New York Times columnist Paul Krugman attempts this morning to blame Argentina's financial crisis on a failed test of "the libertarian credo: that the great expansion in government's role between the two world wars was unwarranted." In particular, Mr. Krugman blames Argentina's troubles on a currency board that essentially fixed the value of the Argentine peso to the dollar. In fact, Mr. Krugman could benefit from reading the news coverage of the New York Times. In particular he might have a look at a dispatch from Argentina in the November 18, 2001 New York Times, which reported, "Provincial governments across Argentina are choking from their combined $23 billion debt, the product of a deepening 41-month-old recession and of their large inefficient bureaucracies, known better for corruption and political patronage than for service." The Times news article goes on to say that, "economists say that most of the provincial financial problems stem from unwieldy bureaucracies, built by old-fashioned political bosses. Eighty-five percent of the San Juan government's $783 million annual budget, for instance, goes to wages rather than services. The bureaucracy of 30,000 workers, combined with their family members, make up a big political bloc that resists wage cuts or trimming of inefficient agencies. 'San Juan residents work and produce to allow the state to subsist, even though it does not serve the purpose for which it was created,' Federico Manrique, an economics writer at the San Juan daily newspaper Diario de Cuyo, complained in a column this week. 'What is the purpose of having more police per capita than New York if there isn't enough fuel to keep them on patrol or enough money to buy them uniforms?'" Mr. Krugman somehow interprets the Argentina situation as puncturing the idea "that government activism is unnecessary, and that radical laissez-faire works." In fact, as the November 18 Times news article shows, it is "government activism" that has helped get Argentina into its current mess, and a dose of laissez-faire that might help cure it.
Moreover, Mr. Krugman in the midst of today's column issues a correction that is incredibly lacking in generosity of spirit. Here's what Mr. Krugman wrote on November 7, 2001: "As little as three years ago Argentina's 'currency board' monetary system was the subject of extravagant praise in publications like Forbes and The Wall Street Journal, and economists at the Cato Institute established lucrative consulting practices advising other countries to mimic Argentina's approach." Here's what Mr. Krugman writes today: "Contrary to what some may have inferred from a previous column, no staff members at the Cato Institute are in the currency-regime consulting business." Well, it looks to Smartertimes.com like the question here is not what "some may have inferred" but what Mr. Krugman actually wrote. Are these nonexistent consulting practices also not "lucrative"? Or is Mr. Krugman going to leave the point about the lucrative nature of these nonexistent practices uncorrected, as well? Some might have inferred that he was talking about specific cases or individuals. Is the problem that there isn't anyone running a lucrative consulting practice advising countries on this, or is the problem just that the people who are doing it are not on the staff of the Cato Institute. Do they have some kind of non-staff affiliation with the Cato Institute? Are they affiliated with some other institute? Times readers are left with all these unanswered questions. Given that the Times has refused to run a letter to the editor from the Cato Institute setting the matter straight, one might think that the newspaper owes Times readers and Cato economists something a little less grudging than this glancing business about what "some might have inferred."