TUESDAY the Houston Chronicle applauded the euro zone's promised bailout of Greece. The editorial was notable less for its platitudinous content than for the evidence it provided that when it comes to matters of the fisc and the economy, our local editors don't entirely know what they're talking about. To wit:
The EU has a systemic/political dilemma that can no longer be ignored. The trouble is basic: Provisions in the Maastricht Treaty, the EU's founding document, requiring members to limit debt to 3 percent of GDP have been routinely ignored by politicians.
First, it's the euro zone, not the entire European Union that has this problem. The United Kingdom, for instance -- having maintained its own currency -- is not directly affected.
Second, the 3 percent rule is not found in the Maastricht Treaty (although it authorizes the setting of rules); it's found in a subsidiary document called the Stability and Growth Pact. (And while we're here, the Maastricht Treaty can loosely be said to be the founding document, except that it was really an amendment to the real founding document, the Treaty of Rome. Maastricht just changed something that already existed, the European Community, into something more muscular, the European Union.)
Third -- and here's the biggie -- the 3 percent rule applies not to each country's "debt" but to its "deficit." If you don't know the difference, you should stop reading this post and go look it up. Alternatively, apply for a job on the Chronicle's editorial board.
Fourth, the 3 percent rule is, in fact, no longer operative. So many counties violated it that the new rule is "whatever."
Fifth, there is (or was) also a corresponding rule on debt (or at least on "public debt"): no more than 60 percent of GDP.
Sixth, none of these rules is, for the moment at least, terribly binding. The deficit and debt rules were an attempt at soft policy coordination, which obviously has failed. (Not mentioned in the Chronicle's editorial is that the Clever People at the EU -- eager not to let a good crisis go to waste -- are using Greece's meltdown to strengthen that the EU's central powers and chip away at the sovereignty of member states, just as the Obamadministration chips away at the shared sovereignty of U.S. states.)
Still, the Europeans deserve credit for doing what this country's leadership has so far failed to do: Getting out of denial on the issue of the risks of excessive sovereign debt.
The Chronicle at least gets this point right (maybe), though in its typically timid manner when trying to say something sensible. What country is "this country?" The antecedentless "this" apparently refers to the good old United States of America, though a casual reader might be forgiven for mistaking the limpish term as a reference to Greece.
And who constitutes the U.S.A.'s "leadership?" Might that include the very president for whom the Chronicle recommended that we vote and whose policies the Chronicle supports with only the rarest exception -- one Barack Hussein Obama and his allies in Congress? If so, why not say so?
As for "getting out of denial," what does that mean, other than thinking about the problem? How about demanding that some specific thing be done to solve the problem, and sooner rather than later?
And why didn't the Chronicle bother to mention that in the year of our Lord 2010 and under the policies of the aforesaid Mr. Obama, the United States would not qualify for eurozone membership under the old 3 percent, 60 percent rules. The 2010 federal deficit will exceed 10 percent of GDP, more than three times the old European limit. Public public debt is already more than 63 percent of GDP and will soon approach 100 percent. So says the Congressional Budget Office. (GDP, as used here, ain't quite the same as GNP, as used by the EU, but they're close enough for our purposes.)
What we have is an editorial board that whips the United States (and Texas and Houston) ever closer to the fiscal policies of Greece while assuaging its conscience every couple of months with a stifled moan about fiscal sanity.
* * *
But it gets worse. Now read Lisa Gray's weekend essay: "An economics lesson on the beer aisle."
Ms. Gray, a member of the Chronicle editorial board, is the cleverest of the Clever People there -- a good writer, less drearily earnest than her fellow opinionators (downright cheerful, in fact), but more than equal to them in her enthusiasm for government interventions and social engineering.
Her bylined article was a wet kiss for an old friend, Barry C. Lynn (for Ms. Gray, he's just plain "Barry"), who is flogging a new book, Cornered, about "the hidden monopolies everywhere." ("'It's not just beer,' Barry said. 'It's everything.'")
A warning sign of shallow waters ahead was Ms. Gray's cheerful -- did I mention she's cheerful -- recitation of blurbs by Thomas Frank ("a manifesto for our time") and Barbara Ehrenreich ("what's gone wrong with American capitalism").
