SO YOU WANT TO BE AN

ECONOMICS JOURNALIST?
 5

The Role of the Media in the Formulation of Economic Policy

Ross Gittins”
Economics Editor
The Sydney Morning Herald

Abstract 1. Introduction

This article examines and comments on the re- Dr Andy Stoeckel tells a story of visiting the
porting of economic news in the Australian me- editor of The Economist and asking him why he
dia, the influence on that reporting of media had taken the backward step of abandoning his
judgments about newsworthiness, the relation- career in Treasury to become a journalist. The
ship between economic reporting and the $- editor explained that, as an econocrat, he had
nancial markets, and governments’ use of the always had trouble getting his minister to take
media in the economic policy process. Finally, much interest in the policy memorandums he
it focuses on the role of economic commenta- wrote. But his minister was always asking his
tors in the quality press, their relations with the opinion of articles the minister had read in the
bureaucracy, their part in the rise of economic newspapers that morning. He’d decided he
rationalism and the nature of their influence on would have more influence if he became a
the formulation of economic policy. It con- newspaper economist.
cludes that when the commentators as a group That is an anecdote to warm the heart of
take up causes and pursue them over sustained every economics editor. An honest portrayal of
periods, they help to create a climate of elite the media’s role in the formulation of econ-
option which emboldens governments to un- omic policy, however, requires me to range
dertake politically diflcult policy reforms. much more widely and to reach a conclusion
much less flattering to journalistic egos. We
should start by looking at the media’s role in
general, before progressing to the particular in-
stance of their role in economic policy forma-
tion.

2. The Media’s Role

In referring to the media I’m limiting myself to

the news media, but remembering that there are
many mediums for news: not just the alleged
quality press, but also the tabloid press, news
magazines, business magazines, radio, televi-
sion and wire services.
In the media’s view of their own role, they
are concerned primarily with the reporting of
news: the recording of facts about events and
* This article is based on a public lecture delivered at the
University of Melbourne in August 1994 as part of the the recording of opinions expressed by people
economics department’s journalist-in-residence program. with some form of authority. Only secondarily
6 The Australian Economic Review 4th Quurter 1995

do they express their own opinions about the which messages they will carry. It is imposs-
news, and then usually in a way that is clearly ible for the media to tell us all that is happening
delineated from the news, such as an unsigned in the world, nor would we want to be told. So
editorial, a labelled ‘comment’ or a host’s con- a process of selection is inevitable. But the
tribution to a talk-back radio session. So the media not only select the information they will
media see themselves as essentially neutral pass on, they also decide the length of the mes-
purveyors of information, the carriers of mes- sage and the prominence it will be given.
sages between one part of the community and All these decisions are based on the per-
another. ceived ‘newsworthiness’ of the information in
In reality, the media’s role is not as neutral or question. Judgments about newsworthiness are
objective as they like to pretend. It is true, how- highly subjective and not easily reduced to a
ever, that the media’s power is not exercised list of immutable principles. I think the key to
solely by themselves and in their own interests. understanding the principles of news selection,
It is available to be used by others, and many however, is to remember-as so many aca-
institutions, interest groups, businesses and in- demic analysts of the media seem to forget-
dividuals regularly avail themselves of the op- that, with the exception of the ABC and SBS,
portunity. the news media are profit-making institutions.
Chief among those who seek to use the Either directly (as in the case of the press) or in-
media for their own purposes are, of course, directly (as in the case of the free-to-air elec-
governments. Government ministers and their tronic media) they are selling their news. So the
departments employ a small army of press sec- news they select is the news they believe their
retaries and public relations officers to ‘man- customers will most want to buy. These com-
age’-or, to be blunt, manipulate-their rela- mercial considerations introduce a host of bi-
tions with the media. Governments use the ases to the selection of news.
media to convey messages to the electorate, The essence of newsworthiness is the per-
and interest groups within the electorate. They ceived interest to the audience. (I say perceived
also use the media for information coming in because journalists and their editors are able
the opposite direction. It follows that the media only to guess at what their audience will find
are used also by members of the public and, interesting. In this guessing game they are in-
more particularly, interest groups to convey fluenced heavily by the guesses being made by
messages to governments. Messages from the their competitors.) This means that news selec-
public are conveyed by means of talk-back ra- tion is amoral: the search is for what people are
dio, letters to the editor, vox pop reporting and interested in, not what they should be interested
opinion polling. in. Importance is one measure of what is inter-
Media workers are perfectly aware that they esting and the media are forever yielding to the
are ‘used’ in this way by governments and temptation to raise the interest-value of events
powerful sectional interests and are, within artificially by exaggerating their importance.
limits, quite unconcerned. They see themselves However, what is important may not be very
as message carriers. The catch, however, is that interesting and vice versa. In such cases the in-
all interest groups don’t have equal access to teresting will almost always crowd out the im-
the media’s broadcasting service; among indi- portant.
viduals, the inequality is even greater. To have Aided by Tiffen (1989), we can list some
your message accepted for broadcast, it must views that are widely held by journalists and
be judged ‘newsworthy’. editors and which influence the selection of
news: people are more interested in other peo-
3. Newsworthiness and Media Biases ple than in concepts; they relate more to the
concrete than the abstract; they are more inter-
The obvious weakness in the media’s percep- ested in what people do than in what they say.
tion of their role as neutral carriers of messages It follows that governments invariably get
is that, unlike most messengers, they choose more media attention than oppositions. Bad
 Gittins: Role ofthe Media in the Formulation of Economic Policy 7

