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Home Publications Blogs Beat the Press The Post Insists on Ignoring the Over-Valued Dollar In Discussing International Competitiveness

The Post Insists on Ignoring the Over-Valued Dollar In Discussing International Competitiveness

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Thursday, 16 September 2010 04:59

Suppose the United States gives a subsidy equal to 30 percent of the purchase price for people who buy imported goods. It also taxes all goods that are exported from the United States by 30 percent. This subsidy and tariff regime would likely have a substantial effect on international competitiveness.

The Washington Post does not see it that way. A front page article that discussed the production of energy efficient light bulbs, and the factors determining plant location, did not once mention currency values.

This reflects an incredible level of incompetence. It would be like discussing the Louisiana fishing industry without discussing the BP oil spill.

Comments (7)Add Comment
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written by izzatzo, September 16, 2010 7:28
All these years WalMart, its employees and customers have been on the subsidy dole? Imagine that, of all places for a bunch of freeloading socialists to congregate and benefit from free market capitalism. It could have been worse. They could be producing stuff and selling it to China instead.
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written by Queen of Sheba, September 16, 2010 2:30
Peter Whoriskey, the unfortunately-named writer of this article, is a stenographer rather than a reporter and about as far removed as possible from an investigative reporter. He covered the lies of George W. Bush by dutifully writing down everything the president said and offering zero context or correction. The fact that he failed in this article to even mention currency values is really no surprise; I doubt he even understands what relative currency values have to do with global competitivness, and therefore just regurgitates the things he's told by the people he interviews. If the interviewee doesn't mention it, he probably doesn't know enough to bring it up.

That's no excuse, however, for the Post's assignment editor's failure to run the story by the business editor or a business reporter who should have been able to spot the omission. The length of this story offers plenty of room to include at least a brief description of the role currency values play in decisions to move production facilities out of the U.S.

The Post seems to have quite a few reporters and editors of such quality on staff.
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written by DavidS, September 16, 2010 5:59
The Washington Post is becoming a disgrace. This is just the latest example of many.

That said, with respect to this specific article, if the renminbi:USD exchange rate increased by 30% overnight, production would simply move, albeit gradually, to a lower-cost Asian country such as Vietnam or Indonesia.

The US' manufacturing supply chains and operational skills are long gone. It would take at least a generation to re-establish them and it would require significant foreign investment and expertise.

Finally, and most importantly of all (far more important than the value of the renminbi), Wall Street does not like manufacturing because it does not like capital expenditures. These are major negatives in quarterly earnings reports and can't easily be massaged away.

This is the elephant in the room that no one is allowed to talk about. I believe this needs to change fast if the US wants the private sector to allocate resources in the economy with some semblance of efficiency.
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written by Wes, September 17, 2010 8:09
As always, Dean does not care to offer any expedience in support of his theory of "overvalued dollar".
typo above
written by Wes, September 17, 2010 12:53
typo above.
should have been "evidence" instead of "expedience".
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written by anon, September 18, 2010 7:40
DavisS writes "The US' manufacturing supply chains and operational skills are long gone."

Who is the world's largest manufacturer? That's right, it is the United States. Please shut up.

As to this 30% figure, it's nonsense. China has printed so much money that the yuan would crash if it were floating and fully exchangeable. The Chinese know this and that is why they keep a giant war chest of US dollars: to defend the currency in the next Asian financial crisis.
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written by Calgacus, September 19, 2010 9:25
Actually, the import subsidy would be a very good idea in the case of an overvalued dollar and big trade deficits. Overvaluation and an excess of imports over exports is a great boon to the US economy. The main negative is that the dollars are leaked away from the US economy, taking effective demand and jobs with them. The US can easily remedy this by a "Buy Chinese" import subsidy part of a budget deficit which should always be at least as big as the trade deficit. The mainstream economic discourse on trade has everything backwards.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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