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Dean Baker

Dean Baker

Dean Baker is a macroeconomist and codirector of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

Articles by Dean Baker

Crypto and finance are waste and a drag on the economy

16 days ago

From Dean Baker
As everyone learns in Econ 101, and immediately forgets, the purpose of the financial sector is to facilitate transactions and allocate capital. This seems like a simple and obvious point, but you would never know it in most discussions of the financial sector.
The point here is that we need finance for these purposes. We don’t need finance to develop elaborate betting games and complex financial instruments. Financial instruments are only useful when they serve the purpose of better facilitating transactions or improving the allocation of capital.
In this context, an efficient financial sector is a small financial sector. We want to use as few resources as possible to serve its function, just as we want to use as few resources as possible in the trucking industry.

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Job loss from going green is nothing like the loss of manufacturing jobs due to trade

August 19, 2023

From Dean Baker
The United States suffered from a massive loss of manufacturing jobs in the 00s. This has come to be known as the “China Shock,” since it was associated with a flood of imports, especially from China, and a rapid rise in the U.S. trade deficit.
In the decade from December of 1999 to December of 2009, the economy lost more than 5.8 million manufacturing jobs, or more than one in three of the manufacturing jobs at the start of the decade. The vast majority of this job loss took place before the start of the Great Recession in December of 2007.
This sort of job loss was not typical for the manufacturing sector. While it lost jobs in the 1990s also, the drop was just 601,000, a bit more than one tenth as much as in the next decade. Since 2009, the manufacturing sector has

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U.S. manufacturing jobs and trade: A tale of two graphs

August 7, 2023

From Dean Baker
The first decade of this century was pretty awful for U.S. manufacturing workers. In December of 1999 we had 17.3 million manufacturing jobs. This number had fallen to 11.5 million by December of 2009. This amounted to a loss of 5.8 million jobs, or one-third of all the manufacturing jobs that had existed at the start of the decade. That looks like a pretty big deal.
It’s also worth pointing out that most of these jobs were lost before the onset of the Great Recession. We had lost almost 4 million jobs by December of 2007, the official start date of the Great Recession. The obvious culprit here is the explosion in U.S. trade deficit that we saw in this decade. If we’re buying more goods from other countries, in general, that means we are producing fewer goods here.

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The Chinese need to stay poor because the United States has done so much to destroy the planet

July 31, 2023

From Dean Baker
That line is effectively the conventional wisdom among people in policy circles. If that seems absurd, then you need to think more about how many politicians and intellectual types are approaching climate change.
Just this week, John Kerry, President Biden’s climate envoy, was in China. He was asking the Chinese government to move more quickly in reducing its greenhouse gas emissions. President Xi told Kerry that China was not going to move forward its current target, which is to start reducing emissions by 2030.
I know from Twitter that many people think that Kerry’s request was reasonable and that Xi is jeopardizing the planet with his refusal to move forward China’s schedule for emission reductions. This is in spite of the fact that China is by far the world leader

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US Government to consider alternatives to patent monopoly financing of drug development

July 22, 2023

From Dean Baker

In some really big news that is likely to get almost no media attention, Senator Bernie Sanders, the chair of the Senate HELP Committee, negotiated a deal with Bill Cassidy, the ranking Republican, on a package of amendments to the reauthorization of the nation’s pandemic preparedness law. While there are a number of items in the deal, a really big one is funding for a study to be done by the National Academies of Sciences, Engineering, and Medicine (NASEM) to consider alternatives to patent monopoly financing of the development of prescription drugs.

This is potentially huge, since our current system is a disaster. No one ever said it was a great idea to finance research by charging tens of thousands of dollars for life-saving drugs, when these drugs would sell for

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Weekend read – Mixed progress in the fight against inequality and for democracy

July 15, 2023

From Dean Baker
I have a birthday coming up, so it seems a good time to assess progress, or lack thereof, on the various issues that I have worked on over the decades. There is some big progress in at least a couple of areas, but not much to boast about in the others.
I’ll start with the success stories.
The Benefits of a Tight Labor Market
The big one, where I feel we really have made huge progress, is the battle for full employment. It might seem like ancient history, but a quarter century ago the absolute standard wisdom in the economics profession was that we could not get unemployment rates below 6.0 percent without ever accelerating inflation. To argue otherwise was to invite ridicule.
The reality repeatedly contradicted the theory. We sustained an unemployment rate of 4.0

