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Article Artículo

Haiti's Former President Préval Has Credible Charges that UN Tried to Remove Him

Writing in the Toronto Star, Catherine Porter reports on revelations from former Haitian President René Préval in Raoul Peck’s documentary film Fatal Assistance that UN head Edmond Mulet tried to remove him from the country on election day in November 2010:

“I got a phone call from Mr. (Edmond) Mulet, who was head of MINUSTAH, saying: ‘Mr. President, this is a political problem. We need to get you on a plane and evacuate you,’” Préval says in the documentary, Fatal Assistance. “I said: ‘Bring your plane, collect me from the palace, handcuff me, everyone will see that it’s a kidnapping.’”       

The comments from Préval echo those made at the time by Organization of American States special representative Ricardo Seitenfus, who told BBC Brasil in January 2011 that Mulet and other representatives of the “core group” of donor countries, “suggested that President Rene Préval should leave the country and we should think of an airplane for that. I heard it and was appalled.” The forced departure of Préval wouldn’t have been the first time a Haitian president was spirited out of the country, as former President Jean-Bertrand Aristide was flown out of Haiti in 2004 on a U.S. airplane and taken to the Central African Republic in what he described as a “kidnapping” and “coup d’etat.” There is no doubt that it was a coup d’etat – the New York Times, among others, documented the U.S. role in bringing about the coup.  And Aristide’s charges that it was a kidnapping are credible and backed up by witnesses.

In response, Edmond Mulet told the Star, “I never said that, he [Préval] never answered that,” adding “I was worried if he didn’t stop the fraud and rioting, a revolution would force him to leave. I didn’t have the capability, the power or the interest of putting him on a plane.”

The first round of voting for president in November 2010 was plagued by irregularities. A CEPR statistical analysis found that some three-quarters of Haitians did not vote, over 12 percent of votes were never even received by the electoral authorities and that more than 8 percent of tally sheets contained irregularities. Perhaps most importantly, Haiti’s most popular political party, Fanmi Lavalas, was excluded from the election. At the time, 45 Democratic members of Congress wrote to then-Secretary of State Hillary Clinton warning that political party “exclusion[s] will undermine both Haitians' right to vote and the resulting government's ability to govern.” These warnings fell on deaf ears, but diplomatic cables released by Wikileaks reveal the international community’s thinking at the time. At an early December 2009 meeting, Haiti’s largest donors concluded that “the international community has too much invested in Haiti’s democracy to walk away from the upcoming elections, despite its imperfections.”

These imperfections proved even greater than anticipated. Based on the pervasiveness of the irregularities and the close results, we concluded at the time that “it is impossible to determine who should advance to a second round” and that if “there is a second round, it will be based on arbitrary assumptions and/or exclusions.”

Jake Johnston / May 13, 2013

Article Artículo

Reinhart-Rogoff One More Time: Why the 90 Percent Never Should Have Been Taken Seriously

As a general rule economists are not very good at economics. This is why almost none of them were able to recognize the $8 trillion housing bubble that sank the economy. (No, this isn't bragging, it only took simple arithmetic and basic logic.) Most economists are unable to conceptualize anything that someone with more standing in the profession did not already write about.

This is the only reason that the Reinhart-Rogoff 90 percent debt-to-GDP threshold was ever taken seriously to begin with. The point that I have tried to make in the past, apparently with little success, is that debt is an arbitrary number. It is not something that is relatively fixed, like the age composition of the population or the supply of land.

The country's debt is something that can and often is easily altered through simple steps. In this way the debt-to-GDP ratio can be thought of as something like the color of a house. Suppose Reinhart and Rogoff told us that people who lived in blue houses had 40 percent less income than people who lived in houses painted other colors. Presumably people would be skeptical of the results, but if their finding was really true, then we would probably want to encourage people in blue colored houses to paint them a different color.

In effect, Reinhart and Rogoff were making the same sort of claim about debt and GDP. Let me try to explain this in a way that even an economist can understand it.  

I have often pointed out that the value of long-term debt fluctuates with the interest rate. I didn't think this is a secret, but apparently few economists have followed what happens to bond prices when interest rates change. The point is that the value of our debt will plummet if interest rates rise, as the Congressional Budget Office and other forecasters expect. This means that we could buy back long-term debt issued today at interest rates of less than 2.0 percent for discounts of 30-40 percent. This would sharply reduce our debt-to-GDP ratio at zero cost.

Yes, this is really stupid, but if you believed the Reinhart-Rogoff 90 percent debt cliff, then you believe that we can sharply raise growth rates by buying back long-term bonds at a discount. It's logic folks, it's not a debatable point -- think it through until you understand it. 

