George DeMartino and Ilene Grabel
This week Paul Krugman used his influential column in the New York Times (NYT) to draw comparisons between the fiscal crises in Greece and Detroit (USA). In the essay, Krugman highlights the rhetorical parallels between the two crises. He argues that “deficit hawks” are misusing the Greek and now the Detroit crises in their continued efforts to lay the blame for fiscal crises anywhere and everywhere on fiscal profligacy and bloated public sectors. He is of course quite right about the misdiagnoses of these crises and the underlying political economy of the attack on the public sector. (Though note that his emphasis on the “Schumpeterian aspects” of the Detroit and the Greek crisis really misses the point insofar as they involve far more than the failure of policymakers to adapt to inevitable changes in competitive advantage.)
There is much more to be said about the Detroit crisis. The sad fact of the matter is that Detroit suffers today from international trade and international financial policies of the past two decades that Krugman himself, and indeed many other leading international economists embraced. It was not so long ago that leading international economists, Krugman included, advocated strongly for the North American Free Trade Agreement (NAFTA), the WTO, and just about ever other neo-liberal international agreement that came down the pike. At the time the champions of neoliberalism ridiculed anyone who raised virtually any concerns about the agreements. Labor and human rights advocates, environmentalists and child’s rights advocates were branded as well meaning but ignorant, sanctimonious, or simply self-interested.