Susan Collins: Good afternoon and welcome. I'm Susan Collins, the Joan and Sanford Weill Dean of the Gerald R. Ford School of Public Policy. And I am simply delighted to see all of you and welcome you here on behalf of the Ford School; the International Policy Center; and, the Department of Economics. It is really wonderful to have so much interest in our speaker today, who I'll introduce in just a moment. But as most of you know, we had to move the venue because of that interest and I'd like to thank Hill Auditorium for wedging us in, in the midst of performance of the University Symphony Band. I feel like I should go and play the drums, but perhaps not. It's a great honor and a personal pleasure to welcome Paul Krugman to campus, as the Ford School's 2009 City Group Foundation Lecture. This lecture series was established several years ago by the City Group Foundation as a gift in honor of Gerald R. Ford. We're very grateful to the foundation for their generous gift, which has enabled us to bring distinguished policy leaders to campus. And we're extremely honored this afternoon to be able to add Professor Paul Krugman's name to the list of our City Group lecturers. Today's lecture is the keynote address for an academic conference we're hosting on campus today and tomorrow. The conference was organized in honor of the distinguished career of our colleague and friend, Professor Alan Deardorff, who is currently the associate dean of the Ford School. Alan's wide ranging and astute contributions have furthered our understanding of why countries trade. The implications for growth and the impact of trade policy on a globalizing world. And the conference has also brought many of the world's leading trading economist to Ann Arbor and I'm very pleased to welcome all of them here today, as well. Well, like many of those conference attendees, I'm an international economist. And while I'm very proud of my profession and its contributions, I do have to concede that there aren't that many economists whose work is followed closely by the general public; whose opinions on economic matters stir great passions among lay people; and, whose weekly writings are routinely discussed around the water cooler. Well, Paul Krugman is the exception. Whether they agree with him or not, people from all walks of life want to know what Paul has to say. And just the past few days, for example, he's appeared in quite desperate settings, such as the keynote speaker at a conference in Helsinki on Finnish Economic Competitiveness and as a guest on the HBO show, Real Time with Paul Maher. Paul's even a hit over YouTube, where a little known performer scored a quarter of a million views with his song, and I promise I won't sing it for you -- his song, Hey Paul Krugman. And if you haven't checked out the YouTube video, I encourage you to do so. But, of course, they don't award Nobel Prizes for popularity or YouTube hits. Paul Krugman is one of the great economists of our time and he was awarded the Nobel Prize for his analysis of trade patterns and the location of economic activity. Traditional theories of international trade emphasize why countries are different and why they will trade with us, exporting and importing, and trade with each other -- exporting and importing different products. Paul's work emphasized that an awful lot of the trade that we see in the real world is between countries that are quite similar. And they're trading relatively similar products. His models highlight both that firms can take advantage of economies of scale, or produce more cheaply by producing large quantities. And the consumers value variety and choice. Thus, he pioneered models of trade in which large firms producing similar products compete in a globalizing marketplace. These models also link globalization to economic geography, helping us to understand where firms and people choose to locate and why. Paul's academic work stands out because of its insights about the real world. In packages that economists love, because they're mathematically elegant and deceptively simple. This work on trade, like his work on financial crisis and in so many other areas, has launched new avenues of research and literally thousands of academic papers. As most of you know, Paul's work is also remarkable for its clarity. Lucidity of the writing in his many articles, books and columns has significantly raised economic literacy around the globe. And as dean of a policy school, I particularly want to highlight his dedication to the importance of clear analytic thinking as a guide for policy. On a more personal note, I can also attest to the fact that Paul has educated and inspired generations of international and policy oriented economists. Nearly 30 years ago, his course on international trade was one of the first courses that I took in my doctoral studies at MIT and I have had the great fortune to benefit from Paul's insights and perspective as a member of my dissertation committee and at numerous points during my career. For all of those reasons and more, I could not be more pleased to call to the stage, our 2009 City Group Foundation Lecturer. Please join me in welcoming Paul Krugman.
[ Applause ]
Paul Krugman: Well, thanks. Thanks Susan and thank every -- thank you all for coming. And thank -- I'd like to thank the [inaudible] Burton [phonetic] for organizing this great event. Not this event, but the Festdrift [phonetic] the celebration of the work of Ellen Deardorff, which is a great group of people and, you know, it's kind of a homecoming for me. This is the world in which I started. Because the occasion for this is the conference honoring Ellen Deardorff's work, I'm going to try to talk at least in a speech a little about different things than what I mostly talk about these days. Mostly, you know, everybody wants to know about the economic crisis and I will talk about that a bit at the end, but I'm sure it will come up in the questions. But at least for starters, I want to talk about my whole new territory, originally, academically, which was discuss -- sorry about that -- other than national trade and globalization. And since this is Gannett, this is really all about honoring Ellen Deardorff. I just thought I'd reminisce for a moment. So I got into international economics, you know, coming straight out of graduate school, late 1970s and joined what was then the conference circuit that people who would meet and many of whom are here now. And so somehow, they all look older. That hasn't happened to me, but in anyway -- and Alan Deardorff was there. Alan was, you know, at many meetings I was at. Late '70s, early '80s and was extremely distinctive because he was an American, which at the time was quite rare. At the time that I got into international economics, there were a few Americans in it, but it was mostly from other places. Actually, the way I thought about it was that it was a field dominated by colonials. Some Indians, but mostly, Canadians and Australians, it seemed at the time. That's probably not true literally, but there were an awful lot of them, which actually, imparted a certain character to the conferences. I was able to finally pinpoint the character. Initially, I would go to these meetings and they incredibly -- I come home exhausted, blasted. Even though I was much younger then, obviously, but even so, I really was having a hard time. And I actually went to one with a bad cold and was taking cough and cold medicine and really couldn't drink. I didn't dare to drink and it's funny how much less -- you know, there's all these Canadians and Australians and an awful lot of beer at those. But anyway, by the way, there's a Chihuahua in my throat now, which may make an appearance. There was a reason why Americans weren't that prevalent in international economics at that point, because even then, international trade didn't seem to be that big a deal for the United States. In 1970, which is about when a lot of people who were on the conference circuit then would have made their decision to be in international economics. You know, imports were only about 5% of GDP. They're 17% now. So we had this explosion of international trade, which has turned what was at the time, a little bit of a back water within economics into something that's enormously important. So I want to talk about globalization. What it's done and I'm going to finish up by talking about the role of globalization and the mess we're now in. But I want to talk a little bit about history, about the forces. What we understand. So first thing you should know in terms of the history is that globalization is not a new phenomenon. It was -- there was a -- the enabling technology for globalization, the key inventions arguably were the railroad, the steamship and the telegraph. There was a very extensive global economy created in the late 19th century. That there's a lot to be learned, even