the reagan deficits were the result of absurd war spending. they're comparable to the wwII and civil war deficits.

i think he makes some worthwhile points about why keynesian policy cannot work in an open economy, and why offshoring doesn't lead to comparative advantage. well, these are points i've made myself. i have a rant somewhere that explains the failure of free trade due to the size of the asian industrial reserve army (the trade is goods for labour, not goods for goods, so people are the commodity here, which is not inconsistent with ricardo's example, but creates a situation where free trade is impossible).

krugman, i also agree, is out of touch. he's living in the world that existed before clinton. ironic? maybe, but it's true.

that doesn't mean i think sovereign deficits matter.

they don't.

i wish stiglitz carried a higher media footprint than krugman.

i should point out that my marxism up there is vulgar; i don't think the point is lost, nor do you even really need to use marxist language to get to the basic point that massive supplies of asian labour decrease labour prices - which is exactly why labour is concentrated there.

see, and it *is* a comparative advantage if you identify the actors as multinationals and consumers. higher profits, lower costs. but it's not sustainable, because it cuts into buying power, which collapses both economies in the long run.

(not to mention the horrific living conditions that it assigns to asian workers)

but that analysis relies on understanding the trade as labour for goods rather than goods for goods, which is closer to colonial mercantilism than free market economics. as the differences in population are so dramatic, which means labour costs will always be lower on one side, it's almost impossible to construct a scenario where free market trade can actually function to a real comparative advantage on a good-for-good basis. you'd have to construct global wage requirements, which maybe aren't a bad idea, but the result of that is going to be a return to local production - rather than create a system of widespread mutually advantageous trade, we'd have a system of minimal trade where the advantage is actually mutual based on accesses to resources.

...which isn't really market-based at all. it's a perversion of the concept of comparative advantage, which is in fact partially based on labour costs!

i'm not the first person to point this out. the idea of large scale free trade agreements is entirely incoherent. it's just a reduction of liberal economics to a tool of propaganda in which to spread mercantilism with.

the key point i'm trying to get across is that any analysis of the situation has to begin with the understanding that there are three billion people in asia competing for a relatively small number of jobs, that labour costs in those countries are a reflection of that reality more so than they are of any statist policy and that strategies for increasing wages in the long term in these areas while maintaining such a high population density (something that is necessary to reconstruct economies in the 'developed world', so long as open borders are maintained) are extremely difficult to grapple with.

can fordism operate in such high population densities?