A heated debate between Niall Ferguson, Professor of History at Harvard University and Paul Krugman, Professor of Economics at Princeton University was a ‘debate of the century’ indeed. The highly anticipated face-off between the two globally renowned scholars was literally a war of words that stunned the audience of the 11th World Knowledge Forum on October 13th.
Shortly after the debate began, Ferguson and Krugman went the length of interrupting each other and even couldn’t manage their voices getting louder in the middle of word war.
Ferguson went first, referring to Krugman’s analogy of the current situation to the depression in the 1930s. “People who don’t study history are prone to bad historical analogies,” he said, while criticizing that wrong analogies lead to wrong policy choices.
“The current situation is very far from being the Great Depression. We wouldn’t find much evidence about that we need yet more fiscal stimulus. We learn from history, we are not in a Great Depression,” Ferguson blatantly attacked his academic rival.
Ferguson argued that it sounds absurd to add more fiscal stimulus on top of fiscal weakness of the U.S. He warned that the combination would run risks, losing investors, and leading to crumbling credibility and collapse. He called the scenario extremely dangerous.
He asserted that there will be no ‘third economic recession,’ although the global economy has been severely struggling for the past few years.
Krugman countered Ferguson’s argument one by one.
He described that there are similarities in the current economic situation with those found in the Great Depression in the 1930s and Japanese recession in the 1990s. He pointed out that 2.5 million public sector jobs disappeared with the incoming of the Obama administration, because the stimulus package was not sufficient enough to have ripple effects through individual states and cities.
Krugman underscored the need of more fiscal stimulus, saying “we never did sufficient fiscal stimulus since March 2009.”
“By the arithmetic, the actual expenditure on stimulus would make almost no difference,” argued Krugman. According to math, implementing an $800 billion stimulus would only raise the inflation rate by 1%, he maintained.
Ferguson retorted by saying Krugman “underestimates how fickle the markets are,” and asked if the economic indicators and mathematical data were so reliable, why the subprime crisis was not spotted and prevented.
When Moderator Shin tried to change the topic by mentioning the return of Keynesian policies, Ferguson jumped at further criticism. “Keynes was a great thinker,” he said, but scholars “oversimplify” his ideology, coming up with misleading conclusions. “If Keynes were alive, he would not agree with Krugman,” he added.
Their standoff did not stop after the debate. During the press meeting after the session, Krugman argued that Ferguson’s arguments were weak and baseless, with no concrete evidence to support his claim. He also mentioned Ferguson’s predictions on the imminent rise of the interest rates, and said that the predictions were wrong, as interests are continuing to crawl at low levels.”
Krugman also emphasized that the recovery would take a long time. “The unemployment rate, as of September, is at 9.6%. This number should fall to at least the 7% range to be called a true recovery,” he said, while recommending another dose of stimulus.
[Written by Yong-seung Chang, Sang-duk Lee, Hee-chul Moon - Su-hyun Song, Samji Chung, edited by Soyoung Chung]
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