news is more interesting than good news. Con- There is no country in the world that is as ob-
flict is more newsworthy than co-operation; sessed with economic issues as Australia. In other
costs get more attention than benefits; the countries, the front pages of their newspapers are
media tend to highlight problems rather than full of stories about civil wars, riots, racial ten-
solutions. sion, constitution crises, etc. Ours are filled with
balance of payments statistics, unemployment
In their concern to interest their audience, the
statistics, Budgets, etc. This is not an original ob-
media tend to pander to what they perceive to servation-I have heard it again and again from
be their audience’s prejudices. One conse- overseas visitors.
quence of this is a lack of logical consistency, [Macfarlane 1994, p. 11
especially in movements between the general
and the particular. In general, government There seems little reason to doubt that the in-
spending is likely to be portrayed as wasteful creased quantity of economic reporting reflects
and excessive, but decisions to cut particular increased demand for information about the
items of spending-say, to close schools or economy on the part of the media’s audience,
hospitals-are usually portrayed unfavourably. though this is difficult to measure because all
If you find this (partial) catalogue of the bi- media outlets present economic news as part of
ases inherent in the media’s selection of news a package of other news. It’s hard to believe
shocking and deplorable, I offer one comment that the media could go on foisting signifi-
in mitigation: the media’s failings mirror the cantly more economic news on their audience
failings of their audience, which are the failings than it wishes to receive, though it’s not hard to
of human nature. And this is no accident; it re- believe that this news could be presented in
flects the media’s primary motivation, which is ways that the audience found more useful.
commercial. However, it is possible that the increased sup-
ply of economic news by the media has added
4. The Media’s Coverage of Economics to demand. The media can’t impose an agenda
on an audience that is uninterested and unsym-
This general discussion of the media’s role and pathetic. But they can, and often do, reinforce
the biases that affect their performance of that and heighten an interest that is pre-existent.
role bears directly on the media’s coverage of As to the quality of all this reporting, the
economics. That coverage is dominated by the kindest judgment is that it is very mixed. It is
reporting of economic events, rather than ex- subject to many of the biases I have outlined:
pressions of pure economic opinion. Those exaggeration of importance, over-emphasis on
events include the release of economic statis- the hip-pocket implications (real or imagined),
tics, movements in prices on financial markets, greater prominence for bad news and reflection
government policy announcements, the publi- of the audience’s prejudices and mispercep-
cation of government reports and speeches by tions. As an example of the latter, falls in the
politicians and econocrats. Economic reporting exchange rate are invariably portrayed as a bad
is carried by all sections of the media: news- thing. As an example of the over-emphasis on
papers, wire services, radio and television, the hip-pocket-and consequent trivialising of
though less so by the (mainly weekly) news economic news-I remember that the media
magazines and business magazines. Outside reaction to the Campbell Committee’s report
the four or five organs of the quality press, the on financial deregulation focused almost ex-
reporting is done mainly by journalists without clusively on the shocking suggestion that the
economic training, much of it by Canberra gal- Government remove the ceiling on home-loan
lery journalists as an adjunct to their political interest rates.
reporting.
There is little doubt that the quantity of econ- 5. The Media and the Financial Markets
omic reporting has increased considerably over
the past decade or so. A deputy governor of the Much of the increase in economic reporting
Reserve Bank has remarked that: seems to be linked with the deregulation of
8 The Australian Economic Review 4th Quarter 1995

