ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

Brazil

Latin America and the Caribbean

World

Brazilian Media Takes on Political Project

On October 20, 2010, just a few days before Dilma Rousseff was reelected to serve a second term as president of Brazil, newscasts focused on reports that opposing candidate José Serra had interrupted his campaign to undergo medical examination after supposedly being attacked by members of Rousseff’s Workers’ Party (PT) during a rally in Rio de Janeiro. In much of the major media and on social networks, it was claimed that the Brazilian Social Democracy Party (PSDB) candidate had been hit by a heavy object. In fact, as documented by at least five TV cameras, Serra had been hit by a harmless ball of crumpled paper.

Earlier this year, on July 30, an attack at the Lula Institute in Sao Paulo (named for former president Luiz Inácio Lula da Silva, also from the PT) involving a homemade explosive was reported as an “incident” of no major consequence. Merval Pereira, a columnist for O Globo, denounced the attempt by petistas (members or supporters of the PT) and Lula’s supporters to transform the event into a “terrorist act,” pointing out that “it only made a small hole in the door.” Ricardo Noblat, also a columnist at O Globo, raised the question of whether the throwing of the explosive wasn’t a “setup to allow Lula to pose as a victim.” Reinaldo Azevedo, in turn, on his blog for Veja magazine – one of Brazil’s most influential publications — accused petistas of wanting to exploit the bomb attack in order to crack down on opposition demonstrations scheduled for August 16 (no crackdown of any kind occurred).

Unfortunately, these are not isolated examples of bias in the Brazilian news media. Brazil’s large media outlets present themselves as bulwarks of democracy when in reality they work to guarantee that a society of exclusion and elitism remains in place. O Globo, for example, was one of the earliest supporters of the military coup d’état in Brazil, and it was only in August 2013 that a public retraction from the newspaper= recognized that “the editorial support for the 1964 coup was an error.”

Until the PT won the presidency, the historic social exclusion of certain sectors of the population had never been countered with efficient public policies. Years of per capita income stagnation, neoliberal economic policies and high income concentration exacerbated a large social gap, as shown by high levels of poverty and illiteracy. The result was that a significant portion of the population had no access to social rights guaranteed under the Constitution (healthcare, education, and complete political participation). The PT’s national project was based on social inclusion and the redistribution of income for millions of people who previously had not had the opportunity to fully exercise their citizenship. From the moment the PT began to gain national relevance in Brazilian politics in the 1980s, the country’s traditional media, led by a few families, made one of its main objectives preventing that project from fully developing.

CEPR and Aline Cristiane Piva (Guest post) / August 19, 2015

Article Artículo

Washington Post Can't Get Access to Data on Japan or Find Experts Who Know Intro Economics

Yes, it can be hard getting access to information in the barren heart of the nation's capital. Therefore it is not surprising that the Washington Post seems completely unaware of the economic situation in Japan at present.

In an account of the economic problems facing the world the Washington Post told readers:

"Japan, meanwhile, has recorded years of slow growth, has alarming public debt levels and is perpetually on the brink of deflation."

Actually in terms of employment growth, which is probably what matters most to the Japanese people (as opposed to GDP growth), the country has been doing pretty well as of late. According to the OECD, Japan's employment to population ratio (EPOP) has risen by 2.4 percentage points from 70.8 percent to 73.2 percent since the new Prime Minister Shinzo Abe took power in the fourth quarter of 2012 and embarked on a policy of aggressive fiscal and monetary stimulus. By comparison, the EPOP in the United States rose by 1.4 percentage points to 68.7 percent in this period. If the EPOP in the United States had risen by the same amount as in Japan it would correspond to another 2.5 million jobs. 

It's not clear who the current levels of Japanese debt are supposed to be alarming to, but clearly financial markets do not fall into this group. The interest rate on long-term Japanese government bonds is 0.38 percent. In terms of being on the brink of deflation, fans of economics everywhere would say, "so what?" The United States, Europe, and Japan all have inflation rates that are lower than is desirable. If the inflation rate ends up being a small negative number rather than a small positive number it doesn't matter. Any fall in the inflation rate, regardless of whether it means crossing zero makes debt burdens worse and raises real interest rates.