now, from studying that economy. But at that, global economy kind of went into abeyance for a long time between two world wars, the Great Depression and protectionism and a lot of shift by much of the world to inward looking strategies of economic development. Globalization receded a lot and by the 1970 World Trade as a share of gross world product is probably only back to around it had been in 1913. Other aspects of globalization were nowhere near their pre-World War I levels. There was not nearly as much flow of capital, even now, despite all that we talk about immigration [inaudible] it's still migration of people than there was, because there are many legal barriers now that didn't exist then and the legal barriers of the poorest do actually matter. But just about the time that I was getting into international economics, just about the time that I first met Alan Deardorff, all that was about to change. Now, there'd been some, some return. international trade had grown substantially in the '60s and in the '70s, but it was done so in a kind of limited fashion. Most of the -- what we would now consider the emerging markets were still inwardly turned in their economic policies. What was happening was there were agreements that had opened up trade between quite similar countries. So there was a lot of trade between the United States and Canada. A lot of trade within Western Europe, but it wasn't a lot of the stuff that we now think of globalization, certainly China was not yet in the picture. Even the smaller Asian economies were barely there. So it really didn't look the way it looks now. What I was -- the analytical work that I did that, that I and others did was a whole movement that really, that ended up with that kind of interesting event in Stockholm, what was largely about that growth in trade. Trying to understand why the United States and Canada, which looked so similar to each other. You do so much trade; why France and Germany ship automobiles back and forth to each other. It's kind of the way things tend to work in economics, is as soon as you have a theory, the world starts moving in a way to make the theory less and less relevant. And so we've actually, in some ways, moved to a completely different world, which in some ways, but not in all resembles the kind of trade that we had in that first age of globalization before World War I. What changed? Two things, I think, really. And they were both happened. I think to myself now, when we were at -- oh, the Handbook of International Economics, the first volume was a conference that took place in Princeton in 1982. And when we were there, we didn't -- had no idea, but in fact, out there, the world was totally changing. The whole world of trade was changing in a way that certainly, I had no sense of at the time. Two things were really changing. One was technology. The ability to ship things long distances, fairly cheaply has been there since the steamship and the railroad. What was the big bottleneck was getting things on and off the ships. A large part of the cost of international trade was taking stuff off the ships, sorting it out, dealing with the pilferage that always took place along the way. So what the first big thing that changed was the box. The container. A lot of those things -- we think about technologies that changed the world. And we think about glamorous things like the internet and -- but if you try to figure out what happened to world trade, there's a really strong case to be made that it was the container. The container that can be hauled off a ship and put onto a truck or a train and moved on. And these days -- used to be the ports were places with thousands and thousands of longshoremen milling around doing stuff. Now, they're like something out of one of those science fiction movies in which something has caused all the people to disappear and they're only machines, right. But there's -- and [coughs] told you about the Chihuahua in my throat -- the, the big change there, I've just been re-reading a very good book called The Box, which is about containers. The big change there was really between the late 1970s and mid 1980s, sharp drop in the cost of transactions, which opened up the world; made it possible to do what we do now, which is to produce a good in many, many different places. As the different stages of production, different components. Ask yourself where is an iPod made and the answer is, that's a really complicated question to answer. The other thing that changed was policy. To some extent, in countries like the United States, but we had actually moved quite a long ways toward free trade. What really changed was that many of the developing countries had followed for 35 years after World War II, they followed a policy of looking inwards. Of encouraging production for the domestic market, which whether by design or simply because that's the way [inaudible] equilibrium works. Ended up discouraging exports, basically, the way these inward looking policies discouraged exports. Great shift toward outward looking policies. Great shift towards allowing foreign trade to become the driver of growth. The most extreme case, of course, being China, which went from virtually closed to the world, to extremely open. And all of a sudden, this explosion of world trade. And all of a sudden or over a relatively short period of time, international trade was no longer interesting to Canadians, for whom it's always been interesting because they have this neighbor. And was interesting to all of us Americans. What do we know about globalization? I think even now, we don't -- we're still adjusting our stories. In fact, I've actually been changing my own story about globalization a little bit than the last two months, because I've been noticing some stuff that I was not paying sufficient attention to. I really should have, because it's up my line very much. So this is the part where I get to tell you what I did on my summer vacation. I did actually take -- was holidaying in Scotland earlier -- just relatively recently. And -- this is kind of depressing. What do we commoners do on vacation? They go to museums that are focused on economics. [Laughter] In Dundee, Scotland, there's a terrific -- if there're any people economics-oriented, you'll find yourself there. Visit the Vurdonport [phonetic] Museum, which is dedicated to the history of the Dundee Jute [assumed spelling] industry. And if you haven't been there, you might think of Dundee, but [phonetic] the name -- it sounds like it ought to be some cute little town. It's actually -- they're trying to rebuild, but it's a grime, decayed industrial city trying to crawl its way back. And what it was industrially, was jutopolous [phonetic] is what they called it. It was the center of the world jute trade, which was a enormous, long-distance trade in the late 19th century. Taking the fibers, which come from India, treating them, drawing them; eventually, ending up as burlap bags and such like. Huge business. Dundee had more millionaires per capita than any place else in Britain. How do we think about that? Part of it was that it was compared advantage, which is what economists -- the grand theory of economic of international trade which has dominated most of our thinking which is the country's trade because they're different. They have different resources, difference competences and they trade, in effect, to take advantage of those differences. Obviously, Britain had to import the jute because it won't grow in Scotland, for sure. Why was the manufacturing taking place in Britain? Because Britain had the capital. It had the technological skill. It had certain kind of skilled labor in a way that India, at the time, did not. Later on, actually, the industry moved back -- the actual manufacturer moved to India because those things did spread. But initially, at least, it was to do with Britain. But that's not the whole story, because that says why you should be producing -- why you should be processing jute somewhere in Britain. It doesn't say why you should be doing it in Dundee. And there the answer is much closer to the kinds of things that I've spent a lot of time thinking about in my career, which is the role of increasing returns. The role of things that accumulate. So as is characteristic of these stories, some more or less accidental historical things that got started. In the early stages, the process of treating the fibers relied on whale oil. Later, it turned to mineral oil, but initially, it was whale oil and Dundee was a whale import. And also, it was similar in some respects to dealing with flax, which was the only thing they had, but all that, that's just how it started. It became irrelevant. You had this clustering. You had this process where it fed [phonetic] on itself. In the economic geography, a lot of us, some years back, we discovered the works of the great Victorian [inaudible] Alfred Marshall, who focused a lot on these industrial clusters, which was very much a story of the time. That he said there were really three things. There was the creation of a thick market for particularly highly skilled, but specialized skill labor. There were specialized suppliers of equipment services that you needed in the industry and there was what we would now call technological spillover, but as he phrase was, the mystery of the trade become no mystery, but are as it were the air. Basically, everybody in Dundee knew all about jute. So you had this kind of clustering. And that's actually quite typical. If you go back, we do tend to think of 19th century trade as having been straight forward. There were countries with different -- there were tropical countries, there were tempered countries. There were countries that knew manufacturing and there were countries that didn't. That was actually a lot of this clustering, as well. So there were many such clusters. Obviously, jute in Dundee. Hose and lace in Nottingham. Cutlery in Sheffield, go down these last -- a series of things. We actually had counterpart things in the United States, as well, although the United States was protectionist and relatively closed. So they served the domestic market. So we also had Patterson, New Jersey was the equivalent of Nottingham. And Troy, New York was the detachable collar and cuff center and that sort of thing. Well, anyway, I always love these historical things. What about today's world? Today's world is extraordinary, complex, enormous volumes of trade. When I was first getting into this, we could say, "Well, you know, in some ways, globalization still falls short of what it was in the Edwardian Era. Can't say that now. Now, we have this enormous -- what we have and what didn't exist in the past is these complex supply chains where things are many, many stages of production. That's the iPod, about a dollar -- the iPod's final assembly point is trying -- but that assembly is only about a $1.50 of the price of the iPod. The rest, there is other trainee stuff in there, but there are just many, many stages and it's a large number of countries are involved. Creates a tremendous amount of shipping back and forth. A lot of that now, reflects again differences between countries. The wealthy countries still have advantages. They have still somewhat better technology. They have more skilled labor. They have all of the advantages of being in an advanced country environment, so there's quality control issues. I understand, I haven't seen it. There's a new book out called, That They Made in China. There's still, even now, there are differences in [inaudible] but on the other hand, the developing countries have inexpensive labor. And in some cases, reasonably good productivity in manufacturing and so we have a trade back and forth that is based upon the goods that are really, goods in stages of the production process that are really still requiring advanced country environment or done in advanced countries. But the other stages are done in developing countries. Within that, there's a lot of the same thing as my story about Dundee, but what's interesting is that these days, if you want to find those clearly defined industrial clusters; those cities where a particularly sort of narrow competence leads to the dominance of the whole city economy, you really find them best in the emerging markets in the developing world. So you go around China, you'll find that there is, you know, there is -- well, if Dundee was Jutopolous in the late 19th century, Yambu [phonetic] is underwear city in the 21st century. There are these clusters, again, the broad -- it's pretty -- it's probably a foregone conclusion that we're going to have labor intensive apparel produced in China or now, moving down to even lower wage countries like, Vietnam. But it's a -- the details depend a lot on accident, which leaves some particular town to develop a specialty. And derive advantages from that, because there are advantages of this cluster. The advantages of this scale of production in a particular locality. I should mention, by the way, since again, this is Alan Deardorff conference that this whole process of fragmentation of production, which has made it possible to have this huge volume of world trade is one of his -- one of the areas he's done a lot of work in. When this stuff first began, when we were just starting to see the surge in exports from smaller Asian countries, we used to say, "Well, you know, there's only a limited amount of this stuff that they can -- labor-intensive stuff that they can export." What will happen? I mean, I remember specifically saying, what will happen if China tries to do this? It just isn't possibly going to be enough labor-intensive stuff. And of course, it's there because the ability to segment the production of goods and produce all of these labor-intensive stages of production. Transformed world -- the process really gained a lot of momentum because of the interaction of these technological changes and the political changes. The technological changes meant the country -- some countries could do very well by integrating with the global economy. And that made other countries more willing to liberalize their policies and do the same thing, and so this explosive growth of globalization. Is it a good thing? Or is it a bad thing? And the answer, of course, is yes. The good thing, first of all, just in terms of the economics. Clearly, there are -- the world economy is richer because of all this stuff. It's richer both, because we have countries -- here [inaudible] for two reasons. One is that we have countries concentrating on the things they do relatively well, which doesn't mean, as the economists know here, it doesn't mean they do absolutely well. Actually, on any given thing, it's almost certain that U.S. labor is more productive than Chinese labor. But that varies quite a lot, so by having the Chinese do the things at which they are relatively productive, we get the whole world producing more efficiently. It means the world wealth has gone up. In addition, the world market makes it possible to do a lot of things on an efficient scale. In some cases, by just having a really big factory, but in many cases, by having a concentration of production of -- not many factories where the firms produce mutually reinforcing advantages. And all that gets passed through ultimately, two buyers. In the end, the world is a richer place because the underwear makers of Yambu are more efficient than any national, purely domestic market-oriented underwear city could be. So we have a world that's clearly richer. But that doesn't mean everybody benefits equally. And there are many dislocations. Many distributional effects. The most obvious and the one we worry about a lot is that lower formal education workers in advanced countries are almost certainly hurt by, by imports, that, that inequality is wider to some extent because of globalization. I would argue that the evidence is still a little suggestive -- that it's a secondary factor -- but inequality has widened and globalization is probably part of it, and that has probably hurt workers in advanced countries. The, on the, if you, if you take a global citizen point of view, though, I think you want to say that those losses are less dramatic than the huge gains which many workers have achieved in the developing world, and you, there, there's a real trap, I think, for, for concerned people in the, in the advanced world, a tendency to think of, to compare the ugly reality of life for workers in today's developing countries with an abstraction of what you think it ought to be or with an idealized picture of what it used to be like rather than with reality. So sometimes this almost comes down to condescension, thinking about happy peasants living their traditional lives and you compare that with the actual workers at Lonjeau [phonetic] and you say, "Oh wow, this must be a terrible thing." But the fact of the matter is, given the reality, which is that developing countries were incredibly poor in 1970, and the fact that some of them have now achieved a really big increase in their standard of living even if it looks pretty bad to us, that there's been a tremendous amount of progress. Hundreds of millions, perhaps billions of people, live better lives because of globalization. But it is a mixed picture, and it's also turned out to be much harder than, I think, many economists believe to actually reap those gains from globalization. When the great takeoff of some East Asian economies took place, a lot of people thought, "Well, if you just open yourself up to world markets, this is what happens." And a number of countries, particularly Latin America, at least, that's where I track it, have opened themselves up to world markets, and have not gotten anything like the same