ECONOMICS REPORTING REVIEW: The NYT and the
Washington Post Under the Microscope
Week of December 2 - December 8
Dean Baker is co-director of the Center for Economic and Policy Research.
TRADE
"Practicing What Free Traders Preach," by Joseph Kahn in the New York Times,
December 3, 2000, Section 4, page 6.
This article discusses the path of trade negotiations since the WTO's talks in Seattle
collapsed last year. At one point, it notes that bilateral trade negotiations have
continued but then adds, "Only the broader [multilateral] talks force all nations to
address the most politically sensitive questions: subsidies for farmers (Europe,
Japan), protections for textile workers (United States), standards for labor and the
environment (developing world)."
Mr. Kahn's claim is very misleading. Because the United States and the European
Union are large blocs, they are often able to unilaterally impose conditions on
developing nations. For example, by threatening trade retaliation, the United States
has often been able to force developing nations to honor copyrights or patents held
by U.S. corporations. Copyright protection is far more politically sensitive for
developing nations than fair labor or environmental standards.
Also, Kahn's list of "politically sensitive" areas is extremely selective. For example, the
protective barriers that largely exclude foreign professionals (e.g. doctors, lawyers,
accountants) from practicing in the United States are a much greater source of
inefficiency than protections for textiles workers. However, since these groups of
professionals are far more powerful politically in the U.S. than textile workers, it is
unlikely that the United States will accept a trade agreement that reduces such
barriers.
At one point the article comments, "The events that were supposed to make people
slow down and think twice about economic integration have done nothing of this
sort." It then points out that the East Asian financial crisis has led Asian nations to
become more integrated into the world economy. This outcome was not necessarily
the choice of the nations in the region. The IMF required that these nations eliminate
many barriers to trade and capital flows as a condition of receiving loans during the
financial crisis. If Asian nations refused to follow the IMF's conditions, they would
have been denied credit from both the IMF and World Bank and probably many
private lenders as well. It would have been appropriate for the article to note the
IMF's role in forcing more economic integration.
ELECTRICITY DEREGULATION
"California Races to Fix Deregulated System as Prices, Tempers Rise," by William
Booth in the Washington Post, December 3, 2000, page H1.
"Can Crisis Repeat Itself Here? We May Find Out Soon," by Peter Behr in the
Washington Post, December 3, 2000, page H1.
"Competitive Electrical Service Is Coming, and Choices Loom," sidebar in the
Washington Post, December 3, 2000, page H1.
This series of articles discusses the failure of electricity deregulation in southern
California -- where residential electricity prices more than tripled in some cases --
and examines whether deregulation in the Washington metropolitan area can lead to
the same outcome.
It is worthwhile to put these articles in context. In June of this year, the Washington
Post had a full section devoted to electricity deregulation. The section had numerous
articles discussing various aspects of deregulation, but it was also filled with ads by
the region's utilities and other firms. These are the very companies that stand to
profit from deregulation. It is notable that none of the Post's articles warned of the
problems that have afflicted southern California since it began to deregulate its
electric utilities.
RUSSIA
"An Ailing Russia Lives a Tough Life That's Getting Shorter," by Michael Wines in the
New York Times, December 3, 2000, Section 1, page 1.
"In Russia, the Ill and the Infirm Include Health Care Itself," by Michael Wines with
Abigail Zuger in the New York Times, December 4, 2000, page A1.
These informative articles report on the collapse of the Russian health care system
and the decline in life expectancy since the end of the Soviet Union. While they
present a valuable account of life in post-Soviet Russia, both articles include a
number of comments that seem to have no purpose except to express distaste for
the Soviet system.
For example, when referring to the medical care that existed under the Soviet
system, the first article comments: "as befit a system that saw people as cogs." The
article includes several other comments in a similar vein. These sorts of comments
are usually restricted to editorials or opinion columns; they generally do not appear in
news articles.
