Want to understand the economy? Don't read the press

Financial crimes and woes are severely underreported in the media, and in many cases, completely overlooked.

    Economists tend not to be very good at economics, not noticing the $8 trillion housing bubble [GALLO/GETTY]

    New York, NY - Financial journalists are supposed to be among the most educated and savvy about the economy. Many have either worked on Wall Street, or have advanced degrees in economics and business.

    Over the past few years, their "news hole" has expanded significantly as the financial crisis became a top global news story. As reporting on workers declined, reporting on business surged because it tends to attract corporate and institutional advertising.

    And yet is the reporting we are getting on financial issues better than ever? Is it more trustworthy, and better informed?

    Unfortunately, some of the same patterns that invariably lead to misunderstandings remain.

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    Here are three reasons:

    1. An over-reliance on official sources skilled at spinning data to bolster politically motivated "consumer confidence", and create impressions, not backed by fact.

    2. A tendency to quote and rely on experts and luminaries with questionable track records and personal or ideological agendas.

    3. A tendency to look at "progress" through the eyes of people in power or in powerful economic institutions with the assumption that if they do well, wealth/prosperity will trickle down into the lives of ordinary people.

    Here are some examples.

    Last week, the press dutifully reported the "good news" that US economy had created 200,000 new jobs and that the unemployment rate had dropped. There was practically a celebration on the editorial pages.

    Sounded good. Most readers stick with headlines on subjects they find dense or inaccessible and get little more than a quick take. Sometimes, the information is packaged in easy-to-read graphics, especially when the arrows point up.

    It can all be misleading.

    Economist Dean Baker writes a regular column on the massive mistakes in economics reporting. He calls it Beat The Press. He wrote:

    "This was an oversight of astonishing importance, sort of like a physicist not noticing gravity."

    - Dean Baker

    Economists tend not to be very good at economics. We know this because almost none of them were able to see the $8 trillion housing bubble that was driving the economy from 2002 to 2007. This was an oversight of astonishing importance, sort of like a physicist not noticing gravity. 

    Their failure to understand the economy has led to enormous misreporting of the December jobs data. There are two basic problems. They fail to accurately put the job growth numbers in the context of the economic downturn and they badly misread the December data leading them to overstate the true growth path we are now on.

    He goes on to detail the errors with the most obvious one - mistaking holiday seasonal jobs for permanent employment:

    The 200,000 jobs number reported for December was distorted by unusual seasonal factors, the most obvious of which was the 42,200 job growth reported in the courier industry. This is primarily companies like FedEx and UPS who hire additional workers to deal with holiday demand.

    There is another dimension to all of this noted by former Labour Secretary Robert Reich who assumes the numbers are right:

    This little bit of good news is likely to raise the hopes of the great army of the discouraged - many of whom will now start looking for work. And what happens when they start looking? If they don't find a job (and, let's face it, the chances are still slim) they'll be counted as unemployed.

    Now on to the "experts" who turn up again, and again, as analysts on the data. The Financial Times is a leading source on the economy. It has just begun a series that finally admits capitalism is in a crisis:

    Greedy bankers, overpaid executives, anaemic growth, stubbornly high unemployment - these are just a few of the things that have lately driven protesters on to the streets and caused the wider public in the developed world to become disgruntled about capitalism. The system, in all its different varieties, is widely perceived to be failing to deliver.

    But to whom, then, does the FT turn to for analysis? None other than Larry Summers, who helped create the failed pro-business Obama policies. his argument, predictably, is: things are not as bad as they look. We merely need a "reinvention".

    Summers, a master of obfuscation and regurgitating conventional wisdom, asks:

    So how justified is disillusionment with market capitalism? This depends on the answer to two critical questions. Do today's problems inhere in the present form of market capitalism or are they subject to more direct solution? Are there imaginable better alternatives?


    Once the news is reported, it's turned over to the opinion writers to kick it around. Irish journalist Phillip Pilkington thinks that for the most part they don't get the depth of economic problems either. He writes:

    Opinion writing, aside from being a comfy way to make a living, gives the writer greater stylistic freedom, and the challenge and opportunity of making a dent in readers' views. The problem is that you have a limited amount of space and, often, an easily distracted readership. Now, that's fine for something like, say, an observation about an upcoming election or the loutish behavior of a major sports figure but it is a patently awful format from which to raise Big Questions.

    One of the big questions that tends to get downplayed are financial crimes. Did you know there are more than a million such crimes that are listed in the annual report of the Financial Crimes Enforcement Network (FINCEN)?

    In the past year, FINCEN tracked 1,446,273 Suspicious Activities reports. This deals with transactions that financial institutions know, suspect, or have reason to believe may be related to illicit activity.

    It does not cover other crimes that banks and investment institutions commit with a claim that they are legal.

    Financial journalists rarely report about these crimes unless someone big is being investigated or prosecuted. Hence the public doesn't really know the extent of the corruption of the system.

    The consequence is that news about the economy is routinely unreliable, written without background and context and incomprehensible to that part of the public whose lives are getting worse.

    News Dissector and blogger Danny Schechter called for protests in his film Plunder: The Crime Of Our Timeexposing financial crimes on Wall Street. Comments to dissector@mediachannel.org

    Follow him on Twitter: @DISSECTOREVENTS

    The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

    SOURCE: Al Jazeera



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