Commentary

Market Sense

OSPIRG's hack publication, the Impact, and the Emerald's Nicole Kristol have one thing in common--an utter lack of common sense.

I'll start this article with a basic premise: government interference in the economy is bad. Don't agree with me quite yet--and granted, you won't find many proponents of this idea on our beloved college campus. But read on and you'll get a feel of why I'm right, and regulators wrong. Above all, government economic interference is arrogant. I'll get back to this point later, but keep it in mind. The OSPIRG Impact, a seasonal publication by our favorite student organization, recently warned consumers about the excessive ATM fees charged by banks. OSPIRG's cause seems noble; anyone who's been charged $2.50 for a $10 withdrawal knows that 25 percent is a pretty hefty fee. And those banks make billions in annual profits, right?

Yep.

Chances are, your own bank charges you $1 for a transaction on a competitor's machine. About $.30 of this charge goes toward transaction and bookkeeping costs. And the bank whose machine you use will charge you $1 to $1.50 on top of your own bankís charge. Again, thirty cents in overhead, and the two banks pocket anywhere between a buck-fifty and two bucks on your transaction. That sounds like a rip-off to me. You too?

Blood-sucking, profit-hungry capitalists!--and the worst sort of capitalist: small white-collar payrolls, no opportunities for blue-collar workers, raking in profits for lousy, upper-class shareholders. Marx is groaning in hell, and you're beginning to understand the virtue of a communist utopia (I know I do).

The obvious retort to this most shallow of rhetorical arguments is that you simply don't have to make the transaction. You could do like they did before the third wave: get down to the bank during their business hours, and take care of your business there.

Unfortunately, as we all know, this can be extremely inconvenient.

The second thing you could do is to make sure to use an ATM owned by your bank. Most banks, after all, don't charge for transactions on their own machines, so you can actually rob the bank for their own transaction costs.

That's what I do. It makes Karl proud.

Or you could perform a hybrid of the previous two suggestions: close your account at the bank across town and open one near campus where you can make free ATM transactions all day long. You no longer need a tommy-gun to rob U-Lane-O: you can beat them at their own game.

Can you hear Ralph Nader cheering me on? Listen closer...

OSPIRG is preaching common sense and no one, even Jonathan Collegio, could criticize them for that, right?

I suppose. But when all of this common-sense preaching ends and calls for regulation begin, I get a bit squeamish. You see, while OSPIRG is preaching this good stuff, our favorite senator, Alfonse D'Amato of New York, has a bill before the Senate Banking committee which goes that one further step toward socialism--federal regulations on ATM charges. Didn't you hear him on C-SPAN? (whoops, wrong audience, Jon...) On CNN? (wrong again, Jon) Did the Emerald write about it? (What's an Emerald?) Anyhow, it went something like this:

Funny-looking Italian senator: "Now, a $2.50 charge on a transaction of $200 is understandable. But when these banks are taking their customers for $2.50 on a $5 withdrawal, something must be done. This legislation that I have drawn up (blah blah blah American Way blah)."

Democrats in audience: (salivating) "Go Al! And you won't even be reelected in '98!"

Stop. I already know what you're thinking. "D'Amato is from New York, and that's where all the banks are. Aren't they pouring money into his campaign to keep this corporate distributive justice from becoming law?"

Common misconception. D'Amato is from New York, and that is where the banks are. He's relatively conservative in a left-wing state, though this legislation is hardly conservative. But he's not doing it bravely in the face of massive opposition from the banks, simply due to his admirable ethics. He's doing it because he faces reelection in '98, and most of New York hates him. He's trying to woo moderate voters who hate their banking statements. Hell, that's politics. But the banks aren't complaining. This is an important misunderstanding by my fellow countrymen.

Myth #1: Big business hates regulations.

Big businesses actually love regulations because they weed out competition from smaller firms that don't have the profit-margins to pocket the regulatory costs. Smaller banks, like U-Lane-O (which, by the way, doesn't charge you for using their ATM's to withdraw from other banks--probably in order to draw customers away from the big banks--thus losing potential profits along the way), end up falling off one by one, until bigger banks gain more market share. And that's when the big money starts rolling in. You see, with fewer competing banks, the big ones can charge more on finance fees and interest payments. And you, who were bitching and complaining about a $2 ATM charge, now have $20 per month more to pay on your mortgage or student loan. Regulations protect consumers, right?

Apply this logic to just about any regulation and, yes indeed, you'll find out that you're a big winner when the government steps in. Last spring, Nicole Kristal of the Emerald came two cents shy of calling for rent control in Eugene. Chase Apartments and Duck's Village, two corporate profit whoremongers, rape all of their tenants with high rent and shoddy housing, while killing their pets. But look at this from a different perspective. Duck's and Chase cost a lot, but they were built in response to a tight housing market in Eugene. I lived there last year, but I save money this year by living at an apartment complex on 12th and Mill. My new manager told me that for the first time in twenty years his complex wasn't sold out by October 1. Although Duck's is expensive (and pretty nice), it competes for tenants in my complex. How can my manager respond? Certainly not by raising prices; if he did, I'd move back to Duck's. If he stays at the same rent level, his unoccupied apartments will be costing him money in foregone profits. At some point, rent must lower--either by an actual cut in rent, or by price stabilization which, over the next ten years, will cut the real rent cost after inflation runs its course.

Nicole Kristal was right. Duck's and Chase are profit whoremongers, but who do they wrong? If she thinks that 1,000 new apartments over five years won't eventually lower rent in Eugene, she needs to take (and fail) Econ 201 again. I mean, this is really basic stuff.

Myth #2: Corporate profits rape consumers.

Profits make ATMs possible. Do you honestly think that banks would have developed technology just so that you could sit on your ass a little more? Banks use ATMs to decrease labor (teller) costs and collect fees, and this drive makes your life more convenient. Think rent controls make housing more affordable? Try finding an apartment in Manhattan. Once you can't, try finding a nice new car in the former Soviet Union. The Soviets, who lived without being raped by corporations for generations, have now learned to rape themselves. The same goes for health care regs, worker safety regs, and the sacred cow at this University: environmental regulations. Apply the logic yourself and see what you find.

I know what you're thinking again. "This guy was talking about arrogance earlier. What a fucking hypocrite!"

But that's not the type of arrogance I'm talking about. That arrogance belongs to the bureaucrat, politician, or Bill Miner for that matter, who thinks he is smart enough to spend money or distribute goods more wisely than the free market. Once they begin to believe that their limited minds can provide rational solutions to economic problems (as they already have), we begin down the slippery slope toward despair. You see, some men are humble to the needs of the people, some before their wives. Bill Clinton is humble before the Poll God. But Jonathan Collegio is humble before The Market. Kind of like Socrates, who, by understanding his own ignorance, was consequently the wisest man of all.

Convinced yet?

Jonathan Collegio, a junior majoring in Economics and Political Science, is a staff writer for the Oregon Commentator