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by Dean Baker
Friday, May. 18, 2001 at 3:19 PM
A weekly analysis of economic reporting in the Washington Post and New York Times. Excerpts relating to corporate globalization: Turkey & the IMF, FTAA, Drug Patents, Bangladesh & Sweatshops.
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A weekly analysis of economic reporting in the Washington Post and New York Times. Excerpts relating to corporate globalization.
By Dean Baker, co-director of the Center for Economic and Policy Research and co-author of "Social Security: The Phony Crisis"
"Turkey Unveils Economic Program to Address Crisis," by News Services
in the Washington Post, April 15, 2001, page A17.
"Needing Cash, Turkey Plans More Sacrifice," by Douglas Frantz in
the New York Times, April 15, 2001, Section 1, page 10.
In the last 54
years, the IMF has designed seventeen failed
economic programs for Turkey
These articles report on Turkey's plans to implement new economic austerity
plans in coordination with the IMF, and the large protests against these
plans. The articles note some of the protesters' criticisms of the negative
effects of IMF policies. It would have been helpful to readers to point
out that in the last 54 years, the IMF has designed seventeen failed economic
programs for Turkey (see "In Turkey, a Quieter Day to Examine Core Problems,"
by John Ward Anderson, Washington Post, February 27, 2001, page A19), which
suggests that it does not have a very good track record.
"NAFTA Lite? Hemisphere-Wide Trade Pact Faces Opposition From Brazil
to Capitol Hill," by Paul Blustein in the Washington Post, April 15, 2001,
The fact that
U.S. economy has created a large number of jobs in
the last seven years says nothing about the impact of
NAFTA on employment growth.
This article previews the summit meeting in Quebec to discuss a hemisphere-wide
trade agreement. The article repeatedly makes allusions to the history
of NAFTA as a backdrop. Some of the allusions are of questionable appropriateness
For example, the article notes that Ross Perot's claim that NAFTA would
cost millions of jobs has been proven false because the U.S. economy has
created 20 million jobs since NAFTA. The fact that U.S. economy has created
a large number of jobs in the last seven years says nothing about the impact
of NAFTA on employment growth. The U.S. could have created 20 million jobs
in spite of a very negative impact of NAFTA and, in fact, the U.S. trade
deficit with the NAFTA nations (Mexico and Canada) has grown by more than
billion since NAFTA was passed. This implies that the direct effect
of increased trade with these nations was a net loss of close to 700,000
It is also questionable whether Ross Perot is an appropriate spokesperson
for opponents of NAFTA. While he is apparently popular with the media,
there are large organizations who are working on this issue and they have
spokespeople with far more grounding in economics than Mr. Perot.
At one point the article reports the predictions of Jeffrey Schott,
an economist at the Institute for International Economics, about the potential
for a new trade agreement to increase exports to Latin America. It would
have been worth noting that Mr. Schott was the co-author (with Gary Hufbauer)
of a 1993 study that predicted that NAFTA would lead to a large increase
in the U.S. trade surplus with Mexico. In fact, the U.S. trade surplus
quickly turned into a large deficit.
The article also asserts that Mexico's economy quickly recovered from
its financial crisis in 1994. This is a questionable assertion. Many farmers
and small business owners remain heavily burdened by debt as a result of
the crisis, and the real wages of Mexican workers are just now coming back
to their pre-crisis levels.
It is also worth noting that the article repeatedly refers to the trade
pact as a "free trade" agreement. One of the major goals of the United
States in these negotiations is to increase patent and copyright protection
throughout the hemisphere, thereby reducing free trade. It would be more
appropriate to refer to the pact as simply a "trade" agreement.
"Bush Says He'll Press Effort for Hemisphere Trade Pact," by Christopher
Marquis in the New York Times, April 18, 2001, page A4.
"Bush to Talk Trade at Summit," by Dana Milbank and Paul Blustein
in the Washington Post, April 20, 2001, page A1.
"Bush's Quebec Task: Push Case for Free Trade in Americas," by Anthony
DePalma in the New York Times, April 20, 2001, page A16.
Per capita GDP growth in Latin America slowed
from an average of 2.8 percent annually in the
1960-1980 period to just 0.3 percent annually in the
last twenty years.
