Dean Baker
Truthout, August 2, 2010

Our friends at the Economic Policy Institute have already done a pretty good job burying the claim from Reinhart-Rogoff that high ratios of debt to GDP will lead to lower growth, but in DC, no bad theory stays dead for long. With that in mind, let's throw a little more dirt on the grave.

The Reinhart-Rogoff analysis is conducted entirely in terms of GDP growth. Back in the old days, economists used to focus on per capita GDP. The idea being that what mattered is output relative to the population. The people of Denmark are much richer on average than people in China even though China's GDP is more than 20 times higher. The reason is that China's population is more than 200 times as large as Denmark's. 

As many critics of R&R have noted, their sample of developed countries with high debt to GDP ratios is very small. Many of the obvious cases (e.g. Japan in the 90s and the 00s) can be readily explained as countries where slow growth led to high debt to GDP ratios. However, in many of the cases, such as Japan and Italy in recent years, the high debt countries are also countries with little or no population growth.

This means that we would expect a slower rate of GDP growth, other things equal. While there is undoubtedly some endogeneity to population growth (e.g. higher GDP growth leads to more immigration), we should still expect the benefits of growth to show up in higher per capita income.

Today two articles report on the recent decision by Haiti’s Provisional Electoral Council (CEP) to exclude Fanmi Lavalas (FL) – the country’s most popular political party - from the upcoming legislative elections, in which all 99 seats in the House of Deputies and one third of the 30 member Senate are up for election.

EFE reports that while registration for the presidential elections will take place next week, the legislative elections will include 55 political parties and some 900 candidates, but not Fanmi Lavalas. Meanwhile Wadner Pierre, writing for Inter-Press Service, reports that in reaction to the CEP's decision, "one hundred Fanmi Lavalas supporters held a sit-in outside the U.S. Embassy in Port-au-Prince." Pierre continues:

"The ambassador here is the representative of the U.S. government in Haiti," said Lionel Etienne, a former Fanmi Lavalas congressman. "We come here today to question the behaviour of the U.S. government. We're asking if they will continue to finance the exclusion of Lavalas by the CEP with Préval."

Yesterday, however, the OAS announced they will be sending an Electoral Observation Mission to Haiti, and that:

The United States and Spain made specific offers of financial assistance while other Member States and Permanent Observers pledged to support the effort through contributions in kind or financial resources towards covering its costs, which are an estimated $5.3 million.

July 30, 2010 (GDP Byte)

The death of two young boys after a brief storm swept through their makeshift camps is "another reminder of the perilous conditions of an estimated 1.6 million people living under tarps and tents on dangerous ground," reports the Associated Press. A ten foot wall in the Terrain Acra camp in the Delmas neighborhood collpased onto a row of tents and tarps yesterday following what the AP described as nothing "more than an isolated squall."

With the Hurricane season underway, and rain a near daily occurence, improving shelter for the some 1.5 million displaced must be immediately ramped up. Thus far only about 6,000 transitional shelters have been built of a planned 125,000 and as the AP notes, of $5.3 billion pledged "less than 10 percent has been delivered. On Wednesday, the U.S. Congress passed a bill to partially fund the administration's $1.15 billion pledge to Haiti and sent it to President Barack Obama." The clearing of rubble, necessary for the construction of new shelters, is moving at a glacial pace; after 6 months, only about 2 percent of the estimated 20 million cubic yards have been cleared.

Mark WeisbrotThe Guardian Unlimited, 28 de julio, 2010En Inglés

Yesterday the Congressional Black Caucus held a hearing, "Focus on Haiti: The Road to Recovery - A Six Month Review," featuring Rajiv Shah (USAID), Dr. Paul Farmer (Deputy Special Envoy to UN, Partners in Health), Loune Viaud (Zanmi Lasante), Camille Chalmers (Haitian Platform to Advocate for Alternative Development), and Ira Kurzban, Esq.(Chair, Board of Directors, Institute for Justice and Democracy in Haiti). To read more about the event and to see reports and issue briefs that were presented, please see the Institute for Justice and Democracy in Haiti.

The Boston Globe reports on Paul Farmer, whose complete testimony is available at pih.org. Farmer focused on the need to strengthen the Haitian state, an issue this blog has written on previously. The Globe reports:

Too often, Farmer argued, proliferating aid agencies and foreign nations have failed to establish enduring partnerships with Haiti’s government.

“Our historical failure to do so is one of the primary reasons that trying to help the public sector now is like trying to transfuse whole blood through a small-gauge needle or, in popular parlance, to drink from a fire hose,’’ Farmer, a UN deputy special envoy for Haiti, said on Capitol Hill.

“How can there be public health and public education without a stronger government at the national and local levels?’’ Farmer said in prepared remarks.

Mark WeisbrotThe Guardian Unlimited, July 28, 2010En Español