Dean Baker / May 11, 2013

Article Artículo

Casey Mulligan on Work Sharing

Casey Mulligan used his Economix blog post to discuss the topic of work sharing. It's always good to see work sharing get some attention and Mulligan raises many of the right issues.

I will correct a couple of points. Mulligan tells readers:

"It is also possible that work-sharing would reduce employment by making jobs less attractive to people who desire full-time work. One reason that people sometimes justify commuting long distances to work or enrolling in demanding training programs – trucking and nursing are two such occupations — is that they expect to recoup those cost by taking advantages of opportunities to earn extra by working long hours."

Neither of these claims is quite right. Long commutes are a disincentive to short workdays, but one could easily imagine shorter working hours being associated with fewer working days rather than shorter work days. (Anyone hear of a 4-day week, say 4 days at 8-9 hours per day?) Of course, if most workers had fewer week days then we would all enjoy shorter commutes.

The other point about fewer hours providing less incentive to train for jobs needs two important qualifications. First, if work sharing is a short-term alternative to layoffs, then it does not imply a reduction in average hours. It would simply reduce the risk of being unemployed and replace it with an increased risk of being forced to work fewer than desired hours. If we assume that most workers are risk averse, this should increase the desirability of training for jobs since there will be a lower probability of being out of work altogether.

If we follow the route of Western Europe and have shorter work years (they work on average about 20 percent less than us), then it is important to keep in mind that no one is literally being prevented from working. In other words, in countries where the average work year is 1500 hours, no one arrests truck drivers or nurses who want to work extra hours. If they want to find a second part-time job in addition to their normal full-time job they are free to do so, just as many people in the United States work at more than one job.

Dean Baker / May 10, 2013

Article Artículo

Economic Growth

Workers

Growth Still Slow Despite Uptick in April Jobs Report

Much analysis of the economy is excessively swayed by one or two economic reports or short-term fluctuations that may be driven by random factors like the weather. This appears to be the case following the Labor Department’s release of the April jobs report last week. In a post for the Roosevelt Institute's Econobytes, economist Dean Baker, co-director of the Center for Economic and Policy Research, on why the April jobs report does not presage an economic boom:

The April jobs report showed somewhat faster than expected job growth for the month, along with upward revisions to the prior two months’ numbers, and a drop in the unemployment rate to 7.5 percent. This led many commentators to speculate that the recovery was accelerating and that perhaps the Federal Reserve Board should be pulling back from its quantitative easing program. A more careful assessment of the data does not support this view.

  • The Commerce Department released a report showing that durable goods orders had declined 4.0 percent in March from their February level.
  • Even pulling out the volatile transportation component, the drop was still 2.0 percent.
  • More narrowly, new orders for non-defense capital goods (excluding aircraft) rose 0.9 percent in March, but were still almost 4.0 percent below their January level. The March number is less than 0.2 percent above the year ago level suggesting that the equipment investment component of GDP is barely growing.

The data that the Commerce Department released on construction last week was not any better.

  • In spite of strong growth in residential construction, total construction spending fell 1.7 percent in March driven by a 4.1 percent falloff in spending by the public sector.
  • This sector will likely continue to show weakness as cutbacks at all levels of government, coupled with weakness in non-residential private construction, offset growth in the residential sector.

Dean Baker / May 09, 2013

Article Artículo

Ecuador

Latin America and the Caribbean

World

Private Bank Profits Don’t Represent the Health of the Economy

Bloomberg’s Nathan Gill wrote a particularly one-sided article on Thursday, in which he states that “Ecuador’s bid to reduce poverty by taxing its banks is threatening to deepen the nation’s economic slump.”

“Slump” seems somewhat dire to describe the state of the Ecuadorian economy. In 2012 the economy grew by 5 percent, and it is projected to grow by 4.45 percent for 2013.

The report also offers no convincing evidence that Ecuador’s taxation of its banks is hurting the economy. 

The article specifically focuses on a set of reforms that took effect on January 1, including the elimination of banks’ tax deductions for reinvested profits and a 0.35 percent tax on assets held abroad. The reporter argues that a sharp drop in bank profits in the first quarter of this year was a result of the taxation. He then argues that an increase in the banks’ interest rates must also be due to the reforms:

Non-government banks, including Citigroup Inc (C).’s local unit, raised rates on corporate loans by an average 0.21 percentage point in the first quarter to 8.88 percent, the highest since November 2010, according to central bank data. That compares with a decline of 0.72 percentage point to 8.81 percent in Colombia and an increase of 0.01 percentage point to 5.79 percent for similar loans in Peru.

However, this causality is not at all clear.  It is more likely that this modest increase in interest rates is attributable to a recent uptick in inflation. Consumer prices increased at an annualized rate of 4.6 percent in the first quarter of this year, as compared to a rate of 0.2 percent in the last quarter of last year.

CEPR and Arthur Phillips / May 08, 2013