At one point, the second article asserts, "Soviet health spending ran between 3 and
3.5 percent of the gross domestic product for decades, barely a third of the rate in
Europe generally." According to OECD data, the average health care expenditure
level for the European countries that are currently members rose from 4.8 percent of
GDP in 1970 to 7.0 percent in 1990. This implies that Soviet health care spending
was generally more than half of the average for other European countries.
FEDERAL RESERVE BOARD
"Greenspan Talk Lifts Markets," by John M. Berry in the Washington Post, December
6, 2000, page A1.
"Greenspan Signals That Fed Will Act To Ease Slowdown," by Richard W. Stevenson
in the New York Times, December 6, 2000, page A1.
These articles report on Alan Greenspan's speech indicating that the Federal Reserve
Board may lower interest rates to check an economic slowdown. Both articles rely
only on economists at financial institutions for comments on Greenspan's speech.
The Times article includes comments from two economists at financial institutions
and the Post article includes one. Since the Fed's actions will affect the whole
economy, it would have been appropriate to look beyond the financial sector for
comments.
The Times article also mentions that a rise in the unemployment rate will reduce the
chance of a "sharp rise in wages that might ignite inflation." Nominal wage growth
has been largely flat for the last three years, even in the face of rapidly rising energy
costs. The rise in energy prices over the last year has virtually eliminated any growth
in real wages over this period for most workers. There seems little basis for concern
that wages were about to start rising rapidly.
REGULATION
"Clinton's Last Regulatory Rush," by Dan Morgan in the Washington Post, December 6,
2000, page A1.
Mr. Morgan's article discusses a round of environmental and health and safety
regulations that President Clinton is considering before the end of his term next
month. At one point the article refers to a set of environmental regulations, and it
asserts these will have "broad economic impact." It is not clear how the article has
determined the economic impact of these regulations.
PRODUCTIVITY
"Productivity Loses Steam As Economy Keeps Ebbing," by Reuters in the New York
Times, December 7, 2000, page C10.
This Reuters article examines revised data for third quarter productivity growth,
which was recently released by the Labor Department. At one point the article notes
that the Federal Reserve Board will be closely examining the November employment
report to see "whether the economic cooling so far is taking pressure off wages."
Nominal hourly wages have grown at approximately a 4.0 percent annual rate for the
last three years. There is no evidence that the relatively low unemployment rate of
the last year has led to any significant increase in wage growth. Since this moderate
pace of nominal wage growth can be sustained indefinitely without causing inflation
to rise, it is not clear why the Fed would be so anxious to have wages grow more
slowly.
TAIWAN
"Down but Not Out in Taiwan," by Mark Landler in the New York Times, December 5,
2000, page C1.
This article discusses the financial and economic problems currently facing Taiwan.
The article includes several comments implying or asserting that there is some
fundamental problem with Taiwan's financial system, and that it should be more like
the U.S. system.
It is worth noting that Taiwan has maintained a growth rate over the last forty years
that is higher than any other nation in the world. As a result, it went from one of the
poorest nations in the world in 1960 to one that enjoys near European living
standards at present. No nation with a U.S. type financial system has ever had a
comparable growth record.
It is also worth noting that Taiwan's immediate problem, according to Mr. Landler, is
that it has too many banks. This situation came about as a result of financial
liberalization moves in the early 1990s -- moves that Taiwan implemented at the
urging of the United States.
TURKEY
"Turkey Grapples With a Severe Financial Crisis," by Douglas Frantz in the New York
Times, December 5, 2000, page C1.
This article reports on the current financial problems facing Turkey. While the article
notes that the current economic troubles arose in the context of anti-inflation drive,
it never raises the possibility that this anti-inflation effort may be the cause of the
nation's problems.
Turkey has had high inflation rates for a long period of time, yet, according to World
Bank data, it has consistently maintained a GDP growth rate of approximately 5
percent annually. This is a much better economic performance than that of many
nations with lower inflation rates, such as Mexico or Argentina. A lower inflation rate
in Turkey would almost certainly be desirable, but it is possible that the cost of
getting there may exceed the benefits of lower inflation. This article never even
raises this possibility.
