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London Fog

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Apart from Austin Powers, there can be few British institutions as groovy right now as The Economist. Der Spiegel has hailed its "legendary influence." Vanity Fair has written that "the positions The Economist takes change the minds that matter." In Britain, the Sunday Telegraph has declared that "it is widely regarded as the smartest, most influential weekly magazine in the world." In America, it is regularly fawned on as a font of journalistic reason. Anthony Lewis has referred to it in more than 50 columns in recent years, deferring to The Economist on such diverse subjects as tax cuts, Patrick Buchanan, medical marijuana, tort reform, Bosnia, East Timor, Middle East peace, Bob Dole, and mandatory-minimum sentences. Bill Gates has boasted of reading it cover to cover. According to the magazine's media kit, Larry Ellison, the CEO of Oracle, has remarked: "I used to think. Now, I just read The Economist."

And you can see why the magazine has earned such shagadelic plaudits. At a time when other newsmagazines are falling over one another to put models, movie stars, and diet pills on the cover, The Economist still doesn't shrink from a 20-page report on Indonesian banks or a sassy take on the Nigerian economy. No other newsstand magazine could seriously hawk the headline: "Telecommunications: A Survey." And, as a weekly compost of world news and economics, it's very hard to beat--a kind of Reader's Digest for the overclass. It's written in the kind of Oxbridge prose that trips felicitously into one ear and out the other, and it subtly flatters some Americans into feeling that they are sitting in on a combination of an English senior common room and a seminar at Davos. Besides, it's hard to dislike a magazine that can run a photo of the pope meeting with Bill Clinton over the caption: "That's 1,000 Hail Marys."

It's also, as a former high-level staffer puts it, "fantastically profitable." Last year, according to The Economist's editor, Bill Emmott, it raked in close to $40 million in profits, unheard of in serious magazine journalism and only slightly more than what The New Yorker was recently rumored to be losing. Packed with luxury-goods ads and corporate image advertising, one in three of its American readers is a millionaire, and one in two is in top management with an income of more than $100,000. Its circulation has risen from 300,000 in the mid-'80s to close to 700,000 today, with more than 300,000 in the United States. (Although it is still referred to by Anglophiles as The Economist of London, its British readership is roughly one-sixth of its total.) At a subscription price of $125 per year for a black-and-white magazine, its marketing success is unparalleled.

But there's a funny thing about The Economist. The closer you look, the weaker it gets. Beneath the shrewd blizzard of one-liners, Oxford Union ripostes, and snazzy graphs, the little secret of The Economist is that it actually contains less original reporting than many other newsmagazines, relies heavily on amateur stringers for write-ups of other news sources, and, when it comes to its vaunted analysis, has shown a remarkable capacity over the past couple of years to be demonstrably wrong. As its circulation grows apace--it was one of the five fastest-growing magazines in America last year-- and its reputation expands even further, the marketing genius of The Economist has become more and more out of line with its journalistic ordinariness.

Weekly newsmagazines, of course, are not an easy venture. At a time of proliferating sources of information and the punditization of news, the project has become even more elusive. The difficulty lies in summarizing a week's events in the entire world in a way that is actually interesting and informative to a reader who might have read at least one daily newspaper, surfed the Web, or watched a fair amount of cable in the previous seven days. One approach is to rewrite the news as idiosyncratic editorials, the kind of thing some opinion magazines aim for. Another is to report the news more deeply and coherently than other media, as other newsmagazines are supposed to do. Another still is to find stories that appear nowhere else, or to specialize in one area and cover it exhaustively.

Unfortunately, The Economist does a little of each of these things but none of them very well. It has a far smaller reporting and editorial staff than other newsmagazines, so it relies predominantly on other news outlets and stringers for its rewrite of the week's news. It covers international affairs far more comprehensively than other magazines, so it spreads its wealth even more thinly than most. (It has, for example, one correspondent for the whole of sub-Saharan Africa.) Its opinionizing is largely reserved for its opening editorials, which vary from the glib to the acute but make up a tiny fraction of its pages. And, although it occasionally finds nuggets of stories that do not appear elsewhere, they tend to be of the abstruse variety and add more detail than depth. As Bill Emmott dryly remarks, "Sometimes we do add hard fact, but that isn't our principal appeal."

Take its weekly survey on the United States, a perfect example of The Economist's strange allure. It's a section designed to sum up the United States in a way no one else does. But a randomly picked recent issue--April 10--shows how implausible an objective this is. The section led with a summary of how Republican candidates had responded to the Kosovo crisis, the premise being that reactions to Kosovo could be "a pre-primary electability indicator." The piece itself replayed much of the week's newspaper reporting (a quick detour through Nexis shows that nothing new had been added by the magazine) but then turned around and argued that none of it really mattered, since money and domestic issues would likely decide the Republican campaign. This was the lead item. News on hate crimes and employment were squeezed into a couple of hundred words, USA Today-style. A small piece on the election of a Green Party candidate in Oakland was better reported in The Washington Post almost a week earlier, and the final "Lexington" column was a thumb-sucker on the U.S.-China relationship on the eve of the visit of Prime Minister Zhu Rongji. The columnist's take? "The public spin for Mr. Zhu's trip may yet prevent it from becoming a public relations disaster for both sides. Yet the visit may, in hindsight, mark the symbolic point at which 'strategic partnership' became 'strategic competition.'" Only time would tell.

In addition, one lengthy piece summarized a report on Chicago urban planning but added scant political or cultural context. Another story detailed a spate of grave robberies in New Orleans, and another mentioned the environmental pressures on the prairie dog. Each of these last two pieces was a classic "stringer" piece, replete with a few colorful moments and scantily reported elsewhere. But, given their trivial content, it is not hard to see why.

So what, one wonders, is the purpose of the American survey? It's not a heavy read, and it has the usual jolly captions and photographs (a classic is a picture of a bird of prey on the White House lawn with the caption: "One Hawk In The White House, At Least"). But it can scarcely tell anyone in America anything significant that he or she didn't already know. It has no original take on the news, except a tone of whimsical condescension, and it adds no significant new reporting to what a brief ruffle through a couple of newspapers could easily provide. This is hardly surprising since The Economist employs a total of seven full-time reporters to cover the United States.

The only plausible purpose of the survey is therefore to inform readers outside the United States of what is going on inside the United States, if they happen to care about prairie dogs. Bill Emmott even argues as much, saying that brief news summaries for expatriates is, in fact, one of the magazine's strengths. That's why the editor of the U.S. survey is, oddly enough, in London. "The fact that we're from the outside from a relatively unimportant country means we have an extra piece of credibility," he explains. Rough translation: We're right because we're British.

 

Perhaps the magazine's coverage of business and finance is better. This, after all, is its specialty. So I tried an experiment. I picked up the business section of another recent issue. In the March 27 edition, five out of seven business stories had appeared in major daily newspapers sooner and with as much, if not more, detail as in The Economist. There were two exceptions. The lead story was an oddly speculative tale of Airbus's competition with Boeing and the wild guesses both companies are making about the shape of future air traffic, especially in Asia. It was well-written but hazarded few clear predictions and was at times bewildering for the nonspecialist reader. (The thrust of the article, that Airbus was planning to expand into super-jumbos, was somewhat undermined a month later by Airbus's announcement of a new, small 107-seat plane.) The other exclusive was a short piece on how small biotech companies were lagging large biotech companies in the stock market. Since the weakness of small caps is perhaps one of the most familiar market stories of the past few years, this hardly counts as news, although the focus was original.

As for the rest, it was more Reader's Digest. The Economist's second story, about a merger of two European power equipment companies, offered little more than a New York Times story of the previous Wednesday and indeed used the same phraseology on occasion. To be sure, The Economist spun its story as a tale of industry decline. The Times was more formulaic, framing the story around declining sales in Asia. But value added? Hardly. A piece about opec's volte-face on oil production took no prisoners--"Could this mark the return of opec? It is far from clear"--and again offered nothing that wasn't exhaustively outlined in the week's Times, which also offered better geopolitical analysis of what was propelling opec's new mood. The Times' coverage of the merger battle between luxury-goods-makers lLVMH and Gucci also bested The Economist's. In a few hundred words, The Economist focused on the egos of the two company bosses--and added some unilluminating details. The Times covered both the color of the moguls' duel and, in a separate story, put the deal in the context of other European mergers. The Los Angeles Times conveyed almost as much information as The Economist, and both papers beat The Economist's deadline easily. The same could be said for The Economist's uninspired summary of two telecommunications mergers as well.

 

But maybe The Economist should be judged not for its views of the past but for its fearless ability to predict and analyze the future. This is a business-oriented magazine, after all, and its cachet lies in pitching itself to the international businessman or politician as an invaluable source of unique information. Its media kit parades endorsements from, among others, British Chancellor of the Exchequer Gordon Brown, Giovanni Agnelli, president of Fiat, and Professor Michael Porter of Harvard Business School. Unfortunately, any international executive or even any 401(k) investor who made business decisions on the basis of The Economist's recent predictions would soon be unable to afford its annual subscription price.

Perhaps crude oil is a good a place to start. On March 6, The Economist put a picture of a gushing oil well on its cover with the headline: "Drowning In Oil." Inside, it analyzed the consequences of a dramatic decline in oil prices worldwide. "Oil is cheaper today, in real terms, than it was in 1973," the magazine opined. "After two opec-induced decades of expensive oil, oil producers and the oil industry as a whole have more or less given up hope that prices might rebound soon. The chairman of Royal Dutch/Shell, Mark MoodyStuart, three months ago unveiled a five-year plan that assumed a price of $14 a barrel. He has since publicly mused about oil at $11... Yet here is a thought: $10 might actually be too optimistic. We may be heading for $5."

This is exactly the kind of crisp, analytical journalism we have come to expect from The Economist, exactly what you might buy and read it for. Pity it was wrong. Within a couple of months, the price of crude oil had risen to just under $20 per barrel. In reaction to plummeting oil prices, opec cut production and raised prices almost as soon as the magazine's cheap-oil cover hit the stands. There was an inkling of such a move in The Economist's pages, but the magazine reassured its readers that "the impact of any such production cuts will be small." The editors buried the subsequent news of the price hike deep in the magazine's pages only a few weeks later. Of course, close to $20 per barrel may not last, and opec may once again fail to hold together. But $5 per barrel still does not look like a good call.

Then there is The Economist's grip on the world economy as a whole. Perhaps it's a little unfair to point out that, three years ago, The Economist's then- Moscow correspondent, John Parker, cowrote a book called The Coming Russian Boom. (He has subsequently been rewarded for this prescience by becoming Washington bureau chief.) Recently, however, the magazine has become a doom-monger. On September 5, 1998, The Economist ran a picture of a disintegrating globe on the cover with the headline: "Outlook For The World Economy?" Inside, the prognosis was doleful: "The global economic crisis continues to deepen... . The sickness that started in Asia is spreading still, claiming victims far beyond its source. Investors cannot find time to count their mounting losses, so busy are they trying to guess where the plague will strike next." There was a marked danger of "an economic setback worse than anything since the Great Depression of the '30s."

Two weeks later, after a swift recovery on Wall Street, the magazine was still predicting a dire future for emerging markets: "Even if the panic subsides ... in a global environment where shares are shaky, emerging markets will surely stay the shakiest. At a time when initial public offerings have slowed sharply on Wall Street, the idea that companies from exotic countries can easily woo investors seems far-fetched... All in all, prospects seem grim." Throughout the fall, the drumbeats gained in momentum. China's economy was deemed shaky. By January, the cover story was: "Storm Clouds From Brazil." "At this point," the magazine argued, "a single question haunts investors and policymakers alike. Will a Brazilian devaluation precipitate global financial meltdown?" Its answer was hardly cheering. The idea that Brazil could weather a controlled devaluation was regarded as "too sanguine."

 

D'oh! since the beginning of 1999, Brazil has weathered its devaluation, and its stock market has gained close to 70 percent in domestic prices, despite a drop in economic growth. Though still with many problems, the country is now regarded as a model of how to contain an economic crisis. As for other emerging markets, India's stock prices rose 16 percent in dollar terms in the first five months of 1999, Mexico's 49 percent, Turkey's 73 percent, Russia's 74 percent, and South Africa's 22 percent. Among developing countries, only Hungary, the Czech Republic, and China have seen declines in their stock markets--and those drops were small. If you discount the growing strength of the dollar, the picture is even more impressive. Out of 25 emerging markets monitored by The Economist, 23 saw gains in the value of their stock markets in their own currencies, 21 of them in double digits. Meltdown? Ahem.

But what about America? Here, The Economist has gone even further out on a limb. In the terrible week on Wall Street before Labor Day in 1998, the Dow Jones industrial average crashed to 7,400. The Economist responded with something between a panic and a gloat, arguing that even 7,400 was way too high. "At these prices," the magazine editorialized, "American equities are still dear." The Economist's particular scorn was reserved for technology and Internet stocks. Back on September 5, the magazine predicted a sharp downward spiral not just for "gravity-defying Internet shares such as Yahoo! and Excite" but also for more solid tech-related companies such as Microsoft, Cisco, and Dell, as U.S. businesses cut back on electronic spending. In October, the magazine reported "omens of slowdown" for the U.S. economy, where "signs of trouble are spreading." By November, with the Dow almost back to its summer highs, The Economist was unrepentant. Arguing that American growth was built on unsustainable consumer spending, it called for monetary tightening and a bursting of the stock market "bubble." "The risks are now high," the magazine editorialized, "that the economy will tip into some sort of a recession." Not quite. The last quarter of 1998 and the first quarter of 1999 were two of the strongest of the decade in American growth. The Dow is now comfortably in the 10,000 range.

One thing you cannot fault The Economist for, however, is the courage of its convictions. By January 30, the magazine ran a spectacularly alarmist cover story on Internet stocks, with the cry: "@@@gghhhh.Gon!: Why Internet Shares Will Fall To Earth." It predicted not merely a correction in Amazon. com's share price, but "something much nastier." And it argued that AOL and Yahoo! would not be far behind. Of course, it is still possible that The Economist will be proved right in the long run, since few believe that the sky-high prices of many tech shares are fully justified by current profits (or losses). And the Internet market has seen some scary gyrations lately. But there is a statute of limitations on journalistic compassion, and The Economist is pressing it. On January 30, for example, it described those obsessed with buying Internet shares as "stark, staring mad." Since then, Internet shares have both rocketed and declined but are still trading near their February levels. Stark, staring mad? And The Economist's prediction that the rise in Internet share prices last winter would reverse itself with " brutal rapidity" has not yet been borne out. Maybe at some point it will. As Bill Emmott jokes, "The important thing about predictions is to give a date and number but not at the same time." But, if the magazine's record on this is as good as its record on other developments in the world economy over the past few years, don't sell your Net stocks.

 

If its economic touch in America has been faulty, its political and cultural touch has been worse. Of course, every journalist makes a few wrong guesses, and the failure to understand the country last year was not restricted to The Economist. (I, for one, plead guilty.) But it seemed more at sea than most. It took a strong stand for Clinton's resignation--the cover blasted: "just go"--but never seemed to acknowledge the major differences between a parliamentary democracy and a presidential system in which resignation is a very rare and traumatic event. It backed impeachment hearings but then backed away from impeachment once the conventional wisdom had turned around in January.

Throughout, the magazine seemed bewildered by the intersection of American politics and culture. It failed to understand support for Clinton and predicted, like so many others, that the only imponderable in last fall's elections was "the magnitude of the Democratic party's slide." In January of this year, in the midst of a booming economy and only weeks before the impeachment crisis would vanish from the news, the magazine saw a collapse in American political stability: "With every day that passes, matters get worse. The country is drifting along in a state of neglect. Legislative programmes are unheard of. Reformist debate has stopped. The political atmosphere is as poisonous as it has been since the 1960s." Only someone with no clue about America in 1999 could have written those sentences. By January, the magazine was reduced to bafflement: "If Bill Clinton is so ordinary, so willfully untouched by the duties and dignities of his office, there seems no reason why Americans should be so keen to keep him." Americans were therefore condescendingly portrayed on the cover as a group of teenage girls gazing at an idol under the headline: "foolish love."

For some reason, the magazine has drifted into other forms of anti-Americanism as well. Its economics pages regularly decry the American economy. Clive Crook, its deputy editor, sees the U.S. economy as vulnerable to renascent inflation and a stock market collapse. (In a priceless Britishism, he described NATO's Kosovo campaign in Slate magazine as a "frightful mess.") Other vestigial Brittery abounds, including the usual condescension to Israel. Here's a sentence from the April 10 editorial on the Balkans: "Such outrages the expulsion and mass murder of Kosovar Albanians have happened before--in Bosnia, Rwanda, the Soviet Union, Palestine, and all too many other places, and the ethnic cleansers have got away with their crimes." Palestine? In one English flick of the wrist, the magazine equates the foundation of Israel with Stalin's terror.

