Are journalists making the economic situation seem worse?
Listener 31 May, 2008
Keywords: Macroeconomics & Money; Statistics;
What is happening to journalism? You will recall that, last year, journalists campaigned for tax cuts based on a total misunderstanding of the Government accounts. They used the wrong measure of the Budget surplus, which gave the impression there was substantial room for tax reductions. There wasn’t; it had already been spent.
More recently, some said housing prices were falling when they were still rising. Yes, they were rising more slowly, but try telling the police you weren’t speeding because you had recently been doing 150km/h, but were only doing 120km/h when you were caught.
Earlier this year we were told the economy was in recession, based on a few select indicators, rather than a look across the entire economy. It was not. Certainly, some economic sectors are weakening (including real estate and financial advice), and some businesses are closing down as production moves offshore. But other sectors are booming – including dairying and telecommunications – and some businesses are moving onshore. How can a couple of newspaper anecdotes give an overall picture?
Maybe the economy is entering a recession, but we are not sure when, how long or how deep it will be. It is possible we will have a “growth recession”, where the growth of production slows down (like the speedster of the earlier paragraph), rather than one where production falls.
Rising prices get exaggerated. One of the most outrageous examples came when the Weekend Herald announced “Food Bill Up 28%” across its front page. The claim was based on the cost of a basket of food in April 2008 compared with a year earlier – so technically it was correct to make that claim. But what is in the basket matters; by selecting items one can get just about any answer desired. The Herald journalists eat, apparently, about two-and-a-half times as much meat as the rest of us, but only a fifth of the vegetables and fruit. They are probably all off sick. They don’t need a doctor, they need a dietitian.
The Government Statistician uses a representative basket of food (a dietitian would cringe at it, rather than blanch). His latest figure for food price rises is that they were 6% higher in April 2008 than a year earlier (not 28%).
What are the media up to? Poor analysis is not confined to journalists. We probably do worse than 25 years ago (despite a better database). Then, we had to get it right; otherwise Muldoon – who was fearsomely competent, if sometimes wrong – would clobber us. Later, one was clobbered if the Rogernomes disagreed with one’s conclusions, even when one was right (which proved to be often). That led to a dumbing-down of analysis, even in universities, from which public debate has never recovered.
Another possibility is that the media’s owners and editors are seeking sales with hysterical headlines, because the truth is prosaic and won’t capture readers. If the media have any influence, they may well have brought the recession on earlier and deeper. Ironically, among those who will suffer from their bumbling are the newspapers, as advertising drops, and the journalists who get laid off.
Or perhaps the owners and editors want to get rid of the Government and are biasing their stories towards making the economic situation look as bad as possible.
There is a terrible downside for the Opposition. If the media are successful, businesses frightened by the promise of a recession will cut investment, thereby deepening it, while workers who think that food prices are rising at an extravagant rate will make outrageous wage claims. The effect of the panicking headlines is to distort expectations, making the economy ungovernable for any new government.
One does not have to be a conspiracy theorist. The instability scenario applies even if the out-of-touch journalism is due to incompetence or circulation seeking. If the media are determined to destroy economic success – for whatever reason – they are going about it the right way.