ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Friday, January 04, 2008

Krugman Watch - Paul agrees with Bush 6 years later

A stunningly stupid op-ed by Paul Krugman, even by his standards:

January 4, 2008
Op-Ed Columnist
Dealing With the Dragon
By PAUL KRUGMAN

On both Wednesday and Thursday, the price of oil briefly hit $100 a barrel. The new record made headlines, as well it should have. But what does it mean, aside from the obvious point that the economy is under extra pressure?

Well, one thing it means is that we’re having the wrong discussion about foreign policy.

Almost all the foreign policy talk in this presidential campaign has been motivated, one way or another, by 9/11 and the war in Iraq. Yet it’s a very good bet that the biggest foreign policy issues for the next president will involve the Far East rather than the Middle East. In particular, the crucial questions are likely to involve the consequences of China’s economic growth.

Turn to any of several major concerns now facing America, and in each case it’s startling how large a role China plays.

Start with the soaring price of oil. Unlike the oil crises that followed the Yom Kippur War and the overthrow of the shah of Iran, this crisis wasn’t caused by events in the Middle East that disrupted world oil supply. Instead, it had its roots in Asia.

It’s true that the global supply of oil has been growing sluggishly, mainly because the world is, bit by bit, running out of the stuff: big oil discoveries have become rare, and when oil is found, it’s harder to get at. But the reason oil supply hasn’t been able to keep up with demand is surging oil consumption in newly industrializing economies — above all, in China.
Global supply of oil has been growing, yet we're running out of the stuff? I can understand that thing increasing demand is taking a larger portion of the increasing growth in the supply, but you can't say that that means we're running out of the stuff while making that argument...
Even now, China accounts for about only 9 percent of the world’s demand for oil. But because China’s oil demand has been rising along with its economy, in recent years China has been responsible for about a third of the growth in world oil consumption.

As a result, oil at $100 a barrel is, in large part, a made-in-China phenomenon.

Speaking of made in China, that brings us to a second issue. There’s growing concern in this country about the effects of globalization on wages, largely because imports of manufactured goods from low-wage countries have surged, doubling as a share of G.D.P. since 1993. And more than half of that rise reflects the explosive growth of U.S. industrial imports from China, which went from less than 0.5 percent of G.D.P. in 1993 to more than 2 percent in 2006.

Imports from China only account for 2% of our GDP? So, 2% of 14 trillion = $280 billion. Man, we should increase that... Although, I suppose Krugman would argue that we must - must - maintain our strategic economic advantage at producing DVD players.

And aren't imports subtracted from GDP calculations, by definition?

Given that our total annual imports are expected to be 2.3 trillion, 280 billion coming in from China really doesn't seem like much. And, given the fact that our annual exports are expected to be 1.7 trillion, what is Krugman's point again? (Data is from forecasts.org)

And the federal budget has grown by 1% (as a percentage of GDP) from 2001 to 2008 (from 1.9 trillion to 2.9 trillion) all thanks to that ueber-conservative George W. Bush.
Last, but most important, is the issue of climate change, which will eventually be recognized as the most crucial problem facing America and the world — maybe not today, and maybe not tomorrow, but soon, and for the rest of our lives.

Why is climate change a China issue? Well, China is already, by some estimates, the world’s largest emitter of greenhouse gases. And as with oil demand, China plays a disproportionate role in emissions growth. In fact, between 2000 and 2005 China accounted for more than half the increase in the world’s emissions of carbon dioxide.
Regular readers of this blog will know that we've pointed this out several times over the years...

but wait, here's the kicker:
What this means is that any attempt to mitigate global warming will be woefully inadequate unless it includes China.

Indeed, back in 2001, when he reneged on his campaign promise to limit greenhouse gas emissions, President Bush cited the fact that the Kyoto treaty didn’t include China and India as an excuse for doing nothing. But the real problem is how to make China part of the solution.
So, Bush was correct in 2001 and has been excoriated for taking the position that China must be included in any effort to curb greenhouse gases.

Bush was prophetic in pushing for China to be involved in any Kyoto-style agreement, recognizing that any limitation on our own economic growth would have zero impact if China continued to out pace us with their environmental devastation.

So what does all this tell us about the presidential race?

On the Republican side, foreign policy talk is all bluster and braggadocio. To listen to the G.O.P. candidates, you’d think it was still February 2003, when the national discourse was dominated by people who thought that American military might was sufficient to shock and awe the rest of the world into doing our bidding.
[...]

To listen to the Democratic side, you'd think that Iraq was still an impossible quagmire that we had already lost.

Krugman continues on... it's sad to watch a once clear-headed economist go off the deep end.

Your Co-Conspirator,
ARC: St Wendeler

Comments (3)
Jason said...

Wait a minute. I thought oil was plentiful, cost $10 to extract, and it was the evil Big Oil and greedy speculators that drove it up to $100/bbl. At least that was the story when we were debating "windfall" profit taxes.

As for China, it's fundamentally a poor country. The government has made some poor decisions, but given their size and compared to other former communist countries, they've managed an impressive transition. Reverting back to a command and control economy for the sake of CO2 control would be a devastating decision. Crippling an economy and forcing a billion people to live in poverty for some quixotic climate experiment is arrogant and cruel.

By the way, some breakthroughs in Global Warming research:
"the transport of heat into the Arctic is actually making things warmer there." How counterintuitive! Research dollars well spent.

saintknowitall said...

"President Bush cited the fact that the Kyoto treaty didn’t include China and India as an excuse for doing nothing."

Excuse me, but the Kyoto agreement failed bi-partisan ratification during the Clinton Administration. In fact the vote was 95 - 0 in 1997.

St Wendeler said...

Saint - Keep in mind that in the worldview of the Democrats, it's Chimpy W. McBushitler who's not "acting on Kyoto" when in reality it's the Democratic Congress that's not putting Kyoto up for ratification.

And they're the "reality based" party...