Many have drawn parallels of the current world economic downturn with history, drawing upon individual country studies over the past few decades and the mammoth dive of the world economic system in the 1930’s – The Great Depression. However, few have noted the uniqueness of the crisis given the technological age in which such a downturn developed, giving it an unprecedented face.
Technological complexity, interdependence and ideological polarization of thought have played a large share in the cause of the crisis. However, information technology (especially with respect to journalism) is the core ingredient exacerbating the crisis developed in its current face, inevitably exposing the shortcomings of the medium with relevance to our human use.
In recent weeks, POLIS, a think tank housed in the London School of Economics has brought forward various issues with relevance to the expertise, management and delivery of financial journalism. Moreover, I will argue how journalism has helped further the spread of the credit crunch across the financial system into the real economy sustaining a dampening impact on consumer confidence and market perceptions. The downturn has exposed our intellectual shortcomings and the subsequent need for effective social responsibility, where the influence on human behaviour and social juice generated by the media has been direly under-rated.
Journalism and broadly the media have a profound impact on public perception at large; they not only influence but also direct opinion. Given the recent mayhem associated with the financial crisis, the spread of the crisis across the economy has been powered by the outcry of the television, radio and print media, creating a dismal and bleakpicture which has severely dampened market confidence and subsequently the real economy; the downturn in the retail industry and auto industry being a prime example due to falling/perceived current and future purchasing power. Ever wondered how the perspective attains nutrition?
The Economic Discussion
Moreover, the workings of the media has handicapped the conventional tools used by policy makers to revive and restore consumer confidence. Consider the case where conventional Keynesian economics, which prescribes increased government spending to revive consumer confidence, has reduced in influence, as increased government spending will not stimulate aggregate demand to the desired extend. Instead cautious and able consumers would be inclined to save rather than spend, or at best instigate capital outflow, an example personified by the Asian financial crisis of the 1990s.
In other words, the impact of government spending will be short-lived and not restore market confidence to the level assumed by the conventional policy maker, since a rational consumer would be heavily influenced by the noting of the media and would remain cautious in his next step. Therefore, in line with innovative technology pertinent to the 21st century influencing and channe-lizing market responses, the government need not purely inject large sums of money in the economic system to restore consumer confidence. It should also use innovative techniques to influence the human mind through its most valuable yet underscored medium, the media.
Evidence from London noted through a research at POLIS shows that the big bang of the 1980s in the city coincided with a revolution in financial journalism through the presence of cable and satellite television coupled with digitized data leading to 24/7 financial reporting, according to author Tambini.
The point to note is that reality is a concept of perception, where journalists have the responsibility to report facts, but facts can undertake a pessimist as well as optimist outlook, depending upon an individual viewpoint. In the years preceding the global financial crisis, journalists pictured an overly colourful picture in line with popular opinion of the time undermining their credibility and analytical ability. In recent months, a U-turn in financial reporting has been taken with a high on pessimism and caution translating into the main street. However, a balance in both cycles is needed; a caution in reporting, undertaking a scientific outlook which challenges and investiga-ting success within good times and exploring, identifying and seeking signs of positivity under bad times, is important.
The Policy Debate
Some may argue for complete legal restrictions and obligations even in this globalizing age. This, in my opinion, would be a response of the non-creative and insecure mind exemplifying our naïve and disconnected response to the changing and growing world around us. Hence, direly unwanted and counterproductive for society as a whole, over the long run anyway.
Some may argue for building of social contracts with the media and related institutions as they can be used to maintain and sustain consumer confidence. Especially as such contracts have had their degree of success stories (at various levels) exemplified from the studies of the Republic of Ireland at the institutional level, where contracts between different institutional stakeholders in the late 20th century led to the turn-around in the fortunes of the country, triggered through confidence, patience, unity, progress and subsequent gain.
The republic underwent a 40 percent increase in GDP per capita (measured in terms of purchasing power parity) over the period 1995-2005, turning one of the poorest regions in Europe to one of the most prosperous economies of the world, let alone the continent, according to author Marc C. Duff Grameen Bank in Bangladesh is another example where social contracts have improved the lives of millions. These contracts are built on the family/community level, generating trust, confidence, livelihood and a degree of empowerment across various lives through micro-level banking.
Although this may be possible, there are various questions which may place a dark hole in the intellectual mind of the policy proposer for media-based social contracts, if applied with a progressive goal.
For one, what would be the universal or national basis of those contracts? What and who would be the defining judge? Would it even serve a progressive purpose? Even if applicable, would such contracts be worthy and sustainable in the money, power and social world the media finds itself in today? Would such contracts be flexible to change? Would objectivity and impartially ever prevail – after all, are we are all humans with our personal opinions? Can the institution steer the balance between honesty and social responsibility? Will it be born and buried by the few or will it ever become a social necessity?