All of these articles discuss President Bush's agenda for the trade
negotiations in Quebec. At one point the article by Marquis notes that
many Latin American nations oppose including labor and environmental rules
in any trade agreement because they "do not want other nations dictating
their domestic laws."
While these nations may not want other nations dictating their domestic
laws, they have been willing to tolerate exactly this practice in a wide
range of areas that are being discussed in recent trade talks, including
rules on investment restrictions, copyright and patent protection, and
even environmental regulations (some types of environmental regulations
have been ruled as unlawful trade restrictions by the WTO). So these nations
are clearly willing to let other nations dictate their domestic laws under
At one point, this article also refers to comments by Chile's president,
Ricardo Lagos, who argued that there was a need for Latin American governments
"to show the connection between trade and growth on one hand and greater
well being for ordinary citizens on the other." It would have been appropriate
to note that the expansion of trade in Latin America in the last two decades
has not been accompanied by increased economic growth. According to World
Bank data, per capita GDP growth in Latin America slowed from an average
of 2.8 percent annually in the 1960-1980 period to just 0.3 percent annually
in the last twenty years. It may be possible to show a link between growth
and greater well being for ordinary citizens, but the data indicate that
it will be far more difficult to show a positive connection between trade
The Post article refers at one point to an argument from the White House,
that U.S. exports to the rest of the western hemisphere would increase
dramatically if a new trade agreement was reached. It would have been appropriate
to note that the Clinton administration made the exact same argument about
NAFTA prior to its passage. Since NAFTA went into effect, imports have
increased far more than exports, which means that the direct effect of
the agreement has been a loss of jobs.
Both of the Times articles refer to the trade pact being negotiated
as a "free trade" pact. As noted above, since the pact will likely also
include the extension of protectionist measures such as copyrights and
patents, it is more accurate to refer to it simply as a "trade" pact.
"Global Issues Dog South Africa on AIDS," by Jon Jeter in the Washington
Post, April 20, 2001, page A1.
"Clash Over Patents," by Andrew Pollack in the New York Times, April 20, 2001, page A16.
Most bio-medical research is actually not supported by patent protection
Both of these articles present overviews of the future of drug patents
in the developing world in the wake of a decision by 39 drug companies
to abandon a lawsuit against South Africa over patent enforcement. Both
articles note that the lack of patent protection could have a negative
impact on drug research by the pharmaceutical industry. It would have been
appropriate to note that most bio-medical research is actually not supported
by patent protection. The U.S. government, together with universities,
foundations and private charities, supports considerably more research
than does the pharmaceutical industry. If it proves difficult to support
industry research through enforcing patent laws, then expanding these alternative
sources of research funding would seem to be a promising option.
"Lives Held Cheap in Bangladesh," by Barry Bearak in the New York
Times, April 15, 2001, Section 1, page 1.
At one point [this article]attributes these conditions to the fact
that "consumers want bargains."
If workers produce one shirt an hour, doubling their wages would raise
the price of a shirt by an average of 6 cents
This informative article examines the working conditions in sweatshops
in Bangladesh. It points out that workers toil often long hours, at low
wages, in dangerous workplaces. At one point it attributes these conditions
to the fact that "consumers want bargains." The difference that eliminating
the worst labor abuses would make in the price that consumers pay for clothing
would in most cases be minimal. According to the article, wages for adults
are in the range of 6 cents an hour (children earn less). This means that
if workers produce one shirt an hour, doubling their wages would raise
the price of a shirt by an average of 6 cents (0.3 percent on a shirt).
The article provides no evidence that a price increase of this magnitude
would have a noticeable effect on demand.
The article also reports on the impact of efforts by "do gooders," who
have tried to block imports of goods produced with child labor. The article
reports that these do-gooders are "suspected of shallow thinking," because
the result of these restrictions was the mass firing of children under
fourteen. It claims that many of these children were hired as a favor to
impoverished parents, and that it actually did no harm to the factory owners
to lose them as workers.
It seems implausible that these factory owners would be so altruistic
in hiring children as a favor to the poor, but so unwilling to provide
their workers with safe and humane working conditions. It is also worth
noting that any child labor law that actually has an impact results in
the firing of children whom their parents would like to be employed (unless
the children are working against their parents' will). In other words,
what the article has identified as the result of "shallow thinking" by
do-gooders is the inevitable result of effective child labor legislation.
The term "do gooder" is pejorative. It does not belong in a news article.
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