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A vaccine summit: Taking the pandemic seriously

April 10, 2021 2 comments

from Dean Baker

You might think that, after a year in which have seen millions of deaths and tens of millions of infections, and trillions of dollars in economic losses, our leaders would take the pandemic seriously. But apparently, that is too much to ask.

To my view, taking the pandemic seriously means doing everything we can to get the whole world vaccinated as quickly as possible. This is not just an issue of being concerned for the poor people in the developing world, who are being left behind in the vaccination race, it is a recognition of the reality that viruses mutate.

We already know about several mutations that are more contagious than the original coronavirus and are at least somewhat more resistant to some of the vaccines that have been developed. If the pandemic is allowed to spread largely unchecked through the developing world for another year or two, then it is virtually certain that we will see many more mutations. Some of these may be even more contagious and deadly, and most importantly, more vaccine-resistant. Read more…

Free trade and free taxes: How our intellectuals help the rich

April 2, 2021 3 comments

from Dean Baker

Since I came to Washington in 1992, I have been working alongside friends in the policy community, labor movement, and community organizations in fighting against a series of trade pacts. NAFTA was the immediate issue in 1992, but a couple of years later we had the Uruguay Round of the GATT that created the WTO. At the end of the Clinton administration, we had China’s admission to the WTO and then various other smaller pacts.

Those of us who opposed these deals (which were not really about free trade), argued that they would put downward pressure on the wages of manufacturing workers, by putting these workers in direct competition with low-paid workers in the developing world. This mattered in a big way because manufacturing had historically been a source of comparatively good-paying jobs for workers without college degrees. Therefore, using trade to depress the wages of manufacturing workers would lead to downward pressure on the pay of non-college educated workers more generally, thereby increasing inequality. Read more…

Quick, how much is $2 trillion?

March 31, 2021 2 comments

from Dean Baker

Okay, it is more money than even Bill Gates, Elon Musk, and Jeff Bezos have, put together. That probably still doesn’t give people too much information, since most people don’t have much familiarity with these folks fortunes. But it might be helpful if the media made some effort to put the proposed spending in President Biden’s infrastructure package in a context that would make it meaningful.

The spending is supposed to take place over eight years, which means that it would be equal to just over 0.8 percent of projected GDP over this period. At $250 billion a year, it comes to about $750 per person each year over this period. It is less than 40 percent of what we are projected to spend on prescription drugs over this period and less than half of the higher prices that we will be paying as a result of government-granted patent and related monopolies. (For some reason, the money transferred to the drug companies and other beneficiaries of these government-granted monopolies never gets called “big government.”)

Anyhow, instead of reporting $2 trillion as some big scary number, often not even telling people the time period involved, it would be helpful if news outlets tried to put the number in contexts that would make it meaningful to their readers. We get that reporting big numbers is a cool fraternity ritual among budget reporters, but making these numbers meaningful is actually supposed to be their job.

More on open-source versus patent monopoly financing of drug development

March 29, 2021 1 comment

from Dean Baker

It is often said that intellectuals have a hard time dealing with new ideas. Unfortunately, for purposes of public debate, open-source government funding of drug development is a new idea, and people in policy positions seem to be having a very hard time understanding it. So, I will try to write this post in a way that even a policy wonk can figure it out.

The basic idea of government-funded research should not be hard to grasp since the government already funds a large share of biomedical research. The National Institutes of Health gets over $40 billion a year in federal funding, with the Biomedical Advanced Research and Development Agency (BARDA) and other government agencies getting several billion more. This puts the government’s total spending in the $45 to $50 billion range, compared to a bit over $90 billion from the industry.[1] So the idea that the government would fund research really should not be that strange.

Most of the public funding does go to more basic research, but there are plenty of instances where the government has actually funded the development of new drugs and also done clinical testing. But under the current system, most of the later stage funding does come from the industry and is funded through patent monopoly pricing. Relying on open-source government-funded research for later-stage development and testing would be a major change.

The Outlines of a System of Government-Funded Research  Read more…

New York Times debates when it will tell readers that China has the world’s largest economy

March 26, 2021 2 comments

from Dean Baker

That seems to be the implication of a David Sanger piece commenting on the state of U.S. relations with Russia and China. At one point Sanger notes that China is a rising economic power:

“Economists debate when the Chinese will have the world’s largest gross domestic product — perhaps toward the end of this decade”

Actually, China already has the world’s largest economy using purchasing power parity measures of GDP, which is what most economists view as the best basis of comparison.

Here is what that well-known source of Chinese propaganda, the CIA World Factbook, has to say on the topic.

