As a leading member of the establishment economists, Mr. Krugman naturally embraces the neoliberal economic order of the day -- globalization. This was especially glaring when Mr. Krugman, on April 22, 2001 New York Times Op-Ed column, came out to denounce the demonstrators at the Summit of the Americas in Quebec City.2.

       “Globalization is not always pretty,” Mr. Krugman said, “if you buy a product made in a third-world country, it was produced by workers who are paid incredibly little by Western standards and probably work under awful conditions. Anyone who is not bothered by those facts, at least some of the time, has no heart.”2.

        However, while admitting that third-world workers are ruthlessly exploited by the Western multinational corporations, Mr. Krugman considers it a great mistake to direct outrage against global trade, as the “people outside the fence, whatever their intentions, are doing their best to make the poor even poorer.”1.

        To Mr. Krugman, the people in the third-world countries are lucky to have any job, however meager the wages may be. “The point is that third-world countries aren’t poor because their export workers earn low wages; it’s the other way around. Because the countries are poor, even what looks to us as bad wages are almost much better that the alternatives.”1.

        Why those countries are so poor then? According to our professor, these countries are poor because of the “low productivity, bad infrastructure, and general social disorganization.” 1. The third-world countries can only compete with the West on low wages.

         Regrettably, as a learned economic professor from a leading American university, Mr. Krugman conveniently neglects to tell us that for the developing countries, the key to getting out of poverty and on the way to economic development is the accumulation and proper investment of economic surplus.

        By depriving third-world countries with any economic surplus through the policy of cheap labors, the Western multinational firms are in effect condemning the people in the third world to be perpetually poor. For a person professing to have a good heart, Mr. Krugman is rather disingenuous not to state the obvious: “ A major reason for the poverty of the poor countries, for the ever widening gap in wealth between poor and rich countries, is that surplus produced in the poor countries is being diverted to the rich countries.”3.

         This can be illustrated with the balance of payment situation in Brazil for the past decade and a half. In 2004, Brazil had a negative balance of $30 billion after paying out interest and principal. Between January and April 2005, Brazil again suffered a balance of payment deficit as interest payments, and profit remittances by the multinationals were $5 billion more than commercial trade revenue.4.

         Other Latin American countries such as Mexico also suffered balance of payment deficits with the United States through the pillage of labor resources. It is estimated that “direct and indirect contribution of Mexican labour to the U.S. economy in balance of payments -- and the corresponding loss to the Mexican economy -- is in the order of $29 billion a year.”5.

         The data from the whole Western Hemisphere was equally not encouraging, as the region -- except the United States, Canada and Cuba, experienced balance payment deficit of close to $90 billion for 1999. This is largely due to the money paid to foreign investors and bankers in the form of dividends, profit remittance to multinational corporations, and interest to IMF, World banks and foreign banks. Unfortunately for the Latin American countries, the balance payment deficit has been chronic for many years.3.

         Indeed, this is a horrible situation for the people in Latin America, as their fruit of labor and surplus have been extracted not only to the utmost limit but have piled up an immense amount of debt as well.

         “It is estimated that over the 1990s in Latin America alone outflows of capital in the form of returns on investments (profit repatriation, interests and debt and equity investments) were in excess of $500 billion.” 6. The overwhelming evidences should be sufficient for our Nobel Prize winner and learned professor to explain why the third-world countries are poor, and some of them are desperately poor. Unfortunately, with his neoliberal ideology, Mr. Krugman either refuses to see the facts or is not willing to explain why people in the third-world are being ruthlessly exploited and remain poor. This is unforgiving for a person claiming to have a good heart.

         In recent years, with the collapse of the countries in the former Soviet Union and Eastern Europe, neoliberal economic policy has been discredited. However, efforts have been made by the neoliberal economists to search for a country with a new neoliberal success story which could be used as a development model. Accordingly, South Korea, then Southeast Asian countries such as Malaysia, Indonesia and Thailand, was being touted as successful models of capital development. These countries were all experiencing rapid economic growth, huge capital inflow and foreign direct investments. Unfortunately, the Asian Financial Crisis completely destroyed this myth. Consequently, the search for the neoliberal economic policy success story led them to China, a country embracing open market, free trade and welcoming foreign investments. Thus, for the time at least, China became the leading neoliberal poster country.

