Full transcript: Paul Krugman interview

Interview with Nobel economics laureate Paul Krugman at a CEPR conference in London on 'Ten Years After the Crisis' on 22 September 2017

A group of economists here are getting a lot of media coverage here for arguing – in contradiction of the rest of the economics profession – that Brexit can be beneficial for UK trade if we have unilateral import tariff reductions. Is that possible?

It’s essentially zero chance that it’ll be beneficial on the trade front. If Britain manages to get [World Trade Organisation] normal [trade]…it’s not going to do more liberal than that…that’s not going to be a major benefit. It looks as if the kind of invisible benefits of being part of the EU, the lack of friction, seems to have had a significant impact on trade patterns. The general thing you find in Nafta [North American Free Trade Association] and even more the EU is, if you try to quantify the tariffs that are taken away, they shouldn’t be having a really big impact on trade but nonetheless you do see a significant increase in trade relative to other trading partners probably due to assurances, lack of friction whatever. You’re reversing that, so that’s a cost. That’s much more tangible than any pipe dreams about big gains elsewhere. It’s not a huge cost – maybe 2 per cent of GDP. But it is a cost. I don’t think there’s any plausible case that Brexit is a good thing for the British economy as a whole

Some economists maintain that greater trade leads to greater productivity growth? Do you believe in that?

A little bit. You get stuff cheaper….The best way to think about it is imports….Not being part of a customs union has some kind of cost, which appears to be an a real increase in costs of buying things abroad. This leads you to produce more things that you really shouldn’t be producing because you’re inefficient at it. And so we have pretty good estimate. We can look at how much trade will increase. What’s not clear is what kind of the implicit cost that corresponds to – what do you think is the elasticity of substitution? It’s productivity, it’s cheaper consumer goods, it’s specialising in the right stuff. All of which is going to be unwound by Brexit.

The currency markets marked down the pound after the Brexit vote. So you have no problem with that judgement on the UK’s future prospects?

First of all the currency markets have no better idea of the magnitude than any of us do but that seems about right. There’s a big wild card in all this which is financial services exports. What does all this do to the City of London? That’s going to make a big difference to just how big the adverse impacts are. I think we still don’t know that. A substantial depreciation of sterling…it’s true the EU has reduced access to the UK market as well but the EU market is a whole lot bigger. So a weaker pound is pretty much what you would expect – and appropriate. If you’re going to do this thing they you do want a weaker pound.

Our foreign secretary Boris Johnson has been rebuked by our statistics watchdog recently for making false claims about how much money we send to Europe. Is this a Trump-like thing? Is it an Anglo-Saxon thing?

From Trump, it’s lies top to bottom. And not just from Trump. It’s [been] lies top to bottom from the entire Republican Party on healthcare for eight years now. There is no centre any more. There is no acceptance of expert opinion on any issue. Britain? I wonder. You may be catching the contagion from us because of how often Britain tends to follow the US cultural lead.

Studies suggest the Rupert Murdoch-owned Fox News is having a major effect on what people believe in the US. The competition authorities here in the UK are examining the Murdoch bid for Sky. What’s your view on whether that should be allowed to go ahead?

Fox is a horrific distorter of public debate. But it’s also true that the rest of the media still, after all these years…it’s 16 years since I wrote that if [George W] Bush said the earth was flat the headlines would read ‘views differ on shape of planet”. It’s still true. If there’s an issue like Brexit – or almost anything else – the media work very hard to make it appear balanced even if it’s really unbalanced. I don’t know how to improve it aside from yelling at my colleagues but when the media do reach a consensus and treat something as an established fact it also often turns out to be just wrong. So all of the assertion that we were facing a [sovereign] debt crisis [in the US] was simply reported as a fact when there was not a hint of evidence in actually behaviour of markets, or anything else, that it was true.

Five years ago you were suggesting the eurozone could go under. Now the bloc said to have turned a corner and the fears for its survival were all overblown. Do you agree?

The political durability of the euro has been greater than I understood. Why is Greece still in the euro? It’s fundamentally because the Greek elite wants to be part of it – they fear being an outcast. They are willing to put up with almost anything to stay in. That’s been a surprise. Even people like me agreed that given sufficient time and sufficient pain internal devaluation will work. If you’re willing to accept many years of high unemployment wages will fall relative to others. Spain is the demonstration of that – the auto industry is booming. But to look at the rate of change now and ignore the enormous costs that were borne in the interim is missing the story. At the moment there’s sufficient recovery in southern Europe ex-Greece that the euro probably goes on now for an indefinite period. But that doesn’t mean it’s working well. In fact you see new stories about the costs of monetary union that draw fewer headlines. At the point after Greece probably the worst performer in the euro is Finland, which no one talks about because Finland is not unstable. But their two principal exports were paper and Nokia, both of which have been hard hit by technological changes and adjustment is a really nasty thing. So the euro still looks like a mistake but at the risk of sounding a bit like Alan Greenspan, regrettably it hasn’t gotten worse! Things are not bad enough to force a revision. In fact if anything [Jean-Claude] Juncker is back hailing the euro as the future of Europe even though the arguments against it are a strong as ever.

