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Paul Krugman on Toyota, Southerners and the welfare state

July 25, 2005

Today's Paul Krugman column is quite interesting, but not because it presents good arguments, but because it contains so many fallacies. His entire column makes a big deal about a decision by Toyota to build a plant in Canada, which he claims proves the superiority of Canada's somewhat more extensive welfare state compared to the United States. That Toyota has also recently announced new factories in Texas, Kentucky and West Virginia is not mentioned, as it would contradict his "empirical evidence" of how beneficial Canadian welfare statism is.

From this single investment in Canada after many more investments in the United States by Toyota he alleges that this proves how the welfare state will attract investments. Well, that surely must explain why continental European countries and Scandinavia attracts so much foreign investments while we all know how no company must surely want to build factories in China who was attacked in The Economist for not subsidizing health care sufficiently.

He also attacks Southerners for being an uneducated bunch — specifically mentioning Alabama where LvMI is headquartered and attributing that to dogmatic right-wing opposition to tax increases to help fund higher government spending on education. Presumably he thinks education spending should be raised to the extremely high levels of District of Columbia, where test scores surely must outperform those in Alabama. Or do they really?

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