results. So it turns out that it's a much more mixed, much more uncertain picture than we were hoping it would be, but if you'd asked me 2 years ago, "How's globalization going," I would have said, "Well, you know, there's a lot of...it's certainly not wonderful but there are some, some...a lot of good things have happened, and that on the whole, this is a, has been a force for good." All right. Something happened to us recently. So we have the world economy go into this terrible crisis. What can we say about the role of globalization in this future globalization, you know, small questions, but anyway, let me, let me, let me try to talk about, about where, where I think we are, right now. And by the way, of course, there is a, if you read your history, you can't help but think, gosh, we had this global economy the single biggest force killing it, the original goal of the global economy was the Great Depression. And now we are in a world slump that bears a definite family resemblance to what happened in the early 1930s. Is it all going to happen again? What does it say about where we're going for now? So, okay. The crisis. We have had, well, it, it has been awesome, of course. The first year of the crisis tracks the Great Depression very closely. It actually turns out that the initial fall in industrial production was as big as it was in 1929-30, that the initial fall in world trade was actually sharper than it was in 1929-30. The fall in GDP, well, we don't really have the statistics back then, probably a little bit less, but, but on the whole, we really did have a, a onset of the Great Depression scale world crisis. It does appear to have stabilized now, so the, it appears that Armageddon has been put on hold for at least a little while here. The Apocalypse has been postponed. But it's, it's been a pretty shocking crisis, and we are of course, nowhere near being out of the woods. Was the crisis caused? Did globalization pave the way for this crisis? Well, certainly not in the simple sense that all this increased trade was directly responsible for the crisis. It didn't do that. If you want to look for causes of the crisis, you would possibly look more at the financial side of globalization, which of course, is not independent. So if you're looking for where things went wrong, you would say, well, as, as, as China became deeply integrated into the world economy, it also sort of stumbled into a policy of accumulating huge reserves, which led to a glut of cheap money in the United States, which helped feed our housing bubble. It's kind of an indirect chain, but it certainly is part of the story. You would also say that, in a more limited sense, that we tend to think of this crisis has having been a primarily U.S. event, but actually, there's a lot of it happened in Europe as well. And they're, they're sort of more localized globalization, if you can use that phrase, played a big role. They had huge lending to Eastern European emerging nations that was, in its own way, as big an imbalance as the U.S./China thing and has ended in similar lease [inaudible] grief. So you can certainly say that the opening up of world capital markets, the opening up of world capital flows, played some role in engendering this crisis. Globalization has certainly played a role in propagating the crisis. One of the things that has been remarkable is that although you can point to certain, you know, obviously, the, the places of the financial excesses were the United States, the U.K., arguably, but in different ways, some of the European countries that had a enormous housing bubble, so Spain. The punishment has not borne, if you look across countries, has not borne very much relationship to the crime. That the steepest falls in GDP, at least initially, have actually come in countries that did not have runaway financial sectors and did not have housing bubbles, have come in Japan and in Germany, which were, well, what was their sin? Their sin was being deeply integrated in the world economy and being exporters of durable manufactured goods, which took the biggest hit. So the biggest declines in GDP, at least initially, have come in countries that were being hit through world trade, and all of this is possible because we have such a, an integrated global economy. And that contributes to what is in some ways, the most troubling feature of this crisis looking forward, which is that it hit everybody. I'll come back to that in a second. There's another sense in which the crisis, in which globalization helped to lead to a synchronized crisis, and this is a little bit softer, but I think, very, still very important. One of the effects of globalization has been, while it's, you know, obviously, what's driving it is people looking for, for profit, and what, what it's about the movement of goods, and services and money, it also produces an integration of thought. We more and more, you know, we all certain of culture, I gather that there was a presentation this morning about the horrors of, of cultural homogenization, which is, you know, whatever you think of it, it's very real. We certainly all dress alike around the world, we all, we all watch the same kind of entertainment and, and we all think alike, which means that intellectual trends, the conventional wisdom of the moment is now a global conventional wisdom rather than a national conventional wisdom. And in particular, pretty much everyone around the world thought it was a great idea to deregulate banking and at the same time, so that we all, when the house of cards came down, it came down everywhere. Which makes this very difficult right now. We've just had an awesome financial crisis. It's not, now that we've seen it happen, that hard to understand. We look at it and it's actually, it is a, it is a more or less a, a historically standard banking crisis, but dressed in different clothes. So we, we, if you go back to the early 1930s, there was a wave of banking failures, bank runs, and such things have happened in individual countries since then. This time, well, we actually had pretty good guarantees for banks as conventionally defined, basically, big marble buildings that take deposits. The trouble was that we had sort of failed to do anything about the growth of, of institutions that functionally are banks; basically, anybody who borrows short and lends long is a bank, but weren't called banks, and didn't look like banks, and weren't strictly speaking, depository institutions, but once you take that into account, what we've had is the 21st century functional equivalent of 1931 around the world. With, it so, this time, bank runs don't consist of hordes of people out in the street banging on the doors. They consist of hordes of people on the Internet clicking their mouses, but it does the same thing. And it's sort of all played out very similarly. And we have, thank God, had a pretty vigorous emergency response. So we have learned a little bit these past 75 years and appear to have contained it from being a total collapse. But what comes next? Well, we've had a number of more localized banking crises around the world since, since the Great Depression. We've had, obviously, we have had financial crises of various sorts. We've had Mexico and Argentina and, and Mexico again and Argentina again, and, and the Asian countries, and Sweden and Finland and, and all of these are very nasty. We know the IMF has done a lot of, you know, reaching back into history to ask what happens, and the answer is that financial crises not only are severe, but it takes a long time to recover. There's one other thing that becomes very clear from, from the record, which is that all modern financial crises, economic recovery from all modern financial crises, relies crucially on the same thing, which is that the crisis-afflicted country recovers to a large extent by, at least for a while, running big trade surpluses. It basically pulls itself out of its hole by selling a lot of stuff to parts of the world that were not caught up in the crisis. I think you see the problem. Unless you can find another planet to export to, the normal [laughter] the normal exit from financial crisis. Not, not the stabilization, which I think has been a tease, but the actual return to something that looks like a reasonably, fully -employed economy, that route is not available. And you really look, it's, there really are no exceptions to this rule in modern times, whether it's Argentina or the East Asians or even Japan emerging temporarily from its lost decade of growth. They've all been achieved through export surpluses. And that is not available, so if you are actually looking for a precedent for a world economy managing to emerge from a financial crisis, and, you know, fully recovered from the effects of a financial crisis, without, where everybody's caught up and where countries are not able to do it by running trade