financial markets. A symbiotic but in some re- In that episode, market participants may not
spects unhealthy relationship seems to have de- have begun with a unified view that yields were
veloped between the media and the markets. rising because of market fears about rising in-
Both institutions have a focus on daily occur- flation, but by the time the media had finished
rences-that is, they are intensely myopic. telling all participants about the inflation fears
Both institutions have a vested interest in the of some participants, all participants were in no
volatility of economic indicators and financial doubt about why yields were rising.
prices-because it gives the media news to sell This means, too, that the media play an im-
and increases the markets’ opportunities to portant part in establishing the conventional
make profits (or losses) through trading. And wisdom-the ex-post rationalisation-as to
both are concentrated in the same city, Syd- why sustained movements in market prices
ney-increasing the opportunity for social in- have occurred.
teraction. The two institutions feed off each
other. News editors seem to have acquired an 6. A Critique of Economic Reporting
exaggerated impression of the wider economic
significance of relatively small and often tran- It can be argued that we suffer from too much
sitory movements in financial prices. These economic reporting, that we are taking the
movements are described in colourful lan- economy’s temperature too often. The promi-
guage: exchange rates and interest rates perpet- nence given to monthly and quarterly econ-
ually plunge, dive, leap and soar. The markets’ omic indicators has outstripped the ability of
tendency to react to economic indicators adds the public (and even of some reporters) to make
frisson-newsworthiness-to those events; sense of the information they are being bom-
any indicator that is closely watched by the barded with. Many seasonally adjusted indica-
markets will be widely reported by the media. tors are quite volatile from month to month; a
The media can’t merely report movements in surprising number move in a saw-tooth pattern.
market prices, they have to develop the story The public is being told that the economy is
by offering an explanation of why prices overheating one week and losing steam the
moved in the direction they did. Usually, this is next. This is the ‘thrills and spills’ approach to
done by junior financial reporters who patch economic reporting. It adds significantly to the
together a consensus view drawn from phone ‘noise’ in which policy-makers and policy ad-
calls to a handful of market participants. Then visers work, exposing them to almost continu-
the media take the story further by drawing out ous pressure and temptation to adjust policy
the possible hip-pocket implications for house- settings.
holds and speculating about a government pol- This is not to imply that we would be better
icy response. off if indicators were published less frequently.
The media’s exaggerated view of the wider Though the public might receive fewer con-
economic significance of movements in market flicting messages about the state of the econ-
prices has given the markets an exaggerated omy, so would those better equipped to inter-
view of their own importance. As well, the me- pret such messages, including the managers of
dia’s focus on the markets has increased the the economy. That would be too high a price to
markets’ ability to influence policy. pay. The ideal solution would be for the media
The media are an important channel by to pay more heed to the injunction of econom-
which movements in market prices impact on ists-and, indeed, the Statistician-not to
the real economy via confidence effects. It may make too much of ‘one month’s figure’. They
be that these confidence effects are as signifi- could do so simply by focusing their reporting
cant as the actual movements in prices. on the Statistician’s trend estimates. But I fear
The media are also an important mechanism this is a pious hope. The media have a vested
by which market participants communicate interest in volatility and, because they are
with each other. Take the sharp rise in long- daily, will always emphasise the incremental
term bond yields that began in February 1994. information simply because it arrived today.
 Gittins: Role of the Media in the Formulation of Economic Policy 9

A related criticism of economic reporting is mitted to perform this larger role, when their
that the media’s preoccupation with day-to-day work isn’t adequately supervised, and when
movements in financial prices and month-to- journalists stray from providing explanation
month movements in macro-economic indica- and background to expressing ‘pure’ opinion
tors is crowding out reporting and analysis of of approval or disapproval.
the forests of economic reports being published I might add that the print media’s increasing
by government committees, parliamentary use of specialist economic journalists to pro-
committees, departments, research bureaus, vide analysis and opinion represents an attempt
private think-tanks and university research to differentiate their product from that of the
centres. In other words, short-term macro- electronic media and to exploit their medium’s
economics is crowding out micro-economics. comparative advantage. Newspapers are no
The public, and even professional economists, longer first with much of the economic news.
have neither the time nor the money to buy and Official economic statistics, for instance, are
read government reports. They rely on the released at 11.30 am. So by the time readers
press to provide them with summaries and pick up their newspapers the following mom-
analysis of reports, and alert them to the exist- ing, they are already well aware of the main
ence of reports of particular interest that they facts of the CPI, the unemployment figures or
may wish to get hold of. A report that isn’t read whatever. The press has to give its readers
makes a negligible contribution to the econ- something more than the main facts: more de-
omic debate. But many reports go virtually un- tails, more explanation of what the facts mean
reported and most go under-reported. In this re- and more discussion of the wider ramifications.
spect the quantity of the media’s economic
coverage doesn’t make up for its low quality. 7. Governments’ Use of the Media in the
The media’s traditional perception of them- Economic Policy Process
selves as engaged in the objective reporting of
facts, with no intrusion of journalists’ opinion, In considering the media’s role in the formula-
is nowhere more inaccurate than in economic tion of economic policy, we should start with
reporting, particularly in the quality press. Eco- the use that policy-makers and policy advisers
nomic reporting is highly interpretive; opinion make of the media. First, they use the media to
is not always restricted to separately labelled ‘sell’ their economic policies; to generate pub-
‘comments’, but often is mixed in with the lic and interest-group understanding of, and ap-
facts in news stories. When Dr Chris Caton re- proval of, their present and proposed policies.
turned to Australia after working for many It’s essentially a process of explanation: ex-
years in the United States, he was struck by the plaining the objectives and mechanisms of pol-
impression that, whereas in America the media icies; explaining the need for unpopular meas-
reported the game, in Australia they tended to ures. This can be democracy at its best-
join in the game. encouraging an informed ‘economic debate’-
I think the Australian approach can be de- or it can be more manipulative, conditioning
fended-up to a point. The Australian press is expectations and softening up the electorate for
more advanced than the US press in the belief unpalatable news. In the run up to a Budget, for
that economic news is too complicated for it to instance, it’s usual to leak details of most of the
be reported adequately by generalist reporters. unpopular measures, but keep the popular
Facts have to be selected and they ought to be measures for unveiling on the night, thus in-
selected by journalists with some understand- creasing the likelihood that the media’s initial
ing of the subject. Once a breed of qualified, reaction to the Budget will be favourable.
specialist economic journalists has been as- Second, ministers and their departments
sembled, it is appropriate for them to give their sometimes use the media to help fight their bat-
non-economists readers some guidance as to tles in Cabinet by persuading economic com-
what the facts mean. Problems arise when un- mentators to take up the cause. This tactic can
qualified or inexperienced journalists are per- be counterproductive if Cabinet decides it’s
10 The Australian Economic Review 4th Quarter 1995

