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Article Artículo

The Generation of Nonsense in the Boston Globe

The main economic story of the last four decades is the massive upward redistribution of income that has taken place. The top one percent's share of national income has more than doubled over this period from roughly ten percent in the late 1970s to over twenty percent today. And, this is primarily a before-tax income story, the rich have used their control over the levers of economic power to ensure that an ever larger share of the country's wealth goes into their pockets. (Yes, this is the topic of my book, Rigged [it's free].)

Anyhow, the rich don't want people paying attention to these policies (hey, they could try to change them), so they endlessly push out nonsense stories to try to divert the public's attention from how they structured the rules to advance their interests. And, since the rich own the newspapers, they can make sure that we hear these stories.

This meant that yesterday the NYT gave us the story of how robots are taking all the jobs and driving down wages. Never mind that productivity growth is at its slowest pace in the last seven decades. Facts and data don't matter in the alternative world where we try to divert folks' attention from things like the Federal Reserve Board (who are not robots, last I checked) raising interest rates to make sure that we don't have too many jobs.

One of the other big alternative facts for the diverters is the generational story. This is the one where we tell folks to ignore all those incredibly rich people with vast amounts of money, the reason most people are not seeing rising living standards is the damn baby boomers who expect to get Social Security and Medicare, just because they paid for it. The Boston Globe gave us this story with a piece by Bruce Cannon Gibney, conveniently titled "how the baby boomers destroyed everything." (Full disclosure: I am one of those baby boomers.)

There is not much confusion about the nature of the argument, only its substance. Gibney complains about:

"...the unusual prevalence of sociopathy in an unusually large generation. How does that disorder manifest? Improvidence is reflected in low levels of savings and high levels of bankruptcy. Deceit shows up as a distaste for facts, a subject on display in everything from Enron’s quarterly reports to daily press briefings. Interpersonal failures and unbridled hostility appeared in unusually high levels of divorce and crime from the 1970s to early 1990s."

Starting with the bankruptcy story, the piece to which Gibney helpfully linked noted a doubling of bankruptcy rates for those over 65 since 1991. It reported:

"Expensive health care costs from a serious illness before a patient received Medicare and the inability to work during and after a serious illness are the prime contributors to financial crises among those 55 and older."

Yes, we have clear evidence of a moral failing here.

CEPR / March 30, 2017

Article Artículo

Job Loss in Manufacturing: More Robot Blaming

It is striking how the media feel such an extraordinary need to blame robots and productivity growth for the recent job loss in manufacturing rather than trade. We got yet another example of this exercise in a NYT Upshot piece by Claire Cain Miller, with the title "evidence that robots are winning the race for American jobs." The piece highlights a new paper by Daron Acemoglu and Pascual Restrepo which finds that robots have a large negative impact on wages and employment.

While the paper has interesting evidence on the link between the use of robots and employment and wages, some of the claims in the piece do not follow. For example, the article asserts:

"The paper also helps explain a mystery that has been puzzling economists: why, if machines are replacing human workers, productivity hasn’t been increasing. In manufacturing, productivity has been increasing more than elsewhere — and now we see evidence of it in the employment data, too."

Actually, the paper doesn't provide any help whatsoever in solving this mystery. Productivity growth in manufacturing has almost always been more rapid than productivity growth elsewhere. Furthermore, it has been markedly slower even in manufacturing in recent years than in prior decades. According to the Bureau of Labor Statistics, productivity growth in manufacturing has averaged less than 1.2 percent annually over the last decade and less than 0.5 percent over the last five years. By comparison, productivity growth averaged 2.9 percent a year in the half century from 1950 to 2000.

CEPR / March 29, 2017

Article Artículo

National Income Accounting for Robert Samuelson and Friends

It would be a much better world if the people involved in economic policy debates understood basic economics. Unfortunately, such knowledge is sorely lacking in Washington.

Robert Samuelson gave us a great example of accounting ignorance in his column where he pushed the idea that the budget should be near balance when the economy is close to full employment. There is of course an important economic point; if we believe what economists thought about prime age (ages 25 to 54) labor force participation rates back before the recession, we are still around 2 million jobs below full employment.

But leaving such trivia aside, there is the accounting issue of having a balanced budget at full employment. Samuelson cites economist Herbert Stein as his authority on this point. It is important to note that Stein made this comment when our trade was much closer to balanced.

