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ECONOMIC REPORTING REVIEW | July 31, 01.

by Dean Baker Tuesday, Sep. 11, 2001 at 12:44 AM

A weekly analysis of economic reporting in the Washington Post and New York Times. Excerpts relating to corporate globalization: The G-8 Summit and protests; underfunding Third World AIDS needs; G-8 protectionism via patents and copyrights opposed by Third World; unproven claim that removing trade promotes Third World growth; U.S. obstructionism on global warming; destructive "development"; how copyrights can cause repression; how U.S. immigration policies contribute to wage inequality.

ERR_7_31_01

The Strawman's Revenge - IMC's E-zine Of Media Analysis
Economic Reporting Review  |  July 31, 01
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"
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.


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.


 

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.
 

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.



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.


 

"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).
 

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.



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.


 

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.
 

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.



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.


 

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.
 

IMMIGRANT LABOR

"Pool Management Firm Goes Overseas to Find Summer Help," by Dana Hedgpeth in the Washington Post, July 21, 2001, page E1.



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.


 

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.
 

You can receive ERR via email every week by sending a "subscribe ERR" email to cepr@cepr.net.  You can find the latest ERR at TomPaine.com.  All ERRs since August 2000 are archived at http://www.tompaine.com/news/2000/10/02/index.html.  For earlier archives, go to http://www.cepr.net/columns/subbaker.htm.
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