Adam Ozimek at Modeled Behaviour Gets His Hatchet Job

     He was trying to get Noah Smith to go after Krugman yesterday. I came across it on Twitter and got a nice post out of it. I had assumed it was Karl Smith but Noah later explained to me that was actually Ozimek but that he and Karl share the same Twitter account.

    http://diaryofarepublicanhater.blogspot.com/2012/07/why-stephen-williamson-hates-krugman-so.html

     Anyway, today Adam got his hatchet job. Ryan Avent stepped up to the plate with a "nuanced" hatchet job on Krugman:

     "THE hive mind behind the Modeled Behavior twitter feed has been trying to goadeconomic types into defending outsourcing, now the subject of intense political debate thanks to Mitt Romney's career at Bain Capital. The direct provocation of MB's ire is, I think, a series of posts from Paul Krugman"

        Avent then does the usual Krugman Treatment-quoting Krugman now vs what he said back in the 90s when he was so much more "nuanced.."

        "R]ecently the Washington Post added a further piece of information: Bain invested in companies that specialized in helping other companies get rid of employees, either in the United States or overall, by outsourcing work to outside suppliers and offshoring work to other countries.
The Romney camp went ballistic, accusing the Post of confusing outsourcing and offshoring, but this is a pretty pathetic defense. For one thing, there weren’t any actual errors in the article. For another, it’s simply not true, as the Romney people would have you believe, that domestic outsourcing is entirely innocuous. On the contrary, it’s often a way to replace well-paid employees who receive decent health and retirement benefits with low-wage, low-benefit employees at subcontracting firms. That is, it’s still about redistribution from middle-class Americans to a small minority at the top.
And later he adds:

And this means that Bain’s activities are part of the really big story about America these past three decades, which isn’t about jobs moving overseas, but about the rewriting of the social contract, with income shifted away from ordinary workers and toward the Masters of the Universe.

           So this is what Krugman said to offend the hive over at Modeled Behavior. Now Avent damns him by evoking the Krugman of the 90s. Everyone who goes after Krugman plays this card. Even the ultimate Krugman hater,  Stephen Williamson does this-'Gee why doesn't Krugman write smart pieces like this anymore?"

          "Those of us who learned our economics in the 1990s remember well when Mr Krugman instead wrote things like this:

[M]oral outrage is common among the opponents of globalization--of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers."

         http://www.economist.com/blogs/freeexchange/2012/07/outsourcing



         Listen Ryan-and you too 90s Krugman!-it's not really a question of moral outrage; 2012 Krugman was just stating a point of fact. Where did he lie about Romney and Bain. What's interesting is that Krugman's simple statement of fact is being taken as a broadside against Free Trade itself-one of the cardinal sacred cows. And listen even if Third World workers are benefiting we First World workers here in the US haven't been. Not that I'm indifferent to Third World workers-of course not all of them do so well under globalization either-but we have really seen a regression in the quality of life here.

        I do think one reason has been outsourcing and off-shoring. Of course to say this is a heterodoxy:

       "Maybe. But if that's what Mr Krugman means, he should make the case forthrightly. As it is, the posts cited above read like a straightforward argument that outsourcing and offshoring are bad for labour, full stop. And that's wrong. If a job can be done more cheaply, then changing production methods to do the job more cheaply frees up resources that can then be used for other things. Unless there is a macroeconomic policy failure, those resources will be used for other things, ensuring that unemployment doesn't rise. Workers should earn their marginal productivity, and if we're not happy with those wages, we should support redistributive taxation, or identify productivity-enhancing public investments in education or infrastructure. We should not heedlessly create worker cartels that fight with firms over the right to capture rents"

        Well unemployment has risen. Yes it's the 2008 crisis, but the pre 2008 status quo was hardly glamorous. Stiglitz was ridiculed for a recent Rolling Stones piece he did by suggesting there's structural unemployment as well. See only conservatives are allowed to make structural arguments-taxes on the rich are too high too many regulations to protect workers and the environment.

