Tuesday, August 25, 2009

Now, I like Krugman and I like Ferguson, but who is better?

Professor Paul Krugman at war with Niall Ferguson over inflation

One of them is a “poseur”. The other is “patronising”. One suffers from “verbal diarrhoea”. The other is a “whiner”. A bust-up on the set of High School Musical 4 perhaps? A scrap behind the catwalk at a Milan fashion show? No. Those accusations were slung round in an increasingly bitter public row between two of the world’s most distinguished commentators on global finance and economics, professors Paul Krugman and Niall Ferguson, of Princeton and Harvard, respectively. It started as an argument about bond prices. But last week it blew up into a row about racism, printing money, spending our way out of recession, and the fate of the global economy

Posted by devo @ 12:30 AM (1809 views)
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23 thoughts on “Now, I like Krugman and I like Ferguson, but who is better?

  • I was considering posting this one myself. My preference is for Ferguson’s argument but I have to acknowledge that the policies advocated by Krugman are the only ones in town, so far.

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  • little professor says:

    There’s only one way to find out…

    Seriously, Ferguson is an unapologetic bigoted imperialist, who believes we should still own India and the rest of the commenwealth because we were better at running it than those silly colored natives, and that America, having taken Britain’s place in the world standings, has the right and responsibility to invade whichever countries are foolish enough to cross it.

    He is a bigoted, extremist racist, whose slavering sycophancy towards the USA and all things American is simply cringe-inducing. He also knows next to nothing about economics or economic history, and his attempts to lecture Krugman (a nobel prize winner in economics and reknowned expert on Keynsianism) smacked of the arrogance and high-handedness that he so often exhibits.

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  • Jim Kunstler has obliged with a piece to reinforce my disdain for Kruger (warning: there’s a little bit of bad language about Kruger here):

    http://kunstler.com/blog/2009/08/financial-crisis-called-off.html#more

    @little professor

    Not looking for an argument here but do you have any URLs to flesh out your criticisms of Fergsuon? Just curious. I have to admit I’m not familiar with Ferguson’s writings.

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  • little professor says:

    Here’s a wikipedia ref to start with

    See also:

    For over a decade now, Ferguson has built a role as a court historian for the imperial American hard right, arguing that the British Empire from the Victorian period on was a good thing with some unfortunate “blemishes” that have been over-rated and over-stated. “If it hadn’t been the British, it might have been somebody worse,” he says. “In any case, empires have been with us as a means of power and control for centuries and centuries, so you might as well cast a moral judgement on rain as on the British Empire.” He adds, “I am fundamentally in favour of empire,” and says the Americans should be our successors as imperial rulers of the world.

    His latest series, accompanied by a flimsy-but-fat book, is called ‘The War of the World’. Picking up where his last work ‘Empire’ left off, he argues that one of the primary causes of genocidal violence in the twentieth century was the collapse of Empires. While the British Empire, with its “elevated aspirations”, kept a lid on ethnic tension, its retreat allowed them to erupt.

    His book and TV series Empire serves as a perfect example of his blatant revisionism. He claims that by introducing Western capitalism to its subjugated countries, Britain brought them wealth – wheras in fact they were plundered and looted mercilessly by the East India Company and others. And the claim that the Empire ‘kept a lid on ethnic tensions’ is laughable – the evidence is everywhere, from the partition of India and Pakistan to the Palestine/Israel problem – Britain deliberately stirred up sectarian hatred as part of its divide and conquer policy, and in doing sowed the seeds for much of todays problems with terrorism and border wars

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  • little professor says:

    Short youtube vid here:
    http://www.youtube.com/watch?v=DXPo2ngs9mU

    Ferguson is a big fan of the British Empire — and wants the United States to follow in its footsteps. That means it’s our job to form colonies in hot climates, for years on end.
    Are we up for this? While Niall would like that to be the case, he doesn’t really think so, because, he says, we’re an empire “in denial” …

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  • little professor says:

    And listen to the original panel discussion between Krugman and Ferguson that kicked off this whole spat. Ferguson at his smarmy condescending best. Has a stellar panel, well worth listening to.

    April 2009 – PEN review of books economic roundtable discussion, with Paul Krugman, Niall Ferguson, George Soros, Nouriel Roubini, Bill Bradley.

