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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: wily who wrote (34507)	10/25/1998 8:51:00 PM
From: Ilaine	Respond to of 132070

Hi Wiley, thanks for post. It so happens that Krugman has a response, hard to find in this darn book without an index, but he points to U.S. Bureau of Labor Statistics Foreign Labor Statistics Web site: "There we find that in 1975, workers in Taiwan and South Korea recieved only 6 percent as much per hour as their counterparts in the United States; by 1995, the numbers were 34 percent and 43 percent, respectively." [p. 91, The Accidental Theorist] He then continues, in his arrogant fashion, "Surprise! The facts fit the Panglossian economist's vision quite nicely: Emerging economies typically run trade deficits, wages do rise with productivity, and actual experience offers no support at all for grimmer visions. But those grim visions persist nonetheless. For smart people like Tonelson (or Gephart) [parenthesis Krugman's] this cannot be a matter of simple ignorance. It must involve ignorance with intent. After all, it must require real effort for a full-time trade commentator, who not only writes frequently about the Third World threat but also decorates his writings with many statistics, not to notice that most of those companies run trade deficits rather than trade surpluses, or that wages have in fact increased dramatically in countries that used to have cheap labor. It is, I imagine, equally difficult to pursue such a career without ever becoming aware of the arithmetic necessity that countries attracting big inflows of capital must run trade deficits." "But perhaps the uncanny ability not to notice these things is acquired by focusing mainly on China, which does appear to run a huge trade surplus even while attracting lots of foreign capital. Most of that trade surplus as we've seen [he was talking previously in chapter about Hong Kong] is a statistical illusion. But it is still, at first sight, hard to understand how China can attract so much foreign investment without running a large current account deficit. Where does the money go?" [My favorite question.] "A useful clue comes if we look again at the last page of the Economist, and ask which country runs the biggest trade surplus of all. And the answer is . . . Russia. Obviously, this isn't because the Russian economy is super-competitive. What that trade surplus actually reflects is Russia's sorry state, in which nervous businessmen and corrupt officials siphon off a large fraction of the country's foreign exhange earnings, parking it in safe havens abroad rather than making it available to pay for imports." Sorry for the lengthy quote, but he is just so refreshing. CobaltBlue