Just as a matter of old-fashioned journalism, not to mention intellecual honesty, Ms. Gray and her editors were obliged to tell readers that Mr. Frank and Ms. Ehrenreich are big-time lefty intellectuals. And not your polite, semi-sensible Washington Post-style liberals. Mr. Frank and Ms. Ehrenreich orbit the Nation, last planet in the solar system of those who think the Soviet Union was just a bad application of otherwise reasonable policies. Why mention this? So readers could appraise the blurbs for themselves, which is to say -- for most of us -- take them as reasons to discredit the book rather than to read it. (The Nation, by the way, gave Mr. Lynn's book almost as glowing a review as Ms. Gray gave it.)
But enough dilly-dallying and shilly-shallying. Here's the good part.
The classic definition of a monopoly is a company so large that it can affect the supply of its product, and thus the price.
Thus sayeth Ms. Gray. When you stop laughing and before we consider the real definition of monopoly, take note that her definition fits every company on earth. What company cannot "affect" the supply of its product by choosing to produce one widget more or one widget less?
Let's assume she really meant "materially affect the supply of its product." That's an improvement. It reduces the universe of "monopolies," so defined, to every big company on the face of Mother Earth, which is still not exactly right, is it?
Here, in no particular order and without the bother of citations (look'em up yourselves), are three definitions of monopoly that actually mean something and that are saying essentially the same thing in different words (emphases added).
Exclusive ownership through legal privilege, command of supply, or concerted action. Exclusive possession or control. A commodity controlled by one party.
When the production of a good or service with no close substitutes is carried out by a single firm with the market power to decide the price of its output.
A monopoly is an enterprise that is the only seller of a good or service.
Put on your monocle and read the definitions again, monotonous though they are. Ms. Gray -- doubtless a monogamist, but (if she knows Spanish or other language besides English) not a monoglot, probably averse to monogrammed clothing and those who wear it, monomaniacal and monophonic about the need for more government spending (though, to be fair, she probably prefers light rail (once known as trollies) over monorail), and rarely monosyllabic -- clearly forgot one thing, so to speak.
Mono means one.
Now read this:
I was happy to see Saint Arnold, which is locally owned and locally brewed, on Walmart's shelves. But to get there, it had to go through . . . one of two monopolies that control the Houston area . . . ."
There simply cannot be two monopolies for one product. Ms. Gray and Mr. Lynn might retort that one monopoly controls Beers A through G and the other monopoly controls Beers H through Z, so there: We have two definitionally pristine monopolies.
Fair enough, except for the old "close substitutes" problem and the old "market power" problem (see above). When beer drinkers can instantly shift their allegiances from one monopoly's brands to another monopoly's brands of the same product, can we say we have a monopoly?
That's not a trick question. The answer is no.
Here are some more references to "monopolies" from Lisa and Barry's world that are self-evidently not monopolies in the real world:
Toothpaste? Colgate-Palmolive and Proctor & Gamble split 80 percent of the American market. Soup? Campbell's controls 70 percent of the shelf space. Bottled water? Nine of the top 10 brands are controlled by PepsiCo, Coca-Cola or Nestle.
At the risk of educating Ms. Gray, these are not monopolies; they are oligopolies -- markets with few sellers. But she should not worry about learning this new word, because her pals at the Nation hate oligopolies as much as monopolies, real and imagined.
What's going on here is simple.
The left is always on the prowl for new reasons to demand other people's money and obedience. Anthropogenic global warming is cooling off as the reason du jour, so Mr. Lynn has dusted off a 19-century favorite -- and one still much favored in the semi-prosperous European Union -- fear of monopolies.
They're everywhere! They're everywhere! It's not just beer! It's everything!
"Our economic system is broken," Ms. Gray intones, cheerily, at the end of her little essay.
* * *
Now let's wander back to the main trail: Chronicle editors are, at best, semi-literate about matters financial, fiscal, and economic. The editors ever thunder for more government spending while rarely stopping to consider the consequences, as measured by taxes, deficits, debts, economic decline, the quality of their children's and grandchildren's lives, and other mundane stuff. Or to consider why Texas, which ignores the Chronicle's advice on most things, is -- unlike Greece, California, and Washington, D.C. -- not broke.
