America and the World

Talking with Martin Wolf

I wasn’t able to do a fresh interview this week, so here’s a link to a talk I had with Martin Wolf for the FT. Transcript below.

TRANSCRIPT

Wolf: Paul, good to see you and talk to you again.

Krugman Good to see you, too, Martin.

Wolf So according to a new National Security Strategy document released by the White House last week, I appear to be living on a continent that faces civilisational erasure. I must say, it doesn’t feel like that.

Krugman Yeah, the same document says that we’re going to help Europe correct its current trajectory by helping, among other things, patriotic parties, which I think basically means parties like Germany’s AfD.

Wolf So Paul, there really is only one place to start, and that’s with America’s new National Security Strategy. So let’s go over its main points and what you make of them. Let’s start with something pretty fundamental.Does the absence of a liberal values mission in the NSS indicate the end of US exceptionalism, or at least US moral endeavours in the world, as a foreign policy principle? Is this all gone?

Krugman Oh, it’s more than gone. I mean, this document goes beyond dropping the historic US commitment to liberal values, democracy, whatever you want to think of as being the distinctive, exceptional American contribution to the world to sort of actively opposing it. I mean, quite a lot of the document is meandering boilerplate.

Some of it reads as if it was translated from the North Korean, with effusive praise for Dear Leader. But it is crystal clear on Europe, which it basically says, Europe better stop adhering to these liberal values, better stop admitting people from other places, or else.

Wolf So John Fitzgerald Kennedy’s famous ‘Ich bin ein Berliner’ at the Berlin Wall is now absolutely ancient history?

Krugman Oh, very much, and even Ronald Reagan, not one of my favourite presidents. But Reagan said: ‘We are a shining city upon a hill.’ And that’s definitely not the message that we’re getting from this document.

Wolf Now, one question before we get to this body blow to Europe, which I certainly am interested in and want to focus on, but I am quite intrigued by how this administration frames its competition with China. It clearly acknowledges the rivalry in tech, the economy, and military matters. But it doesn’t stress any sort of ideological competition.

It’s really just a set of interests. And it also implies in other places that its main focus is regional, that what the US wants to be is the dominant power in its regional sphere of influence, which is the Americas. It sounds as though, in addition to getting away from ideological competition of any kind with China, it’s sort of quite willing to hand over the rest of the world, which is pretty well all the world, economically speaking, outside the US - let’s be clear about that - to China. This is really a very weird way of framing an interest-based policy, isn’t it?

Krugman Yeah. I mean, Maga, make America great again, was a very protean slogan. It could mean whatever you wanted it to mean. But one of the meanings was clearly

that we were going to stand up against China. Trump released a national security statement during his first term that put rivalry with China at the core, although the actual policies proposed were disastrous. But that’s almost disappeared from this document. We’re really not going to try and do anything, at least this doesn’t say anything, about significantly contesting China’s technological progress, Chinese influence in the world outside the western hemisphere. We’re much more concerned with making sure that there aren’t too many non-white people living in Europe than we are with great power competition with China.

Krugman I mean, with the exception that, of course, at that time, the US wasn’t at all interested in Europe except to keep it out of the continent, it reads sort of rather early 19th century as a perspective upon the world. And I’m really surprised by this because it’s only really emerged during this administration, this second Trump administration.

Wolf Just briefly, what is driving that? Where is it coming from?

Krugman First of all, I’m not sure that there’s very much genuine interest in the western hemisphere. I mean, I don’t think - it is true that we have actual - we’re putting a lot of US taxpayers’ money on the line in an attempt to bail out the president of Argentina. And we put a lot of diplomatic capital on the line trying to punish Brazil for having the temerity to put a former president who tried a coup on trial. In terms of actual influence, I mean, it’s not clear that there’s much there going on except that the western hemisphere is a place to do things that this administration wants to do, like bomb small boats and then kill the survivors. So you sound like a crazy person whenever you talk about this administration’s policies, but that’s the reality. So I very much doubt that they have a coherent strategy that says we’re going to try to establish a Monroe-style sphere of influence. I think it’s more that, for various reasons, focusing on Latin America is convenient for them right now. So I think we should come back to that when we consider China and the broader competition for influence, which is clearly there.

