the Reporter Saw - 2
The role of media in globalisation and development
Joseph E. Stiglitz and Anya Schiffrin
These problems were illustrated well in the debate about capital market liberalisation. The IMF tried to change its charter to enable it to push capital market liberalisation on countries around the world at the Hong Kong meeting of the IMF in September 1997 (though it had long been using its economic power to ‘encourage’ recipients of its money to do so). It put forward arguments that capital market liberalisation would enhance both growth and stability, and the IMF was supported in this by Western financial firms that stood to gain from the increased access that such liberalisation would provide for them in the developing world. Much of the reporting and editorials in the leading business press in the West, with its conservative bias and close ties to the business and financial communities, supported this view. In short, economic and business reporters in the developing world were often left with the impression that there was a broad global consensus on the desirability of capital market liberalisation; only ‘backward’ politicians in the developing world opposed it, typically because they simply did not understand market economics. Many well-intentioned reporters in developing countries, wanting to do what they could to advance the development of their countries, adopted strong ‘reform’ positions.
The IMF and the World Bank were at the vanguard of the reform movement and if they advocated capital market liberalisation, if they put such stress on it, it must be central to successful reform, or so they thought. They were simply unaware of the studies in the research department of the World Bank, looking at the hundred or so crises of the last thirty years — studies which showed that one of the most important factors contributing to these crises was premature, excessive and excessively rapid financial and capital market liberalisation. They were unaware too of the academic studies which suggested that capital market liberalisation did not enhance economic growth. The academics who did these studies had other academics as their audience; they certainly did not have large public relations departments to disseminate their findings. It would be another five years before the IMF would release a study confirming that capital market liberalisation did not enhance stability or growth, and for The Economist magazine to recant on its position. If reporters had been well-informed, they would have been able to present the different sides of the debate far earlier; it is even possible that policies would, as a result, have been changed, and that some of the countries that had experienced crises, with the deep recessions and depressions that typically follow, would have been spared the misery which ensued.
In some cases, NGOs may attempt to provide counter information. But they are typically nowhere near as well-financed and sometimes in their zeal, accuracy is lost. If the views of the NGOs are presented, reporters are seldom in a position to do more than simply report; they can provide little assistance in understanding the sources of such marked differences in opinion.
While the biased and advocative nature of major sources of information available to reporters in developing countries poses a major problem for reporters in developing countries, it is not the only problem. National bias is another. US reporters often write patronisingly about the European economy and the need for reform and restructuring of the labour market. Reporters in developing countries sometimes assume that foreign investors are in the wrong and that their comments should be ignored. US coverage of Enron’s activities in India mostly took the view that India was lucky to have Enron investing there and so US reporters didn’t question why power prices in the Dabhol power plant in Maharashtra were so high or why the government should have to bear the risk in the deal. As a result, they did not see the real story: that protests against the plant would grow and that the deal would fall apart.
National bias in the more advanced industrial countries has often presented a problem for those in the less developed countries. One of the main sources of information that reporters rely on is stories published elsewhere. The greater resources of publications in the more developed countries enables them to provide seemingly more comprehensive and in-depth coverage, and many reporters in developing countries are accordingly tempted simply to repeat the perspectives developed there. In fact, in many cases, developed country reporters get their information from the same sources available to those in the developing world, for instance the international economic and financial institutions.
It is, of course, neither surprising nor alarming that most sources of information and much of the reporting is biased, incomplete, and/or distorted. One should expect that those who spend money to provide information often have an agenda. The responsibility of the reporter is to try to understand the biases, to detect the agendas, to let readers be aware of the possible distortions, and help readers unravel the conflicting interpretations.
The importance of the media
We want to conclude with a few words on the central importance of the media1 — of good reporting — for developing countries. One of the ways in which developed countries differ from developing countries is in ‘information density’: in developed countries, there are a large number of channels through which information flows between government and citizens, between markets and consumers, between individuals in one part of the country and those in another. With so many channels underdeveloped or blocked in developing countries, it is all the more important that those channels which work well disseminate information which is accurate and unbiased. The absence of think tanks puts additional burdens on reporters to interpret the information. Thus, reporters need to get the information that will help them become more informed and think critically about this information.
There are by now a large number of studies that show the critical importance of the media in both corporate and public governance. Amartya Sen’s work shows, for instance, that countries with a free press are less likely to have famines; other work shows that a free press helps to limit corruption and ensure that individual rights are not abused. The press played a central role in exposing corporate scandals in the US and applies continuing pressures for reform. Interestingly, there is some evidence that a foreign press may be particularly effective, not suffering from what we referred to earlier as ‘national bias’, and less beholden to powers within the country that would resist such exposure. The Financial Times, for instance, was particularly active in exposing the problems in the New York Stock Exchange; even though the Wall Street Journal first noted the excessive salary of the Exchange board’s CEO, it did little to push the story.
Development is a process of transformation2, and such change is best effected through the creation of a national dialogue on the need for change and a consensus behind what changes are required. Countries are too large for everyone to sit together in such a dialogue; it is largely through the media that such a national dialogue occurs. The media helps frame the issues and provides the information which form the basis of such a dialogue. How they characterise a reform may doom even a good reform to a premature death, or may enable a bad reform to continue to be debated. As participants in the debate increasingly realise the power of the press to help shape the debate, pressures will inevitably be brought to bear; reporters will be increasingly confronted with information and arguments by those wishing to shape the debate in particular ways.
p. 1 p. 2
E. Stiglitz, former Senior Vice President and Chief Economist of the
World Bank, is the author of ‘Globalisation and its Discontents’ (2002).
Regarded as the founder of the economics of information, he is University
Professor at Columbia Business School. Stiglitz was awarded the Nobel
Prize for Economics in 2001