Download Paul Krugman

Unit Six
The Return of Depression Economics
—Paul Krugman

TEXT
A Whiff of the 1930s
IN THE SPRING of 1931, Austria’s largest
bank, the Credit Anstalt, was on the verge of
collapse. In the end, the desperate
government resorted to capital controls.
Unit Six
The Return of Depression Economics
—Paul Krugman
Most modern economists—to the extent
that they think about it at all—regard the Great
Depression as a gratuitous, unnecessary
tragedy. They believe that what might have
been an ordinary, forgettable recession
became a nightmarish slump thanks to the
stupidity (or at least the ignorance) of
p o l i c y m a k e r s .
Unit Six
The Return of Depression Economics
—Paul Krugman
Perhaps we should have known
better and realized, for example, that the
dilemma Austria faced in 1931 could just
as easily arise in the modern world, and
that now as then there are no good
answers.
Unit Six
The Return of Depression Economics
—Paul Krugman
There is, in short, a definite whiff of the
1930s in the air.
We had better all start relearning our
Depression economics.
Unit Six
The Return of Depression Economics
—Paul Krugman
It’s the Short Run , Stupid
As early as 1923 John Maynard Keynes
famously took his colleagues to task,
admonishing them not to ignore the short run.
Unit Six
The Return of Depression Economics
—Paul Krugman
But not until the Great Depression did
economists realize that “short run” shortfalls
of demand were crucially important. Perhaps
slumps were still self-correcting in the long
run, but would the economy survive to reach
that long run?
Unit Six
The Return of Depression Economics
—Paul Krugman
In the 1950s Paul Samuelson dubbed the
resurrection of classical full-employment
economic theory the “neoclassical synthesis.”
It remains to this day the position of those
who appreciate but do not worship free
markets.
Unit Six
The Return of Depression Economics
—Paul Krugman
In reality the Federal Reserve Board
actively manages interest rates, pushing them
down when it thinks employment is too low and
raising them when it thinks the economy is
overheating.
Unit Six
The Return of Depression Economics
—Paul Krugman
To an adherent of the neoclassical
synthesis like myself, then, the really disturbing
thing about the world’s current problems is not
so much the possibility that they will spiral into
a new Great Depression. Instead, the problem
is that for the first time since the 1930s, we
cannot be sure that governments can or will
increase demand when we need it.
Unit Six
The Return of Depression Economics
—Paul Krugman
The Unholy Trinity
WHAT HAS gone wrong? On the face of it, there seem to be
two quite separate issues: the problems of developing countries
threatened with hot money flows and those of mature economies
facing a “liquidity trap.”
As the Bretton Woods system of fixed exchange rates that had
governed postwar world monetary affairs began to show signs of
strain in the 1960s, a number of economists began to argue that
there was a fundamental dilemma—or, more precisely, a
“trilemma”—at the heart of international finance.
Three conflicting objectives in particular, sometimes dubbed
the “irreconcilable trinity,” have preoccupied would-be
international financial architects.
Unit Six
The Return of Depression Economics
—Paul Krugman
The iron law of international finance is that
countries can achieve at most two of the three.
The logic of this law becomes apparent when
one considers what happens if a country tries
to have it all.
Unit Six
The Return of Depression Economics
—Paul Krugman
The trilemma of international finance forces countries to
choose among three basic exchange regimes: a floating
exchange regime, which allows complete freedom of international
transactions and lets the government use monetary policy to fight
recessions at the cost of erratic fluctuations; a fixed rate, which
purchases stability at the expense of monetary independence; or
capital controls, which can reconcile a relatively stable exchange
rate with some monetary independence but only at the cost of
other problems.
Unit Six
The Return of Depression Economics
—Paul Krugman
A country could avoid locking its exchange rate by
reinstituting capital controls of the kind that prevailed for
the first two decades of Bretton Woods, which allowed
the pegs of that system to be truly adjustable, but the
costs of such controls seem a high price to pay. A freely
floating exchange rate, then, appears to be the lesser of
three evils. As a general rule, the preferred alternative
of most economists is a floating exchange rate. In
particular, it is the one most consistent with the
neoclassical synthesis, because it leaves countries free
to pursue both free-market and full-employment policies.
(from Foreign Affairs, January/February 1999)
Unit Six
The Return of Depression Economics
—Paul Krugman
Exercises

Ⅰ. Translate the following into English, using the words or
phrases in the text:
1. 使一国外汇储备大大减少的资本外逃
capital flight depleting a country’s foreign exchange reserves
2. 贬值所引起的国内恶性通货膨胀
domestic hyperinflation caused by devaluation
3. 为增加国民收入而采取扩张性财政政策
to adopt expansionary fiscal policy to increase national income
Unit Six
The Return of Depression Economics
—Paul Krugman
4. 面临总需求日益萎缩的危险
be faced with the danger of increasingly shrinking aggregate demand
5. 受流动性陷阱困扰的资本市场
capital market harassed by liquidity trap
6. 排除大规模投机活动的可能性
to rule out the possibility of massive speculative activities
7. 以经济停滞为代价来压低国内的价格
to drive down domestic prices at the expense of economic
stagnation
Unit Six
The Return of Depression Economics
—Paul Krugman
8. 以固定汇率为特征的国际金本位制
the international gold standard system characterized by fixed
exchange rates
9. 热币流动对货币产生的压力
the pressure of hot money flow on currencies
10. 以市场自发调节为中心的新古典主义理论
the neoclassical theory centering on the spontaneous
adjustments of market
11. 运用多种手段来实现经济目标的聪明的决策者
intelligent policy-makers who will use various means to
achieve economic goals
Unit Six
The Return of Depression Economics
—Paul Krugman
12. 能够帮助经济走出萧条的灵活的财政、金融政策
flexible fiscal and financial policies that can help the economy out
of depression
13. 发展中国家和成熟经济体所面临的不同困境
the different dilemmas that the developing countries and the
mature economies are faced with
14. 以牺牲充分就业来实现高产出率
to sacrifice full employment to achieve high output rate
15. 会导致另一国货币贬值的对这种货币的需求增加
the increased demand for this currency that will lead to the
devaluation of another currency
Unit Six
The Return of Depression Economics
—Paul Krugman
Ⅱ. Translate the following sentences into English:

1.
该国出现的这场经济混乱引起了中央银行和财政部的互相指
责，该事件反映了一国的货币政策和财政政策相互配合的重要
性。(take...to task)
The economic turmoil in that country made the central bank
and the treasury department take each other to task, which
reflected the importance of the collaboration of a country’s
monetary and fiscal policies.
Unit Six
The Return of Depression Economics
—Paul Krugman
2.
如今，政府陷入了这样的两难境地： 要改善国际收支
就要降低汇率，而汇率的降低又会导致国内的通货臌胀。
(dilemma)
The government has now slipped into such a dilemma
that if it wants to improve its balance of payments, it will need
to lower the exchange rate, but to lower the exchange rate will
lead to inflation.
Unit Six
The Return of Depression Economics
—Paul Krugman
3.
虽然贬值能扩大出口，但它也能导致外债的增加，甚至导
致政府信用的崩溃。所以，该国政府不敢贸然采取货币贬值
政策。(magnify)
Although devaluation will magnify exports, it can also lead to
the increasing foreign-currency-denominated debt；it can even
cause the collapse of people’s confidence in the government.
Therefore, the government did not dare to adopt the devaluation
policy without careful consideration.
Unit Six
The Return of Depression Economics
—Paul Krugman
4.
外债的增加并非是经济发展的必不可少的成本，因为外债
的增加虽然会在短期内提高经济增长速度，但从长期来看，
它会加重国内企业负担，导致国际收支不平衡。(in the
short/long run)
The increase of foreign-currency-denominated debt is not
necessarily the indispensable cost of economic development.
Because, although it may promote economic growth in the short
run, it will increase the burden of domestic enterprises and lead to
imbalanced balance of payments in the long run.
Unit Six
The Return of Depression Economics
—Paul Krugman
5.
主要资本主义国家曾一直将金本位视作经济实力强大的象
征，但在大萧条时期，他们都被迫彻底放弃了金本位。
(see...as; for good)
Major capitalist countries had been seeing gold standard as a
symbol of strong economic power, but they were forced to give it up
for good during the Great Depression.
Unit Six
The Return of Depression Economics
—Paul Krugman

Ⅲ. Put the following passage into English:
处于危机中的亚洲国家的经济证明，它们具有许多政策和制度
上的缺陷。但是，如果美国或欧洲明年或后年也陷入危机，我们
可以断定，一些分析家回过头来同样会挑出一些有关西方价值观
和制度方面的毛病来。很难说90年代亚洲的政策比过去几十年更
糟糕，那么最近为何会出现如此糟糕的情况呢?
答案是，世界在目前的危机面前变得如此脆弱并非因为经济政
策没有得到改进，而是因为已经得到了改进。世界各国对大萧条
后政策中真正存在的缺陷所作出的反应是退回去重新实行过去的
一套制度，这种制度在大萧条前自由市场的资本主义中具有许多
优点。然而，当我们在恢复老式资本主义的这些优点的同时，也
恢复了它的一些缺陷，最引人注目的莫过于易于遭受动荡和经济
持续萧条这一点了。
Unit Six
The Return of Depression Economics
—Paul Krugman
Troubled Asian Economies have turned out to have
many policy and institutional weaknesses. But if America or
Europe should get into trouble next year or the year after,
we can be sure that in retrospect analysts will find equally
damning things to say about Western values and
institutions. And it is very hard to make the case that Asian
policies were any worse in the 1990s than they had been in
previous decades, so why did so much go so wrong so
recently?
Unit Six
The Return of Depression Economics
—Paul Krugman
The answer is that the world became vulnerable to its
current travails not because economic policies had not been
reformed, but because they had. Around the world countries
responded to the very real flaws in post-Depression policy
regimes by moving back toward a regime with many of the
virtues of pre-Depression free-market capitalism. However,
in bringing back the virtues of old-fashioned capitalism, we
also brought back some of its vices, most notably a
vulnerability both to instability and sustained economic
slumps.
Unit Six
The Return of Depression Economics
—Paul Krugman

Ⅳ. Answer key for Writing research papers
Exercise 2
1.b
2.a
3.b
Exercise 3
1.Broadest:c
2.Broadest:b
3.Broadest:b
Narrowest:a
Narrowest:a
Narrowest:c