Sunday, August 07, 2005

The New York Times rejects Krugman's "no brainer" on China.

I couldn't help but notice how last week Gail Collins and the NY Times editorial board gave an editorial page lesson on trade policy to its own in-house mercantilist, Paul Krugman, regarding China.

Krugman had argued in his column that the US government should block the acquisition of the Unocal oil company by the China National Offshore Oil Corporation, even though the latter had outbid all others by about $2 billion for it. But he worried that the US government wouldn't be able to do so for risk of offending the Chinese -- upon whom we have, he says, become so weakly reliant to buy our bonds, negotiate with the North Koreans for us, sell us cheap toothpaste, and so on.

As Krugman's good friend Brad DeLong put it...
As I read Paul, he says that if we did not need Chinese help on North Korea and if we were not very vulnerable to a cut-off of capital inflows, then it would be a no-brainer
But Gail & Co., showing a rare (for them) understanding of things political-economic, put paid to that "no brainer". Perhaps they read Krugman's own pre-Times days column mocking those who fear China's trade surplus.

Well, Krugman's analysis was zero-for-two in this column -- wrong both on what other puzzled economists are calling its "illiberal ... bizarre economics" and with the astute political analysis that the US is now so weak vis a vis China that the government would be reluctant or unable to kill the deal.

There was no reluctance at all, *bam*, the deal is dead -- for whatever bad political reasons.

Anyhow, he can't claim the Bushies did wrong this time, eh? Though they did.

As for the Times editorial board, I don't believe for a minute that they actually understand comparative advantage and the real reasons why free trade is good (e.g., as gone over by the old pre-Times Krugman). I rather think their stance on this issue, as on most, just reflects the politically correct beliefs of the liberal establishment elite which (unlike the beliefs of the liberal rank-and-file) still include support for free trade. They don't want to be seen in the same camp as Pat Buchanan -- where now Krugman is.

But heck, we'll take support for free trade wherever we can get it. And if a stopped clock is right twice a day we'll admit it and give it kudos on both occasions.

Time will move on quickly enough, no doubt.