Paul Krugman on Europe's Doom Europe's budget problems have Paul Krugman singing the children's song "There's a Hole in My Bucket," he writes in The New York Times. The song "concerns a lazy farmer who complains about said hole and is told by his wife to fix it. Each action she suggests, however, turns out to require a prior action, and, eventually, she tells him to draw some water from the well. 'But there's a hole in my bucket,'" he responds. Putting aside Greece, Krugman says a run on Italian banks presents the "clear and present danger." Investors demand high interest rates, raising the chances of default, and creating a "vicious circle" of higher interest rates. To stop it, Europe must create a central fund that would promise loans to Italy and Spain. "Such a fund probably wouldn't have to be used, since its mere existence should put an end to the cycle of fear." Yet, if major government were to back one, it could put France's debt in danger, so the fund "could simply have the effect of adding France to the list of crisis countries," hence the inescapable "hole in the bucket." None of this needed to happen, Krugman says. Countries like the U.S. and Britain have high debt and low interest rates in part because they print their own currencies and are thus guaranteed the ability to pay debts. Europe's central bank could help resolve the crisis with a similar printing, which Krugman says probably would not cause large amounts of inflation, but which no one in Europe seems willing to consider. Europe has put its postwar success at risk by locking themselves into a rigid monetary system. "The bitter truth is that it's looking more and more as if the euro system is doomed."
Paul Moreno on Obama, Roosevelt, and big business President Obama seems to be "intending to make resentment of big business a central theme of his re-election campaign," writes Paul Moreno in The Wall Street Journal, "following the lead of Franklin D. Roosevelt, who tried to convince the public that Wall Street was to blame for the double-dip recession that plagued his second administration." In 1937, the American economy contracted. Roosevelt enacted a public spending campaign to counteract it. "Roosevelt and his advisers blamed the recession on a 'capital strike,'" Moreno says, claiming "that big business was deliberately refusing to invest and increase payrolls as part of a political gambit to destroy the New Deal." Robert Jackson, head of the Justice Department's antitrust division agreed, saying given the "astounding profits under the present administration ... big business will never be able to convince the American people that it has been imposed on, destroyed, or even threatened. It has merely been saved from ruin and restored to arrogance." And elsewhere, Roosevelt and his advisers likened big business to fascism. The campaign to "scare" business into spending didn't work very well, and Republicans actually made gains in the next election. "President Obama is perfectly capable of resorting to antibusiness demagoguery," Moreno says. He's campaigned repeatedly against "corporate jet owners," and "We may hear more, much more in coming months, if the economy continues to flounder."
James Surowiecki on big businesses American politicians all seem to agree in their unanimous "veneration of small business," writes James Surowiecki in The New Yorker. "In part, this reflects political calculation -- the small-business lobby is powerful in Washington. But it also reflects the hold that small business has on the public imagination." We've been "ambivalent" about big business. He points to A. & P., the "biggest and most important chain store in the first half of the twentieth century." Many enjoyed its selection and prices, but worried that it hurt small groceries, and enacted laws to limit its lower prices. "The odd thing is that although these laws stemmed from a populist movement, they actually resulted in price increases for the public at large." Today, price raising laws aren't as popular, but defense of small business is, in part because of the virtues of small companies, but mostly because of the belief that the economy depends on them. "But the truth is that, from the perspective of the economy as a whole, small companies are not the real drivers of growth." Small businesses are not as productive as big ones, and "though they do create most jobs, they also destroy most jobs." "Big businesses are also better able to make investments in productivity-enhancing technologies and systems; in the U.S., for instance, big companies account for the vast majority of R. & D. spending." Companies like A. & P. and Wal-Mart enjoy economies of scale, and can thus invest in their inventory and supply chain. It is hard for small businesses to make these kind of investments or to grow. Most small business owners "are people who simply want to run a small company, do work they enjoy, and have some control over their own financial lives." Big companies can offer workers better benefits, or offer consumers lower prices. "And the impact of these things on living standards is not trivial... Small may be beautiful. It's just not all that prosperous."
David Remnick on the GOP and foreign policy Years ago, Muammar Qaddafi was "a professorial friend and vigilant protector of his colleagues in tyranny," funding and training dictators in the region, writes David Remnick in The New Yorker. "In the end, after forty-two years of gaudy oppression, Qaddafi neither sought nor received such fraternal succor. The leaders of the Arab League came to despise him, and encouraged NATO to send planes in support of the Libyan revolution." Last week, he was discovered hiding in a water pipe and quickly executed. The Washington Post's Chris Cillizza wrote that Qaddafi's defeat would provide Barack Obama no political benefits. The economy, he said, is the major issue driving voters. "Yet there's something strange about the backseat status often given to foreign policy in Presidential campaigns," Remnick writes. "Presidents have a great deal more sway over the matters of war, peace, and diplomacy than they have over the economic weather." Two leading Republican candidates, Rick Perry and Herman Cain, have demonstrated a lack of foreign policy knowledge. The hawkish Mitt Romney, meanwhile, wants to expand the Navy and review military budget cuts. "The picture he tries to paint of Obama is that of the cartoon version of Jimmy Carter -- recessive, defeatist, and timid. In this scenario, of course, Romney is the Gipper Redux, ready to reassert American power and singularity." Romney is more educated than his competitors, but he can't argue against Obama's foreign policy record, which includes the killing of bin Laden and al-Awlaki, encouragement of Arab liberation movements, and drawdown in Iraq. "If a Republican had been responsible for the foreign-policy markers of the past three years, the Party would be commissioning statues."
Fred Hiatt on the model of South Korean education "Americans who deem South Korea's education system a model (President Obama, among others) might be surprised at one message leaders here are delivering to their youth: Drop out, please," writes Fred Hiatt in The Washington Post. Hiatt exaggerates, but Korea's attempt to "restore the luster of a high school diploma... has to be sobering for anyone who has assumed that education will be the antidote to the downward-mobility pressures of globalization." American education professoinals often cite Korea's commitment to learning as one of the main reasons for its rise in the past 60 years. But Koreans are unhappy with their system. "They complain about an emphasis on memorization, a stifling of creativity, a failure to teach usable English and a weakness in developing leadership skills." Parents spend so much on after-school tutoring, that some say it contributes to the low birth rate. It's too expensive to educate more than one child. "Much of the pressure arises because Koreans believe their children must go to college to guarantee themselves a middle-class future. As a result, Korea has one of the highest college-going rates of any nation." But even though the economy is doing well, many college graduates there can't find jobs, so the president is arguing for alternatives. "Last month the president urged employers to hire more high school grads," Hiatt writes. "The government also is investing in vocational schools designed to put young people on a career track without going to college." Obama should keep improving America's education system, which has the different problem of denying class mobility by providing terrible schooling to poor and minority kids. But, "the Korean experience does suggest that no nation will find an easy answer to the stresses of the global economy, especially as so much of the work of knowledge occupations -- lawyer, editor, radiologist -- proves as outsourceable as building cars or staffing call centers."
This article is from the archive of our partner The Wire.
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