Edward S. Herman

With a column on trade and globalization in the New York Times of January 2

("Once And Again"), MIT economist Paul Krugman announces his new

status as a Times columnist under the heading "Reckonings." Krugman is

a Times natural, and had appeared frequently in the past with Op Ed columns.

What makes him a natural is that he is fluent, even glib, and though (or perhaps

because) a liberal accepts the institutional and policy status quo as a given.

This was dramatically illustrated in his 1990 book on The Age of Diminished

Expectations, where he acknowledged that we were in the midst of a

"simultaneous growth in wealth and poverty unprecedented in the twentieth

century," but found that we couldn’t do anything about this because the

problem of poverty has "exhausted the patience of the general public"

and reversing this trend is "politically out of bounds." That

political practicality reflects power, and that it might be the responsibility

of an intellectual to challenge this, escaped him.

This "pragmatic" and opportunistic tendency was also apparent in

his attachment to the "natural rate of unemployment" concept, a

Friedmanite and Chicago School construction that focuses on tight labor markets

as the cause of inflation and hence as the proper target of macro policy. Apart

from its focus on inflation control as the policy end, and its mystical and

unmeasurable properties, the natural rate approach assumes that institutions

cannot be changed to alter the tradeoff between wages and inflation (e.g., via

price controls, incomes policies, antitrust actions). But Krugman bought the

concept, and in a NYT Magazine article of February 2, 1996 he assured readers

that the natural rate was 5.5-6 percent and that in consequence an expansionary

macro policy was unworkable. Well, the unemployment rate is down to 4.2 percent

without inflation, so the intellectual basis for Krugman’s earlier support of a

higher unemployment rate has proven untenable (and Krugman and his mainstream

colleagues have been exceedingly quiet on the subject).

In his first NYT column, Krugman leaps to the defense of trade and

globalization. And the modalities of his defense are standard establishment

stuff. First, there is the obligatory mention of "rising living

standards" in the 1990s, the "decade of globalization." But the

rates of growth in the 1990s, both here and globally, though rising toward the

decade’s end, were not as high as they were in the pre-globalization years

(1950-1973). Second, there is the failure to mention income distribution, which

tells us about WHOSE living standards rose, and how the average gains were

shared. Krugman knows very well that income polarization both within and between

countries increased in the 1990s, but he bypasses the issue.

Krugman then supplies a brief history of globalization, featuring the

collapse of the old global system in the Great Depression and its postwar

reestablishment on the foundation of "American leadership," which put

humpty-dumpty back together again. This foundation is stronger than the old as

"we have gotten better at making the distinction between commerce and

conquest–trade no longer follows the flag and blatant imperialism is out of

style." There is "less sabre-rattling imperialism." But the

global idea is "still a minority persuasion all too easily portrayed as an

ideology of and for a rootless cosmopolitan elite that is out of touch with

ordinary people." In truth, says Krugman, it is a cause that should have

won over the protesters attacking the WTO at Seattle, as their oppositional

cause is "denying opportunity to the third-world workers." The big

question for the next century is can this beneficial "Second Global

Revolution" build a mass constituency?

Krugman is wildly off the mark in asserting the end of "sabre-rattling

imperialism" and trade following the flag. I guess he thinks that the

immense U.S. military budget is aimed at human rights service and that our

military protectorate over Saudi Arabia–and Clinton’s successful lobbying for

the sale of arms and communications equipment in that country–and our long and

intimate relation with the Indonesian military have nothing to do with trade

interests. And our war against Nicaragua in the 1980s and military support of a

score of military and other gangster regimes over the past several decades was

presumably just "anticommunism" and was unconnected with any drive for

economic advantage and a world with a favorable climate for investment.

Krugman also seems unware of, or naive about, the coercive power of trade,

investment, and money lending even without sabres. A classic article on

"The Imperialism of Free Trade" (Gallagher and Robinson, Economic

History Review, 1953) showed that even imperial England had depended primarily

on economic coercion rather than sabres. The U.S. has also been adept at using

such coercion. What is more, since the 1950s the World Bank, IMF, GATT and its

successor WTO have provided powerful new international agencies for forcing

weaker countries to follow international trade and investment policies that

serve mainly U.S. interests. These Krugman doesn’t even bother to mention,

because "free trade" is obviously such a global bonanza to

everybody–and the political institutions that help shape and control it are

presumably "noneconomic."

It is amazing that with such allegedly widely diffused benefits working

people so generally oppose "free trade" and the WTO, and that a tiny

elite of businesspeople, journalists, and economists love it. Krugman and

company would have us believe that the workers are misled. But they are not.

They are not opposed to trade, they are opposed to putting corporate rights

ahead of everything else. "Free trade" is not free: it includes

protection of monopoly patent rights and it "frees" foreign investors

at the expense of the democratic rights of domestic voters. And its trickle-down

process often doesn’t reach down very far before the foreign investors leave for

better investment climates. Contrary to Krugman and the New York Times, what’s

good for General Motors isn’t good for the non-elite world.

Krugman and even some people on the left miss a fundamental consideration:

namely, that the drive toward "free trade" and the workings of its

institutional apparatus steadily reduce the power of countries, especially those

of the Third World, to choose their own development path and to serve their own

people. Workers may get opportunities offered by foreign investors, but they get

these under a system that forecloses public investment and work options that

might better serve domestic needs. Entering into and increasingly caught in the

web of global finance, trade, investment and trade agreements, their leaders can

no longer provide for food supplies and maintain a strong safety net. They are

constrained by international rules, international financial obligations, and

budgetary restraints imposed by external interests. In this crucial sense, the

"free trade" drive is anti-people and anti-democratic, and it is

completely rational for those interested in the general welfare to struggle to

enlarge the constituency that opposes it.