CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Op-Eds & Columns Rare Earth Materials and China: Housing Bubble Deniers Get Another One Wrong

Rare Earth Materials and China: Housing Bubble Deniers Get Another One Wrong

Print
Dean Baker
TPMCafé, October 19, 2010

See article on original website

It seems the main qualification for being a top economic policy maker is being wrong about economic policy. It certainly is the only trait that this group has had in common over the last three decades.

The latest big item in their proliferation of errors is their failure to take economic security issues seriously in ensuring that the U.S. maintained an adequate domestic manufacturing base. The context is the decision by China's government to suspend exports of some rare earth materials that are needed in the production of wind turbines, cell phones and other advanced manufacturing processes. The result of this suspension could be a disruption in the normal production schedules in many key industries.

Of course the "who could have known" school of economics is saying that this turn of events was unpredictable. But those economists who actually do economics for a living did raise this issue years ago. But, the "who could have known" school could not be bothered by the possibility that the United States might become reliant on a single producer for an important input in the industrial process.

If anyone in a decision-making position is capable of intelligent thought, China has just done us a huge favor. Its decision to restrict exports will cause some economic disruption, but it will be manageable. If the country learns the lesson that the United States should either be capable of producing necessary inputs itself or that it at least should have a diverse group of suppliers, then we will be much better prepared for such actions in the future.

Unfortunately, this crew could learn almost nothing from the collapse of an $8 trillion housing bubble that wrecked the economy. Therefore it would be very optimistic to assume that China's actions will have any impact on U.S. policy in the future.


Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The End of Loser Liberalism: Making Markets Progressive. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

 

CEPR.net
donate_new
Combined Federal Campaign #79613

Op-Eds by Author

Mark Weisbrot

Dean Baker

Eileen Appelbaum

John Schmitt