Wolf There’s no doubt about that. But let’s first go a little bit deeper into what all this means for Europe. When we last spoke, you were rather optimistic on Europe.

So explain why you were. And has this really changed that perspective? Because I must say that, in Europe now, I sense in my discussions asked, people are really pretty shocked because to them it seems that the Americans have come out, essentially, and said, we are your number one enemy, pretty well. We absolutely despise your political arrangements. We want to replace your governments with governments like ours, of the far right. And well, for Europeans, that starts reminding them of the ‘30s. So this is really pretty terrifying. So where do you think it leaves Europe?

Krugman The United States has much less power over Europe than it imagines it does. European exports to the United States are under 3 per cent of European GDP. It’s not that the European economy is dependent upon access to US markets. It’s not even as dependent, I think, as many people think, on US technology. It has been dependent upon US national security guarantees. But that’s a choice. Europe’s GDP is not very far short of America’s. Europe certainly has the resources to be self-sufficient. So in a way, this may all serve as a wake-up call, saying, hey, Europe, you’re on your own. It’s time to actually recognise your own strengths. And I still, I mean, if we get there, I’m actually doing a bit more sort of background work. And I’m even more sceptical of the Europe in decline narrative than I was a few weeks ago. People should have seen this coming in Europe.

Wolf But it is still kind of shocking to see it out there in black and white.

Krugman Well, they have learnt, haven’t they? I’ve referred to this as learned helplessness.

Wolf After the war, people felt - the Second World War - people, obviously, were very grateful for American vital assistance in winning the war and in, then, in creating and supporting the institutions of a new Europe, economic and political. And most Europeans, not all by any means, but most Europeans have felt pretty grateful for that.

They’ve also quite liked not having to make all these difficult decisions. Now, suddenly, as it were, autonomy has been thrust upon them, to misquote Shakespeare. Obviously, they can. The resources are clearly there. But it could take a few years, and these could be very, very bumpy years.

Krugman Well, yes, but I mean, what are we talking about here, really?

I mean, the United States has complained that Europe does not spend enough on defence. Maybe we change that now that we think that Europe is the enemy.

But Europe spends a little under 2 per cent of its GDP on defence. The United States around 4 per cent. 2 per cent of GDP is not a huge... extra 2 per cent is not a huge burden. And it would take, actually, considerably less than that for Russia, as a rival to Europe, to be a joke because Europe remains immensely wealthy. So the resources are there.

Wolf The political cohesion has been really problematic. And it’s still... the European Union is still very much subject to being hamstrung by various kinds of blocking coalitions, although the US government is looking less and less able to get things done, as well.

Krugman I don’t think it takes as long as people think. I mean, one of those sort of random facts: who is the world’s largest producer of artillery shells right now? The answer is Rheinmetall, in Germany. Europe has reacted quickly in some aspects of just plain raw military clout, already moved into a surprisingly strong position.

Wolf So in terms of economic policy, talk about wider issues. If we were going to talk about accelerating the move towards strategic autonomy, economically, what would Europe have to do? Obviously, they’d have to spend somewhat more on defence,

I agree, something like a couple of percentage points of GDP. It would have to be... they’d have to get rid of a lot of the duplication which they now have, so take advantage of scale. That’s quite a big issue. But they did this famously in civil aviation, where Airbus has been a tremendous success, obviously. So they’re used to doing things like that. They’re going to have to mobilise more manpower. But I mean, the EU alone, leaving aside UK, has, I think, at least 3 to 4 times as many people as... I think it’s about 4 times as many people as Russia. So that should be manageable. And Europe is the largest world trader in aggregate, I think, still. And so it will remain capable of forming worthwhile trade agreements with the rest of the world. And I suspect the rest of the world - and I’ve made this point before in other contexts - will want to minimise its complete dependence on just the US or China. And most of the countries in the rest of the world have a degree of freedom. So they’re going to continue to want European markets and good relations with Europe because a third pole is desirable. Taken together, this doesn’t look too bad, does it?

