The Daily Princetonian sat down with Nobel Prize-winning economist Paul Krugman before his public lecture Monday titled “Learning from Europe.” He spoke about the European recovery, midterm elections, separation from the Universityand his favorite NPR Tiny Desk Concerts. Krugman is a professor of economics and international affairs.
The Daily Princetonian: How much of the divergent outcomes between Europe and the United States can be attributed to structural differences versus policy decisions?
Paul Krugman: It’s structural to a large extent, but the structure affects the policies. Florida has been treated a whole lot better than Spain. They have similar stories up to the point where Florida gets a much better deal. It’s not because we’re smarter, it’s because Florida is part of the United States and Spain is part of the European Union … it’s a policy thing. I don’t think there’s a structural problem with European economics that makes them perform worse in this kind of crisis — the structure is a shared currency without a shared government. It’s structural in that sense of how the structure cripples European Policy.
DP: The European Central Bank recently announced the details of its asset-backed securities purchase program. How might the effects of Europe’s version of quantitative easing differ from the way that quantitative easing has impacted the United States?
PK: Quantitative easing in the United States, I think, has been only modest in its effects. I don’t think it’s been a really big deal, even here. Their version is smaller, it’s going to be much harder to get off the ground, it’s going to run into political and maybe even legal troubles. So what you have is something that’s probably a pretty weak tool even under the best of circumstances, and they’re trying to do it in Europe when it’s not the best of circumstances.
DP: If it’s not the best of circumstances for quantitative easing right now, what policy alternatives do you think would make a more positive impact?
PK: There are two different questions: what the people can do — whatever they can and hope for the best — and what you think is likely to work, and the answer to that is something much bigger than what appears to be on the table at all. [Europe’s] present course basically leads it to Japan with much more human suffering. Basically, Europe is set up for a long stagnation, probably deflation — a really bad scene and basically unpredictable. To break out of that, what they really need is temporary fiscal stimulus of some kind plus a really dramatic change towards expansionary monetary policy … They need something like Abenomics [referring to the policies of Japanese Prime Minister Shinz? Abe] only Abenomics, I think, is falling short, so they need something really aggressive in Europe. Absolutely not on the political table for that to happen … [Mario] Draghi [President of the European Central Bank] is currently trying to bail a sinking ship with a teaspoon.
DP: The recovery has been a little underwhelming, or at least perceived to be by many people. How do you think the state of the economy might play out in the midterm elections?
PK: I read all of the analysts: I read [molecular biology professor and political analyst] Sam Wang, I read “The Upshot” … I think a couple things here from what I’ve heard from the people that study this stuff: The economy is generally much less of a factor in midterm elections. It’s not clear in general. There aren’t that many swing voters these days — people are pretty partisan. Most people who say they are independents aren’t really, so I don’t think that this matters really all that much. I think, if anything, what is going to matter is voter turnout and social issues. The latest analysis crossed my electronic desk just before we did this interview and it said that the Democrats seem to be picking up a little bit over women’s issues. I remember 10 years ago when gay marriage was a big problem for Democrats, and now Republican social neanderthalism is a big problem for them.
DP: Turning to Princeton, how does it feel to know that this is your final year at the University?
PK: Well, I am inevitably appreciating it more now that there’s a cutoff date. I’ve seen more plays at McCarter [Theatre] than I have in previous years, I’m enjoying the beauty of the place, but, you know, it will only be an hour’s train ride away after all. I’m at an age, the fact of the matter is, if you’re not making some life changes, you’re either an incredible prodigy of commitment or you’re just stuck in a rut, so I have no regrets about the decision, but I’m certainly feeling a bit of nostalgia for Princeton. I’m appreciating it a lot more in the last year.
DP: From reading your blog, what is your favorite NPR Tiny Desk Concert and why?
PK: Those move around over time, but at the moment I think my favorite indie band is Lucius and their Tiny Desk Concert was just one of those ... It just turns out that they’re just this joy-creating presence. The second favorite was Suzanne Vega, who was more of my generation but is still doing beautiful stuff, and there’s something wonderful about that, too.