Alex Tabarrok denounces Paul Krugman as an “illiberal demagogue” who has forgotten his heritage as an economist. The reason: Krugman’s claim that China is a strategic rival, and his recommendation that the Chinese bid for Unocal be blocked. Now I’m far from being an expert on Asian politics, and so won’t pronounce on the substance of whether Krugman is right or wrong on this specific issue. But I do think it’s fair to say that there’s another term than “illiberal demagogue” for someone who believes that strategic concerns trump trade interests when push comes to shove. That term is “mainstream international relations specialist.” The kind of “doux commerce” liberalism that Alex seems to favour has been out of fashion in IR theory since Norman Angell’s (somewhat unfairly) ballyhooed The Great Illusion .
If I understand Alex correctly, he’s telling us that economics, which likes to portray itself as a rationalistic and impartial approach to the understanding of human behaviour, is at its core a set of normative arguments for the increase of trade and commerce, and against the pursuit of a certain kind of ‘irrational’ self-interest. I think that Alex is largely right on this – though many economists wouldn’t admit it (and one is faced with the interesting question of whether scholars like, say, Dani Rodrik, are economists under Alex’s definition of the term). But it leads to the interesting question of when economists’ prescriptions for free trade over strategic manoeuvre are in fact the right prescriptions. On the one hand, posturing and mutual distrust can lead to a downward spiral and thus to war, in circumstances where peaceful commerce might otherwise have been possible. And it may well be, as Alex believes, that you can reconstruct people’s beliefs away from war, and towards peaceful exchange by substituting the voices of liberal economists for those of “mercantilists, imperialists and ‘national greatness’ warriors.”* On the other, if one state does see politics as a zero-sum game and is unlikely to be persuaded otherwise, then it may be a big mistake to concede strategic resources to that state – it may use them against you later. This is of course the reason that international trade in, say, advanced weapons systems, does not resemble a free market (whether control over oil companies is a similarly sensitive strategic asset, I’ll leave to the discussion section). Which means that if Alex wants to make a convincing case that Krugman isn’t just making a claim that runs against the usual normative biases of economists, but is actually wrong on the merits here, he needs to provide more evidence than an argument-by-assertion that China is now “moving” from war to trade. As stated above, I’m not a China expert, but from what I do know, this is very much an open debate.
- interestingly, those in international relations theory who make this sort of claim are usually vehemently opposed to economic reasoning.