'Globalization is Not the Answer to the Lesser Depression'

Paul Krugman:

Dean Baker catches David Ignatius suggesting that trade liberalization can provide enough economic boost to offset the effects of austerity. As Dean says, the arithmetic is totally off — almost two orders of magnitude off. ...

First, there’s an especially strong tendency to mythologize the power of free trade. Not that open world markets are a bad thing; they’re definitely a force for good, especially for small, poor countries. But my experience is that the less somebody knows about international trade, the more likely he or she is to imagine that modest moves toward or away from protectionism will have huge effects. Trade economists, who have actually worked with the models, have a much less grandiose view.

Second, even to the extent that trade liberalization would raise the efficiency of the world economy, it is not, repeat not, a route to overall job creation. Yes, everyone would export more; they would also import more. There is no reason at all to assume that the jobs gained from export creation would exceed the jobs lost to import competition.

Globalization is not the answer to the Lesser Depression.