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The myth of the “Free Market”

July 7, 2023

From Dean Baker
The media are really going overboard in telling us the days of the free market are over with Biden’s new economic policies. President Biden has quite explicitly implemented policies intended to reshape the direction of the economy, pushing clean energy and more domestic production of advanced semiconductors and other products. He also has reinvigorated anti-trust policy, which was largely shelved by his predecessors.
But the idea that the policies of the last four decades were somehow a matter of just leaving things to the market is a grotesque lie that no person remotely familiar with economic policy should be repeating.
The Finance Industry Cesspool
I will reverse the usual course of my diatribe here and start with the financial sector. Suppose back in 2008-09 we let

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New York Times headlines article “Public Tired of ‘Neo-Liberal’ Policies Designed to Make Rich Richer”

June 28, 2023

From Dean Baker
Of course, the New York Times did not headline a piece this way, but that would have been a more accurate headline of an article it ran last weekend discussing a turn away from “neo-liberal” policies. As I pointed out in a quick Twitter thread, that piece misrepresented a set of policies that have the effect of redistributing income upward as “free market” policies.
This is wrong in a way that is very convenient for the proponents of these policies. The massive upward redistribution of income in the last four decades is not really a debatable point. However, as a political matter, it is far more salable to say that this upward redistribution was the result of the forces of technology and globalization than of policies designed to make the rich richer.
While it should be

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Will Biden’s industrial policy create a lot more Moderna billionaires?

June 23, 2023

From Dean Baker
People routinely tout Biden’s efforts to bring back manufacturing jobs as a way to rebuild the middle class and reduce inequality. Whatever the motives, there is not much reason to believe that it will have this effect.
When the United States opened up its market to freer trade in manufactured goods, through trade deals like NAFTA and admitting China to the WTO, manufacturing workers had a substantial pay premium over workers in the rest of the private sector. This was largely because manufacturing was much more highly unionized than other parts of the private sector.
However, this is no longer true. In 2022, 7.8 percent of manufacturing workers were unionized, compared to 6.0 percent for the private sector as a whole. As a result, the pay premium for workers in

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AI, job loss, and productivity growth

June 19, 2023

From Dean Baker
Fear the rich, not AI
It is really painful to see the regular flow of pieces debating whether AI will lead to mass unemployment. Invariably, these pieces are written as though the author has taken an oath that they have no knowledge of economics whatsoever.
The NYT gave us the latest example on Sunday, in a piece debating how many jobs will be affected by AI. As the piece itself indicates, it is not clear what “affected by AI” even means.
What percent of jobs were affected by computers? The answer would probably be pretty close to 100 percent, if by “affected” we mean in some way changed. If by affected, we mean eliminated, then we clearly are talking about a much smaller number.
Thinking of AI like we did about computers is likely a good place to start. First of all,

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Recreational vehicles and magazines: what’s up since the pandemic

June 13, 2023

From Dean Baker
Now that we have inflation beat, it seems like a good time to look at what has changed since the pandemic. A full catalog of how the USA is different would be a serious undertaking, but we can learn a lot just by examining how consumption patterns have changed over the last three years. These data are readily available from the Commerce Department’s website.
Losers in the Post-Pandemic Period
Some of the changes in consumption patterns are obvious. The increase in working from home (as many as 30 percent of workdays are now remote) has led to a sharp drop in the amount we spend on commuting. While real consumption expenditures were 10.8 percent higher in the first quarter of 2023 than in the fourth quarter of 2019, real spending on mass transit was down 17.8 percent.