being got at. Many leaks of Expenditure Re- decisions’ and ‘expressing yourself‘ each
view Committee decisions to cut spending pro- scored only about 20 per cent. And ‘champion-
grams represent attempts by the particular ing particular values and ideas’ scored only 15
department to overturn the decision by mobi- per cent.
lising the affected interest groups. Here you see I don’t doubt that these results are a reason-
an example of a common transaction between ably accurate reflection of the motivations of
journalists and people within government. The business and economic reporters-and, indeed,
leakers’ motive is highly self-interested and journalists in general. They see themselves as
their behaviour is clandestine. The journalists informers, not reformers. But our select band
are well aware of this but don’t care because, of economic commentators are not reporters,
by co-operating, they are ‘imparting informa- they are columnists. And most economic com-
tion to others’ and ‘uncovering and publicising mentators undoubtedly do see influencing pub-
problems’. What’s more, they know the story is lic policy decisions, influencing the public and
highly newsworthy and will attract the envy of championing particular values and ideas as im-
their colleagues! portant aspects of their job. They are the group
Third, policy-makers use the media for feed- of journalists most prone to campaigning on is-
back from the electorate and interest groups. sues-certainly more prone than political com-
Kite-flying is just one form of feedback. The mentators. They feel free to take sides on pol-
media reaction to an Industry Commission re- icy issues because they d o stick to issues and
port will have an influence on whether its rec- don’t expect to be seen as merely political par-
ommendations are accepted. tisans.
With respect to policy, economic commen-
8. The Role of Economic Commentators tators see themselves as having two main
roles: to try to explain government economic
Now let’s turn to the role of the print media’s policy and to try to change government econ-
economic commentators-a very small group omic policy. Some individuals give more
of economics editors and other professional weight to explaining, some to changing. To a
columnists who can be numbered on two commentator, explaining comes under our
hands. (Though Australian editors prefer to earlier heading of ‘imparting information to
employ their own commentators, the two na- others’. When commentators seek to explain
tional dailies have in recent years added the the economic policy of the government of the
contributions of a few outside economic col- day they are acting on the other side of the
umnists, mainly former politicians and aca- policy-makers’ and, more usually, the policy
demics. Their motive is to increase and widen advisers’ efforts to use the media to ‘sell’ gov-
the range of views, but not necessarily to pro- ernment policy. When commentators seek to
vide contrary views to those of their profes- change economic policy they often do so with
sional columnists.) the tacit encouragement of policy advisers,
A survey of about 100 business, financial who believe their political masters need to be
and economic journalists conducted in 1991 by encouraged in good works.
the Australian Centre for Independent Journal- As economists, economic commentators are
ism at the University of Technology, Sydney not original thinkers doing original research; if
(ACIJ 1993) asked them how they rated vari- they were, they’d be in universities. They write
ous aspects of their work. More than 90 per on a wide and ever-changing range of econ-
cent rated ‘imparting information to others’ as omic policy issues, whereas most econom-
either essential or very important. ‘Uncovering ists-academic and practicing-are highly
and publicising problems’ scored 80 per cent specialised. They work by following economic
and ‘being among the first to know what’s developments closely and keeping in constant
going on’ scored 55 per cent. But motivations consultation with other economists, who pro-
such as ‘influencing public policy decisions’, vide them with information, explanation and
‘influencing the public’, ‘influencing business intellectual stimulus. Because they write
 Gittins: Role of the Media in the Formulation of Economic Policy

mainly about the state of the macro economy 9. The Economic Commentators and
and about policy issues, their chief contacts are Economic Rationalism
with the bureaucratic policy advisers in the
Treasury, the Reserve Bank, the Industry Com- It would be a mistake to think of economic ra-
mission and other government departments and tionalism as a phenomenon that sprang from
agencies. These ‘contacts’ provide a more de- nowhere soon after the election of the Hawke
tailed, sophisticated and frank exposition of the Government. What occurred in the 1980s was
reasoning behind policy decisions, and of the a coming to the fore of views that had long
pros and cons of policy options, than is pro- been part of the Treasury Line and which had
vided publicly by their political masters. The long been shared by the older economic com-
advent of a small army of ex-econocrats em- mentators-as witness, their long-standing
ployed in the financial markets has, however, crusade against protection and their criticism
made the press commentators less reliant on of the Arbitration Commission, wage indexa-
bureaucratic contacts for macro-economic is- tion and the arbitration system. Equally, it
sues. In my experience, commentators would would be wrong to see the rise of economic ra-
like to make more use of academic contacts, tionalism as a purely Australian phenomenon
but generally find that they aren’t familiar with (though just as wrong to see it as a local cover-
the latest developments (which are the com- version of Reaganomics or Thatcherism). Eco-
mentators’ focus) or aren’t sufficiently ‘ap- nomic rationalism-a term that was in cur-
plied’ (and it’s surprising how often they seem rency among econocrats long before it was
to be overseas when you need them!). All this picked up by Michael Pusey-is the local man-
may help explain why it’s uncommon to find ifestation of the world-wide revival of econ-
commentators running a line consistently criti- omic liberalism, with academic antecedence in
cal of the Treasury or the Reserve Bank- new classical economics and public-choice
though it’s not uncommon to find them consist- theory. Here, as elsewhere, it was fostered by a
ently critical of the government of the day. It decline of faith in the effectiveness and suffi-
should also be remembered that there are well- ciency of traditional demand management. As
established policy divides within the bureauc- for the reform that got the ball rolling in Aus-
racy-such as Treasury versus the Department tralia, financial deregulation, we were neither
of Industrial Relations on wage-fixing, and the the first nor the last country to make such
Industry Commission versus the Department of changes and to make them in response to global
Industry on industry policy. developments that left us little choice.
Despite their close contacts with the bu- Even so, it can fairly be said that economic
reaucracy, economic commentators are free rationalism and its policy expression, micro-
agents. They make their own decisions about economic reform, were ‘sold’ by the econo-
the extent to which they will rely on govern- crats to a Hawke Cabinet composed of minis-
ment sources for column ideas, they choose the ters who were younger, better educated, more
particular econocrats to whom they talk, and economically literate and more disposed to-
they decide which government policies they wards policy reform as such than any Cabinet
will help to sell and which they will oppose. In- that had gone before. With a few notable ex-
deed, they like to see themselves as fearless ceptions, the economic commentators needed
critics of government policies and perform- little persuading to join in the selling job. They
ance. As a class they have a pathological fear of sold it-and still sell it-to their readers and to
being seen as apologists for the government of the Government’s caravan. Why were they
the day. When they view the Labor Govern- such willing recruits to the cause? Partly be-
ment’s many reforms of the past decade they cause of their close links with the bureaucrats.
would like to believe not that they helped it Also because, though all economists are sus-
achieve those reforms, but rather that they ceptible to intellectual fashion, economic jour-
obliged and persuaded it to make them. The nalists are, by the nature of their jobs, more
truth, no doubt, is in the middle. susceptible than most. The news media are
12 The Australian Economic Review 4th Quarter 1995

