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Article Artículo

Robert Samuelson Tells Us It's All So Complicated!

Unfortunately that is not an exaggeration. He concludes his column this morning about the difficulties the folks at the I.M.F. meetings have in promoting growth by telling readers:

"We’re witnessing a historic break from the past. I think the IMF forecasters deserve some sympathy. They’re dealing with a global economy that strains our intellectual understanding and is outside their personal experience. We don’t know what we don’t know."

Samuelson tells us that there are three huge problems. The first one is:

"Sobered and scared, people and businesses delay consumption and investment. To prepare for the next crisis, they reduce debts (“deleverage”) and increase savings. Firms hoard profits."

The problem is that this is not really true, especially in the United States. Consumption is actually quite high relative to disposable income (which means savings is low), albeit not quite as high as at the peaks of the stock and housing bubbles when people had trillions of dollars of ephemeral wealth.

savings rate

The investment share of GDP is not quite back to its pre-recession peak, but it's above its 2005 share. No one in 2005 was saying that firms were scared and deleveraging.

Dean Baker / October 13, 2014

Article Artículo

Bolivia

Latin America and the Caribbean

World

A Full Moon after Bolivia’s Elections?

Campaigning for the Bolivia’s presidential election officially ended on Wednesday, ahead of voting on Sunday. The election, which includes 272,058 voters living abroad in 33 countries, will be observed by a mission from the Organization of American States. While the final outcome is likely to be a first-round victory for the incumbent, Evo Morales, the most interesting results will come from the four departments of the media luna region. In the past, the Morales administration has faced significant opposition there, including a sometimes violent secessionist movement.  This year, the president has a chance to win majority support in all four of the departments, which would mark a major turning point in Bolivian politics.

Earlier this week, Morales expressed confidence that he will surpass his 2009 record of support, and that as much as 70 percent of the electorate will vote for him this year. Morales won previous elections handily, with 54 percent of the vote in 2005, and 64 percent in 2009. When his party, the Movement Toward Socialism (MAS), celebrated the end of its campaign in what has been an opposition stronghold, Santa Cruz, on Tuesday, thousands of people came together to show their support, demonstrating changing dynamics in the relationship between the MAS and Santa Cruz. Then on Wednesday, Morales brought his campaign to an end in El Alto, where he claimed that he will win in all nine of Bolivia’s departments, saying:

Bolivia is united, the “half-moon” is over, now it is a full moon. We have all united at the top the social forces and the youth, who have joined for two reasons: because of the patriotic agenda and stability and because of the economic growth that guarantees hope for future generations.

The “half moon,” or “media luna,” is located in the eastern lowlands of Bolivia and is comprised of the departments of Santa Cruz, Beni, Pando, and Tarija. According to an IPSOS poll the MAS could win in Santa Cruz with 50 percent of the votes. In the 2009 presidential elections, Morales lost in Santa Cruz, Beni, and Pando. Things have been changing, however, and Morales has been strategic in building and maintaining alliances in the media luna departments. Not only do polls show that Morales might win in Santa Cruz, but he might also win in Beni (44 percent), Pando (54 percent), and Tarija (43 percent).

CEPR and Jeanette Bonifaz / October 10, 2014

Article Artículo

Women

Work-Family Policies Can Stem the Decline in Women’s Employment

Back in 2000, a higher share of U.S. women aged 25 to 54 were employed than was the case for prime age women in six of our peers in the OECD. Newly released data from the OECD (see figure below) show that the rate has declined, in both relative and absolute terms, over the last 14 years and is now the lowest in the group, a trend clearly visible in the graph below. Even Japan, which in 2000 was more than 10 percentage points below the U.S. now has a higher share of prime age women in employment.

CEPR and Janine Duffy / October 10, 2014

Article Artículo

Franklin Foer Confuses Amazon's Subsidies from the Government With Profits

Franklin Foer has an interesting, but ultimately badly confused article in the New Republic about Amazon and its growth. The article is debating the appropriate anti-trust approach to Amazon, questioning whether it merits government intervention to protect producers and not just consumers.

