Paul Krugman: Russia and China are weak despite their large trade surpluses

New York Times columnist Paul Krugman argues that Russia and China's large trade surpluses are not a sign of strength for "authoritarian regimes", but of weakness.

The writer mentioned this in

in the newspaper to refute what he described as the issue that American voters consider the most important "issues of the nation", and it is the issue of "threats to democracy."

Krugman, the only winner of the Nobel Prize in Economic Sciences in 2008 for his work on the theory of international trade, said that the American voter does not see beyond the appearance of things, such as that authoritarian regimes, there are currently 59 in the world, govern 37% of the world's population, including the two largest regimes. Two powerful enough to pose major challenges to democracy and the international order are Russia and China.

Democracy is more efficient than tyranny

However, Krugman explains, Russia and China, despite their current large trade surpluses, are weak regimes, and that authoritarianism in the world persists not because it operates more efficiently than democracies.

He explained that Russia is considered a third-class power in economic terms, and its attack on Ukraine, which has continued since February 24, indicates that its military was and remains weaker than most observers had imagined.

However, it has nuclear weapons.

He added that Russia's trade surplus, which had ballooned since its attack on Ukraine, was largely caused by Western economic sanctions, which had been surprisingly effective albeit not in the way many expected.

Russia can't import

What the sanctions have done is undermine Russia's ability to import, especially its ability to purchase important industrial inputs.

One example of the problem is that Russian airlines are crippling some of their planes to dismantle spare parts they can no longer buy abroad. That is, Russia is having trouble using its cash to buy the goods it needs to continue its war effort.

The reason for the inflated Chinese surplus, Krugman explains, is the long-term domestic problems that may eventually reach their peak, because too little of China's national income is transferred to the public, and consumer spending has remained weak despite rapid economic growth.

Instead, China has kept full employment to some extent by channeling cheap credit into increasingly unproductive investment spending and, above all, a bloated housing market backed by ever-increasing private debt.

China's imports are declining

China, according to the author, has managed to keep this unsustainable game going, as the housing market in China appears to be collapsing and consumer demand appears to be falling.

This results in lower imports of the country making its trade surplus larger, so the surplus can be a sign of weakness rather than strength.

China's economy also suffers from the government's refusal to reconsider its strategy to confront "Covid 19", which is a failed strategy based on relatively ineffective local vaccines and a strict closure policy to contain the epidemic.

Nobody dares to advise the leader

He continued saying that democratic countries learn from the dictators and their surpluses that when export exceeds import, this does not mean profit and success.

On a broader level, he concluded, we see the problem of dictatorships, where no one can tell a leader when he's wrong. President Vladimir Putin launched an attack on Ukraine in part because everyone was too afraid to warn him about the weakness of Russia's military power.

In China, the response to "Covid 19" has turned from a role model to a failed lesson that warns others, perhaps because no one dares to tell Xi Jinping that his policies are unhelpful.