Monday, December 1, 2014

Hia!tt Cites Putin While Failing Economics 101

Yes, today is definitely Beat Up on the Washington Post Editorial Page Day.

So, in an unsigned editorial almost certainly written by Fred Hiatt, whose ability in economics may be worse even than Robert J. Samuelson's, "Venezuela's downward spiral," we are told that President Maduro of Venezuela should follow the good advice and policies of, wait for it, Vladimir Putin of Russia, whose "logic" is "also known as Economics 101."

So, I  must agree that some of the policies that Maduro is reportedly engaging in are not all that impressive, such as imposing multiple exchange rates in the face of falling oil prices, which Putin has responded to by letting the ruble fall in value.  Probably the latter is a better policy, but the "logic" that Hiatt invokes by quoting Putin is simply astounding, a clear failure of Economics 101.  The column begins with a report of Putin telling TASS,"We earlier sold a product worth $1 and got 32 rubles for it...and now we are getting 45 rubles for the same product costing $1.  Budget revenues have increased and not decreased."  Yes, he said that, and not only that, Hiatt thinks that not only is he not lying but that this is Economics 101.

Well, for starters, understood by anybody who remotely passed Econ 101, they do not sell goods in dollars, even if oil is priced in dollars.  They are selling them in rubles, which is what they pay those who produce their oil in their country.  So, when the dollar price of oil falls, which is what has happened, the dollars they get for selling their ruble-financed oil, are fewer.  They are less able to buy stuff from abroad, just like the Venezuelans, which is true for both, whatever they do with their exchange rates.

Which brings us to where Hiatt really falls for what is clearly propaganda to put lipstick on the pig of Russian economic decline flowing from the falling price of oil.  Government revenues in Russia have not increased, they have fallen, and the nation is facing a budget crisis, which Putin is lying about.

Weirdly the evidence for this is right there in the same issue of WaPo (today's) on p. A13, in a story entitled, "Moscow's health-care cuts spur protest."  Demonstrations are going on against the planned closing of 28 hospitals and the firing of over 10,000 medical personnel in Moscow.  Why are these cuts being made?  Well, "The pressure on the country's budget has intensified as the economy suffers from low oil prices, a drop in the value of the national currency, and Western sanctions over Moscow's role in the deadly conflict in eastern Ukraine."  It seems Hiatt does not even read his own paper before he approvingly quotes propagandistic nonsense from the lying Putin.

Of course, we should not be surprised that Hiatt pays no attention to cuts in medical care.  He constantly calls for cutting Medicare and Medicaid, along with Social Security, so this sort of thing is right up his alley.  Way to go,  Putin!  That is being responsible!  And the fact that it has just been reported that Putin is personally worth about $40 billion in the just published _Putin's Kleptocracy: Who Owns Russia?_, but Karen Dawisha (published by Simon and Shuster after Cambridge University Press chickened out due to  legal threats from Putin's henchmen), just shows how wise and admirable he is.  Clearly he knows Economics 101, even if  Hiatt does not.

Barkley Rosser

1 comment:

Thornton Hall said...

Folks get their panties in a bunch over the WaPo op-Ed page, but it's hard to justify. Part of the problem is the strange (but ubiquitous) belief that newspaper editors have insight or understanding of things other than the business of selling newspapers.

These are for-profit entities after all. You wouldn't't expect a middle manager at Verizon to understand the economy. Why? Because he's in the business of selling data plans.

Fred Hiatt is in the business of selling newspapers. The strange post war delusion that obscures this obvious truth must end.