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Owning up to mistakes and pandemic deaths

June 8, 2023

From Dean Baker
We should be able to work together for the benefit of humanity.
John Kerry got the start to his political career when he testified to Congress about the Vietnam War as an anti-war veteran, and asked, “How do you ask a man to be the last man to die for a mistake?” The point, of course, was that we were still sending soldiers to Vietnam to fight and risk dying in a war that was widely recognized to be pointless. Rather than just owning up to the mistake, we continued the killing.
We might ask the same question about the U.S. trade embargo against Cuba and our government’s efforts to prevent Cuba from playing a positive role in stemming the pandemic. As my friend Achal Prabhala pointed out in a Washington Post column (co-authored with Vitor Ido), Cuba had developed two

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We can do better with a thousand years

May 26, 2023

Review of Power and Progress, by Daron Acemoglu and Simon Johnson
from Dean Baker
When I saw that two of the country’s most prominent economists wrote a book on “our 1000-year struggle over technology and prosperity,” I expected a lot. I was disappointed. To be clear, there is much here to like and I’m sure that most readers will get much from it, as I did. But, the book fails to follow through adequately on the key point in its analysis, which is that the gains from technology are a matter of struggle, not an outcome given by the technology itself.
I’ll start with the positives. The book gives a cursory, but useful, account of the major developments in technology going back more than a thousand years. Some of their discussion deals with the origins of agriculture, an innovation that

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The “Which way is up?” problem in economics

May 15, 2023

From Dean Baker
Economics famously suffers from a “which way is up?” problem. The issue is whether an economy is suffering from too much demand or too little demand. On its face, that seems like it should be a very simple question, but in fact it can be complicated and people often get it wrong, with very serious consequences.
The Great Depression was the classic too little demand story. We had millions of people out of work through the decade of the 1930s because there was not enough demand in the economy. With the benefit of hindsight, or a good Keynesian understanding of the economy, this demand problem is very clear, but it did not seem that way to many people living at the time.
Most immediately, people saw families who didn’t have food, adequate clothing, or housing. That looks a

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Google AI expert warns of massive uptick in productivity growth: No problems with Social Security

May 4, 2023

From Dean Baker
We have long known that people in policy debates have difficulty with arithmetic and basic logic. We got yet another example today in the New York Times.
The NYT profiled Geoffrey Hinton, who recently resigned as head of AI technology at Google. The piece identified him as “the godfather of AI.” The piece reports on Hinton’s concerns about the risks of AI, one of which is its implications for the job market.
“He is also worried that A.I. technologies will in time upend the job market. Today, chatbots like ChatGPT tend to complement human workers, but they could replace paralegals, personal assistants, translators and others who handle rote tasks. ‘It takes away the drudge work,’ he said. ‘It might take away more than that.’”
The implication of this paragraph is that AI

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David Brooks’ celebration of American capitalism

April 27, 2023

From Dean Baker
Last week, David Brooks had a column that was quite literally a celebration of American capitalism. He makes a number of points showing the U.S. doing better than other wealthy countries over the last three decades. While his numbers are not exactly wrong, they are somewhat misleading. (I see Paul Krugman beat me to the punch, so I’ll try not to be completely redundant.)
Brooks points to the faster GDP growth in the United States than in other wealthy countries. As Krugman notes, much of this gap is due to the fact that they have older populations; the differences are much smaller if we look at GDP per working-age person.
However, a big part of the story is also that they have opted to take much of the benefit of productivity growth in the form of more leisure time. In

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China is bigger, get over it

April 21, 2023

From Dean Baker 
It is standard for politicians, reporters, and columnists to refer to the United States as the world’s largest economy and China as the second largest. I suppose this assertion is good for these people’s egos, but it happens not to be true. Measuring by purchasing power parity, China’s economy passed the U.S. in 2014, and it is now roughly 25 percent larger.[1] The I.M.F. projects that China’s economy will be nearly 40 percent larger by 2028, the last year in its projections.

Source: International Monetary Fund.
The measure that the America boosters use is an exchange rate measure, which takes each country’s GDP in its own currency and then converts the currency into dollars at the current exchange rate. By this measure, the U.S. economy is still more than one-third

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Quick thoughts on AI and intellectual property

April 17, 2023

From Dean Baker
There has been a lot of concern in recent days about the impact of AI on people’s intellectual property. The latest AI programs screen millions of documents, songs, pictures, and videos posted to the web and freely grab any portion that seems to fit the commands given the program. As it stands, the creators of the material are not compensated, even if a large portion of their work appears in the AI product.
This raises serious questions about how AI will affect the future of intellectual property. To my mind, we should keep the focus on three distinct points:
Creative workers need to be compensated for their work;
Copyright monopolies may not be the best route, especially in a world with AI;
There are alternative mechanisms that we already use and which could be