Krugman No, there’s a widespread perception that Europe has fallen very behind technologically, which is not exactly wrong but, I think, in many ways, misleading. Europe definitely has a much smaller footprint in information industries than the United States does. All of the big companies in that area are US or Chinese. Quite a lot of the stuff... I mean, AI is being undertaken largely in the United States and, in a different version, in China. So those are important things. And there’s a really strong case for some kind of European industrial policy, if only to enhance autonomy.

Wolf Overall, the numbers say that European productivity has lagged well behind the United States since about the year 2000.Yes. And I’m actually sceptical. I’m not sure that those numbers mean what they appear to mean. And that’s a whole... that’s a way too technical discussion to have here now. But I’ve been doing some calculations on real wages. European real wages have grown about the same rate as US real wages.

It’s not as if the ordinary experience of the economy has been bad for Europeans. And if we look at the application of modern technology in daily life, that’s every bit as obvious in Europe today as it is in the United States. So it’s not clear to me that Europe has... it’s like there’s a segment that Europe has fallen behind in.That’s a solvable problem, if Europe has the will. If you really use the resources available, there’s no doubt about it.

Wolf Maybe we should take a bit of a leaf out of the book of the Biden administration’s effort with targeted industrial policy, which this administration has completely scrapped. It looks at a great deal more sensible than what they’re now following, scattergun, unpredictable tariffs.

Krugman Yeah. We were talking about how the Trump administration has downplayed, all of a sudden, rivalry with China, seems to have dropped off the agenda and not just in the National Security document, in terms of actual policy, as well. Europe has a real - I mean, I don’t exactly what the grounds for action - I think it’s much less legalistic and much more than it is the United States. But we have Section 232 tariffs, which were designed to give a lot of flexibility in dealing with national security interests. And Europe clearly needs something like a Section 232, where the national security threats are coming as much from the United States as they are from China.

Wolf But we would almost inevitably end up with conflict with both because we want to... people will want to preserve vital industries in this world, in Europe. I accept that the basic fundamental technologies have to be available in Europe. That means we have a concern with the US now, and we obviously have a concern with China. We’ve just heard that the trade surplus of China has been $1tn. There have to be counterparties to that. And if the US doesn’t want to be the counterparty, it looks as though it will be Europe.

And it’s pretty obvious the Europeans are not going to have that.

Krugman Yeah, you can be as much of a free trader as one can be in good conscience and yet having $1tn trade surplus all head to China because the United States has gone protectionist. The dislocation, in some sense the GDP welfare calculations, whatever, are irrelevant. You cannot accept that level of disruption. And I think, actually, there are macroeconomic consequences.

Wolf There are macroeconomic implications. I think we discussed this, as it were, in our different writings 20 years ago in the early stage of the huge expansion of the Chinese surplus and the consequences for macroeconomic policy. So China has to change. And Europe has to adapt. But the US is really something of a threat to Europe. So let’s consider just briefly the political sideof that threat. This seems to be an idea that European states have to facilitate, essentially, the rise of what the US refers to as patriotic parties, essentially, far right parties. And a key emphasis, very clearly in this document, when it refers to the civilisational crisis of Europe, it’s very clearly framed as racial.

Krugman Yeah. It’s absolutely astonishing to me. I suppose I’m naive that it’s got so far that the US considers the civilisation it’s defending not as a series of values, but as just about - let’s be brutal - skin colour and religion. What does Europe do when confronting a power that has the aim of causing racial war in your continent and putting in power parties with - again, be brutal – which are at least ideologically rather similar to well, we have no other way of putting it, the Nazis.

Wolf That’s the echo we all hear when they say, we must go back to defending our civilisation. That inevitably sounds Nazi. How do you deal with this?

