National Opinions

Paul Krugman: Corporate predators need to be regulated

Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as Professor of Economics and International Affairs at Princeton University.

Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes. His professional reputation rests largely on work in international trade and finance; he is one of the founders of the "new trade theory," a major rethinking of the theory of international trade. In recognition of that work, in 1991 the American Economic Association awarded him its John Bates Clark medal, a prize given every two years to "that economist under forty who is adjudged to have made a significant contribution to economic knowledge."

Krugman's current academic research is focused on economic and currency crises.

At the same time, Krugman has written extensively for a broader public audience. Some of his recent articles on economic issues, originally published in Foreign Affairs, Harvard Business Review, Scientific American and other journals, are reprinted in Pop Internationalism and The Accidental Theorist.

Krugman was born on February 28, 1953.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as Professor of Economics and International Affairs at Princeton University. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes. His professional reputation rests largely on work in international trade and finance; he is one of the founders of the "new trade theory," a major rethinking of the theory of international trade. In recognition of that work, in 1991 the American Economic Association awarded him its John Bates Clark medal, a prize given every two years to "that economist under forty who is adjudged to have made a significant contribution to economic knowledge." Krugman's current academic research is focused on economic and currency crises. At the same time, Krugman has written extensively for a broader public audience. Some of his recent articles on economic issues, originally published in Foreign Affairs, Harvard Business Review, Scientific American and other journals, are reprinted in Pop Internationalism and The Accidental Theorist. Krugman was born on February 28, 1953. The New York Times

By Paul Krugman

New York Times

Item: The CEO of Volkswagen has resigned after revelations that his company committed fraud on an epic scale, installing software on its diesel cars that detected when their emissions were being tested, and produced deceptively low results.

Item: The former president of a peanut company has been sentenced to 28 years in prison for knowingly shipping tainted products that later killed nine people and sickened 700.

Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750.

In other words, it has been a good few days for connoisseurs of business predators.

No doubt I, like anyone who points out ethical lapses on the part of some companies, will be accused of demonizing business. But I'm not claiming that all businesspeople are demons, just that some of them aren't angels.

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior, not least so that ethical businesspeople aren't at a disadvantage when competing with less scrupulous types. But we knew that, right? Well, we used to know it, thanks to the muckrakers and reformers of the Progressive Era. But Ronald Reagan insisted that government is always the problem, never the solution, and this has become dogma on the right.

As a result, an important part of America's political class has declared war on even the most obviously necessary regulations. Too many important players now argue, in effect, that business can do no wrong and that government has no role to play in limiting misbehavior.

A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing "a flood of creativity-crushing and job-killing rules." Never mind his misuse of cherry-picked statistics, or the fact that private-sector employment has grown much faster under President Barack Obama's "job killing" policies than it did under Bush's brother's administration.

What are the terrible, unjustified regulations Bush proposes to scrap? Carbon regulation must go, of course, because doing nothing about climate change has become an essential part of the Republican identity. So must Obamacare.

But Bush also proposes doing away with rules regarding the disposal of coal ash, a byproduct of coal-burning power plants that contains mercury, arsenic and other contaminants that can cause serious health problems if they leak into groundwater or are blown into the air as dust. Does trying to limit these risks sound like an arbitrary, pointless action? Then there's for-profit education, an industry wracked by fraud — because it's very hard for students to assess what they're getting — that leaves all too many young Americans with heavy debt burdens and no real prospect of better jobs. But Bush denounces attempts at a cleanup.

Oh, and he denounces the administration for "regulating the Internet as a public utility," which can sound odd until you realize that what's actually being regulated are Internet service providers, who face little or no competition in many local markets. Did I mention that in Europe, where Internet providers are required to accommodate competition, broadband is much faster and much cheaper than it is here? Last but not least, Bush calls for a rollback of financial regulation, repeating the thoroughly debunked claim that the Dodd-Frank law actually encourages banks to become too big to fail. (Markets disagree: Judging by their borrowing costs, big banks have lost, not gained, since Dodd-Frank went into effect.) Because why should we think that letting banks run wild poses any risks? The thing is, Bush isn't wrong to suggest that there has been a move back toward more regulation under Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary Clinton released a plan to limit drug prices at the same time Bush was unleashing his anti-regulation diatribe.

But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight -- and it hasn't worked.

So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell.

  Comments