“From 2013 to 2017, China had one of the fastest growing economies in the world, averaging slightly more than 7% real growth per year. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2017 stood as the largest economy in the world, surpassing the US in 2014 for the first time in modern history. China became the world’s largest exporter in 2010, and the largest trading nation in 2013. Still, China’s per capita income is below the world average.”

Since China has four times as many people as the United States, it is still much poorer on a per person basis, but its economy is already considerably larger than the U.S. economy and is likely to be close to twice as large as the U.S. economy by the end of the decade.

It matters for inequality if top executives are ripping off their companies

March 9, 2021 Leave a comment

from Dean Baker

As can be easily shown the bulk of the upward redistribution from the 1970s was not due to a shift from wages to profits, it was due to an upward redistribution among wage earners. Instead of money going to ordinary workers, it was going to those at the top end of the wage distribution, such as doctors and dentists, STEM workers, and especially to Wall Street trader types and top corporate management. If we want to reverse this upward redistribution then we have to take back the money from those who got it.

If top management actually earned their pay, in the sense of increasing profits for the companies they worked for, then there would be at least some sort of trade-off. Reducing their pay would mean a corresponding loss in profit for these companies. It still might be desirable to see top executives pocket less money, but shareholders would be unhappy in this story since they will have less profits as a result.

But if CEOs and other top management are not increasing profits in a way that is commensurate with their pay, their excess pay is a direct drain on the companies that employ them. From the standpoint of the shareholders, it is no more desirable to pay a CEO $20 million, if someone just as effective can be hired for $2 million, than to pay an extra $18 million for rent, utilities, or any other input. It is money thrown in the garbage. Read more…

The New York Times has not heard of China’s (or Russia’s) vaccines

March 5, 2021 2 comments

from Dean Baker

I guess it is hard to get news at the world’s leading newspapers, but this lengthy podcast on Bill Gates and his efforts to make vaccines available to the developing world never once mentioned the vaccines developed by China or Russia. This is more than a bit incredible because at this point, far more of the Russian and Chinese vaccines are going to developing countries than the vaccines supplied by Western countries through COVAX, the international consortium set up the WHO and supported by the Gates Foundation.

Are New York Times reporters prohibited from talking about the Chinese and Russian vaccines?

This piece is also incredible in that it explicitly says that because Gates doesn’t want the government-granted patent monopoly system of financing from being challenged, there is no alternative. That could well be true, but it speaks to the incredible corruption of our politics and our economy, that because one incredibly rich person to opposed to having a corrupt, inefficient, and antiquated system reformed, it will not be reformed.

To prevent the resurgence of the pandemic, can we talk about open-source research?

February 26, 2021 Leave a comment

from Dean Baker

As the vaccination campaign picks up steam, we have many public health experts warning us about a possible resurgence of the pandemic due to the spread of new vaccine-resistant strains. The logic is that, as more people are protected against the predominant strain for which the vaccines were designed, it will allow room for mutations to spread, for which the current vaccines may not be effective. This can leave us in a whack-a-mole situation, where we have to constantly alter our vaccines and do new rounds of inoculations to limit the death and suffering from the pandemic.

This situation would seem to make the urgency for open-sourcing our research on vaccines even greater than in the past. The point is that we would want evidence on new strains to be shared as quickly as possible. We also would want the evidence on the effectiveness of the current batch of vaccines against each new strain to be quickly shared.

The Problem of Patent Monopolies

That is not likely to happen as long as drug companies are trying to maximize the profits from their government-granted patent monopolies. They have little incentive to share evidence that their vaccines may not be effective against particular strains. Regulatory agencies may make this determination and publicly disclose their findings, but it is not in the interest of, for example, Pfizer, to make this determination and widely disseminate its findings.

Read more…

Bitcoin and baseball cards

February 22, 2021 2 comments

from Dean Baker

I saw this piece last week on the soaring price of baseball cards, and naturally started thinking about Bitcoin. The article begins with a story about how a rare LeBron James trading card (it’s all sports cards, not just baseball cards) would now sell for over $3 million, more than ten times its price in 2016. It then reports on how the prices for rare cards of other famous players have also gone through the roof, with even cards of less great players selling for several million dollars.

The reason this got me thinking about Bitcoin is that the price of Bitcoin has also been soaring. In fact, it has risen considerably faster than the price of baseball cards, increasing more than a hundredfold over the last five years.

Bitcoin as a Currency

Bitcoin proponents see this soaring price as vindication. After all, if the price of a Bitcoin has risen more than a hundred times in just five years, then this digital currency must be extremely valuable.

