Paul Krugman: Holding China To Account

The New York Times:

The dire state of the world economy reflects destructive actions on the part of many players. Still, the fact that so many have behaved badly shouldn’t stop us from holding individual bad actors to account.

Read the whole story: The New York Times

Comments

[xiaozhang]

04:01 PM on 10/06/2011

What is wrong with holding the currency down and protecting your own country's businesses?

Absolutely nothing.

[DOR2]

11:14 PM on 10/04/2011

I can’t believe how many people are missing the forest for the trees.

America is in an elective recession; we didn’t have to have this second half of the double-dip, except that the GOPers couldn’t see anyway to get elected in 2012 on their own merits. Hence, they set up the false debt ceiling crisis as a means of driving the economy back into recession, and purely for their own partisan benefit. Call it economic treason.

China has nothing to do with this recession of the loss of manufacturing jobs. The US has been steadily shedding manufacturing jobs since October 1943. That’s the month when we had the largest share of the employed workforce in manufacturing production. Don’t blame China for a 68-year long trend.

American consumers, that 97.5% (literally) of the population that doesn’t work in manufacturing, will suffer if the protectionists succeed in launching a trade war. Why in the world would you want to pay 10%, 25% or 40% more for daily purchases? These products will never again be made in America; if they aren’t made for American consumers, cheaply and well, in China, they’ll be made less cheaply and less well in Angola, Bangladesh, Croatia, and the rest of the alphabet.

Protectionism is inherently anti-poor: the less money you have, the more dependent you are on low-cost goods. No one decides to shop at Wal-Mart because they don’t like the selection at Saks 5th Avenue.

[golfvue3]

05:20 PM on 10/04/2011

While I rarely agree with Krugman - I do in this case.

However - I can't see how this reconcile's with his push for a big stimulus.

Until we fix the "China problem", stimulus dollars will find their way to China and any benefit from stimulus in the US will be short-lived, but the added debt will be here for a long time.

[uniquindividual]

04:02 PM on 10/04/2011

Free trade with totalitarina societies is not in the interests of democracy and the advance of individual freedom throughout the world.

The TP makes a demon of liberals yet aplauds the totalitarin Chinese who do not allow freedoms of speech, press, association, religion, political choice. They do not honor international patents and have environmental standards that are negligible.

http://wihresourcegroup.wordpress.com/2009/10/28/amazing-pictures-pollution-in-china-by-china-hush-wih-resource-group/

[Ed Baker]

03:47 PM on 10/04/2011

His analysis is perfect. Our trade policy is destroying the middle class. Our trade policy is inflicting suffering on poor people. Our trade policy allows Western corporations to exploit cheap Chinese labor and expand their profit margins.

We've asked China nicely a few times to let the value of their currency float - they've refused.

I can't believe we haven't put massive tariffs on their goods YEARS ago.

[Chubbster]

10:00 AM on 10/04/2011

Kruggy is a Princeton Academic Keynesian Economist. Watch your step...

[tck29]

10:34 AM on 10/04/2011

I notice you didn't claim he's wrong.

[Kye154]

06:05 AM on 10/04/2011

Krugman has really taken a dive on his comment about China. Let's not forget, it was the American Corporate Capitalists who was chasing the cheap labor, and trying to get away from any regulation they could. So, they exploited China, and exported all of our jobs and factories there. It is not a Chinese problem as it is our problem with corporates. The beef isn't with China, it's with unbridaled capitalism and corporate greed. Let's make that distinction clear.

[Ed Baker]

03:45 PM on 10/04/2011

They wouldn't be able to do so if China wasn't manipulating the value of its currency. If it's currency were traded in the open market, it would go a long way in correcting the issue. So, we've asked them to stop it, and they haven't, and now is the time for massive tariffs. They need us more than we need them.

[Kye154]

07:21 AM on 10/05/2011

China hasn't manipulated it's currency since 2005. It is more outdated propaganda we keep getting. The Chinese have no reason to do so at this stage of the game, since the dollar is loosing it's relative value overseas. When the Chinese did tag the yuan to the dollar, it was 8.75 to 1 dollar. Now it is 6.35 to 1 dollar. Why would China want to decrease the value of the yuan to match the falling value of the dollar now? The dollar has been loosing it's value against other currencies as well, so it is just not a Chinese issue, but rather an American issue.

Secondly, China has become more self-sufficient than we are at this time. The only reason why they need us is to sell their products. We don't have much to sell them, and as a consequence they could probably do perfectly well without us, once they dump our treasury bonds we sold them. If they do that, you will see how much we need them to stay afloat.

[DismayedRepub]

01:19 AM on 10/04/2011

Paul, in the end I think it will be China holding the U.S. accountable. We've got us right where they want us, by the short hairs.

[LickMyDecalsOffBaby]

02:01 AM on 10/04/2011

puleeze explain to how how China has us in that position, keeping in mind the Chinese only hold about 7 percent or so of our debt....we're waiting...

[DismayedRepub]

03:13 PM on 10/04/2011

If China were to get fed up with us they could dump those bonds onto the market which would crater bond prices and roil international markets. If would impact the federal government’s ability to borrow. All sorts of bad things would happen were they to turn to “Bond Vigilantism”. If you’ve never heard of the concept, Google it.

