Krugman Sees End of US Auto Industry

Paul Krugman, in Stockholm (here’s a link to the live webcast of Monday’s Nobel lecture, which is entitled “Increasing Returns”–hat tip to Brad De Long) to pick up his Nobel prize, is not impressed with the incipient plan to bail out US auto industry, Die Presse of Vienna (article in German) notes. Krugman believes the plan, as it stands now, will only buy the industry two months of time, and wouldn’t tackle any of the serious structural problems afflicting the industry. A more constructive approach, according to Krugman, would focus on the macro level, and consist of counter-cyclical stimulus packages of the sort proposed by President-elect Obama and already implemented by the Swedish government, rather than attempting to save a doomed industry. Clearly, Krugman doesn’t believe the collapse of the industry would itself have a devastating macroeconomic impact on the economy.

Larry Peterson