This is a reasonable question, but the confusion comes in the first sentence of the second paragraph, which tells readers:

"Rather than pocketing the profits from this creation, Amazon has plowed revenue into bettering itself—into the construction of well-placed fulfillment centers that further hasten the arrival of its packages, into technologies that attempt to read our acquisitive minds and aptly suggest our next purchase."

The problem here is that there were actually few profits to pocket and what little profits did exist were due to the enormous subsidy Amazon enjoyed from not being required to collect state sales tax. The first point is straightforward. Amazon has always had very thin profits and has had almost as many losing quarters as profitable ones.

Dean Baker / October 10, 2014

Article Artículo

The Washington Post Continues Its War on Public Sector Workers

Apparently the Washington Post editorial board is partying over the fact that bankruptcy judges are imposing cuts in the pensions of retired public sector employees in Detroit, Michigan and Vallejo, California. An editorial in today's paper noted these cuts and told readers:

"Yet in many jurisdictions the balance has tipped too far in favor of ­public-employee benefits, largely because neither public-sector unions nor the politicians whose campaigns the unions support have any incentive to budget more realistically. Unsustainable pensions helped cause the recent wave of municipal bankruptcies that has touched cities as different as Detroit and Vallejo, Calif."

Okay, so the balance has tipped too far in favor of public-employee benefits and is "unsustainable."

So those retired public sector workers must be living really well. In Detroit the average non-uniformed public sector employee gets a pension of $18,500 a year. This goes along with an average annual wage for active workers of $42,000 a year. At the Washington Post this is apparently an imbalance where things have gotten too tilted for public sector workers. 

Dean Baker / October 10, 2014

Article Artículo

Haiti

Latin America and the Caribbean

World

High-Level Donor Conference on Cholera in Haiti Fails to Secure Much Needed Funding

Like a Matryoshka doll, inside each cholera elimination initiative for Haiti one will find another and inside that, yet another. At the two-year anniversary of the earthquake, in January 2012, organizations launched a “call to action” for the elimination of cholera. Almost a year later, in December 2012, the U.N. launched a “new” initiative designed to “support an existing campaign.” Then in February 2013, the Haitian government and international partners announced a 10-year elimination plan. When funding was slow to come, the U.N. and other partners began raising funds for a two-year emergency response. In March of 2014, another “high-level” committee was formed and then in July, U.N. Secretary General Ban Ki-moon traveled to Haiti to launch a “Total Sanitation” campaign within the “context” of the cholera elimination plan. Since that first announcement in 2012, 1,600 Haitians have died from cholera. Today, in a “high-level” donor conference sponsored by the World Bank, the Haitian government presented yet another plan.

“We have a plan, it’s a $310 million plan for three years,” Haitian Prime Minister Laurent Lamothe told the crowded 13th floor conference room in the World Bank headquarters here in Washington, DC. Lamothe urged those in attendance to “take action” and “fast-track this process” in order to “protect the lives of millions of people” and “ensure the most vulnerable of the society are protected against water-borne diseases.” But the 2.5-hour conference ended up short on pledges and long on pleas, with only the event’s sponsor, the World Bank, contributing substantial funds.

Cholera, which scientific studies have found was introduced to Haiti by United Nations troops in 2010, has so far killed at least 8,614 and sickened over 700,000. While no speakers at the conference mentioned how the disease was imported to Haiti, Lamothe did play a short video, in which the narrator explains that, “based on press reports, it [cholera] originated on a Nepalese camp of the United Nations peacekeeping mission in Haiti, MINUSTAH.” Later in the video, a Haitian explains how he blamed the U.N. for cholera’s introduction. Meanwhile, lawyers and human rights groups continue to press for U.N. responsibility through the courts. A federal court in New York will hear oral arguments on the U.N.’s immunity on October 23.

