Covering the markets
Jim Schlosser writes about Thanksgiving 1929 at the dawn of the Great Depression. In it, he makes a quick comparison between news coverage then and now.
The difference now -- as stock markets plunge, banks falter and General Motors nears bankruptcy -- is public awareness of just how bad the economy has become. Bad news saturates the front page, 24-hour cable channels and National Public Radio.
Such gloominess was frowned on in late 1929. Newspapers gave bad news a positive spin. The state labor commissioner talked of a "labor surplus" in the state's big cities. He refused to say "unemployed."
Newspapers tended to quote business people with rosy outlooks or who could easily pinpoint blame. Local business leader Pierce Rucker castigated Wall Street "financiers." They had "exploited" the market by recommending risky stocks in Northern companies while ignoring strong Southern outfits.
Some business people tell me they wish newspapers were still that way. Their position is that news about the downturn in the markets undermines consumer confidence, which, I suppose, is true. Some readers, too, ask for "good" news, almost as relief from the stock declines, joblessness and bankruptcies.
So a recent piece in American Journalism Review by UNC-Chapel Hill professor Chris Roush is interesting and timely. He evaluates how the print media has covered the run-up to the latest market collapse. In this case, newspapers may have changed, but reader habits haven't.
The business media have done yeoman's work during the past decade-plus to expose wrongdoing in corporate America. In fact, a review of the top business publications in the country shows that they blanketed the major issues, from subprime loans to adjustable-rate mortgages to credit derivatives, that caused so much economic pain.
Here's the issue that financial journalism faces: No one likes a nattering nabob of negativism, especially when the stock market is climbing and all of our 401(k) plans are tied to it. So we shut out what we don't want to hear because it conflicts with what we'd like to happen.
Comments (4)
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John,
The Great Depression was a very difficult time for America and the American Press.
However, the Great Depression did not strongly affect Japan. The Japanese economy shrank by 8% during 1929–31. However, Japan's Minister of Finance (MoF) Osachi Hamaguchi implemented the first version of Keynesian economic policies: first, by increasing deficit spending; and second, by devaluing the currency. The MoF believed that the deficit spending could easily be paid for when productivity improved.[citation needed]
The devaluation of the currency had an immediate effect. Japanese textiles began to displace British textiles in export markets. The deficit spending, however proved to be most profound. The deficit spending went into the purchase of munitions for the armed forces. By 1933, Japan was already out of the depression. By 1934 the MoF realized that the economy was in danger of overheating, and to avoid inflation, moved to reduce the deficit spending that went towards armaments and munitions. This resulted in a strong and swift negative reaction from nationalists, especially those in the Army, culminating in an assassination attempt on the MoF, leading to his eventual demise from poor health some months later. This had a chilling effect on all civilian bureaucrats in the Japanese government. From 1934, the military's dominance of the government continued to grow. Instead of reducing deficit spending, the government introduced price controls and rationing schemes that reduced, but did not eliminate inflation, which would remain a problem until the end of World War II.
The deficit spending had a transformative effect on Japan. Japan's industrial production doubled during the 1930s. Further, in 1929 the list of the largest firms in Japan was dominated by light industries, especially textile companies (many of Japan's automakers, like Toyota, have their roots in the textile industry). By 1940 light industry had been displaced by heavy industry as the largest firms inside the Japanese economy. (For more on the Japanese economy in the 1930s see "MITI and the Japanese Miracle" by Chalmers Johnson).
These events helped set the stage for World War II. In 1929, Japan's GNP was about a sixth of the U.S. and its per capita GNP was about a third.[citation needed] However, during the 1930s, the U.S. economy contracted by a third. By 1939, Japan's GNP was nearly half that of the United States, and its per capita GNP was nearly equal to the United States. Faced with having to face two Oceans, it was easy to see how some Japanese planners felt that they had an even chance against the U.S. What they may not have considered is that the U.S. had yet to truly kick in deficit financing for munitions until after 1940 - where upon the United States would experience its own doubling of industrial production in four short years.
Posted on November 27, 2008 9:44 AM
Thanks to Jim, a super story.
Posted on November 28, 2008 6:58 AM
Thanks for a great story. I was born in the middle of the Great Depression. It hit my parents hard and marked them with financial fear. I sure hope that it is only similiarities and not a repeat to our present condition.
Posted on November 28, 2008 3:31 PM
Agreed. Dangerous times we're in.
Posted on November 28, 2008 3:35 PM