This matters because if we have a large trade deficit, it was $540 billion (around 2.9 percent of GDP) in the last quarter, then this is a reduction in domestic demand compared to a situation in which trade was balanced. This $540 billion is creating demand in Europe, Canada, China, and elsewhere , not in the United States.

With this sort of drain on demand, we have to make this up from some other source. We can pray to the god of incentivizing entrepreneurs and hope that we will get a huge investment boom, but adults don’t believe in this nonsense. Investment has moved within a fairly small range as a share of GDP over the last half century. At best, we can hope that good policy will lead to very modest gains in investment as a share of GDP – not enough to make up for a trade deficit of 2.9 percent of GDP.

CEPR / March 27, 2017

Article Artículo

New Health Care Plan: Open Source Drugs, Immigrant Doctors, and a Public Option

Now that the Republican health care plan has been sent to the dust bin of history, it’s worth thinking about how Obamacare can be improved. While the ACA was a huge step forward in extending insurance coverage, many of the complaints against the program are justified. The co-pays and deductibles can mean the plans are of little use to middle-income people with relatively low bills.

This is a great time to put forward ideas for reducing these costs and making other changes in the health care system. Obviously this congress and president are not interested in reforms that help low- and middle-income families, but the rest of us can start pushing these ideas now, with the expectation that the politicians will eventually come around.

There are two obvious directions to go to get costs down for low- and middle-income families. One is to increase taxes on the wealthy. The other is to reduce the cost of health care. The latter is likely the more promising option, especially since we have such a vast amount of waste in our system. The three obvious routes are lower prices for prescription drugs and medical equipment, reducing the pay of doctors, and savings on administrative costs from having Medicare offer an insurance plan in the exchanges.

Taking these in turn, the largest single source of savings would be reducing what we pay for prescription drugs. We will spend over $440 billion this year for drugs that would likely sell for less than $80 billion in a free market without patent monopolies and other forms of protection. If we paid as much as people in other wealthy countries for our drugs, we would save close to $200 billion a year. We spend another $50 billion a year on medical equipment which would likely cost around $15 billion in a free market.

If the government negotiated prices for drugs and medical equipment its savings could easily exceed $100 billion a year (see chapter 5 of Rigged). It could use some of these savings to finance open-source research for new drugs and medical equipment.

We already fund a huge amount of research, so this is not some radical departure from current practice. The government spends more than $32 billion on research conducted by the National Institutes of Health. It also picks up 50 percent of the industry’s research costs on orphan drugs through the Orphan Drug Tax Credit. Orphan drugs are a rapidly growing share of all drug approvals, as the industry increasingly takes advantage of this tax credit.

The big change would not be that the government was funding research, but rather the research results and patents would be in the public domain, rather than be used by Pfizer and other drug companies to get patent monopolies. As a result, the next great breakthrough drug will sell as a generic for a few hundred dollars rather than hundreds of thousands of dollars. And MRI scans would cost little more than X-rays.

CEPR / March 25, 2017

Article Artículo

Haiti

Latin America and the Caribbean

World

New Report: Sexual Exploitation and Abuse at the Hands of the UN in Haiti
The following is the introduction to an investigative report conducted by independent researcher Mark Snyder entitled "Sexual Exploitation and Abuse at the Hands of the United Nation's Stabilization Mission in Haiti." The full report is available here. 

Investigative Overview

A preliminary independent investigation conducted in areas close to existing or abandoned bases for the United Nations Stabilization Mission in Haiti (MINUSTAH) brings to light the alarming magnitude of Sexual Exploitation and Abuse (SEA) at the hands of United Nations personnel in Haiti. The purpose of this investigation is to determine if the initial unreported cases brought to the attention of the author were isolated incidents or are instead a result of a systemic problem present in the UN's mission in Haiti. In consultation with Haitian civil society partners, the following report considers that a further, in-depth investigation into these abuses is vital and urgent.

The results of our investigation strongly suggest that the issue of SEA by United Nations personnel in Haiti is substantial and has been grossly underreported. Using the same methodology in all areas where MINUSTAH bases are or have been located[i], a thorough and in-depth investigation would be expected to identify close to 600 victims who would agree to in-person interviews. This number in itself indicates a victim count that requires immediate attention and significant modifications to current MINUSTAH peacekeeping operations, including with regard to the manner in which UN SEA cases are investigated and reported. These preliminary findings are based on the work of one investigator during 27 days of investigation. Through a network of community contacts in eight areas where there currently is, or where there has been a MINUSTAH base, the investigation identified 42 UN SEA victims who agreed to be interviewed. With a professional investigative team, comprised of individuals with specialized expertise and the resources to cover the entire country, the likely number of documented UN SEA allegations from victims would be expected to be significantly higher.