Although checks and balances are vital, one thing is for sure, if the enforcement of such a policy is based around controls and limi-tations advocating a defensive outlook in the working of the media or any institution, it will generate negative and retarding incentives. This will inevitability dampen the lead and effective practice of any organization or institution in its competitive social space, given the technological and increasingly integrated age we live in. Hence, it will become counterproductive. Discipline is important; however it has to be acquired and learned, not grilled and hammered. Therefore, the step forward needs to undertake an evolving outlook, which would generate positive incentives yet bring responsibility and accountability in the working of the media, in a sustained, progressive and discursive manner.
The Way Forward
We can start out by accepting the need for a progressive step further, even for the most open and developed societies. Institutions need to evolve, acknowledge their interaction given their subsequent impact on socio-economic outcomes. Moreover, we need to take the extra step further to compete with rising technology as conventional policies and means to influence behaviour and consumer confidence lose their place in our high-tech integrated world. The pursuit to come closer and closer to the ideal model of exchange needs to continue, where the ideal is an evolving concept by itself. In other words, we may not know what the ideal end product should be, but we do know that the current product needs serious revamping – acceptance is the first step to change.
References
Damian Tambini (2008) What is Journalism for? Ethics and Responsibility in a time of crisis and change, POLIS LSE
Marc c. Duff (2007) Ireland’s Economic Progress, On the verge of Collapse to Economic Star of Europe in 5 years,
The Tax Payers Network
Mutahir, thanks for the comments.
You are missing the basic point. Perception is a key feature (for example, the expectation of inflation leads to greater inflation), which the media can influence through its means – which requires responsibility. Certainly don’t hide the truth, but depict responsibility. Moreover, beyond holy scriptures, truth to a large extend is a matter of perception!
For instance, even if what you say is the naked truth, it did not become such overnight, the structural realities were present well before the burst. Where was financial journalism then? How come the green shots became black only after they were exposed? Where was responsible and criticial journalism before the debacle? Responsible journalism has a role to play, which we all should appreciate and comprehend.
There exists a ‘multiplier effect’ in a economic system. One persons spending becomes the other persons income and so-forth. Therefore, if there is overall feeling of fear it will reduce the overall spending in the economy, people will become conservative in spending. Hence reduced spending by one would lead to reduced incomes of the other, dampening the second parties ability to spend, and the multiplier effect.
Some elements of the financial crisis spread into the real economy (goods etc) because of the financial crunch faced by these organizations, hampering their ability to lend/ respond etc, but a decent share was driven by the lack of confidence the market developed (wonder how that was exacerbated?). The very reason large sums of money is injected in the economy, is to overcome the confidence issue, not necessarily address structural issues, which are generally addressed to regulation, policy changes, the incentive structure etc.
There needs to be a degree of responsibility and consistency- if one is to rely on the medium, especially because of the power it has- see how financial markets change face with the flashing of each news!
The article proposes innovative solutions such as the comprehension of policy makers with regard to the influence of the media. In this regard, they could use the media to develop a sense of confidence in the market. In some ways, spending is channelized to give that confidence. You are right to say, I left the article open-ended in some instances, as i dont have all the answers, and feel that this is an area where extensive brainstorming can be done.
The article is predominantly focused on developing a sense of consciousness and awareness, no where does it provide or claim to give solutions.
Your point in terms of digging deep to understand why the system failed (financial journalism) to deliver is well taken, and you are quite right, it needs to be studied and examined in depth.
The use of extensive English vocabulary is a poor excuse to cover the lack of depth and argument in this article. It fails to answer the questions posed by the author in the opening paragraphs and does not impress.
“Moreover, I will argue how journalism has helped further the spread of the credit crunch across the financial system into the real economy sustaining a dampening impact on consumer confidence and market perceptions.”
Is this bad? The media is finally reporting the naked truth and your tone frowns upon this? Why? Why do you wish the media to suggest green shoots to the investors and consumers when there are none; we are indeed far from a recovered global and local economy.
“Given the recent mayhem associated with the financial crisis, the spread of the crisis across the economy has been powered by the outcry of the television, radio and print media, creating a dismal and bleakpicture which has severely dampened market confidence and subsequently the real economy; the downturn in the retail industry and auto industry being a prime example due to falling/perceived current and future purchasing power.”
Yes. Dismal and bleak. But true? If so, I fail to see the issue in reality being exposed and dirty linen being washed in public.
“The government need not purely inject large sums of money in the economic system to restore consumer confidence. It should also use innovative techniques to influence the human mind through its most valuable yet underscored medium, the media.”
And what are these techniques? Seriously, it’s a disappointment. Open to imagination, the techniques can range from bribing the media to use of extortion, perhaps even regulation. Why leave open ended questions?
If the author wished to induce in his readers, a need for change in the world of financial journalism, then the article must have extensively discussed the reasons for failure of the system, and thereby brought the reader to the conclusion that the system needs to evolve.
The article is a feeble attempt to make a point, which is: “Where were the journalists when the symptoms of the impeding crisis were unfolding?”