There is no doubt that Bitcoin investors could have become rich through their investment. A $10,000 Bitcoin investment in 2016 would be worth more than $1.4 million today. If they had made their Bitcoin investment earlier, they would be even richer today. In that sense, at least for now, we can say that someone would have been right to buy Bitcoin as an investment.

But does this mean Bitcoin is establishing itself as a currency? In fact, Bitcoin’s soaring price argues the opposite. Read more…

Want to reverse inequality? Change intellectual property rules

February 11, 2021 2 comments

from Dean Baker

The explosion of inequality over the past four decades is appropriately a major focus of the political agenda for progressives. Unfortunately, policy prescriptions usually turn to various taxes directed at the wealthy and very wealthy. While making our tax structure more progressive is important, most of the increase in inequality comes from greater inequality in before-tax income, not from reductions in taxes paid by the rich. And, if we’re serious about reversing that trend, it is easier, as a practical matter, to keep people from getting ridiculously rich in the first place than to tax the money after they have it.

While the Reagan, George W. Bush, and Trump tax cuts all gave more money to the rich, policy changes in other areas, especially intellectual property have done far more to redistribute income upward. In the past four decades, a wide array of changes—under both Democratic and Republican presidents—made patent and copyright protection both longer and stronger. Read more…

Excessive stimulus and other things Larry Summers worries about

February 9, 2021 5 comments

from Dean Baker

It seems that Larry Summers is worried that the stimulus proposed by President Biden is too large. I will say at the onset that he could be right. However, at the most fundamental level, we have to ask what the relative risks are of too much relative to too little.

If we actually are pushing the economy too hard, the argument would be that we would see serious inflationary pressures, which could result in the sort of wage-price spiral we saw in the 1970s. As someone who lived through the 1970s, it actually wasn’t that horrible.

Okay, the fashions and hair styles might have been horrible, and I was never a fan of disco, but the period as whole wasn’t that bad. We didn’t have mass starvation and homelessness, but yes, the inflation of the decade was definitely a problem and we would not want to see something similar in this decade.

But will the Biden stimulus really cause us to see a 1970s-type wage-price spiral? That seems hard to imagine. We have not seen serious problems with inflation for many decades. Here’s the picture going back to the late 1990s using the personal consumption expenditure deflator, the Fed’s preferred index.
Read more…

Should people who want to save the world from the pandemic be demanding we pay China to produce billions of vaccine doses?

February 5, 2021 1 comment

from Dean Baker

I have written repeatedly on how we should have been looking for a collective solution to the pandemic, where countries open-source their research and allow anyone with manufacturing capacity to produce any treatment, test, or vaccine. (We pay upfront, like with Moderna, for those wondering why anyone would do the work.) Anyhow, we obviously did not go that route under Donald Trump.

Along with many others, I have argued that we should still go this route, sharing all our technology freely, as has been proposed in a WTO resolution put forward by India and South Africa. The U.S. and most European countries have vigorously opposed this measure thus far.

A main argument in the case of vaccines, is that the mRNA vaccines (Pfizer and Moderna — the only two approved thus far in the U.S.) involve complex manufacturing processes that cannot easily be replicated. While this is undoubtedly in part true, these vaccines did not exist back in March, yet the companies were able to produce large quantities of their vaccines by October, which suggests that if we started today, we could hugely increase output by October or sooner. Since few people think the worldwide pandemic will be over this year, that still sounds like something worth doing, even if does take eight months to get up and running. Read more…

Dealing with a pandemic as if human lives mattered

February 3, 2021 3 comments

from Dean Baker

It’s fair to say that the U.S. performance in dealing with the pandemic has been disastrous. With the effort led by Donald Trump, this is not surprising. His main, if not only, concern was keeping up appearances. Preventing the spread of the pandemic, and needless death, was obviously not part of his agenda.

Unfortunately, many other wealthy countries, like France, Belgium, and Sweden, have not done much better. They don’t have the excuse of having a saboteur in charge who was actively trying to prevent the relevant government agencies from doing their jobs.

Anyhow, I thought it would be worth throwing out a few points about how we should have approached the pandemic. While some of this is 20-20 hindsight, I was making most of these points many months ago. I should add, I claim zero expertise in public health, but I do have some common sense, in spite of my training in economics. Of course, if anyone with expertise in public health wants to correct or expand on any points here, I welcome the opportunity to be educated.