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  • little prof,

    Even if Ferguson is a bigot or racist, it doesn’t mean he is wrong on economics. That’s an ad hominem argument.

    Krugman has come under a lot of criticism because his answer to the crisis seems to be spending our way out of debt. That doesn’t sit well with a lot of people.

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  • What a hoot! Pass the popcorn!

    Henry Kissinger, who knows a bit about fights, both political and intellectual, once observed that the reason academic tussles were so vicious was “because the stakes are so small”.

    That just about sums my view up. I think they are probably both right – the spending is quite necessary but likely to be inflationary without very careful management of interest rates and swift withdrawal if fiscal stimulus. I don’t think the current recovery is – it’s a shortlived illusion.

    Ferguson is economically right but morally wrong about India. The evidence that India benefitted vastly from British Imperialism is that India still retains much of the political, legal and economic infrastructure left by the British. However the country wasn’t ours so we had to get out sooner or later.

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  • The divide and conquer policy probably didn’t leave an entirely healthy atmosphere in India/Pakistan, Ireland, Cyprus, Palesinte, etc

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  • [email protected], does this mean you think this current rally is a shortlived illusion or a full on bull market , therefore making it a V shaped recession, rather than the much discussed W shape??

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  • Interesting debate but my money is on the historian. Krugman will experience the full benefit of the Keynesian policies he advocates as the US dollar slides into the sewer where, some may argue, it belongs. It won’t be long now.

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  • @bystander

    I believe that the current stimulus will have diminishing marginal returns and will therefore need larger and larger injections to sustain – this is why Mervyn King wants to increase QE by £75bn. But in a few months it will need another £100bn, then another £200bn and so on.

    The alternative is to stop the QE or reign it back resulting in a W-shaped recession.

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  • the number cruncher says:

    I have read nearly all of Ferguson’s books and pretty much agree with little professor. He is a second rate economist, empire apologists and puts forward ideas to appeal to those in power.

    Thoroughly disreputable and a bit of a joke in academic circles – the David Starkey of economics (actually David Starkey has some credibility in academic circles)

    to paul at 8

    India suffered horrendously under British rule – the common people lost out enormously – Britain robbed the country blind. Do not let propaganda rule the brain – go and read up on the subject and not just Ferguson’s one sided books. British rule was more benign between the wars, it had to be, but before that it was truly horrendous. Many people view the Pax Brittania with hatred and fear, just as they are with Pax Americana and they have very good reason.

    http://en.wikipedia.org/wiki/British_Raj
    During the British Raj, India experienced some of the worst famines ever recorded, including the Great Famine of 1876–78, in which 6.1 million to 10.3 million people died[27] and the Indian famine of 1899–1900, in which 1.25 to 10 million people died.[27] Recent research, including work by Mike Davis and Amartya Sen,[28] attribute these famines directly to British policy in India.:

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  • So what you foresee is either a world where the major economies keep flooding the market with new money ad infinitum until they all go bankrupt as no-one will lend them any more money and inflation destroys any wealth, or they cause another dip in the economy by being sensible. Inflation, IMO, is a no brainer and will be rampant the moment real, sustainable recovery begins. Also I do believe we will see a W shaped recession as there doesn’t appear to be any real reason for the GDP growth and manufacturing growth except for inventory re-stoking, IMO.

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  • the number cruncher says:

    If Niall Ferguson has his way – America will wage war whereby they rob the resources of the middle east and china and regain the wealth of south America and the economics are secondary to the geopolitics.

    America’s big problem is they are losing control to the BRIC countries and the resources they command. They are fast approaching a watershed – military intervention for resource dominance or reduce their geopolitical control and save money on their Trillion dollar a year military machine . We are seeing that struggle at the moment. This recession is the result of the bush agenda; making a bubble economy to pay for the military option.

    This depression may plunge us into a decade of war just like the last great depression.

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  • @the number cruncher

    I never said that India didn’t suffer under the British.

    But I did say that they still retain the political, legal and economic infrastructure that the British installed. So the legacy can’t be despised all that much after all.

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  • ‘History doesn’t repeat itself, but it does rhyme’ – Mark Twain.

    My money is on the historian to get the bigger picture right. We may manage to reflate our economies by printing money and taking on masses of debt, but history shows that states that do so pay a heavy price down the road.