surpluses, you actually have to go back to the recovery from the Great Depression itself, which was the, you know, the full recovery was achieved through a large public spending program, known as World War II. So, it's, it's not a very encouraging thing. The last time we had a global crisis, one of the effects was to roll back globalization for a long time. That does not seem to be happening right now, although, yes, there's tariffs on tires and things, but there's actually nothing like the kind of protectionist response that took place in the 1930s, not much sign that that's going to happen. The question I guess one might ask is, maybe should it happen? We seem to have a global economy that is, that we don't exactly, we, our institutions have not caught up with this. We aren't actually managing to find global solutions for crisis; we are just managing to find ad hoc patches to, to keep the thing from totally falling apart. We are to a certain extent holding the world economy together with, with scotch tape and chewing gum. So our, is there a, a reason in the crisis to roll back globalization? I think you could actually possibly make that case. But I don't think it's going to happen, because the advantages of globalization are still very real, the virtues, and of course, everybody does remember, actually, they remember something which may not be entirely true, which was that protectionism was a major cause of the Great Depression. That's arguably not true, but in any case, it stands as a cautionary tale. Which means that we need to find a way to deal with this. And I think one way to look at the world right now, I mean, there are many, there are many different ways to look at it, but one way to look at it is that we actually created this global economy without creating the institutions that we need to manage it. We are still in a world of national policies, even where we have super national institutions. They're not functioning very well, so that the European Union is looking awfully disunited when it comes to [inaudible] our policies these days. And they really, they're enormously interdependent, and yet they don't seem to be able to make policy jointly. We've had some cooperation in some of the emergency measures, but those have been amazingly dependent, really on sort of personal contact. I mean, they, you could argue that the, we managed to save the world basically because Jean Truchet [phonetic] and Irving King and Ben Bernanke were able to sort of agree on some things that needed to be done in the heat of the moment. And while I would like to have a rule that the leaders of policy would always be in the hands of smart bearded Princeton professors, that's not something we can really count on in the future [laughter] So we do, we do, actually, we have not yet come to terms with this enormously more integrated economy, this economy that, I have to admit, 30 years ago when I was getting into international trade, I never imagined it would, it would be this relevant. And we have no choice in the end, because, well, you could imagine rolling back trade flows. You could imagine. It would not, it's not technologically impossible to go back to a world of relatively inward looking economies. There are other ways in which we're globalized, like it or not. The atmosphere doesn't care where a ton of carbon dioxide gets emitted and we're now at a stage where those global constraints bind enormously on all of us. So we're, we're globalized, whether we like it or not; it's an amazing, frightening time. I'd like to think that we'll come out of all this with an understanding that we really need to go beyond just trusting this vast global economic machine to do the right thing, and figuring that we actually need to have some adult supervision of the whole thing -- maybe it will actually happen -- and hey, we're supposed to be optimistic, right? Otherwise, what's the point? So, amazing times. As a citizen of the world, I am quite horrified about what we're going through, a little less frightened than I was 6 months ago, but still, awful prospect, but this is a conference to analyze economic research and, and to celebrate the research of [inaudible] Deardorff and as an economic researcher, may I say, "Boy, I'm in clover. This is like a volcanologist watching Mt. St. Helen's erupt, and great time, great time to study, unfortunately, not to live through." Thanks.
[ Applause ]
Thank you so much. Paul. [laughter]
Susan Collins: Yeah. First I'd like to thank you, Professor Krugman, for coming to the University of Michigan today. I wrote this down. Recently I watched you and former Governor Spitzer speak on Bill Maher regarding the current lack of social ability in this country and the decreasing income growth within the middle class. Former Governor Palin was also mocked on the show as she has been before, for saying recently that the key to an economic recovery is a slashing of payroll taxes, corporate taxes, etcetera. Globalization is obviously very real and capital is free to flow where the costs of it are the lowest. If, in fact, the goal for our economy, is job growth, real wage growth, and the decreasing of income gap between the rich and the poor, how does the maintenance of a high corporate tax rate, which makes it more expensive for multinational corporations to do business in the U.S. relative to other countries, and therefore, makes the U.S. that much more uncompetitive with the rest of the world achieve that goal?
Paul Krugman: Okay. The, the corporate tax, the argument that corporate taxes are really high in the United States and are, are driving business out, you know, it could be true, but it happens not to be. I mean, if you actually look at the numbers, [applause] there's a lot of massaging of the data, you know, that are used, so people, the overall corporate U.S. corporate tax rate is not much out of line with other advanced countries and you know, direct investment has, has on balance, been flowing in. It's not, just no sign that that's actually been happening in America, so, not, not, not the thing to worry about. And by the way, you know, if you take the overall level of taxation, you know, we're, we're pretty much at the bottom along advanced countries. And if you take the, and even if there were, there really were a big problem with corporate taxation, it's not as if we're dealing with, you know, anonymous vast forces. If there was a, if there was really a war of corporate tax cutting among the major economies, we could sit down around a table and try and settle this. It's not, it's not a large number of players, so no, this, this is, of all the things to worry about, the idea that high corporate taxes are costing America lots of jobs, is really, doesn't belong in the conversation. [applause] Yeah.
Hello. I'd like to ask you to clarify an observation that you made about globalization leading to greater inequality, because it seems like you're describing globalization as sort of a leveler that lifts up, the wealth of China and that it may be, does that at the expense of, of workers in other parts of the world, so what's the, the, what's the metric by which you see in equality increasing as a result of globalization?
Paul Krugman: Oh, yeah. If you looked at inequality within the United States has increased dramatically. Increased, inequality within most advanced countries has increased a little bit, although basically, mainly in the English speaking countries, which is an interesting thing. But the, but if you were looking at some measure of world inequality, the, that's gone down because of the big rises in income and some of the roles, in some countries that were formally very poor. Actually, I'm going to give my, I didn't give my usual pro-globalization sermon, which is, when I went into economics, when I was a PhD student, I thought to myself that I really should be doing developmental economics, because that's what really matters for the people. But I didn't because in, circa 1975, it was too depressing, because developmental economics was basically non-development economics. There hadn't been any big success stories. There hadn't been...you tried to look for a country that had gone from a third world to first world, and you basically found well maybe Japan, or you know, Japan 1883. All of that has changed now. Lots of poor countries have remained very poor. There are a lot of terrible stories out there, but there are also real success stories and all of those are tied to globalization. I think a world in which it is at least possible to have a place like South Korea, that was on the edge of subsistence in the mid-1960s and is now a decent, advanced society, is a much better world than the one which we have sort of locked into permanent roles, so that's the, that's the pro-globalization sermon. It doesn't mean you should be blind to the downsides, but that is the, the plus, the upside.
