Paul Krugman admits that he may, perhaps, have been a little incorrect about that whole global economy thing, at least in the short term:
Concerns about adverse effects from globalization aren’t new. As U.S. income inequality began rising in the 1980s, many commentators were quick to link this new phenomenon to another new phenomenon: the rise of manufactured exports from newly industrializing economies.
Economists took these concerns seriously. Standard models of international trade say that trade can have large effects on income distribution: A famous 1941 paper showed how trading with a labor-abundant economy can reduce wages, even if national income grows.
And so during the 1990s, a number of economists, myself included, tried to figure out how much the changing trade landscape was contributing to rising inequality. They generally concluded that the effect was relatively modest and not the central factor in the widening income gap. So academic interest in the possible adverse effects of trade, while it never went away, waned.
In the past few years, however, worries about globalization have shot back to the top of the agenda, partly due to new research and partly due to the political shocks of Brexit and U.S. President Donald Trump. And as one of the people who helped shape the 1990s consensus — that the contribution of rising trade to rising inequality was real but modest — it seems appropriate for me to ask now what we missed.
There’s been a lot of this going around. Leading globalists such as Kissinger and Fukuyama have published learned tomes explaining why globalism has “unexpectedly” failed. Of course, it never occurs to them to admit that nationalist skeptics like me were correct all along, hence these revisionist self-critiques that are primarily intended to salvage the tattered remnants of their award-winning reputations.
In the meantime, I will patiently await my Quasi-Nobel Prize in Economics for creating the Labor Mobility proof of the impossibility of free trade.
And I will also fisk Krugman’s entire column on the Darkstream this weekend.