I will break down the discussion into three key areas:

  • Measures to reduce spread;
  • Efforts to develop effective testing, vaccines, and treatments;
  • The distribution of vaccines

Read more…

The GameStop game and financial transactions taxes

January 29, 2021 5 comments

from Dean Baker

The Wall Street crew is furious over the masses at Robinhood and Reddit ruining their games with their mass buying of GameStop, which wiped out the short position of a big hedge fund. The Robinhood/Reddit masses are touting this as a victory over Wall Street. The Wall Street insiders are decrying this effort to turn the market into a casino. It’s worth sorting this one out a bit and answering the question everyone is asking (or should be), would a financial transactions tax fix this problem.

First of all, much has been made of the fact that the hedge fund Melvin Capital was shorting GameStop, as though there is something illicit about shorting a company’s stock. This one requires some closing thinking. In principle, a major purpose of the stock market (we will come back to this) is to assess the true value of a company based on the information that investors collectively bring to the market.

Often this leads people to buy stock with the idea that the price will rise. However, an analysis can also lead investors to conclude that a stock is over-valued. In that case, if they are correct, they will make money by shorting the stock.

Read more…

Quick thoughts on the minimum wage

January 27, 2021 8 comments

from Dean Baker

President Biden’s proposal to raise the minimum wage to $15 an hour by 2025 is prompting a backlash from the usual suspects. As we hear the cries about how this will be the end of the world for small businesses and lead to massive unemployment, especially for young workers, minorities, and the less-educated, there are a few points worth keeping in mind.

While $15 an hour is a large increase from the current $7.25 an hour. This is because we’ve allowed so much time to pass since the last minimum wage hike. The 12 years since the last increase in the minimum wage is the longest period without a hike since the federal minimum wage was first established in 1938. Few workers are now earning the national minimum wage, both because of market conditions and because many states and cities now have considerably higher minimum wages.

If the minimum wage had just kept pace with prices since its peak value in 1968 it would be over $12 an hour today and around $13.50 by 2025. Read more…

The New York Times has not heard about China’s vaccines (or Russia or India’s)

January 25, 2021 5 comments

from Dean Baker

It is more than a bit bizarre that the New York Times can run a major piece about the lack of access of developing countries to Covid vaccines and never once mention the vaccines developed by China, Russia, or India. The piece is very useful in highlighting the fact that the United States and Europe have secured the vast majority of the 2021 production of the vaccines developed by western drug companies, leaving relatively few doses for the developing world. As a result, developing countries may continue to be afflicted by the pandemic well into 2022, with enormous human and economic costs.

That is an important story that needs to be told, but another aspect of this picture is that China, Russia, and India are making vaccines available to many countries in the developing world. China is the leader, with two vaccines that have been approved in at least one country for emergency use. Indonesia, the Philippines, Brazil, and Mexico are some of the countries that are already receiving one of the Chinese vaccines. The country has made broader commitments to provide the vaccine to poor countries in Sub-Saharan Africa but has not yet made large amounts available.

Similarly, Russia and India have both developed vaccines that they have pledged to share with other countries. Neither has completed Phase 3 trials yet, although they are already being used in Russia, India, and elsewhere under an emergency use authorization.

All three countries have been reluctant to share data from clinical trials, which makes it impossible to know how effective they are in preventing the spread of the pandemic and the risks of side-effects. Nonetheless, if developing countries are unable to get access to the vaccines developed by western drug companies, it is likely that they will turn to the vaccines developed by these three countries. This is a very important part of the reality for developing countries and it is striking that the NYT piece never mentioned the prospect of them turning to China, Russia, and India for vaccines.

Trump crazy and intellectual crazy

January 20, 2021 3 comments

from Dean Baker

– the ways in which the economy has been structured to redistribute income upward

It’s hard not to be appalled and scared by the reality denial of Donald Trump’s followers. Their willingness to insist an election was stolen, with no evidence whatsoever, is difficult to understand for those of who like to think that people respond to facts and logic.

I don’t have any easy answers to get these people to start thinking clearly, but I will point out that it is not just ignorant and/or crazed Trumpers who have trouble dealing with reality. Many of our leading intellectuals and our major media outlets have similar difficulty dealing with reality when it doesn’t fit their conceptions of the world.

In particular, I am referring to my standard complaint about the unwillingness to acknowledge the ways in which the economy has been structured to redistribute income upward. I will focus on the two simplest routes, which are often described as “technology” and “globalization.”

The Technology and Inequality Lie

Sorry to get harsh on this, but after what we saw on January 6th, I am not in a mood for being polite. I realize that it is very convenient for people who are doing relatively well in the current economy to believe that it is just a result of the way that technology happened to develop. In this story, it just happened to turn out that the progress in areas like software, artificial intelligence, and biotechnology have made advanced skills in science and math more valuable and less-skilled physical labor less valuable.