The United States is on course toward the same fiscal mess as Greece. It simply won't do for the Chronicle to lay down its BHO pompons every couple of months and whimper in one barely intelligble sentence about how we really, really need to think about the costs. Or to run up and down the aisles at Walmart, waving a tattered flag from the remainder bin of the Progressive Era and shouting:
Monopolies! Not sure exactly what they are, but they're everywhere! Sometimes two monopolies for the same product! And not just beer!
* * *
AN AFTERTHROUGHT, while we're on the subject and dreaming of inviting the visible hand of government to set things right in the aisles of Walmart:
Public regulation has been the preferred choice [for restraining monopolies] in America, beginning with the creation of the Interstate Commerce Commission in 1887 and extending down to municipal regulation of taxicabs and ice companies. Yet most public regulation has the effect of reducing or eliminating competition rather than eliminating monopoly. The limited competition -- and resulting higher profits for owners of taxis -- is the reason New York City taxi medallions sold for more than $150,000 in 1991 . . . .
(George J. Stigler, "Monopoly," The Concise Encyclopedia of Economics, 2008)
Unlike the Chronicle, Mr. Stigler was, may he rest in peace, an advocate of free markets, but an advocate disciplined by a technical education in the subject and by common sense, which is to say that he knows what he is talking about and therefore would not have been qualified to serve on the Chronicle's editorial board.
"The merits of lassez-faire rest less on its famous theoretical foundations than on its advantages over the actual performance of rival forms of economic organization," he once said.
That's essentially the same defense offered more succinctly for democracy by Winston Churchill.
* * *
YET ANOTHER afterthought. Here are some writing assignments for Ms. Gray, now that she knows all there is to know about monopolies and broken economies.
First, explain how a big-city daily newspaper with a monopoly in its readership area could possibly fail to prosper. (And mention in passing why she forgot to mention the Chronicle when she was inventorying local monopolies, which -- as she said -- are everywhere, everywhere.)
Second, explain why the Chronicle, having muscled out all local big-city newspaper competitors, now allows only leftists to scribble editorials and political opinion columns. (Strictly speaking, this is a intellectual monoculture, not a business monopoly.)
Third, identify one unbroken economy.
Fourth, explain who will fix our broken economy, given that so many Clever People are already tied up running the automobile companies, the student-loan business, the home-loan business, the entire health-care system, and soon enough if all goes as planned, everything that emits carbon (which is pretty much everything). Who'll have the time?
UPDATE: The Chronicle did it again today, April 6: an editorial that tut-tuts about U.S. sovereign debt, says not a word about the Chronicle's recommended president's (or the newspaper's own) enthusiasm for bankrupting the generations, and recommends nothing other than thinking real, real hard about the problem -- "the next big worry. It's right around the corner."
No. It's not the next big worry and it's not around the corner. It is (and has been) the current big worry since day one of the Obama presidency, and it's right here right now. If the Chronicle had had even one conservative on its editorial board, it might have noticed.
Read the comments. A couple of readers do a good job of calling out the editorial board, one for cognitive dissonance.
I have to say I agree with a lot of what you are saying here. I am also somewhat appalled, though not really surprised, at the sloppy use of terms in the article you refer to. However--and I am speaking as somebody who doesn't feel enthused with either Republicans or Democrats -- I don't think it is fair to suggest that the current economic crisis, so to speak, is mostly the fault of the current administration. This has been a long time a-brewing, methinks. As an aside, I don't think the EU should have bailed Greece out, but I don't know if there was any way they could actually wash their hands from the situation. Not familiar with the rules of their game. I also don't think the U.S. government should have bailed out all those crappy banking corporations, I mean, isn't the credo of all these financial corps supposed to be a free market? That pretty much means that those market institutions which fail, well ... fail! Don't see why government should bail out organizations that have engaged in what amounts to cheating, obfuscating behavior, and then cry for help. That includes the government of Greece, if what I read about the issue is correct. I know I'm comparing apples and oranges here, but still.
Posted by: Trudy | April 4, 2010 at 02:05 AM