Professor Krugman, I just wanted to ask, do you think the contributions in the economic debates from, from people who aren't macroeconomists, I'm talking voices like Richard Posner, who is not an economist at all or Eugene Falms [phonetic] who is not primarily a macroeconomist or even, even just regular bloggers like Matthew Iglasias. [phonetic] Is their contribution adding to the state of the debate or is, is there a risk that they're muddying it by knowing just enough to sound interesting and reasonable to people like, laymen like me, but not enough to, not, don't know enough to really contribute substantially.
Paul Krugman: Oh boy, I mean, economics is not a priesthood. [laughter] And God knows, at this point, the economists certainly have no claim to say that no one who has, who acts, you know, the piece of paper should be in the debate, it's not like, you know, it's not like we've done all that well in the last year or two? [laughter] So, by all means, people should play in, but I think, I think, you know, in some ways, this whole modern system of credentializing is, you know, is somewhat artificial and someone can be, look, I'll give you, I'll tell you some-, Martin Wolf of the Financial Times, is actually not a trained economist. That doesn't stop him from doing actually superb work, you know, on it, because he's, he's learned a lot about it and not just about the professional work, but observing the world. So, that's fine. Now, if people are going to weigh in on the economic debate and not get basic facts right, not understand the difference between changes at an annual rate and actual changes over the quarter and not, GDP at an annual rate and GDP, and so on, this is, this is about Posner, who was off by a factor of 16, and his critique of Kristy Romer, [phonetic] then, you know, then we probably shouldn't listen to them. But it's not a question of the credentials; it's a question of whether they're serious.
Let me ask you a question from two points of bias. One is, I live in a state that at least used to make its way in the world by making things and selling things and secondly, when I was getting my piece of paper, we studied a lot about exchange rates, a term interestingly, that you haven't mentioned yet; I just want you to think about contemplating a world in which our, two of our major exports cease to be mortgage bonds, private debt...
Paul Krugman: ...and, on the other hand, U.S. Treasuries public debt, and can we think about a world in which there's less demand for those things in other countries. The dollar, in fact, weakens considerably, and all of a sudden, maybe some of our lost or losing industries have a stronger comparative advantage because the dollar is, is a cheaper thing for people to buy with. You know, that was actually starting to happen just before all hell broke loose. You could actually see U.S. exports were surging, U.S. manufacturing was staging a, something of a comeback and we were running into constraints, which were a problem but were revealing. It, there are a lot of stories from 2007, about the emerging shortage of skilled machinists, skilled pipefitters; we were experiencing a manufacturing revival and, and being hurt by the fact that we had gotten so much out of the business and no, I think that's where we will be, if and when we finally emerge from this, and I say it will be a stronger manufacturing nation again, partly because of a weak dollar. It doesn't mean that we'll be doing the same things we were before. It's, you know, I don't think...apparel is something that is going to be done very much in the first world no matter what, but it's, it's not going to happen and it's just; we were in a very weird world on, in the middle years of this decade. We were in a world where the United States was, as I love, as I used to describe, we were in a world where we were making a living by selling each other houses which we paid for by money borrowed from the Chinese. I mean, it was a...that's not sustainable. That's not the way it's going to be. The other version of that is that we actually had fair and balanced trade. Right, if they were sending us poison toys and tainted seafood and we were sending them fraudulent securities, but the, [laughter] the...neither of those is original [laughter] but it'll, it'll come back. Now it won't come back in the...in...and of course, it may be a while. And of course, China, the other thing you need to bear in mind is that China's enormous surpluses, the, that's a recent development. In China, it was roughly in [inaudible] balance as late as 2002, so this whole bizarreness, this bizarre economy, the house of cards that collapsed, was a relatively recent creation, and if we can go back to a more reasonable set of exchange rates, a more reasonable set of capital flows, some of this will come back. I don't, I don't know what the fate of the Michigan automobile industry is, right? That's, that's problematic, not just because of the, of the dollar and the crisis, but also because of transplants and all of that. But it 's going to be quite different. And, yeah, it still is weird, I'm using that word a lot, but, there, there is, it is hard to figure out, we've become so used to a country that doesn't seem to be making many things, although but there's more of those than people imagine, but, but, but certainly less than there used to be. The, if you take the train up the Northeast Corridor, there's a famous, as you cross the Delaware River, there's a sign that says, "Trenton Makes, The World Takes" and what they actually make in Trenton now is nothing. So, things have changed, but I think, I think we'll see some of it come back.
Your comment about the U.S. actually having lower tax rates than a lot of Western advanced nations made me think about what those taxes pay for in other nations, namely, social safety nets, you know, healthcare systems, which led me to the question, if you were made king for a day, and got to design the U.S. health care system, what would it look like? [laughter]
Paul Krugman: Yeah. [applause] Yeah, I mean, look, the, the, if you could wipe away all the political realities, you'd want it to look probably like France, which is, with its heart, it's a very Gallic system. It's actually hard to explain to fully understand what's going on, but it's, it's basically a single payer system with a mixture of public, private, non-profit provision of health care, but yeah, I mean, if, if I could start from scratch or waive away political reality, I'd go for something like, something like an idealized version of Medicare for all, so, not just single payer, but [applause] but a lot more, a lot more effort to sort of police the provision of health care, so that it's done wisely and you don't have runaway costs and, and a lot of spending on procedures that don't help people. Now this is, but, that's it, okay? I don't think you want to be a purist, because there are lots of ways to have universal health care with much lower costs than the American system. Basically, every other advanced country does it, right? And they do it in wildly different ways. They do it, in single payer, they do it with actual socialized medicine in Great Britain and in Spain; they do it with private but tightly regulated and, and subsidized health care in, in Switzerland and the Netherlands. There, there, there appear to be about a half a dozen ways to make this work. We happen to be following none of those ways, but it doesn't, it's not that you have to do it in one ideal way, it's just do it, that's the point. [applause]
Hi there. What's going to happen to the world economy after a nuclear device is detonated at the corner of Sixth Avenue and 42nd Street in New York?
