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THE G-8 SUMMIT AND PROTESTS
"Leaders Vow to Combat Economic Slump, and AIDS," by William Drozdiak
in the Washington Post, July 21, 2001, page A1.
"Protester Killed During Summit Demonstrations," by Mike Allen and
Sarah Delaney in the Washington Post, July 21, 2001, page A1.
"Italian Protester Is Killed By Police At Genoa Meeting," by
Alessandra Stanley and David E. Sanger in the New York Times,
July 21, 2001, page A1.
"Rich Nations Offer a Hand, But the Poor Hope for More," by David E.
Sanger in the New York Times, July 21, 2001, page A6.
"Allies Tell Bush They'll Act Alone On Climate Accord," by David E.
Sanger and Alessandra Stanley in the New York Times, July 22, 2001,
Section 1 page 1.
"With Eye on Unequal Wealth, Young Europeans Converge on Genoa," by
John Tagliabue in the New York Times, July 22, 2001, Section 1 page 8.
"G-8 and Main Protest Groups Concur on Stopping Violence," by John
Tagliabue in the New York Times, July 23, 2001, page A9.
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Most of the articles include
comments asserting that the G-8
leaders spent most of their time
talking about poverty, AIDS, and the
environment -- the main concern of
most of the protestors -- thereby
implying that the protests might have
been somewhat misguided.
It is worth noting that the billion
promised for an AIDS fund for
developing nations, is between 10-15
percent of the amount that Kofi
Annan, the United Nations Secretary
General, estimated would be
needed each year to effectively
combat AIDS in developing nations.
The 0 million promised
by the United States is
approximately equal to what it
spends on its military in six hours.
Actually,
the G-8 leaders have not been
consistent proponents of free trade.
One of the main items in the last
WTO agreement was the TRIPS
accord, which extended U.S.- type
patent and copyright laws to
developing nations.
These
protectionist measures raise the
price of items like software,
recorded music and videos, and
pharmaceuticals several hundred
percent above the free-market price.
Pharmaceutical patents threaten to
make many life-saving drugs
unaffordable to people in
developing nations. Since the
developing nations explicitly
demanded that the reconsideration
of TRIPS be one of the items on the
agenda at the next W.T.O. summit, it
is remarkable that the issue is never
even mentioned in these articles.
The
articles make no effort to determine
whether there is any truth to the
claim of President Bush, and other
summit participants, that removing
trade barriers will be the best way to
promote growth in developing
nations.
The last two decades, a
period in which most nations have
followed the economic path
advocated by the summit
participants, have been a period of
substantially diminished economic
growth and progress in areas like
life expectancy and literacy rates.
This article also included an
assertion that the Kyoto accord
limiting greenhouse gas emissions
"would be largely ineffective"
without American participation.
At some point, the United
States is likely to face trade
retaliation and other measures, if it
fails to restrict its greenhouse gas
emissions. By moving ahead on the
Kyoto agreement, the other
industrialized nations are potentially
setting this process in motion.
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These articles report on the G-8 summit meeting held in Genoa, Italy
and the protests outside the summit. Most of the articles include
comments asserting that the G-8 leaders spent most of their time
talking about poverty, AIDS, and the environment -- the main concern
of most of the protestors -- thereby implying that the protests might
have been somewhat misguided.
For example, the July 21 article by Stanley and Sanger states
that "today for the first time, the Group of 8 leaders discussed
health, debt, and the poor -- exactly the topics that demonstrators
have complained that rich countries ignore." It is not clear whether
this, and similar assertions in other articles, are based on an
actual knowledge of the discussion that took place, or rely on the
press statements of the politicians at the meeting.
It is worth noting that the billion promised for an AIDS fund for
developing nations, is between 10-15 percent of the amount that Kofi
Annan, the United Nations Secretary General, estimated would be
needed each year to effectively combat AIDS in developing nations.
The promised amount is less than 0.02 percent of the public budgets
of the nations represented at the summit. The 0 million promised
by the United States is approximately equal to what it spends on its
military in six hours. Given the relative unimportance of the sums of
money involved, it is reasonable to question whether the leaders
actually spent very much time talking about the issue.
