Green Ink on the Mediocracy

Milton Friedman and the Media

Milton Friedman, not a man known for pushing the role of the state, wrote in 1955:
    “The education of a child is regarded as benefiting not only the child and his parents, but also other members of society, since some minimum level of education is a prerequisite for a stable and democratic society. Yet it is not feasible to identify the particular individuals benefited by the education of any particular child, much less the money value of the benefit, and so to charge for the services rendered. In consequence there is justification on liberal grounds for the state requiring some minimum amount of education for all children, even though this is above the amount parents would otherwise provide, and for meeting some of the cost of education from taxes imposed on all members of society.”

When the electorate are the ultimate deciders of how we are governed, we all benefit when they make an educated decision.  Doesn’t the media also play an equally vital role in this respect?  The media is how we understand the society we live in, and is where we learn almost all we know about the way we are governed.  

And just like education, as Friedman describes it, there is both a private and a public benefit to media consumption, and the market will not of its own accord cover the cost of the public good.  When we pay for a newspaper, we pay the worth of our own interest and amusement; we don’t pay for the education of society.  There are few of us (and certainly not I) who buy a newspaper as a public service to support the important work of journalists. A profitable media baron knows this all too well, and will not waste resources providing public education.

It is in recognition of this that in the UK we have public service broadcasting, some of it provided with public funds, and all of it regulated to ensure that it serves the public and not just private interests.

In the print and online media there are neither public service regulations nor public funding.  With new technology resulting in media convergence, these private unregulated parts of the media have come into direct competition with the publicly funded and regulated parts. 

The result is that the private business model, which can afford to provide less and less public service as competition has increased, has become even more violently disfigured. News has now been reduced by competitive forces purely to its private entertainment value (equivalent to the amount of education Friedman says “parents would otherwise provide”). Even so, it is still struggling to compete with subsidised websites like the BBC, and that part of the press that has always been able to operate at a loss.

When a business can operate long term at a loss, the only explanation is that it is being subsidised from somewhere else, and in the case of the press, it is private rather than public subsidy.  (See this previous post below for more on this.) 

The result is that the news we read is not only failing in its important mission to serve the public interest, but it is not serving the consumer, or even the advertiser. Rather, its real customers are some other special interest that has some reason to subsidise it that we may not even be aware of.

The pugnacious Guido Fawkes blog is often held up (mostly by itself) as the successful example of the new business model. A nimble three-man outfit that digs for political scandal, it appears to support itself from advertising revenue.  Advertising as a source of funding is compromising in itself, since publications will want to avoid upsetting valuable clients. However, at least it is normally clearly visible to all who it is that must not be offended.

I suspect though (and I have no knowledge), that Guido Fawkes cannot sustain even its three staff from its advertising revenues, but is subsidised through consulting services it provides to other blogs and perhaps even lobbying services.  If so, it would hardly count as independent, and we don’t know what external incentives it may have to pursue or suppress news. In any case, there is no longer if there ever were, an advertising market that could sustain anything close to the level of investment needed to support the healthy and independent press that democracy requires.

According to Michael Wolff, Rupert Murdoch’s solution in the US is to buy all the newspapers.  This is the only way that he can avoid having to compete with loss-making subsidised rivals. Only with a total monopoly is it possible to get consumers to accept the paywalls and cover the real costs of production.

This unlikely ‘solution’ does not address the problem of paying for essential public service journalism, and if it did, it would of course be more ‘Murdoch service’ than public service.  A state monopoly would seem even less attractive. 

So in summary, the problem is that the market will not of its own accord produce independent public service journalism, just as it will not produce adequate universal education. Where the state provides it, it distorts the market to make what the state does not provide even less independent, and if the state provides too large a proportion of the news, then there is risk of an unhealthy government influence.  

There is no ideal solution - there are always conflicts of interest. The solution lies not in eradicating them, but in working to ensure that as many different competing interests as possible are represented in the media. The danger comes when the balance of media control tips too far in one direction. Once it reaches a tipping point it is very difficult to tip it back again, because the regulatory mechanisms for restoring the balance have been captured by the government (as in Hungary) or by the private media (as in Italy).  

There need therefore to be over-cautious limits on media ownership to make sure we never get near the tipping point.  It is often the case that as media corporations approach the permitted limits of market share, those limits mysteriously retreat. There should therefore be strict limits set at the European level to guard against regulatory capture in national governments. Regulatory capture is not a simple process, and can be a function of revenue as well as audience share, so there need to be limits set on both. 

As media organisations grow in size, so too should their public service obligations.  This has three benefits, firstly a ‘diseconomy of scale,’ which makes it easier for new entrants and small outfits to survive alongside incumbent businesses, secondly it provides the essential public service, and thirdly it protects freedom of expression in the smaller news organisations at the same time as curbing corporate bellowing in the larger ones. 

The BBC is not simply another organisation among the private ones. It exists only to serve the public, and therefore provides an essential counterbalance to the interests of private companies, which as we have seen are in some ways aligned against the public interest. As such the BBC has far more onerous restrictions on how it operates than any private company. It always carries a larger proportion of public service duties, and should therefore be permitted a much larger share of audience than its commercial rivals.  This should not be without limit though, and if it exceeds its threshold then elements of it should be spun off.