’Paul Krugman Explains Trade and Tariffs’of
March 15, 2018, here are the correct questions people asked him and the incorrect
answers he then gave.
Q1: 1. Literally every small consumer item I buy
is made in China. Please explain how this came to be (and whether you think we
can or should take steps to change it). ( Comment from
EP: This a very legitimate question!)
PK answer: “It’s partly a sort of optical illusion. China dominates assembly of many goods thanks to a combination of still-low wages and an extensive industrial “ecology” of supporting firms. But much of the value of the good actually comes from elsewhere. For example, iPhones are “made” in China, but China only accounts for less than 4 percent of their price.”
EP: ‘Still low wages’ is correct and it is the crux of the present problem but Krugman then weakens this truth by taking a little detail, true in itself but of no consequence in the absolute numbers, and thereby erroneously dismisses the problem!
PK answer: “It’s partly a sort of optical illusion. China dominates assembly of many goods thanks to a combination of still-low wages and an extensive industrial “ecology” of supporting firms. But much of the value of the good actually comes from elsewhere. For example, iPhones are “made” in China, but China only accounts for less than 4 percent of their price.”
EP: ‘Still low wages’ is correct and it is the crux of the present problem but Krugman then weakens this truth by taking a little detail, true in itself but of no consequence in the absolute numbers, and thereby erroneously dismisses the problem!
Q2: Should all manufacturing jobs flow to the
lowest-cost, lowest-wage environments, regardless of working conditions or
environmental impacts? If not, how can a free-trade system prevent this? (Comment from EP: again, an
excellent question!)
PK answer: “Not entirely — there’s some room for insisting on basic working conditions and environmental rules. But not too much. Consider Bangladesh: all it really has is a large labour force, with fairly low productivity. Low wages are the only way they can sell on world markets. If we insist that they follow first-world rules, we’re basically telling them to go starve.”
EP: Krugman deftly switches to Bangladesh, away from what the question is about, which obviously is about China. China does not have low productivity, and so, again, PK evades, skirts the problem and gives an erroneously comforting answer. He does not answer how free trade can prevent this.
PK answer: “Not entirely — there’s some room for insisting on basic working conditions and environmental rules. But not too much. Consider Bangladesh: all it really has is a large labour force, with fairly low productivity. Low wages are the only way they can sell on world markets. If we insist that they follow first-world rules, we’re basically telling them to go starve.”
EP: Krugman deftly switches to Bangladesh, away from what the question is about, which obviously is about China. China does not have low productivity, and so, again, PK evades, skirts the problem and gives an erroneously comforting answer. He does not answer how free trade can prevent this.
Q3.
The government of China is subsidizing the growth of its electric car industry
by providing very significant subsidies (about one-third of cost) to consumers.
This subsidy will allow the industry to scale up much more quickly and produce
electric cars cheaper than anyone else. In a free-trade world, is this good
planning, or cheating? — Nick
Van Kleeck, Tucson, Ariz.
PK answer: “It’s tricky. Subsidizing consumers is O.K. under the rules, while subsidizing producers isn’t. If the U.S. offered tax breaks for electric cars, it would be perfectly legal under W.T.O. rules. The trouble is that given Chinese reality, you’re not going to see a lot of foreign electric cars sold there. But as these things go, it’s not a particularly egregious example.”
EP: In Q3, (also a good question) PK sends the questioner into vague confusion and does not answer.
Paul Krugman avoids the Chinese enrichment problem
- which is due to the too large, 400 million reservoir of cheap Chinese labour
- which threatens us, because China can buy almost everything now. That is deeply wrong and is going to have dramatic consequences. It must urgently be stopped and Krugman does not help.
PK answer: “It’s tricky. Subsidizing consumers is O.K. under the rules, while subsidizing producers isn’t. If the U.S. offered tax breaks for electric cars, it would be perfectly legal under W.T.O. rules. The trouble is that given Chinese reality, you’re not going to see a lot of foreign electric cars sold there. But as these things go, it’s not a particularly egregious example.”
EP: In Q3, (also a good question) PK sends the questioner into vague confusion and does not answer.
Paul Krugman avoids the Chinese enrichment problem
- which is due to the too large, 400 million reservoir of cheap Chinese labour
- which threatens us, because China can buy almost everything now. That is deeply wrong and is going to have dramatic consequences. It must urgently be stopped and Krugman does not help.
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