So I looked for myself.  My estimate is that the USA pays about $661 billion per year on petroleum products, natural gas, and coal and those Communists at the International Monetary Fund says that the USA subsidizes this fossil foolishness with about $649 billion per year.  That's $1.2 trillion per year.

Have yet to see an economist who has figured out what happens when our energy system is renewable and the cost of fuel goes away.  What are we going to do with that $1.2 trillion per year we won't have to spend?

Solar IS Civil Defense

And I don't buy this line of reasoning. First, if you globalize your jobs so that rural peasants in China can move into factories to work 12 hour days, like pre-union westerner workers did, then obviously some of the factory jobs are going to move to China. Second, if you eviscerate your labor unions, and forget the idea of international worker coordination, then obviously the factory owners in China are going to do the same thing the western factory owners did in the department of workers' rights. Third, if you consciously skew your tax and wage system to take from your own working class and give to the wealthy, then obviously the working class is going to be poorer. Etc.

It seems to me that globalization would naturally have disrupted western commerce by rebalancing the economic flow between nations, with damage to some components and improvement to others, but we haven't done ourselves any big favors as far as making things the best they could be within such disruption, either.

I think it is important both for the fact that the origin of the article was The Economist, so long a bastion of a neo-liberal world view, but also for the fact that Krugman himself has for so long been an adherent of the 'Samuelson Synthesis' American version of Keynesian economics. That version, which incorporates Hicks-Hanson's IS-LM toy economic model and Phillip's curve relating unemployment and inflation, but leaves behind Keynes historical contingency and radical uncertainty, is what Joan Robinson called 'bastard Keynes' and it formed one pole of the Cambridge Controversy - a dispute over the legacy of Keynes.

Krugman's climb down from his previous certitude about the benefits of trade is important. After all it was for his work on trade patterns that he received his Riksbank prize in honor of Alfred Nobel. But also important is Lars Syll's critique of the vacuousness of IS-LM.

Left unmentioned is the role of the Phillips Curve. The validity of the Phillips Curve was historically contingent upon strong capital controls by nation states. When countries reduced capital controls the assumptions underlying the Phillips Curve were undermined. Milton Friedmanm during the '70s stagflation, seized upon the failure of the Phillips Curve, which he (knowingly?) conflated with the work of Keynes to proclaim "Keynesianism is dead!" In fact, it was just the Americanized Samuelson version of Keynes that had died.

Krugman himself touted Keynes as the remedy for the problems we faced after the GFC of '08-09. But Keynes has never regained the cachet he had in 1971 when Richard Nixon said: "I am now a Keynesian in economics". We need an all weather economics, not just Keynes in bad times and the latest derivative of Neo-Classical Economics in good times.

However annoying the neo-liberal views of The Economist can be, it is still an influential magazine and Krugman is an influential economist. It is good to see them both adjusting their views to accommodate the harsh realities of the world economy.  

"It is not necessary to have hope in order to persevere."