about the latest; economic journalists have to worker most active in the expression of econ-
be up with the latest. Someone who swims per- omic opinion is a very different group: the
petually against a popular tide is easily seen- radio talk-back hosts. It’s been observed that
by readers and editors-as just not up with it. whereas the views of the newspaper commen-
There is, however, a more fundamental expla- tators tend to be very orthodox, restrained and
nation: the economic commentators and the intellectually respectable, the views expressed
econocrats went to the same university. They by the talk-show hosts are often ill-informed,
had the same schooling in neoclassical econ- strident and populist. Why should this be so?
omics; they shared the econocrats’ world view. Much of the explanation lies in the two media’s
At the time most of the policy changes were differing ‘target markets’. The quality press
implemented the economy was growing (and its advertisers) aims for the upper socio-
strongly. Doubtless there were dissenting economic groups, including business and pro-
views, particularly among academics, but they fessional people and the growing minority of
were muted. The media did little to seek them the population with university educations. It is
out but, to my knowledge, neither did they de- at the cerebral end of the media spectrum and it
cline to publish the contributions of experts acts accordingly. In contrast, commercial radio
anxious to have their dissent recorded. Editors (and its advertisers) aims for a mass market of
are not averse to controversy. The great reac- ordinary Australians, people with few intellec-
tion against economic rationalism came in ret- tual pretensions. Newspaper commentators
rospect, after the recession of the early 1990s aim to inform their readers; talk-back hosts aim
was under way and when it was easy to claim to provoke a lively exchange of listeners’
that economic rationalism had not only failed, views by giving them something to be indig-
but actually had caused the recession. As part nant about. The broadcasters seem to have dis-
of the post-mortem, Schultz (1992) asked: covered that the opinions which attract the
‘Where are the Alternative Views?’. That is a most calls (and listeners) involve intolerant
question to be asked of the possessors of alter- populism; ‘the government’ is an easy mark.
native views, and of editors responsible for pre- Talk-show hosts cover economic issues among
senting a range of views, not just of the econ- a host of others; few if any would have econ-
omic commentators. For the most part, the omic training; many are not actually journal-
commentators’ views were not alternative. ists-that is, they have no background in
What I would concede is that the commenta- factual reporting. In contrast, newspaper econ-
tors participated in the ‘over-selling’ of the omic commentators specialise in economics
benefits of the early micro-economic re- and have economics degrees. Their ease of ac-
forms-in particular, financial deregulation. cess to senior econocrats, and the frankness
They failed to foresee the extent of the transi- with which econocrats speak to them, is partly
tion problems and adjustment costs that would a function of their contacts’ judgment as to the
arise. But they were not alone in this, and the journalists’ depth of understanding of econ-
Reserve Bank has made similar admissions omics. This is a powerful factor in keeping
(Macfarlane 1991).It may be that any fears that their commentary intellectually respectable.
arose in the commentators’ minds were sup- How influential are the talk-show hosts on
pressed in the interests of ‘making the sale’; it’s economic issues? I believe that, as a group and
more likely that they simply lacked the percep- in concert with their callers, they are quite in-
tion to foresee the shoals that lay ahead. fluential, though in a strictly negative way. If,
after a policy has been announced or foreshad-
10. The Influence of the Economic owed, the callers run loud and long in their op-
Commentators position, not infrequently the policy will be
abandoned or modified.
I have focused so far on the role of the small How influential are the print media econ-
group of economic commentators employed by omic commentators? More than they would ad-
the quality press. But the other class of media mit, but less than you may imagine. Readers’
 Gittins: Role of the Media in the Formulation of Economic Policy 13