“The UN has a binding international law obligation to install the water and sanitation infrastructure necessary to control the cholera epidemic, as well as compensate those injured,” said Brian Concannon of the Institute for Justice & Democracy in Haiti, who is representing cholera victims in their case against the U.N. “MINUSTAH has spent far more than $2 billion since cholera broke out on other things. It is a question of priorities.”

While the U.N. has refused to accept responsibility for the disease’s introduction or take direct remedial actions, in December 2012 Ban pledged to “use every opportunity” to raise the necessary funds for cholera elimination and has since cited the U.N.’s “moral obligation” to respond to cholera. Despite the support, actors have thus far failed to raise an adequate amount of funds for the eradication plan. At the conference, Ban stated that “as of today, the $2.2 billion 10-year national plan is just 10 percent funded. While a lot has been done, there is clearly much more to do.”

Jake Johnston / October 09, 2014

Article Artículo

Wage-Price Inflation and the Way Things Work In Economics

There's an old saying in economics that it doesn't matter if what you say is right, what matters is if the right person says it. I was reminded of this line when I read Matt O'Brien's Wonkblog post on the success of the Fed in allowing the unemployment rate to fall below the nearly universally accepted measure of the NAIRU, without having any notable acceleration of inflation. 

This is a great history that should be tattooed on the forehead of everyone involved in the current debate on how low the unemployment rate can go without kicking off a wage price spiral. Back in the mid-1990s all right thinking economists thought that the NAIRU was in the neighborhood of 6.0 percent. This meant that if the unemployment rate was below 6.0 percent the inflation rate would begin to increase. And, it would keep increasing as long as the unemployment rate stayed below 6.0 percent.

While there was some difference on the precise number (the usual range went from 5.6 percent to 6.4 percent), there was almost no dispute on the basic point. As O'Brien notes, even Janet Yellen adhered to this view, expressing concerns in 1996 that if the Fed didn't raise interest rates inflation would be a big problem. (Paul Krugman also expressed a similar view at the time.)

Thanks to the eccentricities of Alan Greenspan, the Fed did not raise interest rates. Instead it allowed the unemployment to continue to fall. It fell below 5.0 percent in 1997, it crossed 4.5 in 1998, and reached 4.0 percent as a year-round average. And inflation remained tame. The result was that millions of people had jobs who would not have otherwise. Tens of millions of workers at the middle and bottom of the wage distribution saw substantial real wage gains for the first time in a quarter century.

And, for the folks fixated on budget deficits, we saw a large surplus for the first time in decades. As much as the Clintonites like to boast of their great surpluses, the reality is that the budget would have remained in deficit if Clinton's Fed appointees (Janet Yellen and Lawrence Meyer) had gotten their way. It is only because the Fed allowed the unemployment rate to fall far lower than these folks thought wise that the budget shifted from deficit to surplus. (In 1996 the Congressional Budget Office projected a deficit of $240 billion [2.5 percent of GDP] for 2000. In fact, we ran a surplus of roughly the same amount. According to CBO, the legislative changes over this four year period went a small amount in the wrong direction.)

Anyhow, all of this should be a good reminder that the whole of the economics profession can be completely wrong on the most important issues affecting the economy. But that isn't why I brought you here today.

Dean Baker / October 09, 2014

Article Artículo

Bolivia

Latin America and the Caribbean

World

Bolivia's Economy Under Evo in 10 Graphs

On October 12, Bolivians will go to the polls to choose their next president for a five-year term. Recent polling suggests that the incumbent, Evo Morales, will obtain a decisive first-round victory over his closest opponent, Samuel Doria Medina. Below are ten graphs on economic and social developments since Evo’s election in 2005 that help explain the strong support for his re-election.

 

      1. Economic Growth: Bolivia has grown much faster over the last 8 years under President Evo Morales than in any period over the past three-and-a-half decades.

Source: International Monetary Fund.

Jake Johnston and Stephan Lefebvre / October 08, 2014