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The Silicon Valley bank bailout: The purpose of government is to make the rich richer

April 3, 2023

From Dean Baker
There is a standard tale of politics where conservatives want to leave things to the market, whereas the left want a big role for government. The right likes to tell this story because it advantages them politically, since most people tend to have a positive view of the market. The left likes to tell it because they are not very good at politics and have an aversion to serious thinking.
The Silicon Valley Bank (SVB) bailout is yet another great example of how the right is just fine with government intervention, as long as the purpose is making the rich richer. Left to the market, the outcome in this case was clear. The FDIC guaranteed accounts up to $250k. This meant that the government’s insurance program would ensure that everyone got the first $250,000 in their

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SVB was Donald Trump’s bailout

March 14, 2023

From Dean Baker
There are two key points that people should recognize about the decision to guarantee all the deposits at Silicon Valley Bank (SVB):
It was a bailout
Donald Trump was the person responsible.
The first point is straightforward. We gave a government guarantee of great value to people who had not paid for it.
We will get a lot of silly game playing on this issue, just like we did back in 2008-09. The game players will tell us that this guarantee didn’t cost the government a penny, which will very likely end up being true. But that doesn’t mean we didn’t give the bank’s large depositors something of great value.
If the government offers to guarantee a loan, it makes it far more likely that the beneficiary will be able to get the loan and that they will pay a lower interest

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The answer to the Silicon Valley bank bailout: Federal Reserve Banking

March 13, 2023

From Dean Baker
Word from the grapevine is that the risk of contagion may cause the Fed or the FDIC to engineer some sort of bailout of uninsured deposits, where they get paid back in full, instead of being forced to accept a partial loss on deposits over $250k. That would be unfortunate, since the people who run these companies that have large deposits are supposed to be brilliant whizzes, who should be able to understand things like FDIC deposit insurance limits.
Their incessant whining, that losing 10-20 percent of their deposits, would shut down Silicon Valley and the country’s tech sector, made for good laughs. However, the risk of a nationwide series of bank runs is a high price to pay to teach these people about the limits on deposit insurance.
We know that the view of most of

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The future of vehicle prices

February 24, 2023

From Dean Baker
On a lazy Friday afternoon, a person’s thoughts naturally turn to car price indexes. There is actually a reason that I became interested in this topic. I noticed that in the January Consumer Price Index, the new vehicle index rose 0.2 percent. The December measure was revised up due to new seasonal adjustment factors so that what had been reported as a 0.1 percent decline last month is now reported as a 0.6 percent increase.
I was inclined to think this was an aberration and that we would see the downward trend that had previously been apparent in the data reappear in another month or two. However, I noticed that the Manheim index for used vehicle prices showed a sharp uptick for January and the first half of February. This was after a full year in which declining

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Weekend read – Ending the cesspool in pharmaceuticals by taking away patent monopolies

February 10, 2023

From Dean Baker

Outlawing items such as marijuana or alcohol invariably leads to black markets and corruption. Since there is much money to be made by selling these products in violation of the law, many people will follow the money and break the law. They will also corrupt the legal system in the process, making payments to people in law enforcement and elsewhere in the legal system.
The old line from economists on this problem is to take the money out, by making marijuana and alcohol legal. If people can buy these items in a free market, then no one is going to have any big incentive to make payoffs to police officers or judges, there would be no reason.
We should think the same way about the pharmaceutical industry and patent monopolies. Patent monopolies and related protections

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Debt, deficits, secular stagnation and the which way is up problem in economics

January 24, 2023

From Dean Baker
The economy can have a problem of too much demand, leading to serious inflationary pressures. It can also have a problem of too little demand, leading to slow growth and unemployment. But can it have both at the same time?
Apparently, the leading lights in economic policy circles seem to think so. As I noted a few days ago, back in the 1990s and 00s economists were almost universally warning of the bad effects of an aging population. The issue was that we would have too many retirees and too few workers to support them.
This meant a problem of excess demand. Since much of the money to support retirees comes from government programs for the elderly, like Social Security and Medicare, this meant we would see this show up as large government budget deficits, unless we had

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Why debate markets vs. government when we let the right rig the market?

