How come that press coverage of financial crises often give free publicity to makers of alcoholic drinks?
April 10, 2000
Remember back in 1994, when Mexico hastily devalued the peso? Within days, investors lost confidence not just in Mexico, but in almost every emerging market — and financial markets around the world fell on hard times. Within days, people began to speak of a “tequila effect.”
Then, in the summer of 1998, the Russian government suddenly announced it could no longer afford to repay its debts. Again, investors fled from emerging markets — and the pundits began to speak of a “vodka effect.”
Given this nomenclature, one can easily draw the conclusion that economic policy makers in emerging market countries are guilty of DUI — or Devaluing Under the Influence.
We realize, of course, that Asian policy makers did escape having one of these booznik labels pinned on them. Even though a deep financial crisis swept out of Thailand in 1997 and wiped out billions of dollars of financial wealth in East Asia, there was no talk of a “rice wine effect.” Instead, the term “financial contagion” was widely used. But let’s face it, the term “financial contagion” sounds far too academic for today’s media.
But how about all the potential crises in the developed world’s markets? In the post-colonial era, we clearly can’t just use boozey labels for the emerging market economies. Well, if things go South again in Europe — with, say, Italy’s budget bursting — look out for economic devastation caused by the “grappa effect.” Of course, if Greece stumbles on its way to adopting the euro, be prepared for the onset of the “ouzo effect.” And if anything explodes up north in Scandinavia, the world will probably be abuzz talking about the “aquavit effect.”
Come to think of it, the IMF — or, even better, the United Nations — should urgently establish a commission to consider the commercial implications of this increasingly widespread naming convention.
In order to replenish their overstretched budgets, these organizations should consider charging promotional fees for some distillers — like Seagrams and Jack Daniels — when the financial crisis pops up. At a minimum, these companies should be prepared to pay in the range of a hundred million dollars for getting such free publicity.