Sat Oct 24th, 2020 at 08:49:18 PM EST
Economists on the Run - Michael Hirsh, Foreign Policy
Frontpaged with minor edit - Bernard
Paul Krugman has never suffered fools gladly.... In a series of books and articles beginning in the 1990s, Krugman branded just about everybody who questioned the rapid pace of globalization a fool who didn't understand economics very well. "Silly" was a word Krugman used a lot to describe pundits who raised fears of economic competition from other nations, especially China. Don't worry about it, he said: Free trade will have only minor impact on your prosperity.
Now Krugman has come out and admitted, offhandedly, that his own understanding of economics has been seriously deficient as well. In a recent essay titled "What Economists (Including Me) Got Wrong About Globalization," adapted from a forthcoming book on inequality, Krugman writes that he and other mainstream economists "missed a crucial part of the story" in failing to realize that globalization would lead to "hyperglobalization" and huge economic and social upheaval, particularly of the industrial middle class in America. And many of these working-class communities have been hit hard by Chinese competition, which economists made a "major mistake" in underestimating, Krugman says.
It was quite a "whoops" moment, considering all the ruined American communities and displaced millions of workers we've seen in the interim. And a newly humbled Krugman must consider an even more disturbing idea: Did he and other mainstream economists help put a protectionist populist, Donald Trump, in the White House with a lot of bad advice about free markets?
Invented just for the occasion "hyperglobalization" is the new fig leaf behind which to hide all of the sins of his and 'Mainstream Economic's past three or four decades. Who knew 'globalization' could cause so much harm? And Larry Summers has now come around
to supporting much more deficit spending. Perhaps the prevailing winds of 'Mainstream Economics', especially as expressed in media article, will be blowing in a helpful direction - for a change.
Of course there were dissenters to the 'globalization is good' consensus. But meanwhile great damage has been done.
Dani Rodrik, a Harvard University economist who in 1997 published a then-heretical book called Has Globalization Gone Too Far?, said last week that he wrote it precisely because he believed that "the profession was so blasé about globalization." Now his views are mainstream, and Rodrik is president-elect of the International Economic Association. But the economists have barely begun to clean up the mess they left behind, as a recent conference on inequality at the Peterson Institute for International Economics in Washington, organized by Rodrik and former International Monetary Fund (IMF) chief economist Olivier Blanchard, made clear. And now in some ways it's too late because, as Rodrik says, it's not even possible to have a reasonable discussion under Trump. The U.S. president has effectively discarded modern economics, reembraced crude protectionism, and, like the mercantilists of the pre-Adam Smith era, appears to see trade as a zero-sum game in which surpluses are in effect profits and deficits are losses. His ignorance of basic economics "is without parallel among modern American presidents," Appelbaum writes in The Economists' Hour.