Dean Baker

Recent Articles

Dollars Down the Drain

The Washington Post reported on former Treasury Secretary, and soon to be former Harvard President, Larry Summers' suggestion that the foreign central banks of developing countries begin to unload some of their huge dollar holdings. As someone who has been writing on this issue for almost five years (see here , here , and here ), I am glad to see that it is now getting attention from some prominent economists. Unfortunately, the article (and perhaps Summers) confuses cause and effect. The article implies that the central banks acquire these huge holdings because of their countries' vast trade surpluses with the United States. It suggests that the banks buy up dollar reserves because they don't know what else to do with their money. While there be some holdings due to simple confusion of this sort, this is probably the least important factor in the huge build-up of reserves. Part of the reason is that developing countries do not want to end up in financial crises where they can then be...

Rich Countries Provide $300 Billion Annually in Subsidies to the Pharmaceutical Industry

You won't see this headline in the newspapers. You should ask why. Newspapers have repeatedly reported on the hundreds of billions of dollars that the rich countries give to the agricultural industry. (See the Financial Times for the latest example.) While the wording of the headlines, and often the articles themselves, would lead readers to believe that this money is being paid directly from rich country governments to farmers, the vast majority of this money takes the form of higher prices that result from trade barriers of various types. To those who might say that it doesn't matter whether the money comes from government coffers or through higher prices to consumers, I will point out that this is not how the media generally treat the issue. The media have never run a story about the hundreds of billions of dollars in government subsidies to the pharmaceutical industry. These subsidies take the form of patent protection, government granted monopolies that raise the price of patent...

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...

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