"Pop internationalists"—people who speak impressively about international trade while ignoring basic economics and misusing economic figures are the target of this collection of Paul Krugman's most recent essays. In the clear, readable, entertaining style that brought acclaim for his best-selling Age of Diminished Expectations, Krugman explains what real economic analysis is. He discusses economic terms and measurements, like "value-added" and GDP, in simple language so that readers can understand how pop internationalists distort, and sometimes contradict, the most basic truths about world trade.
All but two of the essays have previously appeared in such publications as Foreign Affairs, Scientific American, and the Harvard Business Review. The first five essays take on exaggerations of foreign competition's effects on the U.S. economy and represent Krugman's central criticisms of public debate over world trade. The next three essays expose further distortions of economic theory and include the complete, unaltered, controversial review of Laura Tyson's Who's Bashing Whom. The third group of essays highlights misconceptions about competition from less industrialized countries. The concluding essays focus on interesting and legitimate economic questions, such as the effects of technological change on society.
"At this point the conversation gets unpleasant, with some remark about this kind of thing being the reason why people hate economists." So writes Paul Krugman -- economist -- in Pop Internationalism. As for what point "this point" is: Let's put it this way: I suspect that many people in the country, especially those who are touting the importance of American competitiveness vis-à-vis foreign countries, will find their stomach acid to resemble levels equaled by Noah's flood at darn near any point in Pop Internationalism, a collection of 13 essays written for a variety of audiences, from Scientific American to the Harvard Business Review. Although I never thought that I'd want to recommend a book related to economics (I must confess to being able to make it to just the 14th page of Krugman's Development, Geography, and Economic Theory, published last fall by The MIT Press), this one has changed my mind. Krugman, who is a professor of economics at Stanford University, is not against jobs or wealth creation or a high standard of living in the U.S. What bothers him is what he considers to be the uniformed, disinformed and/or ill-informed, oft-heard and consequently prevailing notion about trade that he characterizes as "pop internationalism." He defines "pop internationalism": "In effect, it portrays America as being like a corporation that used to have a lot of monopoly power, and could therefore earn comfortable profits in spite of sloppy business practices, that is now facing a new onslaught from new competition." He quotes President Bill Clinton as having stated in a speech: "Now the United States is like a big corporation in the world economy." That is a simile that Krugman finds to be flat-out wrong, simplistic and, in some cases, dangerous. Let me hasten to point out that although Krugman criticizes some of the positions of President Clinton and current and former advisors including Robert Reich, Laura D'Andrea Tyson, and Ira Magaziner, this book is not one that the Republican Party is likely to buy in bulk, either. People including Clyde Prestowitz take hits, too. Krugman is so catholic in his criticism, I wonder who he hangs around with. Krugman is pro-productivity, but for a reason that is unlike the one that seems to be held by people across the political spectrum. According to Krugman, "high productivity is beneficial, not because it helps a country to compete with other countries, but because it lets a country produce and therefore consume more. This would be true in a closed economy: it is no more and no less true in an open economy.. ." He notes that his ideas about productivity aren't particularly trendy: he even harkens back to David Ricardo, a 19th century economist, who explained, Krugman writes, "a country whose productivity lags that of its trading partners in all or almost all industries will export those goods in which its productivity disadvantage is smallest. In the standard terminology of international economics, a country will always find a range of goods in which it has a 'comparative advantage' even if there are no goods in which it has an 'absolute advantage.'" Or, if one country is good at producing high-skill goods and high-labor goods and another country is not as good, the first country has an absolute advantage. But say the second country is so-so in high-labor goods. The first country is likely to concentrate its efforts on the high-skill sector and import product from the second country, which means that the second country will have a comparative advantage. Krugman seems to be making an extended and repeated argument that flag waving, table thumping and other rhetorical flourishes that are evidence of more heat than light are misleading and will not help people concentrate on the real issues at hand. There should be little doubt that Krugman is interested in continuing the prosperity in the U.S. if, for no other reason than I suspect that economies professors aren't exactly highly valued in societies where the standard of living is sub-par. The core of the book is this: "The sources of U.S. difficulties are overwhelmingly domestic, and the nation's plight would be much the same even if world markets had not become more integrated. The share of manufacturing in GDP is declining because people are buying relatively fewer goods: manufacturing employment is falling because companies are replacing workers with machines and making more efficient use of those they retain. Wages have stagnated because the rate of productivity growth in the economy as a whole has slowed. and less skilled workers in particular are suffering because a high-technology economy has less and less demand for their services. Our trade with the rest of the world plays at best a small role in each case." We don't need to go looking for false enemies. As Krugman puts it. "It is important to get these things right. Improving American economic performance is an arduous tusk. It will be impossible one if we start from the misconceived notion that our problem is essentially one of international competitiveness." We can start with ourselves.