The Chinese set this whole depression in motion when they demanded we make good on all the mortgage bonds Fannie, Freddie, Goldman et al sold them defaulted. Where do you think all that TARP money went? Every dollar of debt they hold is a bullet in their economic arsenal. They could take down whats left of our economy.

[Clairvoyant Evangelist]

09:01 PM on 10/03/2011

An error in Krugman's commentary is shows in the title: "Holding China to Account" suggests China is responsibl­e for the United States' economic difficulti­es. It suggests that China manipulate­d the United States, its markets and economy to put us where we are.

China did not. China simply filled orders, conforming its manufacturing to market circumstan­ces their buyers provided, and created.

It was American marketers who took advantage of, and increased, for more advantage, the imbalance of low costs provided by China's "cheap" yuan economy and higher resale pricing the United States "expensive­" dollar economy provided.

It was the marketers who bought low from Chinese manufactur­ers, who could sell cheap, and sold high (relatively, cheap to Americans so "taxed" by insurance premiums and other inescapabl­e costs imposed on them, so they had to seek the cheapest products in their markets), to irresponsi­ble excess.

The Chinese did not imbalance the American economy. The American middle-man profiteers did, to maximize their profits. The Chinese simply filled orders as the profiteers placed them.

Nor did Chinese investors force American corporatio­ns to sell their production equipment to them. Whole plants, lock-stock­-and-barre­l.

It was American corporations who moved their American production operations to China. Who moved their manufacturing to China, to further exploit cheaper Chinese production cost to American selling price­ ratios. American corporatio­ns did this, to maximize profits. To milk Americans to their last dollars of purchasing­-power resources.

[golfvue3]

05:18 PM on 10/04/2011

The Chinese refuse to the let Yuan fluctuate - you must have missed that - which makes most of your post moot.

If the Yuan adjusted freely (it would gain a lot of value), imports to the US would be more expensive in US$$ making US mfg more competitive.

[DickGranite]

08:29 PM on 10/03/2011

We should send Paul Krugman to tell them. After they are done laughing at this 12 year old quivering little girl, they'll kick him out of the country.

[Social Construct]

08:47 PM on 10/03/2011

It seems you and Prof. Krugman have a lot in common. From your own perspective, that is.

[ElCojonuo]

08:20 PM on 10/03/2011

But Paul, who would buy our debt if we piss the Chinese off ?
There aren't too many takers for our debt out there you know.

[tck29]

10:35 AM on 10/04/2011

Not true and he cites it in the column.

[Social Construct]

08:01 PM on 10/03/2011

An old adage, "When in Rome .... ," pretty much puts it in a nutshell. Want to believe in current "Free Trade" policies? Then the US employs the very same ways and means that our biggest trade partners follow. I'd much rather hammer out fair trade among global trading partners; but hey, when in Rome ....

[jpcrisan]

06:39 PM on 10/03/2011

China's communist regime has grown rich at the expense of the free world with a predatory currency policy that is insidious in the way it undermines fairness at a most fundamental level, and goes far beyond any reasonable tariff or protectionism policy our country would ever impose.

[ElCojonuo]

08:28 PM on 10/03/2011

Cut the BS, PLEASE.
We need China to buy our debt ( no one else will ).
They run their country the way they like and we run ours the way we like. They don't tell us what to do and we shouldn't tell them what to do ( minding your own business pays dividends ).
Besides, China has been around for 6,000 years and us less than 300.
They don't need us to teach them anything.

[oldsquare]

09:01 PM on 10/03/2011

Whoa! Are you saying that you support China in the pursuit of policies that threaten to push this country into third world status. Do you "mind your own business" when others are screwing you? I doubt it. Maybe your should reread Krugman's article.

[Eugene Berkovich]

11:01 PM on 10/03/2011

China only owns 7 (SEVEN) per cent of our debt. YOU should stop the BS.

[ezer]

06:09 PM on 10/03/2011

I am not sure that Krugman knows how much some of our corporations are just empty shells. Many products that we feel are American products but made in China are in fact completely foreign.
HP. Xerox and all those guys often just re-badge already on the market products from Sanyo, Canon, Sharp under their own brand.
They lost their know how and would be completely unable to design and manufacture new products on their own in the US.

[adamben]

08:10 PM on 10/03/2011

puh leaze. not a good way to start off for your argument considering he is an economics professor at princeton, a nobel laurete and on a council advising the president on economic matters.

boeing just rolled out a new airliner, fyi that is going to japan, btw.

[ezer]

09:28 PM on 10/03/2011

Am I supposed to be impressed by his neo-keynesian ideas? Sorry, I am not. Many economists disagree with him.
That wonderful Boeing is using technology from all over the world. And what about my argument that Xerox and HP are empty shells as well as many other US companies?

[kamact]

10:01 PM on 10/03/2011

Sad, but true,...all for short-term gains

[JoeBlough]

05:44 PM on 10/03/2011

Before we beat up on China, we should first pay back all our war loans. China was nice enough to help Bush/Cheney fund their fake wars. We should be nice.

[tpsdodger]

05:56 PM on 10/03/2011

we are, with devalued Obama American dollars. Is this a great country or what.

[DickGranite]

08:30 PM on 10/03/2011

So they're not lending Obama any money for his wars?