Re: Krugman on good news
Paul Krugman wrote: "And there are signs of an economic takeoff in at least parts of India [...] every one of those development success stories was based on export-led growth." Then Michael Pollak made the following remark: "India wasn't. Exports are 10% of its economy, like the US." India is a big country. Those parts of India where there are "signs of an economic takeoff," aren't they export zones? I'd bet they are. Julio _ MSN Amor: busca tu ½ naranja http://latino.msn.com/autos/
Re: Krugman on good news
On Thu, 27 Nov 2003, Krugman was quoted saying > Now we know that the club isn't that exclusive, after all. South Korea and > several smaller Asian economies have made a full transition to modernity. > China is still a poor country, but it has made astonishing progress. And > there are signs of an economic takeoff in at least parts of India. I'm not > talking about arid economic statistics; what we've seen over the past > generation is an enormous, unexpected improvement in the human condition. > > How was this improvement achieved? Whenever I give talks about my latest > book, someone asks whether I still believe in free trade. The answer is > yes - not because I have any fond feelings about multinational > corporations, but because every one of those development success stories > was based on export-led growth. India wasn't. Exports are 10% of its economy, like the US. So of the only two examples that really matter for the global proportion of poor people stats, one is wrong. Talk about drawing a curve through one point. Michael
Re: Krugman on good news
--- Eubulides <[EMAIL PROTECTED]> wrote: > [Jeebus..] Quite intriquing that workers keep producing and producing, yet *we* appear to be in debt to other ruling classes of the world. I guess there's nothing left to do but to take over and run the means of production for ourselves. Wake up turkeys or we all through. And now for the bad and the ugly, Mike B) ** Pause in the Crisis or Beginning of New Boom? By Loren Goldner On Oct. 30 the U.S. Department of Commerce announced that the U.S. economy had grown at a 7.2% annual rate in the third quarter of 2003. Since these statistics are constantly being revised, one wonders what they really mean (the productivity miracle of the second half of the 1990s almost disappeared in retrospective downward revisions after the March 2000 dot.com crash). Whatever the case, is clear that the Bush administration is pulling all stops in its re-election strategy for 2004. One does not have to believe in a political business cycle to recognize that the U.S. government has sufficient tools to pump up the economy going into an election year. Most notorious in the history of this strategem was Nixons 1971-1972 reflation based on wage-price controls, the reform of the Bretton Woods system (amounting to a 32% surcharge on foreign imports and massive (for the period) deficit spending) to assure his 1972 re-election, after which inflation took off, the Bretton Woods system collapsed, and the U.S. and the world plunged into the deepest economic downturn to date (1973-1975) since the 1930s. Of course Nixon like Bush today--was dealing with long-term trends that pointed far beyond his election strategy, but the aim of the political business cycle is to have the shit hit the fan immediately after the election, allowing maximum political flexibility to Do Something after consolidating political power. What is indisputable is that there was a three-year (2000-2003) bear market in the U.S. and world stock markets in which trillions of dollars of paper value disappeared, and a mild recession which, again, appears mild based on dubious statistics that are constantly being manipulated for political ends. The official unemployment rate of 6% during the 2001-2003 period does not include the 1% of the U.S. population in prison, nor the people who have entirely dropped out of the labor market, nor people who are working part-time (as little as a few hours per week) who would like to work full-time. With these parts of the population included, the real rate of unemployment has been estimated at roughly 11%. In reality, 2.7 million jobs have disappeared in the U.S. economy since 2000, and there has been little upturn so far in employment figures. It is equally clear that from January 2001 onward, Greenspan and the Federal Reserve bank were looking at the possibility of a full-blown deflationary crash, following the end of the high-tech boom (in which it was discovered, for example, that 98% of the fiber-optic cable laid in the preceding years would never be used). The Federal funds rate (the rate at which the Fed lends to banks) came down in lockstep fashion from 6% to 1% by June 2003. To this must be added the Bush tax cut for the rich (approximately $200 billion per year) and the rapid increase in the Federal deficit (estimated at $375 billion for 2003) from the balanced budget achieved (with some creative accounting) in the last years of Clinton (it is somewhat hilarious to see the Democrats now attacking the Republicans for large-scale deficit spending). Finally, the post-2002 decline of the dollar (30% against the euro, 10% against the yen) is aimed at making U.S. goods cheaper overseas, which so far has not begun to curb the $500 billion annual U.S. balance-of-payments deficit, but which should in short order result in inflation in the U.S. by increasing the cost of imported goods. In the meantime, the U.S. must borrow $1.5 