minds are not blank pages on which journalists conventional wisdom to which the policy-
write. Newspapers offer a smorgasbord of makers respond.
stories from which readers pick according to It follows from this that economic com-
their tastes. Readers tend to read more for re- mentators are probably more influential in
inforcement than enlightenment; they keep matters of micro-economic policy than macro-
reading the things they agree with and stop economic policy. You may think that commen-
reading things that make them feel unconifort- tators, in concert with the financial markets,
able. They tend to remember things that fit with exercise significant influence over the size of
their pre-existing belief structure and tend to the deficits governments budget for. But a
forget things that don’t fit. They absorb what former deputy secretary in the Prime Minis-
they read through the filters of their own val- ter’s Department (Sims 1994) has observed
ues, prejudices and experience, and frequently that politicians are well aware of the ease with
take away a meaning quite different from the which they can influence the yearly debate on
one the author intended to convey. the size of the deficit. ‘Deficit discussion rarely
Commentators’ ability to influence public seems based on objective assessment, but in-
opinion is further reduced by the fact that they stead on whether or not the Government jumps
often are selling propositions that are counter- its own deficit hurdles’, he wrote. Commenta-
intuitive: protection doesn’t save jobs, technol- tors, as a class, seem to be more influential in
ogy doesn’t destroy jobs, minimum wages the micro-economic area, where they pick up
don’t protect the poor, and so forth. So the ideas, popularise them and press governments
commentators’ influence is probably greater on to act. Most governments want to perform great
‘elite opinion’ than on popular opinion. By acts of reform, but they want also to survive.
elite opinion I mean the opinions of people ac- The commentators’ role is to help create a cli-
tive in business and trade union interest groups, mate of elite opinion which convinces govern-
members of political parties, backbenchers, ments that they can make the necessary policy
ministers and shadow ministers, their staffers changes without endangering their survival.
and bureaucrats. The most striking example of this process is
There is, however, a second channel through the commentators’ role in tariff reform. Over a
which the newspaper commentators exercise period of 20 years or more, elite opinion-but
influence. Their columns are read by other not, let it be noted, popular opinion-swung
journalists in all the media, including political away from support for protection, to the point
journalists, journalists reporting economic where the Hawke Government was embold-
news and the talk-show hosts. So they have ened to announce its virtual phasing out. The
some influence over the rest of the media’s un- Government did so with bipartisan support and
derstanding of what it all means and which is- surprisingly little criticism. Bob Hawke’s an-
sues are more important than others. But you nouncement of the second stage of the phase-
would have to say that it’s a limited influence. down, in March 1991 during the depths of the
For instance, the commentators have not suc- recession, was greeted by the media-the
ceeded in persuading their colleagues that the economic commentators-as an act of historic
size and timing of asset sales are of little significance and great statesmanship. Why the
macro-economic consequence. sea-change in elite opinion on protection?
Though it’s no doubt true that some com- You’d have to give a lot of the credit to the In-
mentators have more influence than others, I dustries Assistance Commission, which cam-
believe it’s mainly the preponderance of com- paigned tirelessly for tariff reform over many
mentators’ opinion that has influence. When years. But you would also have to give a lot of
most of them are pushing in the same direction credit to the economic commentators, who-
and for a sustained period, that eventually will led by Alan Wood-also campaigned tirelessly
have an effect on elite opinion and, through over many years. To put it bluntly: the IAC
that, on economic policy. It’s a process of made the bullets and the commentators fired
wearing away the stone, of helping to create a them.
14 The Australian Economic Review 4th Quarter 1995