        Unfortunately too, after 30 years of economic development, the salary of workers in Japan is catching up to the level of the United States, while the Chinese are only 3 percent of the American workers. Meanwhile, China’s natural resources are plundered and real wealth is directly transferred to the West. “Not only is the general welfare of the Chinese being sacrificed, but worse, it’s depriving future generations of their resources.”7.

        Thus, in the absence of any explanation by our neoliberal economists such as Paul Krugman, it is all the more puzzling why China, despite depriving future generations of her resources, is still not able to develop from a poor to a prosperous country after 30 years of economic development. It is true, China did achieve a huge balance payment surplus, as her foreign currency reserves have reached $1.8 trillion in 2008, the largest in the world and, according to IMF, it will be $2.4 trillion by 2009. It is also true that China is well endowed with smart and talented people, and many Chinese scientists have contributed immensely to the technological development in the United States. Unfortunately, due to dollar hegemony, the economic surplus accumulated by China remains a part of U.S. financial system, rather than to be used on education, health care, etc. for the benefit of Chinese citizens. The reason for this is that trillions of dollars of this economic surplus are either invested in U.S. Treasury bonds, “mortgage-back securities”, or Euros, which are not available for China’s domestic development. Thus the surplus is diverted, “and if the surplus is diverted or if it’s wasted, a poor country will remain poor. A major reason for the poverty of the poor countries, for the ever widening gap in wealth between poor and rich countries, is that surplus produced in the poor countries is being diverted to the rich countries.”3.

          It is obvious that Western multinational firms not only exploited the Chinese workers by giving a miserable wage, thereby extracting a huge amount of profit from China, but the Western countries led by the United States, further appropriate the little economic surplus through dollar hegemony, forcing China and other developing nations to use dollar or Euros as reserve currency.

          Neoliberal economists such as Paul Krugman not only fail to tell us the reasons why the third-world countries such as China are poor, but he also exploited the fear of China. In a June 2005 New York Times column entitled “The Chinese Challenge”, Mr. Krugman raised the spectacle of fear with the Chinese bids for Maytag and Unocal.

          Although the takeover of the 100 years old appliance company by a Chinese company is a good deal for America, even Mr. Krugman admits, as both Maytag shareholders and workers will benefit from it, what really concerns Mr. Krugman is that China is “emerging as America’s strategic rival and a competitor for scarce resources.”8. For this reason, the offer by the China National Offshore Oil Corporation to acquire Unocal is “more than just a business proposition.” “If it’s up to me,” Krugman said, “I’d block the Chinese bid for Unocal.”8.

          This seems to be an incredible statement from a neoliberal economist who openly advocates for free trade and globalization. Obviously, Mr. Krugman doesn’t believe in level playing fields, as under the WTO rules, American multinational corporations can rush into China, play the taken over games or receive national treatment for foreign direct investments, thereby dominating key strategic sector of the Chinese economy. It looks as if the ghost of the Unequal Treaty in the 19th century imposed on China by Westerners’ ancestors has reappeared once again.

           Moreover, as a neoliberal economist, Mr. Krugman is always against protectionism, which conforms to the interest of U.S. multinationals and the vested interests of the members who sit on the Council on Foreign Relations.9. Not surprisingly, Paul Krugman would do his best to counter the theory of infant industry protection.10. Like most neoliberal economists, he argues for wide-open international trade and globalization. Mr. Krugman totally ignores the historical experiences of the industrial development. History shows that today’s economic super powers such as the United States, Britain, Japan, and other European advanced industrial states all became successful and rich by employing protectionism to protect their infant industries. “Many of them also actively used government subsidies and public enterprises to promote new industries. Japan and many European countries have given numerous subsidies to strategic industries. The U.S. has publicly financed the highest share of research and development in the world.”11.

           In order not to be poor, a country must protect her own industry and restrict foreign investment. “In the 19th century, the U.S. strictly regulated foreign investment in banking, shipping, mining, and logging. Japan and Korea severely restricted foreign investment in manufacturing.”11. In the area of intellectual property rights, “the Netherlands and Switzerland refused to protect patents until the early 20th century. In the 19th century, most countries, including Britain, France, and the U.S. explicitly allowed patenting of imported inventions. The U.S. refused to protect foreigners’ copyrights until 1891. Germany mass-produced counterfeit ‘made in England’ goods in the 19th century.”11.