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 said "the positions [the Economist] takes change the minds that matter". In Britain, the Sunday Telegraph declared "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. Bill Gates has boasted of reading it cover to cover. Larry Ellison, CEO of Oracle, is said to have remarked: "I used to think. Now, I just read the Economist."
You can see why the magazine has earned such plaudits. At a time when other news magazines 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".
Yet as a weekly compost of world news and economics, it's hard to beat - a kind of Reader's Digest for the upper classes. It's written in the sort of prose that trips felicitously into one ear and out the other, subtly flattering some Americans into feeling witness to a combination of an English senior common room and a seminar at Davos.
It's also, as a former high-level staffer puts it, "fantastically profitable". Last year, according to its editor, Bill Emmott, the Economist raked in close to $40m (£26m) in profit, unheard of in serious magazine journalism and only slightly more than the New Yorker was recently rumoured to be losing. Packed with luxury goods 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. Although it is still referred to by Anglophiles as the Economist of London, its British readership is just one-sixth of its total. Circulation has risen from 300,000 in the mid-80s to close to 700,000 today, with almost half in the United States.
But there's a funny thing about the Economist. The closer you look, the weaker it gets. Beneath the blizzard of one-liners, Oxford Union ripostes and snazzy graphs, it contains less original reporting than many other news magazines 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 news magazines, of course, are not easy. The difficulty lies in summarising a week's events throughout the world in a way that is interesting and informative to an audience which might have read at least one daily newspaper, surfed the web, or watched a fair amount of TV news in the previous seven days.
One approach is to rewrite the news as idiosyncratic editorials. Another is to report it in more depth than other media and find stories that appear nowhere else, or to specialise in one area and cover it exhaustively.
The Economist does a little of each, but none of them very well. It has a far smaller reporting and editorial staff than other news magazines, relying predominantly on other news outlets and stringers for rewrites of the week's news. It aims to cover more international affairs than other magazines, so its resources are spread even more thinly than most - it has, for example, only one correspondent for the whole of sub-Saharan Africa. Opinionising is largely reserved for 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 exclusive stories, they tend to be abstruse and add more detail than depth. As Bill Emmott dryly remarks: "Sometimes we do add hard fact, but that isn't our principal appeal."
In America the Economist has gone out on a limb. In the terrible week on Wall Street before US Labor Day in September 1998, the Dow Jones industrial average crashed to 7,400. The Economist responded with something between a panic and a gloat, arguing that even this level was way too high. "At these prices," the magazine commented, "American equities are still dear". Particular scorn was reserved for technology and internet stocks, predicting 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.
In October, the magazine reported "omens of slowdown" for the US 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 that the economy will tip into some sort of a recession," said an editorial. Not quite. The last quarter of 1998 and the first quarter of 1999 were two of the strongest of the decade in American growth, and 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. On 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 it 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). But there is a limit on journalistic compassion, and the Economist is close approaching it.
If its economic touch in America has been faulty, its political and cultural sensitivity 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. At the time of Clinton's troubles, the cover blasted: "Just go", but it never seemed to acknowledge the differences between a parliamentary democracy and a presidential system in which resignation is a very rare and traumatic event. It called for impeachment hearings but then backed away when conventional wisdom turned. The magazine failed to understand support for Clinton throughout and predicted, like so many others, that the only imponderable in last autumn'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 predicted 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.
Theories about the magazine's decline abound among its former and even current staffers. One of 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, privatisation, and globalisation. Its libertarian bent on social issues made it more palatable to moderate readers and so gave it an enviable mix. With the end of such an ideology, the magazine has notably wandered.
However, 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 articles. 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. The editor, deputy editor, and New York editor, plus a handful of other former and current staffers, didn't only all go to Oxford but to the same college - Magdalen. In fact, in the last contest for the editorship, four out of five candidates went to the hallowed college.
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.
The fact remains that there is 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. 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 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.
©1999 The New Republic. The full article appears in the June 14 edition of the magazine