Krugman Well, I think you deal with it by saying, no, hell no, expressing outrage. I’m not sure exactly how it plays in European politics. But in a number of other countries, including Canada, which is far more dependent on the United States than, just because of geography, than Europe is, Trump has been a highly effective campaigner on behalf of liberal values, also the Liberal party.

Wolf I agree. Mark Carney is prime minister of Canada in an election that was supposed to be a devastating defeat for his party, largely because Trump so visibly was on the side of his opponent, and that turned the vote. It’s at least possible...

Krugman I mean, something like that, to some degree, happened in Brazil, as well. So in some ways, the famous phrase from Franklin Roosevelt in 1936 about his enemies, ‘”I welcome their hatred,’ I’d like to see. I think it’s probably a good idea for European politicians to say we welcome Trump’s hatred. If there’s something he wants, this is something Europe should not want. I think, actually, it is possible - and the next few years are going to tell us - that exactly what you described will happen.

Wolf If it continues in this way, with this sort of rhetoric and - I’ll come to another aspect of it - of action, then I think the hostility to anybody who clearly puts himself or herself forward, as it were, as Trump’s avatar in Europe is going to be very substantial. It’s going to be really a huge, crucial moment in European history. And this other aspect is the role of big tech. I mean, this is quite extraordinary, to me, that essentially they are making foreign policy. 10 years ago, 15 years ago, I thought of big tech as predominantly liberal. Well, that’s certainly gone. And they’re basically claiming that they are entitled to complete free rein. There should be no controls whatsoever on what they produce because free speech. And they seem to be utterly in control of US foreign policy. That’s really quite extraordinary. Is that going to continue? Should we reckon that just a feature, not a bug, in US foreign policy now?

Krugman Well, what we do need to say is that it’s very much a partisan thing. Big tech used to have... to some extent probably still does, but used to have a lot of power in both parties. It was a lot of the tech guys were major contributors to Democrats. They have very much tied themselves now to Trump’s waggon, and the attempt to use US government power on their behalf. I mean, the part of the conflict, aside from the, how dare you allow non-white people into your countries, but part of the conflict is, how dare you try to have some prudential regulation of social media... Indeed. ...digital services in Europe. And the people who are gone crazy about that, Elon Musk calling European bureaucrats ‘woke Stasi commissars,’ I think...

Wolf That’s right. ...they have very much identified themselves now with Maga, with Trump.

Krugman And if the United States is able to turn this around, if we are able to shake off this malign movement, then US foreign policy will also change. So this is not... hopefully, it’s not a permanent feature of US-EU relations. But you should behave as if it might be a permanent feature. And it’s wild. I mean, we have our commerce secretary threatening to keep steel tariffs high on Europe if Europe doesn’t stop attempting to prevent the psychological and social harm caused by untrammelled social media.

That’s amazing. The tech bros want the US government to act on their behalf in Europe the way that United Fruit Company used to expect the US government to do its bidding in the banana republics of Central America, which is... that’s where the banana republic name comes from.

Wolf The other policy that Europe follows that they want to savage is anything to do with climate change. Now, this is, of course, seen increasingly by the world as, essentially, a war of the US on the world because most people recognise the importance of doing something about this.

Krugman The worst part is not simply that Europe is encouraging wind and solar power, but that it’s working - not great. Prices are a little high. There are some questions. But when you have Britain relying very, very heavily now on wind power, some of the European continental economies relying very heavily on solar power, the demonstration

that you can actually do this is something that really, really annoys the American right as much as anything else. If Europe is going to, were to say, OK, never mind the wind and the sun, we’re going to go back to fossil fuels, where are those fossil fuels going to come from? And the biggest answer is actually natural gas from the United States. So just on national security grounds, Europe should be pushing for renewable energy. I mean, they were getting gas from Russia, and that has turned out to be a really bad idea. Being dependent on liquefied natural gas from the United States is almost equally bad as an idea.

