Watchdog can muzzle government critics

FINKELSTEIN'S proposals would empower state-appointed officials to silence dissent.

Lobbecke cartoon

SHOULD the News Media Council recommended by the Finkelstein media inquiry be established, it will have no difficulty finding penalties: for severe offences, 100 pages of the inquiry's report; for recidivism, another 100; and for the truly heinous, the entire document, committed to memory. Like capital punishment, that should ensure recalcitrants never do it again.

Not that they will learn much along the way. This report is at war with itself, as it struggles to make a case that contradicts its evidence; yet on those unsure foundations it advances recommendations even more dangerous than they seem to be.

The regulation that the report proposes goes far beyond a low-cost alternative to defamation proceedings. Rather, it aims to curb "obsessive attempts to influence government policy by day-after-day repetition of issues", "opposition to government policy which is commercially-driven" and "treating expert and lay opinion as being of equal value or deliberately selecting opinions opposed to government policy while ignoring opposite views".

As for remedies, they include "to require withdrawal of a particular article from continued publication" and "to require a media outlet to publish a reply by a complainant or other relevant person". And all this without any right of review of decisions on the merits.

To arrive at this extraordinary point, the report relies on three propositions. The first is that the market in which Australian newspapers operate is "highly concentrated", with the result that "media organisations exercise virtually unreviewable power".

But that claim is at odds with the report's own assessment. On no less than 50 occasions, the report refers to intense competition, and the shrinking role of newspapers, in the market for news and information. But that doesn't stop the report from being schizophrenic: for whenever it recommends regulation, it ignores its evidence and asserts consumers lack alternatives.

Paragraph 7.6, for example, claims the market "is highly concentrated", with paragraph 9.21 asserting that reaches "to the point of monopoly in some cities and regions". But paragraph 9.66, explaining why the inquiry rejects some outlandish proposals put to it, firmly states "there is no monopoly in the provision of news. The public has access to radio, television, newspapers and the internet for diverse information, opinions and ideas."

The second key proposition on which the report rests is no better established. Because "the production of news is costly", the report says, "it would be unnatural for newspaper proprietors not to minimise costs by reducing quality to the minimum acceptable to readers". As a result, "the idea that the market can act as the primary mechanism of accountability can be put to one side".

That statement could not survive an acid bath of common sense, much less of economics. After all, producing cars is "costly", but it is hardly irrational for BMW and Mercedes to compete on the basis of quality.

Here too, the report ignores its own analysis. It emphasises newspapers' incentives to attract readers that can be sold to advertisers; and rightly says that "because of the very high up-front cost of producing and distributing a newspaper", publishers have "an incentive to expand readership so long as the additional cost is less than the revenue from extra copy sales and from higher advertising rates that can be charged because of extra readership".

But it is exactly that incentive that underpins competition on the basis of quality: because readers who demand quality have other attributes, including income, that make them a valuable direct revenue source and attractive to advertisers. It is that incentive that has shaped the newspaper industry's development.

In the 19th century, the fixed costs of producing newspapers were low. The result was a proliferation of papers, partisan in their coverage and shoddy in their production. But as high capacity printing presses were invented, the cost of starting a paper increased tenfold, while the number of papers a press could print per hour increased even more. At the same time, the cost of newsprint fell, thanks to improvements in transport and manufacturing. These changes induced widespread industry consolidation. But they also made it crucial for papers to secure a wide audience, thus shifting the balance from partisanship to an emphasis on the objective, timely and accurate presentation of news. The rise of display advertising gave that shift further impetus, entrenching the shape of the modern press.

Competition, even between few market participants, ensured those incentives had even greater bite. The Washington Post pursued Watergate so as to stay ahead of The New York Times; as for The New York Times, the threat that the Pentagon Papers would go elsewhere impelled their immediate publication. With even more contending channels today, those pressures are only stronger.

But the report seems ignorant of all this. Rather, having dismissed the role of market forces, it draws its third proposition, which is the need for far-reaching regulation. Yet here too it lurches into inconsistency. It emphasises that "news generates 'external' social benefits beyond the private benefits to producers", with the risk that it will be undersupplied. But if so, penalising its provision, thus aggravating any deficiency, makes little sense.

Nowhere is that tension starker than in the recommendation that bloggers be regulated. For the report pays no attention to the social cost of deterring these sources of news that have more fragile incentives than career journalists to generate information. Regulation may sharply reduce amateur journalism's comparative advantage, which lies in its diversity and unruliness.

Overall, it seems difficult to believe the report's proposals could be taken seriously. Unfortunately, the intellectual limitations of an undertaking are one thing, its political efficacy quite another. Since times immemorial, governments have sought to muzzle mass communications they did not control. And with an election approaching, Labor could well seize on threats of expanded regulation to intimidate the press.

That the Finkelstein report provides it with a feast of nasties on which to draw reflects a process tarnished in both its conception and execution.

Yes, there are real issues about the future of the print media that deserve serious investigation. This report, however, falls well short of meeting that need.

Background material and references can be found at http://blogs.theaustralian.news.com.au/henryergas/