The articles also include numerous assertions -- some by the
politicians at the summit -- that the G-8 nations are promoting freer
trade as the best way to help poor nations. Actually, the G-8 leaders
have not been consistent proponents of free trade. One of the main
items in the last WTO agreement was the TRIPS accord, which extended
U.S.- type patent and copyright laws to developing nations. These
protectionist measures raise the price of items like software,
recorded music and videos, and pharmaceuticals several hundred
percent above the free-market price. Pharmaceutical patents threaten
to make many life-saving drugs unaffordable to people in developing
nations. Since the developing nations explicitly demanded that the
reconsideration of TRIPS be one of the items on the agenda at the
next W.T.O. summit, it is remarkable that the issue is never even
mentioned in these articles.
It is also worth noting that the articles make no effort to determine
whether there is any truth to the claim of President Bush, and other
summit participants, that removing trade barriers will be the best
way to promote growth in developing nations. The last two decades, a
period in which most nations have followed the economic path
advocated by the summit participants, have been a period of
substantially diminished economic growth and progress in areas like
life expectancy and literacy rates (see "The Scorecard on
Globalization 1980-2000: Twenty Years of Diminished Progress").
According to the Post article by Drozdiak, the summit participants
attributed the current world economic slump to "high and volatile oil
prices." Currently, the world price of oil is approximately
barrel. After adjusting for inflation, this is approximately the same
or slightly lower than it was in the early '90s when the price
hovered near a barrel.
The July 22 article by Sanger and Stanley estimated the size of the
Saturday protest at "as many as 50,000 demonstrators." (This figure
appears again in the July 23 article by Tagliabue.) The Washington
Post, along with the Associated Press and ABCNews.com all estimated
the size of the protest at 100,000. The Times article does not give a
source for its estimate.
This article also included an assertion that the Kyoto accord
limiting greenhouse gas emissions "would be largely ineffective"
without American participation. While it will be difficult to
effectively curb global warming if the United States, the largest
emitter of greenhouse gases, takes no steps to control emissions, the
accord could set a process in motion that would lead to this result,
even without immediate U.S. participation. If the other
industrialized nations all take steps to curb emissions -- and pay
even more than they already do for energy -- it might shame the
United States into eventually signing onto the agreement.
Alternatively, the nations adhering to the Kyoto agreement are likely
to balk at cooperating with the United States on trade and other
matters, if the United States refuses to curb its emissions. At some
point, the United States is likely to face trade retaliation and
other measures, if it fails to restrict its greenhouse gas emissions.
By moving ahead on the Kyoto agreement, the other industrialized
nations are potentially setting this process in motion.
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GLOBAL WARMING
"Nations Wrangle in an All-Night Marathon Climate Treaty," by Andrew
C. Revkin in the New York Times, July 23, 2001, page A3.
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The article asserts that "the United
States and Europe clashed over
whether countries should get credit
toward emissions goals by planting
forests, which absorb carbon
dioxide."
This was not the conflict at the last
conference. The Clinton
administration was demanding
credits for forests that were in place
as of 2008-2012 (the years in which
the limits would be binding), even if
the amount of forested land was less
than what had been in place in 1990,
the base year for the treaty.
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"Nations Wrangle in an All-Night Marathon Climate Treaty," by Andrew
C. Revkin in the New York Times, July 23, 2001, page A3.
This article discusses the negotiations in Bonn, Germany over a
treaty to curb greenhouse gas emissions. At one point the article
refers to the last round of negotiations in November of 2000. It
asserts that "the United States and Europe clashed over whether
countries should get credit toward emissions goals by planting
forests, which absorb carbon dioxide."
This was not the conflict at the last conference. The Clinton
administration was demanding credits for forests that were in place
as of 2008-2012 (the years in which the limits would be binding),
even if the amount of forested land was less than what had been in
place in 1990, the base year for the treaty (see, for
example, "Treaty Talks Fail to Find Consensus In Global Warming," by
Andrew C. Revkin," in the New York Times, November 26, 2000, Section
1 page 1; "Envoys Could Not Agree on Value Of Forests to World
Environment," by Andrew C. Revkin in the New York Times, November 26,
2000, Section 1 page 16; and ERR 12-1-00).
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DEVELOPMENT AND THE ENVIRONMENT
"Thriving Guatemala Shrimp Farm Sets Off a Conflict," by David
Gonzalez in the New York Times, July 21, 2001, page A3.
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At one point the article portrays this
as a dispute between the "rights of
companies that invest in the shrimp
farms" and the "needs of traditional
fisherman." This language has the
effect of putting the competing
claims on different plains. In fact, the
traditional fisherman have "rights"
as well.
