Paul Krugman

The Great Debunker

A Nobel-Bound Economist Punctures the C[onventional] W[isdom]--and Not a Few Big-Name Washington Egos

by Michael Hirsh

from Newsweek, March 4, 1996, pp. 40-41. Copyright Newsweek 1996

Paul Krugman leans back in his chair, arms behind his head, relishing his notoriety. He is reciting, like verse, his favorite hate mail. "Your article made me want to throw up." says one letter. "Stanford should fire you." says another. "You snide elitist." writes a third fan. Vicious epithets are everyday fare in the voluminous correspondence of America's most controversial economist. "'Arrogant ass---e' is the best phrase I've heard lately." Krugman chuckles, a little nervously. The anonymous missives can occasionally be scary, he admits, like the one that warned him to stay out of Washington--adding, for good measure, "Jew boy."

Who is Paul Krugman and why do people say such nasty things about him? And why is a mere economist drawing the kind of fire usually reserved for real celebrities--say, Rush Limbaugh? Simple. The Stanford University scholar has been puncturing the reputations of policy wonks all over Washington. In a prodigious spate of essays and books--the latest, Pop Internationalism (221 pages. MIT Press), hits the stores next week--Krugman has launched a one-man crusade to shatter the era's most cherished economic myths. Among the most pernicious: the very C[onventional] W[isdom] idea that in our dog-eat-dog, post-cold-war world, America must viciously compete for jobs and markets against other nations.

But more on that in a moment. What most riles the wonks is that Krugman is impossible to ignore. Born on New York's Long Island, educated at MIT, he's one of the world's most eminent trade theorists--a future Nobel Prize winner, in the view of his peers. He's not just some ivory-tower type, either; he writes eloquently and simply for the public. "A lot of dumb stuff passes for sophistication out there," says the frenetic, gnomishly handsome Krugman, his brown eyes darting to and fro as a cascade of ideas tumbles from his mouth. "What amazes me is that people will have a vast thesis of the world economy and what it's doing to us--and not check their facts."

Since his popular 1994 book, Peddling Prosperity, Krugman has been asserting "the facts" as he sees them. Along the way, he's debunked the conventional wideom on nearly every hot-button issue dear to Washington--not to mention the Pat Buchanan parade. There is a Krugman take on the trade deficit with Japan. (Unimportant. An infinitesimal impact on GDP.) On jobs and wages lost to cheap Third World labor. (Hugely overstated; far less damaging than lagging productivity and new technology.) On the notion that economic war has replaced the cold war. (Gibberish; unlike war, trade is not a zero-sum game.) On the idea that nations compete with each other. (They don't, because unlike corporations, they can't go bankrupt and their "employees"--the citizens--mainly buy and sell among themselves.)

You could think of Krugman as a sort of highbrow version of James (The Amazing) Randi, the magician who goes around telling the real story of how rivals bend spoons using the power of their minds, and such stuff. For he delights in skewering the fallacies and errors of math made by what he calls Washington's ever-growing legions of "policy entrepreneurs." Nor is he shy about naming names, some of them very prominent Washingtonians indeed. Labor Secretary Reich, a much-quoted proponent of national competitiveness, is an "offensive figure, a brilliant coiner of one-liners but not a serious thinker." Trade maven Clyde Prestowitz, a hard-liner on Japan, is little more than an intellectual snake-oil salesman, by Krugman's lights. Lester Thurow, the MIT economist and author of the best-selling Head to Head: The Coming Battle Among America, Japan, and Europe, is a "silly" writer who doesn't do his homework.

Say this for Krugman: though an unabashed liberal (he plans to vote for Bill Clinton), he's ideologically colorblind. He savages the supply-siders of the Reagan-Bush era with the same glee as he does the "strategic traders" of the Clinton administration. "Paul's great strength," says Fareed Zakari, managing editor of Foreign Affairs, which publishes some of his most inflammatory stuff, "is that he's not intimidated by authority--either intellectual or political." In a recent New York Times op-ed piece, Krugman accused flat-taxer Steve Forbes of dwelling in economic "never-never land." He blames Buchanan's rise partly on the Clintonians--for feeding an atmosphere of xenophobia (aobut Japan, in particular) that played to the new front runner's primitive populism. "Buchanan wouldn't be able to get away with this," he says, "if policy entrepreneurs hand't created an intellectual rationale for it."

Buchanan is an easy target for any Econ 101 graduate. He's a protectionist Visigoth rattling at the hallowed gates of free trade. But there's probably no one better qualified to challenge the Republian candidate on these issues than Krugman. Among his Nobel-caliber work, he has shown that trade barriers not only boost prices at home and give consumers less choice, the usual opposing arguments. They also "fragment" markets globally--and in doing so make everyone poorer.

Krugman doesn't short-sell America's economic problems. He is alarmed at the country's widening income gap, for one thing. He was also among the first to warn of the blue- and white-collar backlash against corporate layoffs--which Buchanan is effectiveley exploiting. "I'm terrified of what's happening to our society," says Krugman. But the remedies he would propose "mostly involve improving and strengthening what we're tearing apart--health care for our children, a decent education for poor kids, things like the earned income tax credit." What he's after, he says, is a sense of proportion." If this administration would put a tenth as much of its attention into trying to prevent a million kids from being thorwn into poverty as it did into extracting a few more exports from Japan, "we'd all be better off."

Sharp-tongued maverick:

Krugman's critics see him as a spiteful self-promoter. "It's gratuitous spleen," says sometimes Krugman target James Fallows, a journalist whose economic writing has reportedly influenced Buchanan. "He behaves like someone with a massive chip on his sholder," adds former commerce secretary Jeffrey Garten. Was Krugman peeved because Laura D'Andrea Tyson, and not he, was originally chosen as Clinton's chairman of the Council of Economic Advisers--as many of his detractors suggest? Not at all, he says. "I'm temperamentally unsuited for that kind of role. You have to be very good at people skills, biting your tongue when people say silly things."

Krugman's outspokenness, Newsweek has learned, is the main reason the Clinton administration didn't offer him a job. Yet the White House may regret the snub. If anything, Krugman has probably had more impact as an outsider than he would have had as just another brilliant insider-economist. For instance, there's already been noticeably less talk of national "competitiveness" among the policymakers Krugman has targeted for attack. That's all to the good, thinks the sharp-tongued maverick. Curing bad economics and catching false "facts," he says, is a bit like flushing cockroaches down the toilet: "They always come back." To the dismay of his victims, Krugman will no doubt be there to yank the chain.