This, I think, tells you a lot about the econ- elite opinion. But, though they are open to
omic commentators’ role in the formulation of manipulation, economic commentators are not
economic policy. You can see them playing a passive agents in this process. They choose the
similar role in the moulding of elite opinion in issues on which they will campaign. Their in-
favour of decentralised wage-fixing and the de- fluence on economic policy formulation is
regulation of the labour market-although it is probably more indirect (that is, via their influ-
significant that, in this instance, fewer of the ence on the general climate of elite opinion)
bullets they are firing have been fashioned by than direct (in the sense that they suggest spe-
the bureaucracy. cific policy ideas which are new to the policy
advisers, or that policy-makers read newspaper
11. Conclusions articles and act on them). Individual commen-
tators probably don’t have all that much influ-
It is clear that the media play a significant role ence, but when the commentators as a group
in the formulation of economic policy, but the take up causes and pursue them over sustained
role they play is far from clear. They provide periods, they can shift the conventional wis-
the forum in which the economic debate is con- dom and create a climate in which govern-
ducted, and conducted on at least two levels: ments respond to pressure for policy reforms,
elite opinion and popular opinion. The media secure in the belief that they are not moving
carry messages in both directions between the ahead of elite opinion.
rulers and the ruled, but they don’t do so in a
neutral way. They select the messages they First version received December 1994;
carry and the degree of prominence given to $nu/ version accepted September 1995 (Eds).
them on the basis of their perceived newswor-
thiness, a process which imparts significant bi- References
ases to the communication process.
Media coverage of economic matters is pre- Australian Centre for Independent Journalism
dominantly concerned with the reporting and 1993, ‘Reporting business’, Working Paper
interpretation of news about short-term move- no. 5, University of Technology Sydney.
ments in the macro economy. The media exag- Macfarlane, I. J. 199I , ‘The lessons for monet-
gerate the significance of the inevitable volatil- ary policy’, in Proceedings of a Conference:
ity in financial prices and economic indicators. The Deregulation of Financial Intermediar-
This increases the ‘noise’ in which the macro- ies, Reserve Bank of Australia, Sydney.
economic policy-makers work, adding to the Macfarlane, 1. J. 1994, ‘Pessimism and opti-
difficulties of their task and possibly encourag- mism about Australia’s future’, Reserve
ing them to adjust policy settings more often Bank of Australia Bulletin, March, pp. 1-6.
than they otherwise would. The media’s cover- Schultz, J. 1992, ‘Where are the alternative
age of the debate about micro-economic policy views?’, in The Trouble with Economic Ra-
issues is much more cursory. tionalism, ed. D. Horne, Scribe Publications,
Policy-makers and advisers make consid- Newham, Victoria.
erable use of the media to ‘sell’ policy changes Sims, R. 1994, ‘History says cut the deficit for
to the electorate in general, but also to the growth’, Australian Financial Review, 14
opinion-making elite. Economic commenta- April, p. 2 1.
tors are one of the main vehicles through which Tiffen, R. 1989, News and Power, Allen & Un-
policy-makers and advisers seek to influence win, Sydney.
Received: 5 October 2017 Revised: 25 January 2018 Accepted: 22 February 2018
DOI: 10.1111/soc4.12579

ARTICLE

The economy. How do the media cover it and what

are the effects? A literature review
Alyt Damstra | Mark Boukes | Rens Vliegenthart

University of Amsterdam
Abstract
Correspondence
Alyt Damstra, Amsterdam School of This article provides an overview of key findings in the field
Communication Research, University of
of economic news research. The focus is on the relationship
Amsterdam, Nieuwe Achtergracht 166, 1018
WV Amsterdam, the Netherlands. between the real economy and economic news, and the
Email: [email protected]
subsequent effects of economic news on people's economic
perceptions. Additionally, we discuss research that looks
into the construction of economic and financial news. Rec-
ommendations for future research relate to the application
of mixed methods approaches and individual level studies,
and a specific focus on new (social) media.

1 | I N T RO DU CT I O N

It is a phenomenon as ubiquitous as it is elusive: the economy. When asked, most people have an idea—by and large—
of how the national economy is doing. Some have personally experienced certain economic advancements or
setbacks or know, for example, people who recently found or lost a job. However, more than by such first‐ or
second‐hand experiences, people learn about the state of the economy by reading and watching the news. Economic
news stories shape people's economic perceptions, which, in turn, have profound impacts on a range of other
attitudes and behaviors, and sometimes even again on the economy itself.
The interrelationships between economic news, economic perceptions, economic conditions, and other (political)
attitudes and behaviors have been the focus of research for decades. Besides the work on the effects of economic
news, there is a vast body of research that focuses on the content of economic news, showing how economic news
is characterized by a set of specific features. A strand of mostly qualitative research has focused on the process of
economic news production, in which different actors with different views on the economy and its management com-
pete for limited media space in an ongoing power struggle.
From a societal perspective, it is imperative to study economic news—both its content and its effects—because
it has such a strong bearing on the daily lives of citizens. Whether news reports deal with unemployment rates,
with inflation, or with bailout programs for bankrupt Eurozone member states, people are sensitive to the
message and tone of the content, especially when the news is negative. Moreover, the impact of economic news
on people's economic perceptions has subsequent consequences for a range of political behaviors, such as party
preference (e.g., Kalogeropoulos, Albæk, De Vreese, & Van Dalen, 2016; Lewis‐Beck & Stegmaier, 2000; Nadeau,
Niemi, Fan, & Amato, 1999; Sanders, 2000).

Sociology Compass. 2018;e12579. wileyonlinelibrary.com/journal/soc4 © 2018 John Wiley & Sons Ltd. 1 of 14
https://doi.org/10.1111/soc4.12579
2 of 14 DAMSTRA ET AL.

From an academic perspective, economic news comes with unique features rendering it an interesting topic to
study media effects. The availability of standardized economic data is high, facilitating comparisons between real‐life
trends and economic news in different contexts, often a more complicated endeavor in other areas such as crime,
foreign affairs, or the environment. As Soroka (2014, p. 83) puts it: “It allows us to explore the difference between
the distribution of information in reality and the distribution of information in news content.” This is not to say that
economic news is neutral or unidimensional, for a variety of reasons it is not. But news reports about decreasing or
increasing unemployment rates, or a growing or shrinking economy, do lend themselves to be compared with
over‐time trends in the actual measurements, allowing to assess real‐world reflectiveness of certain news content.
This article provides an overview of the key findings in the field, shedding light on what we know about economic
news, and what is still to be learned.