Dean Baker / August 15, 2015

Article Artículo

Manufacturing Jobs, Trade, and Productivity

Steve Rattner had a column in the NYT in which he derided Donald Trump's economics by minimizing the impact of trade on the labor market. While much of Trump's economics undoubtedly deserve derision, Rattner is wrong in minimizing the impact that trade has had on the plight of workers.

Rattner tells readers:

"In Mr. Trump’s mind (although not in the minds of serious economists), that’s why [the trade deficit] we’ve lost five million manufacturing jobs since 2000.

"The Chinese are certainly protectionists, but a shift in manufacturing jobs was inevitable. For centuries, as countries have developed, the locus of jobs has shifted based on comparative advantage.

"Moreover, many of those manufacturing jobs weren’t lost to other countries but to growing efficiency, just as employment in agriculture in the United States has fallen even as output has risen."

"No policies could reverse tectonic forces of this magnitude, and in suggesting that there are remedies, Mr. Trump is cynically misleading the American public."

There are several points here that are worth correcting. First, productivity in manufacturing is not new, but the large-scale loss of manufacturing jobs is. According to the Bureau of Labor Statistics, in 1971 we had 17,200,000 jobs in manufacturing. In 1997, we 17,400,000 jobs. This is in spite of the fact that there was enormous productivity growth in manufacturing over this quarter century. Manufacturing employment then fell to 13,900,000 in 2007, the last year before the crash. The big difference between this decade and the prior twenty-six years was the explosion of the trade deficit as jobs were lost to China and other developing countries.

The fact that we would have more manufacturing jobs without the trade deficit is almost definitional. We currently are running a trade deficit of more than $500 billion a year, a bit less than 3.0 percent of GDP. Total manufacturing output is roughly $1.8 trillion, which means that if we filled the deficit entirely with increased output of manufactured goods, we would expect to see manufacturing employment rise by more than a quarter ($500 billion divided by $1,800 billion), creating more than 3 million new manufacturing jobs.

There is also a fundamental difference between the shift out of manufacturing jobs and the shift out of agricultural jobs to which Rattner refers. Workers left agricultural jobs for higher paying higher productivity jobs in manufacturing. The jobs didn't actually disappear, the workers did not want them.

This is the exact opposite of what we are seeing with manufacturing jobs. Workers are losing relatively good paying jobs in sectors like autos and steel, and are then forced to take lower pay and lower productivity jobs in the retail or restaurant sectors.

Dean Baker / August 14, 2015

Article Artículo

The $4 Trillion That No One Can See

Economists and people who write about the economy are not known for being especially astute when it comes to economic issues. After all, there were almost no people in this group who were able to see the $8 trillion housing bubble whose collapse sank the economy. More recently, we have a substantial clique running around yelling that the robots will take all the jobs. This is at the same time that we continue to have most of the Washington elite types fretting that the retirement of the baby boomers will leave us without any workers. These concerns are 180 degrees opposite, sort of like complaining that the soup is too hot and too cold, but that's the sort of conceptual absurdities folks have come to expect from people who write about the economy.

The usually astute Catherine Rampell is one of the guilty parties today, telling readers that the recent drop in the value of the Chinese yuan is a response to the market, not the result of currency management by China's government. The problem in this story is that it ignores that China's central bank is holding more than $4 trillion of reserves, about $3 trillion more than would be expected for an economy of China's size. This stock of reserves has the effect of raising the value of the dollar and other reserve currencies against the yuan.

If that is not obvious, consider the analogous situation with the Federal Reserve Board and its holding of more than $3 trillion in assets as a result of it quantitative easing (QE) policy. Under this policy, the Fed bought up large amounts of government bonds and mortgage backed securities. The idea was that the Fed's purchases would drive up the price of these bonds and thereby directly lower long-term interest rates.

