« Fed Watch: Inevitable Inflation Fears | Main | Why Does Inequality Matter? »

Monday, January 24, 2011

Paul Krugman: The Competition Myth

What does Obama's embrace of competitiveness as a theme of the State of the Union Address  signal about economic policy in the future?:

The Competition Myth, by Paul Krugman, Commentary, NY Times: Meet the new buzzword, same as the old buzzword. In advance of the State of the Union, President Obama has telegraphed his main theme: competitiveness. ...
This may be smart politics. Arguably, Mr. Obama has enlisted an old cliché on behalf of a good cause, as a way to sell a much-needed increase in public investment...
But ... talking about “competitiveness” as a goal is fundamentally misleading. At best, it’s a misdiagnosis of our problems. At worst, it could lead to policies based on the false idea that what’s good for corporations is good for America.
About that misdiagnosis: What sense does it make to view our current woes as stemming from lack of competitiveness?
It’s true that we’d have more jobs if we exported more and imported less. But ... ultimately, we’re in a mess because we had a financial crisis, not because American companies have lost their ability to compete...
But isn’t it at least somewhat useful to think of our nation as if it were America Inc., competing in the global marketplace? No.
Consider: A corporate leader who increases profits by slashing his work force is considered successful. Well, that’s more or less what has happened in America recently: employment is way down, but profits are hitting new records. Who, exactly, considers this economic success?
Still, you might say that talk of competitiveness helps Mr. Obama quiet claims that he’s anti-business. That’s fine, as long as he realizes that the interests of nominally “American” corporations and the interests of the nation, which were never the same, are now less aligned than ever before. ...
So what does the administration’s embrace of the rhetoric of competitiveness mean for economic policy?
The favorable interpretation, as I said, is that it’s just packaging for an economic strategy centered on public investment, investment that’s actually about creating jobs now while promoting longer-term growth. The unfavorable interpretation is that Mr. Obama and his advisers really believe that the economy is ailing because they’ve been too tough on business, and that what America needs now is corporate tax cuts and across-the-board deregulation.
My guess is that we’re mainly talking about packaging here. ... But even if he proposes good policies, the fact that Mr. Obama feels the need to wrap these policies in bad metaphors is a sad commentary on the state of our discourse.
The financial crisis of 2008 was a teachable moment, an object lesson in what can go wrong if you trust a market economy to regulate itself. ... For whatever reason, however, the teachable moment came and went with nothing learned.
Mr. Obama himself may do all right: his approval rating is up, the economy is showing signs of life, and his chances of re-election look pretty good. But the ideology that brought economic disaster in 2008 is back on top — and seems likely to stay there until it brings disaster again.

    Posted by on Monday, January 24, 2011 at 01:08 AM in Economics, Politics, Regulation | Permalink  Comments (121)


    Feed You can follow this conversation by subscribing to the comment feed for this post.