ARGENTINA
"Budget Is Victory for Argentine President," by Clifford Krauss in the New York Times,
December 8, 2000, page A12.
This article reports on the Argentine Senate's approval of a budget bill that will bring
it into compliance with conditions established by the IMF for a new loan. At one point
the article observes, "The Argentine economy has suffered from several factors out
of the country's control." As an example of these factors, the article cites
Argentina's Argentina's loss of competitiveness after Brazil devalued its currency.
This loss of competitiveness is actually directed related to the Argentina's decision to
tie its currency to the U.S. dollar. That decision was fully within the government's
control.
The problems that have resulted from tying the currency to the dollar were entirely
predictable. By making this decision, Argentina restricted its ability to respond to
economic problems, but the original decision to tie the currency to the dollar (and
the more decision to maintain the link) was certainly under the government's control
(see "Argentina's Woes: With Peso Overvalued, It Can't Compete," by Floyd Norris,
New York Times, December 8, 2000, page C1).
RECESSION PROSPECTS
"White House Mocks Cheney on Economy," by Glenn Kessler in the Washington Post,
December 5, 2000, page A26.
This article reports on the Clinton Administration's efforts to ridicule Richard Cheney's
warnings about the possibility of a recession in the near future. It would have been
helpful to readers if the article had made some effort to analyze the current
economic situation, and evaluate the forces that could lead to a recession. This
would have put the back-and-forth between Cheney and the Administration in
context.
DEVELOPING NATIONS AND AIDS DRUGS
"South Africa to Distribute $50 Million in Donated AIDS Drugs," by Rachel L. Swarns in
the New York Times, December 2, 2000, page A4.
This article reports on an arrangement whereby the South African government would
distribute drugs donated by a pharmaceutical manufacturer to AIDS victims. At one
point the article says that South African government officials pledged to "continue to
pressure pharmaceutical companies to lower prices for the developing world."
This statement is somewhat misleading. Developing nations are not asking the
pharmaceutical industry to lower its prices; they are asking the industry not to
prevent them from buying low priced drugs. It is possible to manufacture AIDS drugs
at relatively low prices. Firms in India and Brazil can produce most AIDS drugs and
sell them at very low - but still profitable - prices to developing nations. The U.S.
and European pharmaceutical industries are trying to prevent these sales by arguing
that their patents are being violated.
Developing nations do not need the U.S. and European manufacturers to lower their
prices. They just need the U.S. and European governments to stop interfering in
countries' efforts to buy drugs from third parties at the prevailing market price.
OUTSTANDING STORIES OF THE WEEK
"Memo to Analysts: Thanks for Nothing," by Gretchen Morgenson in the New York
Times, December 3, 2000, Section 3, page 1.
This article reports on stock analysts' failure to predict the decline in computer sales
at Gateway. When Gateway announced its lowered projections for sales it caught
the markets completely by surprise and led to a 32 percent drop in its share price in
a single day. Virtually all of the professional analysts who follow Gateway were also
surprised by this report.
"Critics Calling U.S. Supplier In Nicaragua A 'Sweatshop,'" by Steven Greenhouse in
the New York Times, December 3, 2000, Section 1, page 7.
This article reports on a Nicaraguan apparel factory that has fired workers who were
trying to organize a union. There is opposition to a contract between the factory and
the U.S. military.
"Unfortunate Timing, No Matter Who Wins," by Louis Uchitelle in the New York Times,
December 3, 2000, Section 3, page 1.
This article examines the current state of the economy. It points out that the next
president will have to deal with a number of economic problems, and possibly a
recession, which was not his fault.
"Argentina's Woes: With Peso Overvalued, It Can't Compete," by Floyd Norris in the
New York Times, December 8, 2000, page C1.
This article discusses the problems that Argentina has faced as result of its decision
to link its currency to the dollar.