Weeks after the massive -- and so far unsuccessful -- bailout of some financial institutions and days after Congress took another whack at the auto industry, New York Times columnist David Carr today identified the boogieman behind the country's economic woes -- the media.
Every modern recession includes a media séance about how horrible things are and how much worse they will be, but there have never been so many ways for the fear to leak in. The same digital dynamics that drove the irrational exuberance -- and marketed the loans to help it happen -- are now driving the downside in unprecedented ways.
The recession was actually not officially declared until last week, but the psychology that drives it had already been e-mailed, blogged and broadcast for months. I used to worry that my TiVo thought I was gay -- doesn't everyone enjoy a little "Project Runway" at the end of a long, hard week? Now I worry that my browser knows I am about to lose my job.
"When everyone is talking about recession, we all feel like something has to change, even if nothing has changed for us," said Dan Ariely, author of "Predictably Irrational," a book that explains why people do things that defy explanation. "The media messages that are repeating doom and gloom affect every one, not just people who really have trouble and should make changes, but people who are fine. That has a devastating effect on the economy."
Carr's riff isn't all that different from a similar one in the '70s. Only then, the subject was the Vietnam War. We really weren't losing it, the media was just focusing on the bad news.
But increasingly, the message behind Carr's prose is being amplified. A Business and Media Institute writer said today:
The barrage of constant bad news can affect people who don't find themselves in financial trouble, Carr noted, citing Dan Ariely, the author of "Predictably Irrational."
"When everyone is talking about recession, we all feel like something has to change, even if nothing has changed for us," Ariely said. "The media messages that are repeating doom and gloom affect every one, not just people who really have trouble and should make changes, but people who are fine. That has a devastating effect on the economy."
It sounds plausible, but who are these people for whom "nothing has changed?" People still may have jobs, but their plans for retirement are in ruins. Not everyone is 30 with a lifetime to get back what's been lost.
And Carr doesn't say the media is making it up; only that the bad news these days can be collected and disseminated far more quickly than ever before. But what are we supposed to do about that? In fact, that's a question that media critics have specifically not answered.
Here's today's economic news: The Tribune company filed for bankruptcy, 3M cut its earnings outlook and announced more job cuts, many borrowers who have their mortgages restructured are defaulting a second time, and auto magnate Denny Hecker closed some more businesses.
In non-economic news, the Timberwolves fired a coach, the Fergus Falls band is going to march at an inauguration, and a truckload of reindeer slid off an icy road in Freeport. So it's not as if other stories aren't being reported.
"The media are only doing what they always do eventually: They get it right, way too late to make a difference," said the Center for Citizen Media's Dan Gillmor, who hasn't had a nice thing to say about mainstream media, it seems, since savings accounts paid 5 percent.
Gillmor said, however that "people who save their money today are not being irrational, even though this is exactly the time you hope that enough people will spend to keep the economy from an absolute crater."
So there we are. A gloomy economy, a gloomy media, and a handful of critics who don't know the solution to either problem.
I think it's a giant make-up call. I would guess that by now everyone in the media must realize that they should have seen this coming but they were too bizzy cheerleading.
Now, we get the other side. Oh, boy are we getting it.
The solution is to have a media that national nooze that doesn't have a tendency to feed off of itself in its own insular world. In short, get out a little bit and keep your mind and eyes open. Don't worry what the NY Times or CNN has to say - they're more likely to have a firm grasp of what happened yesterday than what's happening today.
I do keep hearing that: The media should have seen this coming. But what is THIS? What does that look like? That the auto industry in Detroit was out of step? That's hardly new. That the American consumer had spent himself/herself into a predicament? That was reported.
Is the problem really that the media didn't see it coming, or people weren't interested in hearing about it?
I have long held that the news media is more of a mirror and less of an agent of change.
"The media messages that are repeating doom and gloom affect every one, not just people who really have trouble and should make changes, but people who are fine. That has a devastating effect on the economy."
Is this guy Pawlenty's speech writer?
I understand the complaint that the media coverage makes things worse (we hear this from realtors all the time). Frankly, I'm one of those 30-somethings with lots of time for my 401K to come back, and my salary is unchanged, so my life hasn't been hugely affected by the economy.
Yet I'm also cutting back, and perhaps that is "irrational." Or perhaps it's rational to be conservative in an uncertain time.
Either way, when people in good shape are cutting back, it does make things worse.
But what are we supposed to do? Not report on the bad news? It IS bad!
I do think the fair criticism is that media tends to ignore mass layoffs or spend a small amount of time on those layoffs, except if it involves a TV weatherguy or a popular radio host. Then 1 person gets a ton of ink, when we should be hearing about the 300 who lost their jobs at a manufacturing plant.
But then, news consumers have to demand that.
> But what is THIS? What does that look like?
Good point. I'll be less flippant.
A lot of people saw the Tech Bubble become the RE Bubble and immediately said, "This has to end badly". By badly, we all meant that the dependence on cheap credit to keep the entire economy moving made a serious meltdown more or less inevitable. The over-extension on RE was only the most obvious part of the over-extended economy.