Wolf Yes, and one of the attractive aspects of clean tech is that even Donald Trump can’t stop the sun shining or the wind blowing. He’ll try, but yeah. I think that’s still beyond him. So it’s time for a short break. And when we come back we’ll be talking about the battle for supremacy between the US and China, particularly economic supremacy, and whether China has already won.

Wolf So let’s talk about China and the US. You’ve argued that China isn’t the world’s number two economybut is, in fact, already the world’s number one economy. Can you explain that view?

Krugman In terms of the dollar value of GDP, China is still number two. But the overall price level is lower in China, which is a well-known thing. China is still, per capita, it’s a middle income country, not a high-income country. And there’s a well-established relationship, the Balassa-Samuelson effect, which people do not want to know about. But it is, in fact, pretty much uniformly the case that countries at a middling stage of development tend to have cheaper non-traded services than countries with a more advanced level. And therefore, the true volume of stuff they produce, the real quantity of goods and services they produce is larger than you might infer from just looking at the dollar value of their GDP. And China, on a purchasing power basis, the economy is already substantially larger than the economy of the United States. The United States is still ahead in cutting-edge technologies, although that’s a surprisingly fragile lead.

And the Chinese have shown an awesome ability to catch up technologically, or at least catch up most of the way technologically, in areas that they consider a priority. So I think there’s really no serious question that, at this point, China has the bigger economy. For investors, it’s not as big a market,because the dollar value of its GDP is smaller. But we’re really not close. And everything that’s happening on the ground in terms of support for science and technology, in terms of having any kind of coherent industrial strategy, says that the gap between China and the United States is going to get wider.

Wolf One of the factors, obviously, is the rate at which countries invest. We know that quite a bit of Chinese investment is inefficient. But quantity is quality, to some degree. And if you look at China’s annual dollar savings, it’s even bigger in GAAP and PPP terms, they’re actually as big as US and Europe together. Even if you assume that a lot of that is wasted... and quite a lot of that is wasted in buying really pretty poor assets because of this huge trade surplus of theirs. But nonetheless, their capacity to mobilise resources in pretty well any sector they’re interested in, as they’ve shown with clean tech, is pretty daunting. And the US has got nothing to compete with that because they just aren’t these flows of savings or investment.

Krugman Yeah. There’s been nothing like the situation of China before. In the past, the world’s biggest economies have also been its richest per capita. And this is, for the first time, that the biggest economy is, in fact, not also at the top in terms of per-capita GDP.

And in some ways, you might think that leaves China with some areas that it just really can’t compete with the United States, except that that’s probably not true, because although China’s overall technological level kind of lags still, China is so big, has so much deployable investment, so many deployable savings, and an ability to focus on...

I mean, industrial policy can sometimes go very badly wrong. But if there’s a sector that the Chinese think is really important for them to dominate the world in, they pretty much can do that. And the United States has no ability to counter, at least certainly has no desire to counter that in any systematic way now. So sure, this is a world where, yeah, the United States is still richer, our standard of living is still higher. But in terms of any kind of geopolitical competition, there’s almost nothing. If it goes head to head between the US and China, my money would be all on China.

Wolf So if you look at this, imagine you were sitting in Beijing, and you were looking at the way America has behaved since Trump was inaugurated, look at the trade war, look at what they’re doing in domestic policy, particularly, as you said, science and technology. Now, this National Security Strategy comes along with its very strange ideas about spheres of influence and no real indication of a desire to challenge China, as far as one can see. Would you conclude, well, basically, it’s all done? We are going to be the top power. We are going to be a more reliable trading partner for most countries in the world, including even Europe. I mean, the Europeans are very worried about this industrial competition, all the rest of it. But China hasn’t been behaving in quite the way the US has been behaving. Look at the way it’s been behaving with Brazil or India. So the Chinese sort of feel, if you look at all these things together, their scale, their mobilisable resources, the international relations that the US is now busy sacrificing, including its most important allies, which, as you’ve pointed out, are the basis of the larger bloc it had around it - and I wrote about that very recently when I talked about a world global economic fragmentation - the Chinese must just feel that everything is falling into their lap.