If the shrimp farm is
actually causing the damage
claimed by the villagers, it is not
clear that it is actually leading to any
economic growth at all. It may
simply be transferring income from
one group of people (the villagers) to
another (the owners of the shrimp
farm). Neither Guatemala, nor any
other developing country, has a
need to lure investment that leads to
a net loss to its economy.
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This informative article examines the dispute between a shrimp farm
in Guatemala and neighboring villagers. According to the article, the
villagers believe that wastewater from the shrimp farm is polluting
the mangrove swamps where they have traditionally fished for their
livelihood. The villagers also claim that the shrimp farm has been
draining water from the swamps to cleanse the shrimp farm.
At one point the article portrays this as a dispute between
the "rights of companies that invest in the shrimp farms" and
the "needs of traditional fisherman." This language has the effect of
putting the competing claims on different plains. In fact, the
traditional fisherman have "rights" as well, just as in the United
States property owners would claim that they have the right not to
have their land polluted by the disposal of toxic chemicals or other
pollutants.
The article also presents this as an example of "how a developing
country's need to lure jobs and investment was often accompanied by
lax enforcement of environmental regulations." If the shrimp farm is
actually causing the damage claimed by the villagers, it is not clear
that it is actually leading to any economic growth at all. It may
simply be transferring income from one group of people (the
villagers) to another (the owners of the shrimp farm). Neither
Guatemala, nor any other developing country, has a need to lure
investment that leads to a net loss to its economy.
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COPYRIGHTS
"Arrest Raises Stakes in Battle Over Copyright," by Amy Harmon and
Jennifer S. Lee in the New York Times, July 23, 2001, page C1.
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This article discusses the arrest of a
computer programmer who gave a
lecture on how to evade an
encryption mechanism for a software
system.
This sort of repression is exactly
what would be expected when the
government attempts to maintain
barriers, like copyrights, which
create huge differences between the
price of goods and the marginal cost
of production.
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This article discusses the arrest of a computer programmer who gave a
lecture on how to evade an encryption mechanism for a software
system. While the article provides comments on this issue from
representatives of the software industry, computer programmers and
legal scholars, it would have been appropriate to include the views
of economists.
This sort of repression is exactly what would be expected when the
government attempts to maintain barriers, like copyrights, which
create huge differences between the price of goods and the marginal
cost of production. For example, if the government imposed a tax of
several hundred percent on an item, it would generally be expected
that it would lead to a large black market. Typically, it would only
be possible to contain a black market under such circumstances
through repressive measures and harsh punishments. In the case of
software, while firms seek to use government copyright protection to
sell it for hundreds, or even thousands, of dollars, it can generally
be reproduced at no cost.
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IMMIGRANT LABOR
"Pool Management Firm Goes Overseas to Find Summer Help," by Dana
Hedgpeth in the Washington Post, July 21, 2001, page E1.
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Since this firm was allowed to
bring in foreign workers, it was able
to avoid raising its wages in
response to market pressure. In this
way, immigrant workers have been
used to depress the wages of large
segments of the labor force.
Professional restrictions generally
prevent the use of immigrants to
depress the wages of higher paid
workers like doctors, lawyers and
economists. It would have been
appropriate to note how labor
shortages lead to higher wages for
these professionals, but simply to
more immigrant workers in other
fields. This asymmetry explains part
of the growth in wage inequality in
the last two decades.
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This article examines the practice of hiring foreign lifeguards by a
Washington area company that manages swimming pools. The article
includes a quote by the company's recruiting director that "it became
nearly impossible to get American college and high school kids to
take jobs as lifeguards."
If this were true, it would contradict virtually all of modern
economic theory. Presumably, the recruiting director meant that it
was nearly impossible to get workers at the wages he was offering.
This means that he was offering a below-market wage. Since this firm
was allowed to bring in foreign workers, it was able to avoid raising
its wages in response to market pressure. In this way, immigrant
workers have been used to depress the wages of large segments of the
labor force.
Professional restrictions generally prevent the use of immigrants to
depress the wages of higher paid workers like doctors, lawyers and
economists. It would have been appropriate to note how labor
shortages lead to higher wages for these professionals, but simply to
more immigrant workers in other fields. This asymmetry explains part
of the growth in wage inequality in the last two decades.
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