January 18, 2023

From Dean Baker
I was happy to see this segment of Ezra Klein’s show (hosted by Rogé Karma) which featured an interview with Columbia University Law Professor Katharina Pistor. Pistor is the author of The Code of Capital: How the Law Creates Wealth and Inequality.
I’ve not yet read the book, but got the gist from the interview. Pistor is arguing that we have structured the market in ways that generate enormous inequality. In the interview, she presents several ways in which the law has been written that facilitate the accumulation of wealth by a small group of people. These include rules on property in land, intellectual property, and the creation of corporations as distinct entities with an existence independent of their owners.
Pistor’s point is that the way these rules are

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Contrary to what the NYT tells you, the problem in an aging society is distribution

January 9, 2023

From Dean Baker
The New York Times had a major article reporting on how many people in South Korea, Hong Kong, and Japan are being forced to work well into their seventies because they lack sufficient income to retire. The piece presents this as a problem of aging societies, which will soon hit the United States and other rich countries with declining birth rates and limited immigration.
While the plight of the older workers discussed in the article is a real problem, the cause is not the aging of the population. The reason these people don’t have adequate income to retire is a political decision about the distribution of income.
If the issue was simply that too few people were working in these aging societies, we should expect to see slower per capita growth than in countries where

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Holiday read – Industrial policy is not a remedy for income inequality

December 24, 2022

From Dean Baker

The idea of industrial policy has taken on almost a mystical quality for many progressives. The idea is that it is somehow new and different from what we had been doing, and if we had been doing industrial policy for the last half-century, everything would be better.

This has led to widespread applause on the left for aspects of President Biden’s agenda that can be considered industrial policy, like the CHIPS Act, the Inflation Reduction Act (IRA), and the infrastructure package approved last year. While these bills have considerable merit, they miss the boat in reducing income inequality in important ways.
First, the idea that we had not been doing industrial policy before Biden, in the sense of favoring specific sectors, is wrong. We have been dishing out more than

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We don’t need government-granted patent monopolies to finance drug development

December 16, 2022

From Dean Baker
I was having an exchange with an old friend on Mastodon (yes, I’m there now @[email protected]), in which I was arguing that the best way to get alternatives to the current patent system was to have examples of successful drugs developed without relying on patent monopolies. Of course, there are great historical examples, like the development of insulin as a treatment for diabetes or the polio vaccine, but it would be good to have one from the current century.
The most obvious example, that really deserves a hell of a lot more attention than it is getting, is the Covid vaccine developed by Peter Hotez and Maria Elena Botazzi at the Center for Vaccine Development at Texas Children’s Hospital. This vaccine was developed using grants in the single digit

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OMG, a right-wing jerk can buy Twitter! Media concentration matters

December 1, 2022

From Dean Baker

It’s more than a bit bizarre that until Elon Musk bought Twitter, most policy types apparently did not see a risk that huge platforms like Facebook and Twitter could be controlled by people with a clear political agenda. While just about everyone had some complaints about the moderation of these and other commonly used platforms, they clearly were not pushing Fox News-style nonsense.
With Elon Musk in charge, that may no longer be true. Musk has indicated his fondness for racists and anti-Semites, and made it clear that they are welcome on his new toy. He also is apparently good with right-wing kooks making up stories about everything from Paul Pelosi to Covid vaccines. (Remember, with Section 230 protection, Musk cannot be sued for defaming individuals and companies

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Sam Bankman-Fried’s truly effective philanthropy: teaching

November 26, 2022

From Dean Baker
We should all recognize that Sam Bankman-Fried is much smarter than the rest of us. After all, outwardly he looks to be one of the biggest frauds of all time. By the age of 30 he amassed a fortune that dwarfs that of your average billionaire. He did it by running a crypto Ponzi-scheme. While claiming to be using his wealth to support philanthropies that were carefully selected to maximize human welfare, he was actually living a high life-style with his friends.
Now that the Ponzi has collapsed, the investors who trusted him look to be out of luck. And, of course there is no money for the philanthropies that he supported, many of which will are now struggling because they won’t get contributions they had been counting on.
That all looks pretty reprehensible, but maybe

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