        Yet Stiglitz's

         "Now I can't say for sure, but I suspect that Mr Krugman might respond to that argument by saying that it's hopelessly naive. I think he might own up to being radicalised by policy over the past decade or so and say that he's discovered that economic policymaking, as practiced in America, is much different than what textbooks suggest ought to occur. Political economy and bargaining power are everything, he might argue, and the inefficiencies associated with a class-conscious, organised labour force are a price worth paying for a check on the class-conscious wealthy who are all too willing to use the political system to protect their interests and gobble up rents. Just look at the enormous wealth and waste in finance, he would probably shout, and the appalling, intimate connections between Wall Street and Washington."

       "And honestly, I have some sympathy for that perspective. But here's where I differ from that imagined Paul Krugman. First, I think the process of globalisation, which has moved billions of people out of dire poverty, is worth defending loudly and proudly, even if it came along with a costly side order of dysfunctional American politics and policymaking. We have a moral responsibility to be very clear about what aspects of globalisation we think should change and why, because the cost of encouraging a broader backlash against the process of liberalisation, with all the great good it generates, is simply too high."

        Right, Avent has "some sympathy" for the millions of unemployed and underemployed, but not as much as his sympathy for the orthodoxies of macro. Note how while he ridiculed-through the words of the 1990s Krugman-those who are "morally outraged" he does talk of "moral responsibility" to make sure that there isn't a "broader backlash against the process of liberalisation" with all the good it generates (!)

       If it generates such good why is it so easy to ferment a backlash? Clearly the benefits are fairly uneven or there wouldn't be one.

       So the moral responsibility to the ideology of Free Trade is greater than any such responsibility to the unemployed and the underemployed. Indeed that whatever good that has been generated is very uneven and far from apparent to many is underscored by the just how sensitive The Hive is to any criticism.

       "And second, it seems to me that an effort to restore the bargaining power of labour by having a showdown over outsourcing or by trying to reinvigorate the labour movement is destined for failure. The rise in worker bargaining power that occurred in the first half of the last century was a product of social movements, but those movements were enabled by the production technologies of the time, and it is the dissolution of those production technologies that has been most responsible for the weakening of labour's position. As Mr Krugman understands very well (his work on the topic helped earn him a Nobel Prize) the transportation technologies of the industrial revolution dictated in favour of large, industrial agglomerations. Geographic concentration enabled worker solidarity, and the benefits of the agglomeration meant that employers couldn't credibly threaten to move elsewhere. But the days of the large, urban industrial agglomeration are gone."

      "If labour is to capture more of the producer surplus—or have more of a say in Washington, for that matter—it will be as a result of a social evolution that matches the production technologies of today. That's a much, much harder process to think about and talk about than a call for the return of the glory days of labour. It's certainly not the sort of thing that lends itself to deployment in the binary dialogue of a presidential campaign. The truth is that Bain didn't really do anything wrong by outsourcing. It could have not done it, but that would primarily have created a profit opportunity for someone else. It may say something about Mitt Romney that he was the man who opted to take the profits. But the nature and distribution of economic activity is about the interaction between technology and institutions, and not about whether an individual capitalist tries to be fair or not. It's not Mitt Romney's fault that the median worker hasn't gotten a real pay increase in over 30 years. And Mr Romney's Bain experience might cost him the election, but that's not going to bring real pay increases back, either."

       It isn't his fault? He certainly isn't part of the solution. Listen if individual capitalists can't be fair why should the election for a millionaire candidate with foreign bank accounts everywhere in the world but prominently in the Cayman Islands be?

       Even if you buy that it isn't his fault this is no reason to elect him. Everything he suggests in terms of policies seem to make things worse for the median worker. He's gone as far as tell college girls that if they want free stuff they should "vote for the other guy."

      As Ryan himself gives lip service to " redistributive taxation, or identify productivity-enhancing public investments in education or infrastructure", the obvious point is that this can't be any further away from what Mr. Cayman Islands is running on. And again, it is Mitt himself who insists on running on his biography at Bain Capital. Whether you think he did anything morally wrong or not at Bain there is nothing in the record that suggests he should be admired-underscored by the fact that he refuses to give us much information of what his real record was at Bain, and the jobs created keep growing like Pichnoccio's nose.

    Romney has tried to claim that being president of Bain makes him especially qualified to lead the economy to recovery. This is a very dubious claim. Being a successful businessman, much less a successful private equity guy hardly proves you have some deep "understading of the economy" has Mitt claims. That's all this was really about. That mainstream macro is this thin skinned is highly suggestive.