Wednesday, October 15, 2008

Nobel winner Krugman says world recession likely

The world is likely headed for a deep recession despite the European-led plan to bail out banks hit by the credit meltdown, the US economist who won the 2008 Nobel prize for economics said on Monday.

Paul Krugman, an economics professor at Princeton University and columnist for The New York Times, said the plan to recapitalize banks has the potential to heal financial institutions, unlike the U.S.-led plan to buy bad debt that preceded it.

Earlier on Monday he told reporters in Sweden: "We're going to have a recession and perhaps a prolonged one but perhaps not a collapse."

Krugman, an outspoken critic of the Bush administration in his newspaper columns, denied that he felt vindicated by the Nobel Prize because it was given for his professional work as an economist rather than for his commentary.

Krugman argued that the crisis signals a cultural shift away from the belief in the primacy of markets, as espoused by the Bush administration.

"The people who assured us that markets work, that the private pursuit of profit always leads to a good result have been rather massively wrong," he said.

The Nobel committee awarded Krugman the prize for work that helps explain why some countries dominate international trade.

The Royal Swedish Academy of Sciences said the award recognizes Krugman's formulation of a new theory that addresses what drives worldwide urbanization. "He has thereby integrated the previously disparate research fields of international trade and economic geography," the committee said. To read more, please, visit -The Economic Times

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