By Matthew Yglesias
Everyone should read what Paul Krugman has to say about the idea of including “buy American” provisions in the stimulus. It’s not a crazy idea, but it is a bad one. What’s really needed is global policy coordination. Yes, some American stimulus funds will go to production in Canada and China and Europe and Japan. But some Japanese, Chinese, European, and Canadian stimulus will go to production in the United States. The alternative in which we buy American and the Japanese buy Japan and the Europeans buy European is quite a bit worse for everyone.
But this does require actual coordination. We can’t have the US buying American and Chinese and European and Japanese while nobody else buys anything. That’s not good for us and it’s ultimately not going to be good for them either. Indeed, while all countries need to engage in stimulus it seems to me that we actually need bigger stimulus relative to GDP from surplus countries like Japan, China, and German than we ourselves engage in. That means the administration needs to be engaged with the international dimension of the crisis. In bad economic times, the voting pubic tends to turn its attention inwards and lose interest in foreign affairs. But the truth is that in the modern world you can’t separate the economy from international issues. And it’s also true that the “explosions and corpses” aspects of foreign policy attract the most attention, America’s peaceful interactions with Latin America, Europe, and Asia have more impact on the average citizen’s life than do the elections in Iraq.