Would you take a similar view on UK austerity? Things have picked up but it could have been better…

In the end there was quite a lot less of it than the rhetoric would have suggested but it was certainly a bad thing. UK performance over the [George] Osborne years is nothing to write home about. There is nothing that vindicates the policy. In turns out that, yes, there is some resilience in all of our economies…

What’s your personal work life balance like? Has Donald Trump upset it?

Personally I’m making a real effort. I did reduce my teaching load by shifting [from Princeton to CUNY]…I think I’ve been mostly successful in adopting the attitude that this is going to be a long haul. The [US] Republic is at risk, but I’m feeling quite a lot better about it than I did at inauguration day. It appears there is more resilience- which doesn’t mean that we’re safe. I love the phrase that what we see in the Trump administration is “malevolence tempered by incompetence”. They haven’t consolidated power. We still have a lot of effective resistance. Part of the point is it’s not just Trump. We have a very sick GOP [US Republican Party] which has a lot of support. Any quick turnaround is unlikely. There’s not going to be a silver bullet. When Trump said I could shoot someone on Fifth Avenue, there’s something like that. Very possibly a number of senior people close to him will be indicted for treason, but 35 per cent of the public will probably stay with him regardless.

Have people come around to your view that the Republican Party is the central problem, that Trump isn’t an aberration?

I’m not sure. I think there is still a strong instinct among a lot of journalists that given the slightest excuse they want to go back to “both sidesism”. If you look at how Trump reached a deal over Federal government finance for a few month – and all of a sudden we have “oh Trump has pivoted – we now have bipartisanship”. Which was insane. They were shocked when stuff went south again. For the moment, with this craziness with Graham-Cassidy [the Republican attempt to repeal Obamacare] people are admitting that Republican moderates aren’t [moderate]. But I’m still seeing articles that refer to Bill Cassidy as a serious policy wonk. Oh my god, he’s even less of one than [Republican house speaker] Paul Ryan is. I personally, even if there’s a lot more support for the view that the GOP is mad, will always be considered unreliable because I was premature.

What’s it like being in America when you have a white supremacist sympathiser in the White House? How do you cope with that?

In some ways it helps to be in New York. I get some funny emails from people. They say: ‘It’s all very well you to criticise [the brutal Arizona sheriff that Trump pardoned] Joe Arpaio but how would you feel if New York was full of immigrants?”. You look around. I have an African-American wife and it turns out that anti-Semitism is one of those things that never goes away so it doesn’t affect my daily life. Not yet – who knows what it may do [in future].

Do you devote most of your mind to the economics side of Trump?

Probably not. I read all kinds of stuff. But what I meant by daily life is I belong to a class of people who don’t get beaten up by the police. It doesn’t affect anything I see. The closest I’ve got is CUNY has a lot of student including a fair number who were affected by the Muslim ban. So I get all of that as part of community, trying to defend these people’s rights.

What do you think of that idea that liberal campus intolerance is feeding the support for people like Trump, the identity politics argument?

On the one hand it’s stupid to play into right wing caricatures of who you are. On the other hand the idea that that’s responsible for [Trump] is crazy. The overwhelming example of identity politics in America is white Christian identity politics – that’s far more important. So yes I wish Antifa [the direct action anti-fascist group] and any of these people, I wish they’d shut up or go away, and there’s a little bit of co-dependency there. The very small violent left – they’re in their element and they’re making it worse for the centre left.

As a Nobel laureate there must be a temptation to be on a plane all the time, speak at events constantly. Is that something you actively resist?

Not well enough. New York Times rules are actually a protection. I can’t go and talk to Goldman Sachs. I can got to talk at a Ruritania finance association meeting – and those can eat up a lot of time. So I have to fight and I don’t always successfully hold that down. But yeah –[there are] temptations, pressure.

Presumably they pay a lot…

[It’s] trying to realise that I’m not short of money. I am short of time. So I blow off steam on cycling trips and time in the country. My primary residence is now in Manhattan and I have country house up in Massachusetts. I came to this conference by way of Beijing and Kiev. But I had few days – instead of packing another thing in – I actually just spent the last five days walking in the Cotswolds. I’ve been before but not for a long time. It was perfect….I said I didn’t want to go to London right away. I always think of London being grey and bleak. And yeah actually, it’s grey and bleak!