Krugman Yeah, I mean, I don’t know whether the Chinese, whether Chinese officials, what they do when they’re feeling triumphant, whether they rub their hands with glee or they giggle or what. Whatever it is they do, they must be doing it because, my god. It’s funny. I was just... kind of random, I was reading some posts on history on Substack and someone who was amazed to discover that the Roman Empire, how did Rome conquer the world? And yeah, the Romans had good armies and good soldiers, but not that much better than anybody else. Ancient Rome’s real strength was its ability to cultivate and assimilate allies. It was the strength at building alliances that made the Roman Empire. The United States used to be really good at that. We were the leader of the free world. And it’s still true, as I wrote in the piece that appeared just before we had this conversation, that the former free world, collectively, is still a much bigger economic power than China. But the United States has just declared that large parts of what we used to call the free world are actually our enemies. And we are, on our own, without allies, are not a match for China. So the Chinese must be feeling, hey, the second Cold war is over, and we won.

Wolf I mean, indeed, in the book I wrote, The Crisis of Democratic Capitalism, quite a lot of columns were basically, over the years, the recent years, were framed around the idea China on its own is so big and has such huge potential that a country with a quarter of its population - that’s roughly the relationship between the US and China - is very unlikely to be able to match it on its own over the next 30, 40, 50 years.

Nothing’s certain. But if you look at the difference, do you really think China can’t get to real GDP per head of half of US levels? When you just do the arithmetic, you can see where you end up. But actually, the US had this vast alliance and lots of friends and lots of countries which at least leant towards it. India is obviously an incredibly important example because of its scale. And it’s just burnt them all. And what’s astonishing to me is there doesn’t seem to be any serious debate about the implications of that. I may be wrong, but among the foreign policy community, what I’m seeing is nothing but complacency. There are distinguished exceptions. Obviously, there’s huge concern in the US about the domestic side. That I understand fully, this attempt to create a despotism. But I’m really astonished at how few people have been arguing that the US is just burning all its major assets in this competition. Maybe the explanation is, ultimately, these people don’t care about the competition with China. They just care about the societies they create at home. Well, that’s probably true of... it’s not probably, it’s definitely true of the Trumpists. This whole competition with China, great power, that was always an excuse. It was always a reason to do what they wanted to do domestically. And if they’re given a choice, I mean, I was wondering how much pushback I’d get, but I just said that Trump has, effectively, chosen white supremacy over national greatness. And that’s clear. Given that choice, that’s the choice they will make.

Krugman In many ways, this has been prefigured. This explicit downgrading of international competition and in the National Security Strategy is prefigured by everything else that’s been going on. Let’s not forget that all of Trump’s tariffs are flat violations of past agreements US tariffs were not set... Of course. ...in isolation. They were set through global negotiations. We promised Europe. We promised Canada. We promised the world a lot. And then Trump not only just ripped all of that up, but did so without even explaining why. No sense that US promises are something that should be honoured or, if you’re not going to honour them, you owe the world an explanation. So what authority - diplomatic, moral, however you want to measure it, what authority do we have in this world now?

Wolf Well, of course, the excuse they gave - but they’ve never justified it with anything rigorous, of course - is that the rest of the world was ripping us off. And Europe, of course, was presented as being the arch ripper-offer, if I may use that phrase. And that is obviously part of what justifies the view, which seems to be very clear now, that Europe, which always has considered itself sharing values with the US, and objectives and aims, is actually the enemy, this very, very strong sense of grievance. So the white nationalism is clearly important. But the other point, at least with Donald Trump himself - I don’t know with the others - is this very profound sense of this incredibly powerful and, on the whole, successful country, that it’s been ripped off. Again, that’s a psychological problem, isn’t it? I mean, it’s nothing... you can’t really interpret that, coming from this country of all countries, as a sort of credible position.

