Political Economy: April 2009 Archives

China's exports fell by more than 17% in March, following a decline of 25.7% in February. This has been the trend for the last five months, since the beginning of the global financial crisis. About 140 million of China's migrant workers work in export industries. According to official figures, about 23 million of them lost their job since the beginning of the year. Many were sent on long "vacations" and/or are working less hours per week. The figures are based on data from December 2008, and cover only migrant workers, the most vulnerable segment of the local workforce. A more moderate rise in unemployment is visible in other parts of the economy as well. Taking into account the continued deceleration of China's growth over the past 4 months, it is safe to assume that the number of unemployed is now higher. 

A couple of months ago, (parts of) the world celebrated the 200th of Charles Darwin's birth. The british scientist published On the Origin of Species in November 1859, ten months after Karl Marx published his theory of Historical Materialism in A Contribution to the Critique of Political Economy.

An economic crisis is upon us, and the public (finally) seems to be fed up with financial types who see the world through charts and graphs. The common view is that economic "experts" have led us into this mess. Now more than ever, it is clear that economics, unlike physics or chemistry, cannot make accurate predictions about real situations based on empirical research. This is because its subject matter is influenced by natural, political, psychological, and cultural factors. Thus, economics can mostly be used to test theoretical assumptions about isolated phenomena and describe processes after the fact.

Still, a quick look at internet traffic over the past twelve months reveals an interesting trend: traffic for the web sites of some of the world's most popular economists - Paul Krugman, Brad DeLong, and Nuriel Roubini - has grown by an average of more than 160%. Krugman's blog on the New York Times web site enjoyed a growth of more than 260%, while the site's overall growth stood at slightly more than 22%. The bulk of the growth has been during the past six months. One could argue that at times of crisis, people consume more news. However, traffic for the world's most popular news web sites - CNN, International Herlad Times, and the BBC - has grown by an average of less than 6% during the same period.

The discussion surrounding the global financial crisis is plagued with dishonesty. In most cases, the crisis is used by commentators and politicians as an excuse to promote their agenda - big/small government, nationalization/chapter 11 for banks, more/less regulation, etc.

While US commentators differ widely in their analysis of the causes for the crisis and their proposed solutions, most of them have one thing in common: a reluctance to accept the fact that the crisis was caused by anyone other than the US and that the prevention of the next crisis requires more than just regulatory and political change in the US. In a Post Traumatic Stress Disorder of sorts, Americans blame themselves for the crisis, and seem to enjoy describing the fall of their own empire and the invalidity of their own values.

And so, I was pleasantly surprised to read Paul Krugman's article in yesterday's New York Times. Krugman seems to be America's new economic oracle, and has been an ardent critic of Bush and Obama's response to the current crisis. In the article, Krugman is finally pointing his analytical skills towards China and stating a few important facts: