Can You Believe It?
Marvin R. Shanken, Gordon Mott
From the Print Edition:
The Cuba Issue, May/Jun 01
It's the year 2001. Since the beginning of this century, it's been a pretty normal period of extraordinary occurrences. A new space station. A stock market bust. Earthquakes in Seattle. Droughts in Florida. An exciting and extremely controversial U.S. presidential election in which the candidate with the most votes isn't sitting in the White House. Many of these occurrences would be best bets for "Ripley's Believe It or Not!"
But there are some things we just can' t believe.
Can you believe in the year 2001 that California, the most populous state in the most technologically advanced nation in the world, has been experiencing power shortages? Not just a few days of brownouts, but full-scale "rolling" blackouts, a euphemism for the fact that widespread areas of the state are going without power for hours at a time. (And peak summer demand hasn't even begun!)
Can you believe that last year the number of delays for scheduled airline departures and arrivals reached all-time highs? Nearly 25 percent of all flights in the United States were delayed, and the average delay was more than 50 minutes. Some flights were delayed for hours. At airports like New York City's La Guardia, delays seemed the norm rather than the exception.
Can you believe that a baseball player, Alex Rodriguez, signed a 10-year contract for $252 million with the Texas Rangers, $2 million more than the 1998 purchase price of the entire club? But even more incredible was that his signing triggered a rash of big-salaried players, like Frank Thomas of the Chicago White Sox, to complain that they weren't being paid enough. Thomas had signed a long-term deal that was scheduled to pay him $9.9 million a year for the next six years. But he held out for six days in spring training, saying he wanted to renegotiate his contract to "bring it in line" with other players.
So what's going on? No power in California? Deregulation was supposed to bring cheaper and more abundant power. Instead, politicians devised a quick fix that left some top utilities practically bankrupt and taxpayers holding the bag. Flight delays? Deregulation of the airlines was supposed to produce lower fares. Airlines created huge hub systems that were supposed to be more efficient and economical. What it has done is forced passengers into paying higher airfares while traveling circuitous routes just to get where they want to go. Stratospheric sports salaries? Baseball players, even mediocre ones, are now demanding, and getting, huge multimillion-dollar contracts. If they have a good year, suddenly they demand to renegotiate. But if they have a bad year, they still expect to be paid the same extraordinary salary.
You want an example of how free markets are supposed to work? How about the Internet stock market boom of the past few years? Thousands of people left their secure jobs to seek their fortunes in the dot-com world. Some, and you know who they are, did get rich. Others thought they did, but the gains were all on paper. Then the market collapsed. Many of these same people are now out of work. Most didn't reap any rewards at all. Why? Because their business models produced revenues but no profits. Their price/earnings ratios defied all logic. Investors finally came to their senses and said," This doesn't work," and stopped putting their money into dot-coms.
That's the way things should work in the greatest and richest country on Earth. People with good ideas and hard work should be rewarded. When what seems like a good idea doesn't pan out, however, whether it's pie-in-the-sky Internet companies, the deregulation of the power and airline industries, or insane salaries paid to pro athletes, market forces and common sense must step in to restore a balance. That's something we can all believe in.