Krugman Yeah, especially... even if you buy the bad economics of Trumpism, the belief that bilateral trade imbalances mean that you’re being ripped off by the other guy, that they sell more to you than you sell to them, that that means that somehow or other that you’re subsidising their economy... it makes no sense, but that is what Trump has often said. But the European Union, if you include exports of services as well as goods, EU-US trade is almost balanced. We don’t even actually have a big... Absolutely. ...trade deficit with Europe. So even on Trumpian economics, it makes no sense at all. But the facts have a well-known liberal bias, I guess, or something. It is, I think, ultimately, the sense of being ripped off here comes more from we don’t like the fact that the Europeans still have the values that we used to have. And then we’re going to make up some other story to justify our hostility.

Wolf Now, in this world that we’re envisaging- I think we’ve considered this before, but I’ve thought about it some more - if you were a rational ruler of a Latin American country, of a south or east Asian country, which isn’t itself a superpower yet, as it were, how would you navigate this? Presumably, you don’t really want to choose China. There are problems there. You want to manage and contain your risks vis a vis the US. You probably don’t want to close your economy up. It seems to me part of what you would want to do is to get really quite close to Europe. But how do you think this will play out? And a particular issue there, since we started with this, is this whole Monroe Doctrine revived attitude of the US, the sphere of influence. Most of the - not all - Mexico is obviously an exception, but many of the south American countries, because their commodity exports, their biggest market is China. America is a competitor, not a natural market. They’re not going to want to... they’re going to want to continue to trade with Europe and China. Is the US somehow proposing to blockade them? Are they envisaging that somehow the south American countries will be invaded or, in some other way, forced? I mean, I feel the same about Canada. Where’s the beef here? What is actually underneath all this insane rhetoric?What, in concrete terms, might it mean for US policy in the rest of the world? What choices might we be faced with?

Krugman Yeah, I mean, the idea of certainly of south America as a US sphere of influence, I mean, even on just raw geography, Brazil is as close to Europe as it is to the United States. Exactly, of course. Argentina is, and in economic terms, they’re roughly equidistant in some kind of economic distance, from the US, China, and Europe. And in many cases, they do more trade with China and Europe than they do with the United States.

Wolf Indeed they do.

Krugman And if you ask the question, why single out Latin America, I get a maximum cynicism. I mean, we can go out there and sink small boats in the Caribbean. I don’t think we could get away with doing the same thing in the Mediterranean. If you want to go out there and kill people, Latin Americans are kind of the targets of opportunity, regardless of whether there’s any real motivation for it. I’m sorry, that’s... again, it’s hard to talk about this stuff without sounding crazy, but that’s just kind of where we are. But I don’t think there’s a coherent doctrine. I think if you look for a coherent geopolitical doctrine in that National Security Strategy, you won’t find it. I actually read it quite carefully and was very sorry. Page after page of meandering, circular drivel, coupled with occasional sycophantic praise for the president until you get to the European section. The only thing that is really coherent is, we hate Europe. And the rest does talk about, yes, well, western hemisphere is ours. We tried invading a country to produce regime change back 20 years ago, and it did not go well. And I can’t imagine... no, I can’t imagine all kinds of things, but I would be really surprised if they’re willing to actually apply serious force towards regime change in South America. I would have thought that regime change in a vast continent like that... the one thing I thought about the Maga movement is they really didn’t like foreign wars.

Wolf Well, that would be beyond insane. I mean, the conclusion I’m reaching from this discussion, essentially, from the European perspective, is something like this. We seem to have a superpower that we trusted, respected, and in many ways profoundly admired. It has become, more or less across the board, economic policy, domestic policy, foreign policy, sort of, at best, senile. But it has one coherent idea. It hates us... Yeah. ...that is to say, Europeans, because we’re the last major liberal democracies left in the world. So my reaction to this is that it’s a combination of pity and fear, as it were. But the pity is not just for America. It’s also for all its former friends. Can you give us one ray of hope that this will, before we go, that this will not last, that this sort of doctrine that we are now seeing emerging at home and abroad, all that we’ve experienced this year and this paper, that this will be a temporary phenomenon, and we will get back something like the US we knew and loved?