The magazine's record on the Balkans has been obtuse. Throughout 1998, its coverage was patchy and inconsistent. Sometimes predicting gloom, it also argued that the likeliest outcome was peace in Kosovo. Last October, the magazine let its readers in on the insight that "many believe that the Serbian boss might actually welcome NATO's bombs because they would give him the excuse to face down his own hawks and make concessions that he sees as inevitable." By late March, it was still peddling the theory that "Milosevic may be hoping that NATO will settle for hitting a few remote installations, causing little real damage to his army. That would allow him to channel popular anger toward the United States, and away from himself, while he capitulated on Kosovo to save the Serb nation from further harm." (The magazine, however, did urge that the West should not bank on such a scenario.)

The magazine's prescriptions for the crisis have been remarkably slithery. For a while, it campaigned for armed intervention if necessary, with ground troops. But, when the war started, the magazine argued that ground troops would not be introduced and that therefore the West should negotiate a deal with Milosevic for a partition of Kosovo. This kind of tactic, very common in The Economist, is described by one former staffer as classic "neck-wrench journalism." The magazine gets all the kudos for taking the high ground, while making a last-moment, and often last-paragraph, reversal. The Kosovo editorial was a classic. The cover blared over a picture of Milosevic: "Don't Let The Endgame Be His." The small print urged capitulation.

 

Theories about the magazine's decline abound among its former and even current staffers. Among the most persuasive is that The Economist is yet another victim of the end of the Cold War. Until the 1990s, it had a definite role in promoting the free-market revolution, pioneering such concepts as deregulation, privatization, and globalization. Its libertarian bent on social issues made it more palatable to liberal readers and so gave it an enviable mix. But, with the end of such an ideology, the magazine has wandered. In its pages now, there is no single driving politics. It is still fanatically in favor of free trade, but it is also increasingly anti-American. Anyone who can discern its true position on the euro should be awarded a medal. It has also lost some of the humor it once had under its previous editor, Rupert Pennant-Rea.

 

But its drift might be better ascribed to more structural factors. The paradox of The Economist is that, although it is an apostle of free-market, free-trading capitalism, its own structure is more like a socialist, mercantilist dictatorship. There are no bylines and therefore no personal accountability for any single piece of text. There is no masthead. Power is closely held by the editors of the various sections, a brigade of seasoned rewriters in London, and by the editor himself, who admirably reads, rewrites, and corrects every single sentence in the magazine. And there is more than a little old boys' network in its upper ranks. When the editor, deputy editor, and New York editor didn't only go to Oxford but to the same college at Oxford--Magdalen--and when a handful of other current and former staffers attended Magdalen as well, one begins to wonder whether meritocracy is truly at work. In fact, in the last contest for the editorship, four out of five candidates went to Magdalen. One staffer recalls a recent dinner at Magdalen for Economist writers, where much self-congratulatory merriment ensued. This is, of course, a wonderful system for producing a single distinctive voice for which The Economist is rightly admired. And Magdalen College is probably the finest academic institution in the world (er, I went there, too). But it is a somewhat ineffective system for correcting internal flaws in a global magazine.

There is also no real competition in the market--no other global, weekly magazine of business, politics, and finance. The Economist, founded to defend free trade, has a virtual monopoly. So there are also no external mechanisms for the magazine to correct itself if it goes astray. The duller and dumber it gets, the more its circulation climbs and ad pages mount. When the magazine was a small pamphlet in London, its eccentric structure didn't matter very much and, in some respects, added to its charm. But, as it has become a vast global enterprise, the weaknesses of journalistic socialism are beginning to appear. The lack of bylines adds a weird twist. Other journalists are less likely to be envious of faceless, nameless Economist writers and so less likely to offer criticism or intelligent praise. A critical piece on The Economist comes out about once a decade (James Fallows wrote the last one in The Washington Post in 1991). Meanwhile, pompous plaudits are showered several times a week, and the shareholders are understandably ecstatic. The result is what Milton Friedman would predict: the flabbiness that always comes with protectionism.

Given this structure, in fact, it's a miracle that The Economist is as good as it is. But the truth is, it could be enormously better. Being groovy is not always the same as being good. When a magazine is as witty, as independent, and as important as The Economist, journalists shouldn't be the only ones hoping for improvement.

Andrew Sullivan is a contributing editor for The New Republic.

By Andrew Sullivan

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