Nobel Memo to America: Turn Away from the Far Right
Giving the Nobel Memorial prize to Paul Krugman was not just recognition of his theory of economic geography, but a strong message. This would not be the first time, nor will it be the last time that those awarding the prize have sent a message.
One part of this message is on trade and globalization, and why developed nations should not fear global trade, another, however, is more direct and more blunt: it is about a changed world. In a year which has seen more tumult in not only the markets, but the basic institutions that support them, it is a message that the United States can no longer maintain an exceptionalist policy.
It is a message that the Era of Reagan is Over writ in large letters. A message that Europe sees the Republican Party as having turned dangerously towards politics and policies that are coming close to spiraling into the abyss.
There is a great deal of fear in Europe about the possibility of a resurgent far right in Europe and globally. Many in Europe look at the recent elections in Austria with the creeping fear that comes from memory. For Americans, the 1930’s were "The Great Depression." For Europe, it was the rise of Nazi Germany. Some people regard the satire of Jesus’ General in comparing the GOP to Naziism as over the top. But really it is the Republican Party which has gone beyond reason. Krugman has seen this side of America’s far right as well.
One of the people who needs to heed this message is Ben Bernanke, who has been one of the worst central bankers in a developed nation since the Second World War, and to whom Paul Krugman has been a good deal kinder than the record perhaps allows for. That message is that he cannot both be supportive of certain ideological outcomes, and save the banking system. The markets have realized that the age of greed is good is over, and so have European governments, whose pledges of aid to banks helped create today’s massive stock market rally. If Bernanke cannot stop backing bad policies in public, then the incoming Obama administration should invite him to return to academic work, and appoint a Fed Chair who be part of a new policy regime.
[Specifically the committee mentioned three papers:
Krugman, P (1979) Increasing Returns, Monopolistic Competition, and International Trade, Journal of International Economics 9: 469–479.
Krugman, P (1980) Scale Economies, Product Differentiation, and the Pattern of Trade, American Economic Review 70(5): 950–959.
Krugman, P (1991) Increasing Returns and Economic Geography, Journal of Political Economy 99(3): 483–499. ]