Krugman Well if there’s a ray of hope, it would be how Latinos voted in the New Jersey election last month... I mean, kind of seriously. Trump’s ascent to a second term in the White House does not now look like it was a fundamental structural change in US politics. It was a lot of relatively low-information US voters who actually believed that Trump could bring down prices and have been very rapidly disillusioned. So assuming that the attack on democracy at home hasn’t gone too far, it’s very, very likely that Maga will at least be set back seriously politically in the midterm elections. 2028 is a long ways away, but the possibility... I would say there’s better than even odds that we do not have this kind of regime in the United States a few years from now. Now, that’s not the same thing as saying that America will be back. I mean, it’s going to be... I don’t expect in my lifetime to see us repair the damage to our reputation, to our credibility that we’ve just done. But meanwhile, Europe needs to put on its big boy pants, or whatever is the appropriate metaphor these days, and say, hey, we are a superpower, too. And we may not be quite as big an economy as America, but on the other hand, we have a lot of strengths that America is throwing away. So time for us to take charge of our own destiny.

Wolf I very much agree with that conclusion. It’s very much what I have been and will be arguing, and I hope that Europe does respond because the alternative is really pretty horrible. I think this has been a very illuminating discussion. And next week, we’re going to be answering your questions. We’ve had plenty of comments on YouTube and Spotify, as well as the FT website. So if you’ve got a question you want us to answer, do comment on this whenever you’re listening or watching. Or email us at economics.show@ft.com. And we’ll do our best to answer your questions.

Krugman The question and answer is always the most fun of any kind of presentation, so this should be the most interesting part.

Wolf So what’s your cultural coda this week, Paul?

Krugman OK. It is funny. I was searching for something and then discovered, as I often do, that I had already used it for the Substack, but I’ll bring it back. And for once, I’m going to do classical music. There was a magnificent performance of Beethoven’s Ode to Joy, held for a vast public square in Maastricht a few years ago, Andrew Rieu conducting. And there’s something about it. There are a lot of, YouTube first, lots of panning through the crowd. And there are people weeping, as they should be. Let’s try to remember all the great things that actual western civilisation, not the caricature of it that the Trumpists want, has done and reclaim and move it forward.

Wolf Well, that’s a wonderful coincidence because I was going to suggest exactly the same passage. But it occurred to me, if they can find it, if I remember correctly, that just after the fall of the Berlin Wall, Leonard Bernstein performed it, I think, in Berlin.

And they changed the word. The first word in the German is ‘freude,’ which is ‘joy.’

But I think he did a performance in which the first word was ‘freiheit,’ ‘freedom.’ And in a way... Oh, wow. ...that is even more appropriate to this moment because he was symbolising the freedom that the fall of the Berlin Wall meant, which was, to me, as I wrote at the time, the most exciting political event of my life, watching the division of Europe end. And this is the Europe that Trump and his minions wish to destroy and turn back into a fascist system. Because of course - another little point - that choral song, based on the Schiller poem, is the anthem of the European Union and therefore could not be more appropriate at this moment, when the European Union, which was such a magnificent idea of co-operation and peaceful relations in a continent that had been destroyed by war over the centuries, but particularly in the first half of the 20th century, this is so symbolically powerful, the connection with that, the connection with European history, one of its greatest geniuses, and of course, the hopes of contemporary Europe. You’re at the EU seeing up close, reading Commission documents, it’s easy to get annoyed at all of the pettifogging bureaucracy and all of that. But the reality is, given the past few centuries of European history, what a magnificent thing it is for Europe to have gotten to where it is today.The longest period of peace in European history since the fall of the Roman Empire.

Krugman Yep.Thank you, Martin.

MARTIN WOLF: Till next week.