Krugman's attempt on that occasion, in his column, and elsewhere to draw comparisons between the magnitude of the Great Depression and the recent recession and were absurd for myriad reasons then as they are now, as I noted at the time here, also more recently here and here.
Now the speculation is over and the extent of Krugman's misread is evident. As The Economist reports this week, global trade and global manufacturing are surging back:
At first, the recession did hit trade hard. Global GDP fell by 0.6% in 2009 while the volume of world exports dropped by 12.2%. But whereas the Depression saw trade decline for at least four years, this time the rebound has been quick, and sharp. By May this year, emerging-economy members of the G20 were importing and exporting around 10% more than their pre-crisis peaks (see chart). Rich-world trade has recovered from the trough too, though it has not yet made up all the ground lost since the credit crunch began.As it turns out, there is nothing Depressing about current prospects in the global economy...unless, of course, you happen to be Paul Krugman.
At least he's still got his Nobel Prize to keep him company while the rest of us enjoy the good (if not unexpected) news.
ADDENDUM: An response to all the
First, Hooray for Paul Krugman. He is an elegant theoretician of international trade. Hooray again for Paul Krugman.
Now that were done with the hero worship, two additional points:
- Yes, the quote in the first line above came from remarks Krugman delivered a year ago. My question is this: How many times does Krugman have to compare the current recession to The Great Depression before he becomes accountable for having made that claim? It is clear why Krugman wants to advance this argument ("What Paul? The stimulus package might not have been big enough? You don't say..."). But at some point, if the sky doesn't fall, it is fair to say--sky's not falling, Paul.
- Along the same lines, but from an analytic vantage point: My 5-year old daughter can look at a chart and say "that line is pointing downwards." My 12-year old daughter can look a chart with two lines and say "Line A is more steeply sloped than Line B." Neither of them has a Nobel Prize (yet). So to say, as David more or less does (below), "He made that statement a year ago. How was he to know that the trend would reverse itself...completely. Invalidating his comparison...entirely." Indeed, how was he to know? Well that is exactly why he is paid the big bucks. That is why he has the big reputation. Because we expect that he can do more than just compare the slopes of two lines.
(And by the way: I am not fundamentally opposed to analytically-based extrapolation based on trends. You just have be straight about what you really know with confidence, and be prepared to accept responsibility for your claims when any speculations made turn out to be wrong.)