Krugman vs. Estonia
From the Scrapbook
Jun 18, 2012, Vol. 17, No. 38 • By THE SCRAPBOOK
John Maynard Keynes famously summarized his recipe for spurring growth as having the government pay people to “dig holes in the ground and then fill them up.” It’s only fitting that Keynes’s most famous contemporary disciple, the New York Times’s Paul Krugman, is adept at digging holes. Krugman has never met a criticism of Keynesian stimulus spending that he didn’t try to shout down, even at the price of torturing data.
Last week, Krugman was in rare form. With most of Europe on the edge of a fiscal cliff, a recent article in the Global Post pointed out that one country in the eurozone, Estonia, has a “fiscal surplus, low debt, and soaring growth.” Not only that, Estonia’s success might be because “the country, led by President Toomas Hendrik Ilves, has cut government budgets, slashed civil servants’ salaries, and raised the pension age.” This not only flies in the face of Keynesian economics, but jars every liberal bone in Krugman’s body. So the Princeton professor produced a chart on his New York Times blog showing that since 2007 Estonia has endured “a terrible—Depression-level—slump, followed by a significant but still incomplete recovery.” Speaking of incomplete, if you look at Estonia’s economic performance over the last decade, GDP has tripled. And it had nearly quadrupled at the peak of the bubble in 2007, a suspiciously convenient point in time for Krugman to begin evaluating the country’s economy. Estonia’s economic growth is still moving at a healthy clip if you look at any trend line longer than the five years chosen by Krugman.
One person who helpfully pointed this out was Estonia’s American-educated president, Toomas Hendrik Ilves, who took to Twitter and began rather amusingly lambasting Krugman: “Let’s write about something we know nothing about & be smug, overbearing & patronizing. . . . Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a ‘wasteland.’ ” Krugman responded on his blog, “I’m hearing from various sources that my rather mild-mannered post on Estonia has generated a vitriolic response from the nation’s president. I’m not going to try to track the thing down.”
That last line is a hoot. A New York Times columnist has no shortage of paid help to track down a few tweets. And tellingly, Krugman pretends the dispute is about manners (not that he’s a winner on that score, either) rather than about his own tendentious use of the data. What’s more, this is not some random critic he brushes off but a man who might know a bit more about Estonia’s economy than Krugman does.
David Case of the Global Post—who’s no conservative, by the way—followed up on the Twitter dustup, asking “why did Professor Krugman peg his chart to the peak of Estonia’s bubble? Doesn’t that simply demonstrate that Estonia has yet to re-capture the frothy, debt-driven bubble of 2007?” Case noted that since Estonia is a small country with no debt, it may not be a model for handling fiscal crises in Greece or Spain. Nonetheless, “its recovery, after implementing austerity, is intriguing. . . . Lord knows, Europe could benefit from any insights.”
Indeed, European leaders need all the insight they can get. The Scrapbook’s advice to them: Don’t try to track it down in Krugman’s column.
The Obama Vogue
The moment last week at which The Scrapbook felt a twinge, just a twinge but a piercing twinge, of mortification on behalf of President Obama was not the crushing defeat at the polls of public employee unions—and in Wisconsin, of all places, where they were born. No, it came as we watched a video of Vogue editor Anna Wintour as she advertised a raffle to attend an Obama fundraiser in New York City.
Readers are probably aware of the gory details. The villainess of The Devil Wears Prada, wearing her signature severe pageboy hairdo and sitting in her Mussolini-style office, invites the great unwashed to enter a lottery to win two seats (“the two best seats in the house”) at a $40,000-per-person Obama fundraiser at the fabulous New York home of Sex and the City star Sarah Jessica Parker.