This line is repeated endlessly in media outlets and academic circles with zero reflection. Read more…

Even in the face of coup attempt, NYT continues propaganda for upward redistribution through trade

January 19, 2021 3 comments

from Dean Baker

I have repeatedly raised the point that media accounts routinely use the term “free trade” when they can more accurately say simply “trade” or trade policy. It is amazing to me that this practice continues.

We saw it yet again in a NYT article on how many Republicans continue to be faithful to Trump even after last week’s coup attempt. The article told readers:

“Anthony Sabatini, a Florida state representative, described Ms. Cheney and other Republicans who voted for impeachment as ‘artifacts,’ saying they were out of step in a party that has embraced a more populist platform opposed to foreign interventions and skeptical of free trade.”

As I have pointed out endlessly, we do not have a policy of “free trade.” We do not allow foreign trained professionals, such as doctors and dentists, to freely practice in the United States. Our trade policy has been focused on reducing barriers to trade in manufactured goods, while leaving in place the barriers that protect the most highly paid professionals.

This has the effect of putting U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This has the predicted and actual effect of lowering the pay of manufacturing workers in the United States. Since manufacturing has historically been a source of relatively high-paying jobs for workers without college degrees, the loss of good-paying jobs in manufacturing has put downward pressure on the pay of non-college educated workers more generally. This distributional impact has nothing to do with “free trade,” it is due to a policy of selective protectionism.

In the same vein, much of our trade policy has been focused on making our patent and copyright protections longer and stronger and imposing these rules on our trading partners. These protections are 180 degrees at odds with free trade, they are government granted monopolies. They also have the effect of redistributing income upward, to drug and software companies and people with skills in the relevant fields. Very few dishwashers and custodians benefit from patent rents or royalties from copyrights.

It would be helpful if the NYT and other media outlets could stop trying to pretend that the upward redistribution from globalization was some sort of natural process involving free trade. That is a Trumpian lie and it would be good if the media stopped repeating it.

Debt and deficits, yet again

January 14, 2021 6 comments

from Dean Baker

With a Democrat in the White House, the season of the deficit hawk has returned. So, it’s worth going through the old arguments just to remind everyone that the best response to these people is ridicule.

It looks like President Biden will propose a robust stimulus package of well over $1 trillion. According to press accounts, the package is likely to include another check for $2,000. (I believe it is supposed to $1,400 above the $600 in the last package.) It is likely to include a refundable child tax credit that will do much to reduce child poverty.

It will also include money to state and local governments to make up massive pandemic induced shortfalls. There will also be money for mass transit and a down payment on green new deal programs. Biden also plans to increase the subsidies provided in the Affordable Care Act, to make its insurance more affordable. And, he is likely to ask for a reduction in the age of Medicare eligibility.

In other words, this will be a really big deal. And, it will cost money. Biden will propose tax increases on the rich and corporations, but there is little doubt there will be a large increase in the deficit and the debt. So should we be worried? Read more…

End of the year thoughts on inequality and its remedies

January 1, 2021 4 comments

from Dean Baker

The approach of the end of the year seems a good time to sum up thoughts. My comments here will not be news to regular readers, but may be to others. Also, this exercise is helpful for me to keep my thoughts clear. (I also expect to take next week off, so you won’t be hearing from me for a while.)

Most of my work for the last several years has been focused on ways to reduce before tax inequality by reducing the amount of before-tax income that goes to those at the top of the income distribution. For better or worse, there don’t seem to be a lot of progressives that share this beat. There are a few points that are worth making.

First, my focus on reducing income at the top doesn’t mean for a second that I don’t see efforts at raising income for those at the bottom (and middle) as being important. I have long been involved with or worked alongside people trying to raise minimum wages, protect or increase Social Security benefits, and increase unionization rates.

These are very important efforts, but at the end of the day, our ability to raise incomes at the middle and bottom will depend on reducing incomes at the top. This gets to the old pie-cutting story. If we want those at the middle and bottom to have much bigger slices of the pie, the folks at the top will have to get by with smaller slices.

To see how skewed the pie eating has gotten, if the federal minimum wage had kept pace with productivity growth since 1968, as it did from its establishment in 1938 until 1968, it would be $24 an hour today. That means a single full-time minimum wage earner would have an income of $48,000 a year. A two-earner couple getting the minimum wage would have an income of $96,000 a year. Read more…