billion per day to cover this deficit, and is currently taking 40% of world savings. The minimum estimate of $2 trillion of foreign indebtedness ($10 trillion held by foreigners offset by $8 trillion of U.S. assets abroad) means that total U.S. foreign debt is already 20% of GDP, a level typical of a Third World country. Already 1% of U.S. GDP is going to pay off the interest on foreign-held debt. The current wave of euphoria that the 2000-2003 bear market is over is based on these (and other) paper indicators of an expansion that has not yet altered any of the fundamental crisis trends of earlier years, but is rather based on all the expansion of liquidity mentioned above. For all the late 1990s hype about the New Economy and the high-tech revolution, it seems that the health of the U.S. economy still depends on the willingness and ability of Americans to buy houses and cars on credit, exactly like 40 years ago. Third-quarter corporate profits in the U.S. generally look good,
Krugman on good news
[Jeebus..] [New York Times] November 28, 2003 OP-ED COLUMNIST The Good News By PAUL KRUGMAN I've heard it said that I should try, just once, to write something upbeat. Honestly, on the domestic front it's hard. Yes, the business cycle is looking up - but with the budget out of control, pork-stuffed legislation making its way through Congress and the extractive industries making environmental policy, we seem to have lost the ability to govern ourselves. Did I mention civil liberties? But if I take the global long view, there's still a lot to cheer about. When I went to graduate school, almost 30 years ago, I initially thought about specializing in development. After all, there is no more important topic in economics than how to raise the standard of living of the world's poor. But in the mid-1970's, development economics was just too depressing to pursue. Indeed, it might as well have been called non-development economics. No third world nation had made the transition to advanced-country status since 19th-century Japan. Circa 1975 it seemed that the club of nations with decent living standards was no longer accepting new members. Now we know that the club isn't that exclusive, after all. South Korea and several smaller Asian economies have made a full transition to modernity. China is still a poor country, but it has made astonishing progress. And there are signs of an economic takeoff in at least parts of India. I'm not talking about arid economic statistics; what we've seen over the past generation is an enormous, unexpected improvement in the human condition. How was this improvement achieved? Whenever I give talks about my latest book, someone asks whether I still believe in free trade. The answer is yes - not because I have any fond feelings about multinational corporations, but because every one of those development success stories was based on export-led growth. And that growth is possible only if rising economies can expand into new markets. Some critics of globalization seem to be nostalgic for the era before the big growth in third-world exports of manufactured goods. I'm not, because I remember the way that era really felt, our despair over the possibility of development. That said, the critics of globalization do have some valid points. First and foremost, the promise of export-led growth has failed in too many places. In particular, Latin America has signally failed to replicate Asia's success: Latin nations have liberalized, privatized and deregulated, with results ranging from disappointing (Mexico) to catastrophic (Argentina). Open world markets, it seems, offer the possibility of economic development - but not an easy, universal recipe. Meanwhile, competition from newly industrializing economies does hurt some workers in advanced countries. I could tell you how sensible government policies could minimize this cost, but since we don't have those policies and aren't about to get them, free trade is, in reality, a morally ambiguous issue. And someone in my situation has to acknowledge being in a particularly weak moral position, since they aren't yet having newspaper columns written in Bangalore. Yet I keep coming back to the big good news of the past 25 years: in a world with more or less free trade, development is possible. We are not, it turns out, condemned to live forever on a planet where only a small minority of the global population has a decent standard of living. Will this good news continue? Growing tensions over world trade worry me. The steady trickle of U.S. protectionist moves, against everything from steel to Chinese bras, hasn't yet become a torrent. But there's a definite sense that the grown-ups have left the building. What's particularly striking is the contempt this administration has for the rules. I was on the staff of the Council of Economic Advisers during the Reagan administration (those were nonpolitical jobs back then); one thing I remember was that if the experts said a proposed trade restriction violated international trade law, that was that. By contrast, just about every protectionist step taken by the Bush administration has been clearly in violation. And if the major economic powers stop honoring the rules that preserve open global markets, the chances of future development in poor nations will be much reduced. But none of this cancels the fact that over the past 25 years more people have seen greater material progress than ever before in history. That's something to celebrate.
