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JUNE 7, 2004
A Clap For Mandel's Manifesto I read with trepidation the reasoning of economists with regard to what contributes to productivity growth ("In praise of heady growth," Book Excerpt, May 17). Until now, I had looked on economists as lightning rods and as pacesetters in economic growth and related ideas. Either they willingly choose to ignore the productivity gains occasioned by technological innovation -- even of some simple machines such as the electric typewriter -- or they have ganged up to rebel against the truth. Such rebellions should not go unpunished since they would be consigning us to the primitive level of the caveman. Kudos to Michael J. Mandel for his magnanimous representation of the economist as the "unintentional enemy of growth." The technologist is an angel. E.O. Essang Lagos, Nigeria The Declining Dollar's Overlooked Impact On Oil Prices "Energy: the big squeeze" (News: Analysis & Commentary, May 17) suggests that oil prices are so high mainly because of surging demand in China, OPEC's restraint on production, and jittery political conditions in the Middle East. However, perhaps the most influential factor has been the recent weakening of the U.S. dollar. Oil is priced and sold in U.S. dollars worldwide, and the recent devaluation of the greenback has sent crude prices skyrocketing. From September, 2003, to the beginning of May, 2004, a period that saw crude prices head up from about $32 a barrel to about $39 a barrel, the dollar lost value against many foreign currencies. An almost 9% decrease in the dollar's value against the euro has in fact translated into cheaper crude for many members of the European Union. Such a price decrease would not be possible if Chinese demand and OPEC's stinginess were the main factors driving prices. While demand for oil is undoubtedly increasing in China, the country still depends on coal for about 75% of its energy needs. Last year, China represented just 7% of global oil consumption. Even a significant increase in Chinese demand would only slightly increase global demand. As for OPEC's restraint on production: In every year since 2000, OPEC has decreased production from September to December. However, in 2003, OPEC increased production slightly in this period. Coupling this with the recent OPEC announcement to increase production, it does not appear that they can play the scapegoat for this price jump. Currency-exchange rates stand out as the most influential cause for surging crude oil prices. These rates seem to be rebounding a bit, but this may not translate into an immediate decrease in prices. Joel A. Claghorn New York   Greenspan's View May Be Broader Than Barro's Re "The tea leaves that matter to the Fed" (Economic Viewpoint, May 10), by Robert J. Barro: The U.S. Federal Reserve's interest-rate policy model, while interesting, is missing an important global dimension. China is trying to engineer a soft landing with regard to its overheated economy, and I believe the last thing Fed Chairman Alan Greenspan wants to do at this point is upset that attempt with an interest-rate hike. All one has to do is look back at Greenspan's reaction to the last Asian crisis, when he drastically lowered interest rates. It would make no sense to raise rates now only to lower them again in a couple of months. I think Greenspan's interest-rate policy at this point is more a reflection of his belief that China can achieve a soft landing than a response to what is happening within the U.S. borders. Economics is a global playing field now, Mr. Barro, so I wouldn't sit back just yet. Gerry Dröge Amerang, Germany
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