Paul Krugman: Oh boy. [laughter] If it's one of the days that's...it's fairly frequent, that I'm actually in the city, I guess I won't care. The [laughter] no, look, this is, can I say, though, that this is terrifying, but, what actually would be, the actual terrorist incident we had which, you know, first was what supposed to change everything, you know, didn't. That we, this is, this is a real possibility that someone could do it, but it's not, it's not something that any of the players we know about is capable of doing. I mean, I'm stepping completely away from economics now, but Al Qaeda is a vicious gang of fanatics, but they really got lucky on 9/11/2001. They haven't been able to do anything on that scale since, and, but, sure, you want to be fighting nuclear terrorism which, as I understand it, the most important thing is actually securing nuclear material in places like the former Soviet Union, not, and, and doing all of the things that one tries to do to fight terrorism. The, it, it's not a...there's no indication that you have to completely change the way you live. That we need to become a police state ourselves, that we have to, there was a lot of talk about world trade, world interactions have to be shut down because of the terrorist threat and that, that has proved unnecessary. And, and I even think, I, every time I squeeze my shampoo bottles into my little bag, I get really mad because that was clearly an overreaction, that the war on liquids was, was inappropriate [applause] so, you know, there are lots, there are lots of bad things that happen in the world and you try to deal with them. I don't, you know, don't want to fixate on just that one.
Thanks again for being here. As an economics student, you learned a lot, especially in mac, introductory macroeconomics, you learn about, when it comes to government spending, there's 2 major factors - there's the Kansian [phonetic] multiplier and then you have crowding out, and recently, I know that some economics have argued that the Kansian multiplier isn't as effective as we once believed, and you've actually argued against crowding out, you believe that the large trillion dollar stimulus package is crowding in. So I was just wondering if you would just explain that a little further.
Paul Krugman: Yeah. It's not a, we're in a very special circumstance right now. We're in a situation where, which we, in the United States, haven't been in since 1930, although the Japanese were there in the 90s. Which is, that interest rates, short term interest rates are basically zero, that there's a, and, if, see, the normal, we talk about crowding out sometimes as if it's a mechanical thing, but it's actually, it's mediated through, through, through actions by the Federal Reserve normally. If you expand and the, you know, fear of inflation expanding economy causes the Federal Reserve to jack up interest rates, the ones it controls, which then lead to higher interest rates on other things that should crowd out private investment. Ordinarily, that's a very real story. Certainly, what happened in the 80s from the Reagan deficits. Right now, take the Taylor [phonetic] rule. It's a rule of thumb for, to, for Fed policies; it depends on how depressed the economy is and the rate of inflation. Apply a Taylor rule that actually fits Fed policy in the past and that's what the Federal funds rate would be, should be, according to the Taylor rule right now. And the answer is about minus 5 or 6%, around minus 500 basis points. This is a world in which expansion of fiscal policy is not going to cause the Fed to raise rates. It's not going to lead to higher interest rates. So, the normal arguments about crowding out don't apply . And in fact, or, an alternative way of saying it, I'm going off this...one way of saying it is, right now, the world is awash in excess savings. Around the world, the amount that people want to save is less than the amount that businesses are willing to invest, even at zero short-term interest rates. That's a world in which governments, by borrowing and spending, are not crowding out, are not taking away savings that could be used for private investment; they're actually putting these excess savings to work. And we'll actually need to hire investment, because the main reason businesses aren't investing now is that there is not enough demand for their products. So this is not, you know, we don't expect to be in this kind of situation very often. This is a, this is Alice Through the Looking Glass territory. This is a weird, boy, that's been my word all through the night, anyway, but this is a, this is a, this is an economy in which everything is kind of reversed and which, I think I wrote this at some point, that virtue is vice and prudence is folly. That's not the normal state of affairs, but it is the state of affairs we're in now and if you believe the projections from the Office of Management and Budget, it's the world we're going to be in for 2 or 3 more years at least. So that, this is special times and part of what drives me crazy is the way that conventional wisdom about economic policy has not taken on board the craziness of the times we're now living in.
So, here in Michigan, where the unemployment rate's really high, the local industries are really struggling, you know, the idea of some form of protectionism starts to have some appeal. I think you mentioned you thought that was unlikely, but the argument could be made for that. Can you explain that a little bit please?
Paul Krugman: Oh, no, I mean, there, there are different levels of argument. So the first is, you mean would Michigan manufacturing workers benefit from some protectionist measures, yes, at least in the short run. Would those protectionist measures make America as a whole poorer? Under normal circumstances, yes, but arguably not now, because we do have this depressed economy and we need more demand. You can even make an analytical case, though you want to be very careful about it, that the world as a whole would be a little richer if we had a little bit more protectionism because every individual country would feel freer to engage in fiscal stimulus, knowing that the extra jobs it creates would be at home, so the lack of policy coordination gives you some case for protectionism. Now, there are good reasons not to do this; namely, that in the, protectionism does make the world poorer in normal times. Normal times will return eventually and if you break up the system of trade we've built, then it's very hard to put it together again -- probably take decades of negotiations to reconstruct it, so you don't want to do this lightly. But it does, look, take the issue. The tire tariff, that, there was a lot of hyperventilating about that. It happens to have been legal, because we had pre-arranged that we had more, that we had the right to temporary restrictions on Chinese exports that were imposing a big market share, market, taking a big market share in a short period of time. So we, it was, everyone's out here someplace, it was, it was not a violation, it was not like the steel tariff that Bush did which was a clear violation of the rules. This was within the rules. Was it a wise thing economically? Probably not, but it, it was a response to the very real concerns of workers and, I, I think you have to be, you have to cut some slack in these very special, in certain situations. If temporary protectionism is what it needs to sort of hold our political fabric together for the time being, okay. As long as it doesn't endanger the underlying rules of the game, which we have not done. So the, the way to think about it is, is, to, not be too much of, of a purist here. This is, this is, not the moment to be crusading for absolutely free trade and no use of the, the safeguards that are actually built into the rules of international trade. It's a time to say, "Let's get ourselves out of this economic crisis, so we don't have worse things happen on, under, under irresistible pressure."
Yeah. Your show is great. I think everybody like, love it, and it's great. It's better than David Letterman [laughter]
And without the blackmail, too.
Haha. Well, you both are even better. I like those statements such as Gal Val [phonetic] and Dao Ao [phonetic] but I do have some question as you hope it's not aggressive? Can you give me the honor to explain a better version of the statement "cash for trash." We got 4.1 billion dollars interest rate, the interest payback and after Tim Geitner [phonetic] have that statement, and you have very strong, disagreement, and I was positing if you can give me the honor, explain, what is the latest version of your "cash for trash?"
