Progressives Are Right To Cheer Paul Krugman's Nobel As A Vindication Of His Anti-Bush Criticism, But . . .
On one level, the awarding of the Nobel Prize for economics to Paul Krugman is a well-deserved slap in the face of George Bush and his disastrous market evangelist policies with a roll of crisp 1.4 million dollar bills. It's a beautiful sound. Krugman has been an outspoken critic of market evangelist tax cuts for the top 1%, at a time when conservative anti-tax mantras seemed to fill every angstrom of the mainstream media bandwidth. So, bravo.
But while I admire Krugman for refusal to fall for market evangelist tax policies, I think his pro-globalization stance has been somewhat naive. His position is that falling wages are not the result of outsourcing and trade with sweatshop nations. But the model he's using looks at aggregates. In fact, the benefits and burdens of globalizing capital and labor (without globalizaing worker rights) is distributed differentially according to every single study. That is, the top income brackets benefit through higher profits (the result of cheap labor), while the lower income brackets are burdened with downward wage pressure.
On average, increased trade tends to result in increase wealth. But you don't buy groceries with average dollars, just like you don't put average tax cuts in your bank account. The distribution of the wealth that has resulted from increased globalization is the issue. And Krugman is somewhat tone deaf on that.
The usual riposte (which Krugman falls back on in a pinch) is that trade with sweatshop nations results in cheap goods being available to working Americans. Needless to say, workers in American have not benefited from lower prices where it counts -- education and health care. These prices have skyrocketed. So the model is disastrously inaccurate.
So while most progressives see this award as a symbolic victory over Bushonomics, we still have to address the core issue of cheap labor conservatism. That is, cheap labor. Which is a bad thing, and the black hole that is at the center of most of our economic woes, including the current credit meltdown.
The nice thing is, Obama is onto it. In an NPR interview this weekend with Obama's economic adviser, Jason Furman, he said what I've been waiting to hear since the start of the financial crisis -- he puts the blame squarely on falling wages, and the loss of value of credit default swaps due to the inability of working people to pay their mortgages. As he points out (and it's the Giant White Bust Of George Bush in the room), if working people's incomes had risen to the same extent the income of the top brackets did, they could have afforded the higher mortgage rates, and everybody would be happy -- the banks would have had higher profits, working people would have homes, and the housing market would still be viable.
So congratulations Paul, but please think a little harder about the wage suppression policies that got us into this mess.