Economic Illiteracy From The Washington Post

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Posted: Jul 07, 2021 1:35 PM
Economic Illiteracy From The Washington Post

Source: AP Photo/Manuel Balce Ceneta, file

I’ve written nearly 6,100 columns for International Liberty, but only one of those columns has focused on Lebanon.

That was back in 2018, when I explained how the nation could have avoided a fiscal crisis with a spending cap.

Now it’s time to once again write about Lebanon, though maybe today’s column is actually more about media bias.

That’s because this story in the Washington Post, authored by Sarah Dadouch, shows how journalists have far too little understanding of economics.

Lebanon’s worsening financial meltdown has been accompanied by a dire shortage of imported fuel. Roads in cities like Beirut and Tripoli are now lined with cars queuing for hours to get their allotted amount of gasoline, at most a third of a tank. …smugglers have discovered there’s good money to be made by buying gasoline in Lebanon at the heavily subsidized price and then selling it on the black market in Syria, which has a debilitating fuel crisis of its own. …Many Lebanese politicians blame the gasoline crisis partly on smuggling… In April, Lebanon’s caretaker energy minister said the disparity in gasoline prices between Lebanon and Syria means smugglers can make huge profits next door. …The Lebanese army, which has received more than $2.5 billion in aid from the United States since 2006, has made concerted efforts to curb the illicit commerce.

The smugglers aren’t the cause of Lebanon’s energy crisis. They’re merely a symptom of the real problem, which is that the country’s politicians buy votes from motorists by subsidizing gasoline.

Get rid of those subsidies and smuggling will disappear overnight.

The moral of the story is that bad things happen when politicians interfere with prices. We have forty centuries of evidence showing price controls don’t work. When politicians try to curry favor by rigging prices, bad things happen.

And the second moral of the story is that journalists don’t understand the first moral of the story (not that I’m surprised, given the shaky track record of the Washington Post).

P.S. I’m flabbergasted that American taxpayers have sent $2.5 billion of foreign aid to Lebanon’s army, which gives the government fiscal leeway to pursue bad policies such as gasoline subsidies!

P.P.S. While gasoline subsidies are an insanely foolish policy for a nation enduring a fiscal crisis, fiscal policy isn’t even Lebanon’s biggest problem. As noted in this video, the country does even worse on trade policy, regulatory policy, and rule of law.

P.P.P.S. The post-war German economic miracle was triggered by the removal of price controls.