America Moving "A Few Steps Back from the Brink," Krugman Says

Though Guilford didn’t deliberately schedule Paul Krugman’s Bryan Series talk on Election Night, the timing offered a nice bit of symmetry. Krugman, the New York Times columnist who received the Nobel Prize in Economics a little over a year ago, offered his perspective on the financial crisis that exploded just in time for last year’s election season – what caused it, what we’ve done right to dull its potential impact and when it might end.

Krugman’s talk last night reminded me an awful lot of the Bryan Series appearance almost a year ago of CNN’s Christiane Amanpour and her husband, former State Department official James Rubin. In both cases, you have speakers who are breathtakingly insightful about their chosen areas, and yet able to translate complex, theoretical concepts for a person like me.

Watching Krugman – as professorial and unassuming as he is – break down the "great recession" last night was riveting, due in large part to his emphasis on socio-historic and even geographic influences. For instance, the real estate bubble in Europe rivaled that of the U.S. - as Krugman put it, "Spain = Florida" – and the unsustainable levels of capital pouring into Eastern Europe meant that "We had some of the biggest trade deficits in history in places like Latvia and Estonia."

Speaking of trade deficits … According to Krugman, recessions of the level we’ve seen in the U.S. over the past year may technically end once the economy starts growing again, but unemployment levels can take years to return to pre-recession levels – unless one of two things happens. The first is an "export-driven" recovery like the one South Korea enjoyed in 1998, where "the route to recovery is a big trade surplus."

The other is something unforeseen that’s too explosive and attractive not to invest in – railroads in the 19th Century, the Internet, etc. Krugman thinks that green technologies could act as that type of game-changer this time around, saying that it “could drive a recovery if the right incentives were there.”

In Krugman’s analysis, our economy has taken at least a few steps back from the brink. With creativity – and boldness – we’ll make it back to safety.

--Sara Butner

Comments

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