Dean Baker / August 14, 2015

Article Artículo

Bringing Data and Intro Econ to Discussions of China's Currency Devaluation

The NYT went a couple of miles over the top with Peter Eavis' analysis of China's currency devaluation. It begins by telling readers;

"For years, China looked like the principled noncombatant. As other countries, seeking to secure an economic advantage, let the value of their currencies slide on international markets, China held firm on the value of its money."

"The principled noncombatant?" What are they smoking over there? China accumulated more than $4 trillion in reserves to keep its currency from rising against the dollar. China looked to the world outside of the NYT like the principal combatant. This massive intervention led China to run massive trade surpluses, peaking at more than 10 percent of GDP in 2007.

Fans of economics everywhere know that fast growing developing countries like China are supposed to run large trade deficits, as capital is supposed to flow from slow growing rich countries to fast growing developing countries. Given China's 10 percent plus annual GDP growth a trade deficit of 10 percent of GDP would have been reasonable, instead China had that reversed.

This also explains the massive housing bubble in the United States and other wealthy countries. With trade deficits creating enormous gaps in demand, the only way they could be easily filled was with demand driven by asset bubbles. (We could have filled the demand gap with large budget deficits, but people in positions of power in Washington are superstituous, so we can't run large budget deficits to fill demand gaps.)

The rest of the article is no more in touch with reality. It tells readers:

Dean Baker / August 14, 2015

Article Artículo

Economic Growth

Health and Social Programs

United States

Inequality Is the Threat to Our Children’s Living Standards, Not Social Security Taxes

Those pushing to cut and/or privatize Social Security have long tried to rest their case on an appeal to generational equity. They argued that the taxes needed to support baby boomers would impose a crushing burden on our children and grandchildren.

This argument flies in the face of reality. If we see the sort of wage growth projected by the Social Security trustees, and if it is evenly shared, then real wages would be 55 percent higher in 2045 than they are today—a $61,388 median annual wage compared to $39,560.

Suppose that we close the projected shortfall in Social Security entirely by raising the Social Security payroll tax, with no other revenue increases and no cuts in benefits. In this case, our children would see after-tax wages that are 51 percent higher than what we earn today, with a median wage of $59,547.[1] It’s hard to see the generational injustice here. (It is worth reminding those who consider this tax to be a generational injustice itself that we now pay a far higher tax rate than our parents or grandparents did.)

Dean Baker / August 13, 2015

Article Artículo

Because Oil Is Priced in Euros, China Will Buy Less Oil Now That the Value of the Yuan Has Fallen

Yes, I know oil is priced in dollars, not euros, but it doesn't make one iota of difference. In an article on the meaning of the drop in the value of the yuan on people in the United States, USA Today told readers:

"China, the world's second largest economy, consumes a lot of oil, second only to the U.S. However, oil prices are denominated in dollars, so a gutted yuan means China's purchasing power is reduced, which could prompt the Chinese to spend less on oil-based products. That reduction in demand could lower prices, an upside for American drivers."

Everything in this paragraph would be equally true if oil was priced in euros. The Chinese currency is now worth less measured in dollars, euros, yen, or oil. The loss of purchasing power will lead China to buy less of everything that is produced abroad, including oil. The fact that oil is priced in dollars matters not at all.

As a practical matter, anyone hoping to get super cheap gas due to less demand from China is likely to be disappointed. If we assume that the 2 percent drop in the value of the yuan leads to 2 percent higher gas prices in China, and we assume an elasticity of demand of 0.3, then China's gas consumption will fall by roughly 0.6 percent as a result of the devaluation. This almost certainly has less impact on the demand for gas than even a one-year reduction in China's growth rate by 2 percentage points. If the devaluation and other stimulatory policies speed growth in China, then we may see increased rather than decreased demand for oil from China.

The piece also gets the story of U.S. companies manufacturing in China somewhat confused. It tells readers:

Dean Baker / August 13, 2015