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  • little professor says:

    Paul – India had an advanced political, legal and economic infrastructure while the ancient Britons were still living in mud huts.The idea that they needed ‘civilizing’ is pure nonsense.

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  • the number cruncher says:

    Paul, I think your thesis is wholly wrong

    I think your are deluding yourself if you think the Indian’s do not despise the legacy the British left.

    The British legal and economic system is a subtle system that has banished many poor countries to a legacy of turmoil and exploitation as they have privatised natural resources and land and taxing those who actually contribute to the economy. This traps the vast majority in grinding poverty with no control or share in their natural resources. It allows dictators to flourish who monopolise wealth, land and natural resources.

    Ex colonial Countries that have adopted our system have done very poorly while those that have tried to break free from colonial systems of law and governance have done much better on the whole. The best example is Botswana or Hong Kong who have not adopted our economic system at all. India has done well in spite of our system and because they have modified it considerably.

    The best example of a country slavishly holding on to our economic and legal system is actually Zimbabwe, I kid you not. watch this enlightening video http://www.youtube.com/watch?v=pSYlFwXmPqU

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  • the number cruncher says:

    On the economics side of this argument

    Jasper Desmond comments are better than min in the comments section:
    Krugman has been relentless over the years in his criticism of the deficit-exploding policies of the Bush administration. So, he’s hardly unaware of the risks of too much public debt. I think he’s on firm ground, however, in advising caution when it comes to deficit-trimming policies in the present. The last time a US administration presiding over an economic cataclysm caved in to the arguments of deficit hawk critics, what ensued was the disastrous downturn of 1937. I think Ferguson is an able and very entertaining historian. But he’s no economist

    and

    Steve Cook wrote:
    While the two disciplines often overlap, and there are conflicting perspectives in both, it is far too easy, especially in the current web 2.0 internet age, for revisionist historians to propagate misinformation to the masses. These same masses are far more likely to gravitate to historical writings than to economic studies. The material is simply much more entertaining than reading about economics, and far easier to grasp, if one can read.
    Let’s leave aside for now the dumbing-down of the educational institutions in America since the Reagan years, amplified by the No Child Left Behind policies of the Bush administration. Suffice it to say that it has vastly increased the size of the choir to which the right-wing preachers pander their rantings.
    The bottom line is this: if I have a plumbing problem, I call a plumber, not a carpenter or psychiatrist. Economic policy, flawed though it might be, is best left to economists, not historians. Let the economists decipher how it happened, and the historians can then report what happened.
    Fortunately, Ben Bernanke’s particular area of expertise is the Great Depression, so if anyone is qualified to navigate us around another one, it is he.
    For the record, it was not the stock market crash that caused the depression, although it is certainly related if only from the perspective of an early warning system or seminal event. The two real causes of the Great Depression were restrictive monetary policy by the Central Bank, and restrictive, protectionist trade policy instigated primarily by the Smoot-Hawley tariffs, championed by two republican politicians, Senator Reed Smoot, and Representative Willis Hawley. The law went into effect in June of 1930. Retaliatory acts by former trading partners, which had been forewarned and ignored, soon followed, and these accelerated the onset of the depression, ultimately exporting it to the rest of the developed world. Enough said.
    I’ll take Krugman’s advice, hands-down, anyday.

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  • 19. the number cruncher said…

    “The British legal and economic system is a subtle system that has banished many poor countries to a legacy of turmoil and exploitation as they have privatised natural resources and land and taxing those who actually contribute to the economy. This traps the vast majority in grinding poverty with no control or share in their natural resources. It allows dictators to flourish who monopolise wealth, land and natural resources.

    Ex colonial Countries that have adopted our system have done very poorly while those that have tried to break free from colonial systems of law and governance have done much better on the whole. The best example is Botswana or Hong Kong who have not adopted our economic system at all. India has done well in spite of our system and because they have modified it considerably.”

    I don’t know much about this subject, but I found ‘The Silver Bullet’ by Fred Harrison to be very informative as to why many post-colonial nations (and indeed many in our own nation) languish in poverty.

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  • In general I agree, with the notion it is the conquerers who get to write history.

    @ #13. Would India have been in a much worse position under the continued reign of the Mughal empire?

    I dont buy the myth for instance, that Britan before the Romans, for thousands of years, was a backwater, without civilisation.

    I think Britain BC probably had one of the most interesting cultures in pre history.

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