The financial crisis poses threats to globalization as nations take measures to shield their economies from external shocks, while struggling to recover from the worst recession since World War II, a visiting Nobel Prize-winning economist said yesterday.
Paul Krugman, who won the Nobel Prize last year for his work on trade theory, told a forum in Taipei that the downturn had stabilized but that it may leave the world economy in near-stagnation for 10 years — similar to what happened in Japan in the 1990s.
“The world as a whole looks quite a lot like Japan during its lost decade,” Krugman said, meaning the recovery could be slow and protracted with high unemployment and weak private demand.
PHOTO: FANG PIN-CHAO, TAIPEI TIMES
OPTIMISM
The Nobel laureate said he was optimistic about the short-term outlook, with the chances of a slump as ominous as the Great Depression dropping to 5 percent.
However, the Princeton University professor was pessimistic about the economic landscape for the next 10 years.
Krugman said he saw threats to globalization following the financial crisis, which he attributed to excess leverage and consumption in the US that have evolved into global economic woes.
The slump has dampened world trade, with demand for durable goods falling sharply, the economist said, adding that the trend would likely continue.
PROTECTIONISM
Krugman also voiced concern that the downturn could fuel protectionism, with some governments implementing measures to protect their industries.
He also cautioned that the crisis may encourage a return of mercantilism, with governments promoting exports and frowning on imports.
That would help realize “the beggar thy neighbor” phenomenon where nations compete to reduce export costs to boost their trade surpluses, Krugman said.
Krugman advised against the practice as people already question the wisdom of debt expansions by governments that serve to benefit other countries such as China.
“Some are asking why we got the debt, they got the stimulus,” he said.
“Protectionism is hard to reverse once it is in place,” Krugman said.
IMBALANCES
Krugman added that persistent currency imbalances between nations amid the economic slump would prove unfavorable to globalization in the end.
The economist cited China as a major example, saying the country had strangely engaged in exports of currency capital to boost its foreign exchange reserves.
He saw little chance of further monetary interventions as central banks had already cut interest rates to record-low levels.
The root of the economic woes lies in slumping demand, Krugman said, not inadequate supply, and they tend to last longer when financially driven.
Elon Musk’s lieutenants have reached out to chip industry suppliers, including Applied Materials Inc, Tokyo Electron Ltd and Lam Research Corp, for his envisioned Terafab, early steps in an audacious and likely arduous attempt to break into the production of cutting-edge chips. Staff working for the joint venture between Tesla Inc and Space Exploration Technologies Corp (SpaceX) have sought price quotes and delivery times for an array of chipmaking gear, people familiar with the matter said. In past weeks, they’ve contacted makers of photomasks, substrates, etchers, depositors, cleaning devices, testers and other tools, according to the people, who asked not to
Taiwan is attracting a growing number of foreign jobseekers as companies increasingly recruit overseas talent to ease labor shortages and expand global reach, recruitment platform 104 Job Bank (104人力銀行) said yesterday. More than 40,000 foreign nationals searched for jobs in Taiwan through the platform last year, a 28 percent increase from a year earlier, the company said. Malaysians accounted for the largest share of overseas jobseekers at 12.2 percent, followed by Indonesians at 11.9 percent and Vietnamese at 10.8 percent. Indonesian applicants surged more than 50 percent year-on-year, while Vietnamese jobseekers rose by more than 30 percent. Applicants from the
NO SHORTCUTS: Asked about Elon Musk’s Terafab initiative, TSMC CEO C.C. Wei said it takes two to three years to build a fab and another one to two to ramp it up Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday raised its revenue growth forecast for this year to above 30 percent, up from the 25 percent it estimated three months earlier, citing extremely robust artificial intelligence (AI)-related chip demand. “Our customers and customers’ customers, who are mainly cloud service providers, continue to send us very positive signals and outlook,” TSMC chairman and CEO C.C. Wei (魏哲家) said at an earnings conference. The company also hiked its capital expenditure for this year toward the higher end of its forecast, or US$56 billion, as it aims to step up advanced chip capacity expansions, such as
The founder of Chinese property giant Evergrande Group (恆大集團) has pleaded guilty to charges of fraud and bribery, a court said yesterday, the latest blow for what was once the country’s leading developer. Evergrande’s rise was propelled by decades of rapid urbanization and rising living standards, but in 2020, its access to credit dramatically narrowed when the government introduced curbs on excessive borrowing and speculation. The company defaulted in 2021 after struggling to repay creditors. Founder Xu Jiayin (許家印), 67, known as Hui Ka Yan in Cantonese, was reportedly held by police in 2023, with Evergrande saying he had been subjected to
RSS