Dean Baker

Recent Articles

From the Times Europe Bashing Desk

The NYT had a piece this morning reporting on how Europe is heavily dependent on coal, despite its "green image." While the article had much useful information, it never mentioned the fact that Europe emits approximately 50 percent as much greenhouse gas per capita as the United States. In the numerate world, this is an important piece of information. At one point the article discusses how much Europe will have to reduce its emissions if it is to compensate for growing emissions in China and India "to say nothing of the United States." As far as I know, none of the people running European countries are morons, nor are the environmentalists who promoted the Kyoto agreement. If China, India, and the United States do nothing to contain their emissions of greenhouse gases, then whatever Europe does or does not do will be completely irrelevant. There would be absolutely no point in Europe absorbing substantial economic costs in a futile attempt to stop global warming. The proponents of the...

Do the Washington Post Editors Know How Markets Work?

The Post has a piece this morning about the non-enforcement of laws against hiring undocumented workers. The article includes several statements, including one from Homeland Security Secretary Michael Chertoff, to the effect that native born citizens will not do the jobs that are filled by undocumented workers. Believers in markets would say that if wages rose, then plenty of native-born citizens would be willing to fill the jobs. Interestingly, meat processing is one of the industries discussed in the article. Thirty years ago, this was an industry with relatively high-paying (albeit extremely unpleasant) jobs. It was also relatively highly unionized. Plenty of native born citizens wanted these jobs. The Times had a much more insightful piece on the same topic. It reports on the growing use of undocumented workers as custodians and how this has been associated with a decline of wages in the occupation. --Dean Baker

Wasting Public Funds on Destroying the Planet

It is remarkable that ostensibly intelligent people can be made to fear the possibility that Europe and Japan will be less crowded places in the years ahead. The Financial Times has an article that reports on a warning from "top fertility experts" over "Europe's chaotic response to its demographic crisis." It is hard to find the evidence for the crisis in the story. The article reports that health care spending as share of GDP is projected to rise from a Europe-wide average of 6 percent at present to 8 percent by 2050. Since the U.S. currently spends 15 percent of its GDP on health care, it is difficult to get too concerned about this prospect. The article gives the usual hype about the rise in dependency ratios, there will be fewer workers for every dependent. Those who have mastered arithmetic know that the projected increases in productivity swamp the impact of rising dependency ratios on living standards. For example, if productivity growth averages a very modest 1.5 percent...

Interesting News On China

The New York Times reported on Saturday that China's central bank is adopting a more contractionary monetary policy in order to slow its economy and reduce inflation. If China's central bank is concerned that inflation is getting out of control, then it would be an ideal time for the country to begin to raise the value of its currency against the dollar. This would have two beneficial effects from the bank's standpoint. First, a more valuable Chinese currency will make Chinese exports more expensive. This will slow China's export growth, and thereby help to slow its economy. The other effect is that a higher valued currency will make imports cheaper. Lower priced imports will help to alleviate domestic inflation by making cheap goods available as inputs into production, and also by allowing workers to consume more without pay increases. A higher valued Chinese currency will be a mixed story for the United States. On the one hand, it will make U.S. goods more competitive, both in the...

Strong Words on the Fed

"The Fed chairman may be appointed by the president and confirmed by the Senate, but his real bosses are on Wall Street." This isn't the ranting of some crazed radical; it is a line from a column in the Washington Post 's Outlook section, by Richard Yamarone, an investment analyst. While I probably never would have phrased it so bluntly, I think that Mr. Yamarone is largely correct. It is worth reflecting on this one. The interests of Wall Street investors are not necessarily the same as the interests of the public as a whole. For example, big wage increases, that come out of corporate profits, would be very welcome news to the vast majority of the population, since they depend on wages for the bulk of their income. Needless to say, lower profits are not welcome news on Wall Street. The fact that we have an arm of the federal government that answers to the special interests on Wall Street, rather than the larger public, should be cause for concern in a democracy. --Dean Baker

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