STOCKHOLM (Reuters) - U.S. economist Paul Krugman, a fierce critic of the Bush administration for policies that he argues led to the current financial crisis, won the 2008 Nobel prize for economics on Monday.
The Nobel committee said the award was for Krugman’s work that helps explain why some countries dominate international trade, starting with research published nearly 30 years ago.
While the research for which he won the prize was not obviously partisan, Krugman is best known as the author of columns and a blog called “The Conscience of a Liberal” for the New York Times. He has long been tipped as a likely winner.
A professor at Princeton University, the 55-year-old Krugman argues that President George W. Bush’s zeal for deregulation and loose fiscal policies helped spark the current banking meltdown.
He said news of the prize took him by surprise. “I took the call stark naked as I was about to step into the shower,” he told a news conference at Princeton on Monday afternoon.
Speaking by telephone to a news conference earlier, Krugman offered a snap analysis on the turbulent times.
“We are now witnessing a crisis that is as severe as the crisis that hit Asia in the 90s. This crisis bears some resemblance to the Great Depression.”
Praising world leaders’ efforts to staunch the financial bleeding, particularly in Europe, he added: “I’m slightly less terrified today than I was on Friday.”
World policy makers met at the weekend, after a black week on financial markets, to agree on radical measures to rescue banks, revive liquidity and avert a global recession.
It was the second year in a row that a major Nobel prize was awarded to an American known for his strong criticism of Bush — last year’s peace prize went to former U.S. Vice President Al Gore for his work on climate change.
Asked at the Princeton news conference if he saw a trend of Nobels going to people who were anti-Bush, Krugman said “A lot of intellectuals are anti-Bush.”
The prize committee dismissed any suggestion its choice was influenced by the current crisis or political considerations.
“I don’t think the committee has ever taken a political stance,” committee secretary Peter Englund told Reuters. “The real, dramatic crisis is an event of the last month or so, which is in practice after the committee took its decision.”
Krugman’s latest column in the New York Times, published on Monday, praised Britain for thinking clearly and acting quickly to address the crisis, unlike the United States. He mused: Did British leader Gordon Brown just save world markets?
Britain unveiled a plan last week to bolster ailing banks, and on Monday it waded in with 37 billion pounds ($64 billion) of capital, a move that could make the state the banks’ main owner.
Readers of Krugman’s blog posted hundreds of comments congratulating him as an accessible voice of common sense.
“Sometimes it feels as though you are the only sane person in America,” said a writer who identified himself as Martin Gruner Larsen.
Krugman said he was encouraged by recent steps to address the crisis and said it was vital there should be a combination of capital injection and guarantees for banks.
Commenting on policy proposals from the two U.S. presidential candidates, he said: “It would be kind of nice if we did have a sophisticated government, but that may change.”
Asked about accountability for the crisis, Krugman said the financial system had outgrown the regulatory system.
“There is a lot of grotesque greed under this crisis but greed isn’t illegal,” he said.
The Royal Swedish Academy of Sciences said the prestigious 10 million crown ($1.4 million) award recognized 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. “Krugman’s approach is based on the premise that many goods and services can be produced more cheaply in a long series, a concept generally known as economies of scale.”
Krugman’s theory clarifies why trade is dominated by countries that not only have similar conditions but also trade in similar products.
Writing by Anna Ringstrom; Editing by Charles Dick and Philip Barbara