The UN Conduct and Discipline Unit (CDU), under the Department of Field Services (DFS) documented 75 total allegations of UN SEA countrywide in Haiti[ii] from 2008-2015. In comparison, 40 of the 42 victims interviewed within the limited scope of this independent investigation allegedly suffered sexual exploitation perpetrated by UN personnel during this same time period. Of the remaining two individuals: one stated she was first a victim in 2005, and the exploitation occurred repeatedly until 2015. The other was a victim of a single incident prior to 2008. Only four of the 42 said they had previously reported the SEA in some manner to the UN, suggesting that the magnitude of the problem may be dramatically underestimated by the CDU. The victims we spoke to were not made aware of whether their cases were included in the 75 total allegations documented by the CDU. All four victims stated they were not satisfied with the subsequent investigatory process or its results.

In comparison to the CDU's 75 total allegations, the estimated total possible victims of SEA - during the years 2008-2015 – based on an extrapolation of the results of our investigation – is 564. Again, this is an estimate derived from the findings of a single investigator and based only on allegations from those who agreed to meet and be interviewed.

The preliminary results of our investigation show that actions taken, such as the creation of the CDU and the extensive efforts with the three pillars of prevention of misconduct, enforcement of UN standards of conduct, and remedial action, do not appear to have been adequate in preventing further SEA perpetrated by MINUSTAH personnel. These efforts have failed to interrupt a persistent cycle of exploitation and abuse followed by UN statements of regret and reform, and then additional incidents of SEA.

The UN has stated in numerous publications that while there has been an approximately 50 percent increase in UN peacekeeping personnel in the world, the number of SEA accusations has been steadily decreasing.[iii] However, within the seemingly disconnected array of the UN's SEA reporting and response mechanisms[iv], wide concern is expressed by UN personnel about the validity of the official numbers of UN SEA allegations. Many suspect that the numbers and their decline do not accurately reflect the occurrences of exploitation and abuse.[v] The results of this investigation thus far have shown that in Haiti, as UN personnel suspected, this downward trend of accusations is not due to decreased levels of UN SEA, but instead is caused by a reduction in victims' reporting of these acts.

The reforms and initiatives that have been taken over the years since MINUSTAH's 2004 inception appear to be inadequate to prevent UN SEA and fail to encourage victims to come forward. For these reasons, we strongly suggests that a professional independent investigation, comprised of individuals with specialized expertise in sexual exploitation and abuse, be undertaken in Haiti at all locations that currently have or have had MINUSTAH bases so to determine the level of sexual exploitiation and abuse by United Nations' personnel. In order for MINUSTAH to fulfill its mandate of assisting Haiti with the restoration and maintenance of the rule of law and support efforts to "promote and protect human rights, particularly of women and children, in order to ensure individual accountability for human rights abuses and redress for victims"[vi], UN SEA victims must not remain hidden in the shadows. Instead, their existence must be officially recognized, and their voices must be a part of the discussion on the necessary reforms to the UN peacekeeping system.

Introduction

Sexual exploitation and abuse by UN personnel in Haiti has been extensively documented since MINUSTAH's founding in 2004.[vii] Notably, two years after the UN openly recognized SEA by UN peacekeepers as a problem[viii] and sanctioned the 2005 UN Zeid report focusing on UN SEA and describing specific actions to be taken to eliminate future abuse[ix], investigations in Haiti uncovered that the mission's peacekeepers from Sri Lanka were committing extensive sexual exploitation and abuse including rape and transactional sex. This led to a reported 114 soldier repatriations, a move presented as a model for other UN peacekeeping missions. Of those repatriated to Sri Lanka, none of the perpetrators were criminally prosecuted in their home country[x]. In response to the scandal, the UN assured that they remained committed to both to the zero-tolerance policy on SEA and to best practices in peacekeeping.[xi] Other highly visible cases, such as the repeated rape and subsequent kidnapping of a young special-needs boy by peacekeepers in Goniave, Haiti[xii], caused the mission to express outrage and the official response was that the mission would take their responsibility in dealing with abuses by UN personnel extremely seriously.[xiii]

Jake Johnston / March 22, 2017