Paul Krugman: Okay. Cash for trash, which was not original. I picked up the phrase from somewhere, was the term I used for the original Paulsen [phonetic] plan, which was simply to buy toxic assets off the banks at prices that I guess would have been sort of invented. I thought that was a really bad idea, it would be a really bad idea for the taxpayer. What we actually did, or what Paulsen and then Geitner actually did, that was, that version was dropped. What was actually done was buying equity in, in the banks to improve their capital ratios. And that's what's being, you know, they're being paid back and has actually, it appears in the end to be making a little bit of money for the taxpayer, but it's not the original plan. The original Paulsen plan was a pure giveaway and, and that was, well, it wasn't, you know, it was, it had the risk of turning into a pure giveaway and that was what was so awful. Now, what's actually happened, I still think taxpayers did not get enough of the upside. We essentially set up our system under which it was clear that, we socialized the downside, and, but, but didn't get the full payment for the taxpayers on the upside, and as it turns out, the banks have been, at least so far, more profitable than, than I expected and it, it's turning out, at least in a financial sense, okay, although the banks are still not lending, but it, it was a, a, there was some really, the, you know, if you revisit what happened in those first 2 weeks after Lehman failed, there were some really, really bad proposals out there. And they, they got better. They still weren't good, but they got a whole lot better after the, after the first round.
You mentioned that you thought that the actions of the central bankers and Chairman Bernanke was essential to stabilizing the economic downturn, and you might be aware that there's a bill sponsored in the House right now by everyone from Barney Frank to Michele Bachman calling for an audit to the Fed. I was just wondering if you could, clar-, like what, what do you think the real role of the Fed should be and how should it be administered?
Paul Krugman: You know, I'm, I have mixed feelings about the whole thing. I believe in democracy, and the Fed is, you know, it is a part of the government, even though it's sort of structured as if it was, in a way that makes it a little bit ambiguous and should have oversight. That said, the, it's, it's unclear what's being audited. Part of the problem is we're going to audit the Fed but without defining what is the Fed supposed to be doing, you know, the Fed is not there to be making a profit. The Fed is there to be stabilizing the economy. So what are we auditing exactly? And we have been reasonably well served. Not, not, with some big holes, but, by, by a quasi-independent central bank. Now, that, that's turned out, the, it doesn't look as good as it did 3 or 4 years ago, when people still thought that Alan Greenspan was right about everything, but, but it still, there's a lot, you know, we do do this, we do create institutions that are supposed to be somewhat outside politics, ultimately accountable but somewhat outside. I mean, I used to say that the Federal Reserve was, was like the Supreme Court. That it was something that was, was stabilized, you know, something that was ultimately accountable, but, but, but insulated from politics and, and above the partisan process and then there was a point around 2001 where I was saying, okay, now we're 0 for 2, but [laughter] but still, there's some virtue in it. This isn't going to be a, this is a tough debate, we got to think about the question. The notion of a very independent central bank was something that really took hold at a time when people thought that credibility and inflation fighting was the most important thing. And obviously, we are not in that world anymore, but it's not something, and basically, I don't think that any audit process in which Ron Paul is playing a large role in, in, in determining what we're looking for is going to be helpful. [laughter]
Susan Collins: Unfortunately, we just have time for one more question.
What are the implications of your theories on clustering and economic geography for the future of automobile production in Michigan, and what must the region, the state, the local and the national policy do to retain its competitive advantage or is this exodus in manufacturing inevitable?
Paul Krugman: Yeah, I'm not going to be really reassuring here. [laughter] What we think we know is that the sort of peak of the forces for manufacturing, clustering in the United States was, was probably in, in the 20s or the 30s, that the, the, you can actually this, Suku Kim [phonetic] has actually looked at these indices of geographic concentration of manufacturing in the United States and they peak around 1930, and head downwards. Partly that might be because mature industries, the necessity of having very specialized suppliers in the same place becomes less; partly it may just be something about the changing nature of manufacturing. It seems to be less and less necessary to have manufacturing clusters. If you look for the really spectacular industrial clusters or economic clusters in the United States now, they tend to be intangibles; they tend, I mean, Silicon Valley is not really at this point a semiconductor manufacturing cluster, it's more like a semiconductor design cluster, and of course, the financial sector in New York City. So the, the forces that made it possible for Michigan to be the, this dominant force in automobile manufacturing, despite having high wages relative to other places where you might also do manufacturing seems to be reduced. It's not clear that there is any way to recapture that. It's not, and it's not just imports, it's the spread of the auto industry down auto alley, so it's, it's Tennessee and, and Georgia and the Carolinas to which stuff has, has migrated. So I don't claim to be an expert on the auto industry, but I've read books and articles by people who are. And they seem to think that the conglomeration effects that once made this such a dominant place in the auto industry are just, just much weaker in today's world. That doesn't mean you can't do other things. I mean, but its, that's a wrenching transition. It's, and, I guess ,the hopeful thing would be to imagine, and, boy, if I was a presidential candidate, I would be killing myself at this moment, but you think about Massachusetts, which had an old industrial base that went away much sooner than all those did here and eventually reconstructed itself as a, as an economy based on, it's a little bit hard to know exactly what it's based on, but appears to be [laughter] no, one of the things -- people talk about in the geography, when people talk about amorphous specialization now, because it's really hard to figure out sometimes what clusters are doing even though there's clearly some kind of cluster there. But anyway, but has rebuilt and has become a reasonably strong, vital economy in spite of, of all that. The other thing, of course, is that, this is the United States and people move. I mean, there is a, there is this, Massachusetts is now a state that tends to have unemployment rates that are comparable to the national average that does pretty well, but its share of the American population has dropped a lot. And that, that happens as well. So, I don't think you can imagine Michigan rolling back the clock to, to, to 1980. It's not going to, it's not going to work that way. Same thing could be, you know, the, there's, there's a, a, probably, I think there are a multiple of Bruce Springsteen songs about the industrial decline in New Jersey, right? So where I live and the industry, that industry has never come back, but there are, are other things, and so there's a, the state has, has done reasonably well economically except right now, where everyone is suffering. So the, the short answer is, I don't think you can just turn that back. You can probably try to hold on to some of it longer, you can try to find other things that will spring off from it, but it's, what can I say, that, that, that's an awfully downbeat way to end this, discussion [laughter] yeah, we, has to be something good to say here [applause] This is, Ann Arbor, Ann Arbor must have all kinds of knowledge resources; maybe this can be the hub of the new Michigan. Thank you all.
[ Applause ]
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