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THE ROVING
EYE 'We are a banana
republic' By Pepe Escobar
BANGKOK - With a playful smile, Paul
Krugman says China will inevitably become the
world's No 1 economy, depending on the criteria
one applies, "by 2020 to 2040". You can't be too
careful when it's early evening, but the internal
clock says it's early morning US East Coast time,
you crave for breakfast, but soon have to address
a US$250-a-plate dinner. Krugman adds - to the
despair of many a neo-con - that a multipolar
world is also inevitable, the poles being the US,
the European Union, China and India (not Russia).
But China has to watch out for environmental
constraints and address its pressing water problem
("they say that the Yellow River never reaches the
sea".)
Professor Paul Krugman, currently
enjoying the status of being the Mick Jagger of
political/economic punditry, is in Bangkok to
address a seminar on how Thailand should position
itself in the global economy - although he's also
careful to point out he's no Thailand specialist;
he does not even know exactly what "Thaksonomics"
means - a reference to Thai Prime Minister Thaksin
Shinawatra's policies. He says Thailand has not
experienced a "searing recovery like Malaysia or
even Argentina" and "has not returned to the
growth rate of 1996, before the Asian crisis". But
"it could be a lot worse". Thaksin would take that
as an endorsement.
Krugman, a laid-back,
affable personality, forgets about his jet lag
when he starts talking to Asia Times Online about
the US and the global economy. The facts are known
to all: half-a-trillion-dollar deficits, the
endless quagmire in Iraq, the weak dollar, loss of
industrial competitiveness. If he were Obi
wan-Kenobi in this particular galaxy, what would
he do to extricate the US from this mess? "No more
budget deficits," he says. "We should be running
surpluses." Tax increases: "We should be getting
28% of GDP [gross domestic product] in revenue. We
are only collecting 17%." And most of all, clean
up the foreign-policy mess. Not much of a chance
though. "We are a banana republic. For the moment,
all of these things are politically impossible."
Krugman sees three reasons forcing the US
to leave Iraq: domestic pressure; military
problems, caused by Pentagon chief Donald
Rumsfeld's insistence on invading Iraq with a
small army; and the fact that the Shi'ites (not
the Sunnis) may become more of a problem. "We do
not control Iraq, by all means. It's under the
control of militias." He notes that many in
America, like the financial elite in Wall Street,
for instance, don't even want to talk about it
anymore, pretending the quagmire will vanish by
itself.
Unlike scores of independent
analysts, Krugman does not think much of a
possible switch from petrodollars to petroeuros -
already contemplated by Russia and some
Organization of Petroleum Exporting Countries
members: "It's an overrated issue." He says the US
gets only $20 billion out of all those $100 bills
floating around the world. "The US is already
losing position anyway. The Russian mafia is now
using euros. This is not a big deal." He sees a
shift toward diversifying reserves as inevitable
both in Japan and emerging Asia. And for him, the
dollar is not weak enough: "It should go down
more, for instance, against the yen." He does not
realistically expect a major devaluation of the
Chinese yuan - maximum 5%. Krugman admits it's
hard to predict what happens next: "It needs a
trigger. But I'm convinced it's the collapse of
the housing market in the US that will trigger the
dollar's decline."
Krugman has never
personally met Pascal Lamy - the new director
general of the World Trade Organization (WTO) -
but says he has only heard good things about the
former European trade commissioner, whose job
until recently was to vigorously defend European
farm subsidies, to the chagrin of the developing
world. "I don't blame him for doing his job. I
think he'll be serious at the helm of the WTO. The
big players - the US, the EU - respect him. The
decisions to be made are politically difficult.
But whenever the US applies pressure, something
happens." He does not think that the Doha round
has failed. "At the end, they will come up with
something."
Krugman may be a relatively
reluctant warrior in his position as one of the
most influential pundits on the planet - courtesy
of his widely reprinted New York Times columns.
"My life would be much calmer now." But he
wouldn't have been able to live with himself if he
hadn't taken the job. He's still amazed by the
level of vitriol in current American political
discourse - "and I'm not talking only about the
left, you should see what comes from the right and
the extreme right".
Krugman recently
relocated to Princeton, New Jersey. He's a lover
of Thai food - something that prompts him to say,
"people usually think that globalization means
Americanization. But look at Thai food, sushi,
Hong Kong movies". Unlike Boston - where he used
to live - and New York, "it's not easy to find a
Thai restaurant in the middle of New Jersey". In
the interests of globalization, some gentle souls
in the "banana republic" might as well supply the
professor with a proper Thai meal once in a while.
(Copyright 2005 Asia Times Online Ltd. All
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