In the fallout of the 2008 global financial crisis, the financial media were criticised for failing to fulfil a watchdog role, for boosting the global asset boom that contributed to the crisis, and for exacerbating the crisis when it happened.
Among the strongest accusations was that financial journalists had been captured by the small coterie of elite sources they used for information, and by a newsroom culture that favoured free markets and encouraged a pro-business attitude.
The corollary of this was that perceived doomsayers and others providing alternative viewpoints and warnings were left out of the debate. While people have called out these trends, there has been little hard evidence measuring the extent of the problem.
A captured sector
As economic policies have favoured deregulation and minimal regulation of financial markets, they have encouraged a process known as financialisation, which prioritises the finance industry and related interests at the expense of all others. The general public has been actively encouraged to become players in the finance marketplace, either directly or indirectly through loans, credit cards and savings.
Yet, while this has been happening, the public’s financial knowledge has not kept pace. Nor has the mainstream financial press concerned itself with the task of increasing general financial literacy. In fact studies suggest the trend is in the opposite direction, catering even more exclusively for finance insiders.
In the US, for instance, Columbia Journalism Review blogger Dean Starkman notes the predominance of what he calls “access reporting” – providing information to investors and corporate elites – over “accountability reporting”, which investigates corporate misdeeds and developing trends.
In Australia, a study by Melbourne University academic Andrea Carson has shown that while there has been an increase in press investigations overall, there has been a decline in investigations that deal with big companies.
Is financial news addressing the public interest, or the interests of the financial elites? Are there observable trends over the years?
To answer these questions we conducted a comparative and longitudinal study of mainstream financial journalism in three countries during three periods of economic crisis. We looked at the coverage of the New York Times in the US, the Guardian in the UK, and the Sydney Morning Herald in Australia during: the 1990 recession, the Dot Com boom of 2000 and the global financial crisis (GFC) of 2007-8.
We analysed the number of articles that provided warning and discussion about an impending downturn in the two years before each crisis, the sources that framed the discussion, and the kinds of topics and narratives that shaped the coverage pre- and post-crisis.
Our results back up concerns that financial journalism standards have been falling.
There has been a narrowing of the range of sources used to explain events, with public relations more and more predominant. There is less context and critique and little or no warning given to the public of problems that may be looming. These tendencies worsened from case study to case study.
Of the 1990 recession data set, 60% of the coverage appeared before the recession was officially called and the discussion was broad, with a lively debate about the implications of the deregulation of the finance industry. In the two years before the bursting of the Dot Com bubble, 20% of the data set discussed various features of the boom and contemplated the possibility of a potential bust. But by the time of the global financial crisis only 8% of articles in the data set appeared before August 2007, at which time coverage suddenly explodes.
Also, by the time of the Dot Com boom and GFC the range of topics that defined and framed each crisis had narrowed, dominated now by two master narratives. First, the “new economy” idea pushed the concept of the end of financial booms and busts – something that was not completely disproved until the GFC. The GFC is shaped by the narrative of a natural disaster, which spreads like a disease from the US.
The research also found a difference in approach between financial and economics journalists, with the latter providing the most warnings, more breadth and explanations of trends.
Part of a bigger crisis
The crisis in financial journalism is but one dimension of the crisis in professional journalism generally. The traditional business model for news is under threat from reduced revenues, while the 24/7 production process directly impacts the quality of reportage. Conflicts of interest between business and media further impede the capacity and desire for critique that may damage the free market. All the evidence suggests that news quality has taken a hit and it is the general public that suffers.
Without financial journalism providing the context and critique required to understand the complexities of the financial environment, we must explore new opportunities for fair and fearless scrutiny of a sector which now impacts everyone.
The paper “Reporting the Global Financial Crisis: A Longitudinal Tri-nation Study of Mainstream Financial Journalism” will be published by Journalism Studies in August 2015.