Many of us were tracking one simple fact: GDP growth, less federal deficits less home equity withdrawals, has been NEGATIVE since 2001. That is an unsustainable economy. It simply had to collapse at some point, and the way credit was being misused that was easily the weakest point.
There were other signs of a general bubble made out of the other bubbles, like historically high PEs and so on. But the abuse of credit and reliance on it to fuel the economy meant the entire economy was vulnerable.
Was this information out there? Oh yes. I got it from a number of places. Did the mainstream American Press cover it? Not a chance. You'll find very few references, and those will be highly scattered.
For all my complaining about the consensus media, I'd never attribute a recession to the media. Anyone who looks at the history of the US will see that there have been numerous depressions, recessions, "panics" over the last 200+ years. Even when news traveled on horseback and less than 40% of the populations could read it even if they saw it, we still had recessions. Recessions are triggered by depressed.
I think the whole function of news media is to present accurate information, good or bad, that facilitates and stimulates productive public discourse. Contrary to Mr. Carr's claim, I think if the media had done a better job reporting the bad news and telling people how to respond to a worsening economy, it may have actually lessened the recession. If for instance instead of having a roll call of financial advisers and coaches who all told everyone not to panic, and not to move their money, they had brought in people who explained what happens to the stock market during recessions, and where an how to find relatively safe havens, people could have saved much of their retirement savings instead of losing them. How would our recession look if people thus far had only lost 8%-10% of their investments instead of 30%-50%?
The media could have explained that these annuities, IRA, and what not's are not set it and forget deals. You can move money in there, and some funds are less volatile than others. How do you move money in your IRA? Can you do it online? This is the "this" that was missing amongst other things.
Yeah, it's the MEDIA's fault.
It has nothing at all to do with:
28 years of incremental deregulation;
unrealistic and unsustainable cheap debt;
socializing and securitizing risk;
or the 401k bubble.
Shoot the messenger? Hate to say it, but things REALLY ARE THAT BAD. Just because this might be all due to a stampede of the herd (which it isn't) doesn't make it any less real. We now have to deal with this disaster, regardless of the cause. We will be better served by waiting until the crash is over before trying to determine the actual cause.
Good luck, everyone - we will need all we can get.
BJ, you're very right. It's not (directly) the media's fault.
However, why did people support things like speculation and an economy based on getting something for nothing? It was very popular, and the media had a role in supporting that.
The key role? No, not at all. But I think that a lot of people in the press understand this, and hence the big make-up call. The sky is falling!
It was easy to find stories of the vapor economy failing as early as 2000 or so. No one hunted them out. Those were "other people" being affected - those manufacturing jobs we continued to lose were just a part of the "old economy". A lot of excuses were made for ignoring the warning signs by nearly everyone. As recently as the primaries a big case was made for Ohio somehow being unusual It wasn't.
I don't want to blame the press entirely for the lack of coverage when this was forming, and I don't want to blame them entirely for the make-up call that tells us how horrible it is now. But I do want to see them stop being an echo chamber of stories written from a warm cubicle in New York (or somewhere) and spend more time out on the street.
Sadly, the way media in general is getting hit in all this, many of them will be out on the street. Let's hope that those left in the cubicles don't run the same, old same-old kind of show.
Its the internet's fault. The media can not put forth news as fast as the stock markets swing so it has to be something else.
The speed of personal communications today makes the difference. Some of the stock market swings we have had in a single day would have been considered a crash in past years.
Just look back to October 1987, not that long ago for some of us. If we started developing longer term outlooks and not just thinking about the next 4 to 6 weeks our whole economy would change.
Lets base bonuses on what the stocks are valued on 5 years from now instead of the value 2 months from now and then the executives would make entirely different decisions just like they do in many private companies.
Having spent nearly three decades in the newsroom I can tell you that the problem isn't reporting bad news. The problem is the reporting of nothing of substance, possibly a tidbit of good news but an insatiable appetite for all that is bad or negative, and, if the situation isn't that bad it's nothing that creative writing won't fix. The problem has become considerably worse over the last 15yrs. I retired from TV a short time ago. There's only so many one car accidents we can put into 50% of our newscast. Problem is, we stink, we know it and we have no desire to change it. The economy is making things worse in a newsroom, but that's not an excuse. We've been on this train to no-where for over a decade. I've worked in a major market newsroom. This type of writing and reporting became an interesting and fun way of doing the job (any kind of ideology aside). Alot of folks knew it wasn't professional, but it beat doing it the right way. Yes, we need to report the bad stuff, we need to stop using unidentified "experts" all the time (I'm sure you've seen the storys with the line "experts say"....well, who are they?...quit hiding behind them because they're usually wrong). Turn off the news for a week or two and you'll see how much better the world looks...and the world didn't come to an end because we didn't stay glued to the 24hr news cycle battering. You'd think we were sponsored by Xanax.