Paul Krugman: The Last of the Keynesians

He doesn’t hold out high hopes for the Trump presidency: in fact, calamity is on the horizon. Barely a month into the Trump Administration, economics professor and New York Times columnist Paul Krugman concluded that the high and exalted office has failed to rub off on, or ennoble, the real estate tycoon: “Every day brings further evidence that this is a man who completely conflates the national interest with his personal self-interest and who has surrounded himself with people who see it the same way. Each day also brings further evidence of his lack of respect for democratic values.”

Mr Krugman (64) writes and speaks with considerable authority. In 2008, he was awarded the Nobel Memorial prize in Economic Sciences for his research on trade flows and economies of scale. A prolific as well as opinionated writer, Mr Krugman authored over twenty books and many hundreds of columns and essays. A self-styled modern-liberal, the New Yorker played a minor role in the formulation of 198s Reaganomics – an episode he remembers as both thrilling and disillusioning: “Already then, I was quite convinced – as I am today – that the welfare state represents the most decent economic arrangement yet devised.”

That opinion makes Mr Krugman an instant outsider in a world obsessed with – though not addicted to – fiscal probity. Mr Krugman is an unabashed social democrat – and as such, an oddity in the United States – who incessantly argues that capitalism needs to be saved from itself to the benefit of all people – as opposed to the oligarchic few.

“Considering President Trump’s proposals for the US economy as “Reaganomics on steroids”, Mr Krugman fears that the white working (or salaried) class that propelled him to the White House is in for a rude awakening: “They are about to be betrayed and won’t be happy for long.”

Considering President Trump’s proposals for the US economy as “Reaganomics on steroids”, Mr Krugman fears that the white working (or salaried) class that propelled him to the White House is in for a rude awakening: “They are about to be betrayed and won’t be happy for long. The numbers tell an interesting story. Thanks to Obamacare, the number of uninsured Americans fell by thirteen million. Whites without a college degree, who voted for Trump by a two-to-one margin, account for almost two-thirds of that decline. That means around five million Trump supporters just voted to makes their lives nastier, more brutish, and shorter.”

Most may not have fully understood what was at stake, or believed Mr Trump’s repeated assurances that he would replace Obamacare with something “great”. It never fails to amaze Mr Krugman how many voters insist on self-harm. The gullibility with which simplistic solutions to complex issues are accepted as the ultimate truth, lays bare an inconvenient truth in politics: demagoguery wins. It just happens that Donald Trump, for all his shortcomings, is a marketing genius.

Of late, Mr Krugman has attracted significant flack when debunking fallacies in economic thinking. The myth of trickle-down economics is one of his favourites bugbears as is the more recent window dressing by the Trump Administration: border taxes and strong arming corporations to stay at home are to Mr Krugman a sure-fire way to undermine US productivity – and by extension prosperity – levels. Contrary to popular perception, Mr Krugman was no fan of President Obama and his economic take. He thought the stimulus plan that followed the 2008 financial crash too small in relation to the size of the US economy and too tilted to providing relief to the financial sector.

Though he advocates free trade, Mr Krugman did suggest subjecting imports from China to a surcharge in order to compensate for the country’s insistence on keeping the exchange rate artificially high, thereby indirectly subsidising Chinese exporters. A Keynesian through and through, Mr Krugman never tires in criticising governments that in times of crisis chose fiscal austerity over full employment: “lives are blighted by the absence of jobs as recessions turn into depressions. When caught in a downwards spiral, the only feasible solution is to provide stimulus via increased expenditure. Not doing so, affects the social fabric of society and causes damage that, of not irreparable, always proves very expensive to repair.”