2 | T HE A N T E C ED E N T S O F E C O N O M I C N E W S

2.1 | Real economy and economic news coverage

In the mid‐1970s, one of the first studies comparing the real economy to the content of economic news stated: “The
model of the economic story, especially as told on television, is the soap opera” (Stein, 1975, p. 40). Despite the
inherent complexity of the economy as a phenomenon, the media show a persistent tendency to simplify and to
excessively dramatize. The consequences of this reporting are, as economist Herbert Stein argues, “hard to evaluate,
because we do not know to what extent public opinion is formed by the media” (Stein, 1975, p. 41). More than
40 years later, Stein's first observation has not lost the slightest relevance: The economy is still complex, arguably
much more complex today than it was in the 1970s, and economic news is still characterized by several persistent
biases. But in contrast to Stein's second observation, we now have some ideas about the consequences of economic
news due to decades of research, on which we reflect below.
The tendency among journalists to dramatize the state of the economy is confirmed by many empirical studies.
The 1992 US Presidential elections have been a catalyst for research into the content of economic news, since these
have made clear how economic news rather than real economic circumstances have the capacity to shape electoral
outcomes. In the US, Goidel and Langley (1995) are among the first to systematically investigate the responsiveness
of economic news to real economic conditions, concluding that the media have “plenty of latitude in deciding what
economic news is important, and this latitude is exercised by focusing disproportionately on bad economic news”
(Goidel & Langley, 1995, p. 320). This observed negativity bias—the tendency to systematically devote more attention
to negative as compared to positive economic trends—is not a stand‐alone finding but reflects a rather generalizable
pattern in economic news reporting.
Scholars find negativity biases in macroeconomic news reporting (Damstra & Boukes, 2018; Fogarty, 2005;
Hagen, 2005; Hester & Gibson, 2003; Ju, 2008; Soroka, 2006, 2014; Soroka, Stecula, & Wlezien, 2015; Van Dalen,
De Vreese, & Albæk, 2015; Wattenberg, 1985) and news about unemployment rates (Soroka, 2012). Although
most research focuses on print media, television broadcasts are also found to foster a preference for bad news
when reporting about macroeconomic developments (Hester & Gibson, 2003) or about economic subthemes such
as inflation and unemployment rates (Harrington, 1989). An area still understudied is how economic news is
reported on social media. In a recent exploratory study, Soroka, Daku, Hiaeshutter‐Rice, Guggenheim, and Pasek
(2017) find that the tone of Twitter posts is more responsive to positive economic shifts, in contrast to traditional
outlets.
An exceptional finding is provided by Casey and Owen (2013), who investigate the antecedents of economic
news in the US (1983–2008) and who do not find a structural (negativity) bias. Similarly, in the context of the
financial crisis, Schifferes and Coulter (2013) conclude that the BBC news website provided a rather balanced output
in terms of positive and negative coverage. Notwithstanding these exceptions, research repeatedly suggests a rather
DAMSTRA ET AL. 3 of 14

robust tendency in economic journalism to overemphasize negative trends, which might lead to a distorted informa-
tion environment for citizens, at least in modern Western democracies.
In terms of newsworthiness, not all types of economic developments are considered equally important. Several
studies point to a remarkable sensitivity among journalists towards shifts in unemployment rates (Fogarty, 2005;
Goidel & Langley, 1995). Fogarty (2005) finds that changes in unemployment rates lead to more economic news,
while changes in inflation rates or ICI (index of coincident indicators) do not lead to more coverage. Arguably, this
may be explained by the abstractness of the latter issues. Additionally, Soroka et al. (2015) investigate whether news
content is most reflective of past, current, or future economic trends. While often perceived as a function of current
economic conditions, the authors find that economic news is actually more reflective of future conditions: “It
responds more to where the economy is going, not where it has been or where it currently is” (Soroka et al., 2015,
p. 467).

2.2 | Specifying the measurements

The idea of mass media producing content that is systematically more negative than economic reality gives reason to
is based on two types of findings: (1) a bad economy leads to more economic news, and (2) a bad economy leads to
more negative economic news while a good or improving economy does not lead to more positive coverage. While
some studies take either volume or tone as their main dependent variable (e.g., Goidel & Langley, 1995), most recent
research looks at both (e.g., Fogarty, 2005; Lamla & Lein, 2014; Soroka, 2012, 2014; Soroka et al., 2015; Van Dalen
et al., 2015). Volume is most often operationalized straightforwardly as the number or share of economic news items
per time unit (print or television), while tone captures the general sentiment of an economic news item (i.e., valence:
positive or negative). In some cases, volume and tone are captured simultaneously in a single measurement, such as
the number of recession headlines in the New York Times (e.g., Wu, Stevenson, Chen, & Güner, 2002).
On the side of the real economy, as explanatory variable in such analyses, it is increasingly common to distinguish
between levels (e.g., absolute unemployment rate) and changes (e.g., the development—up or downwards—of the
unemployment rate). Stimson (1991) is among the first to stress that journalists are particularly responsive to change:
“Journalists pursue ‘news’ as a criterion of relevance. Change is news. Stability isn't.” (Stimson, 1991: xxiii). Following
this line of thought, Nadeau et al. (1999) argue that journalists respond to shifts in objective economic indicators,
rather than to levels, which is empirically confirmed by their data. Just like novelty, change is a defining feature of
newsworthiness; for that reason, changes in the real‐world economy are more likely to be selected as news (Galtung
& Ruge, 1965; Soroka et al., 2015).
Following news values theory, it can be anticipated that negative change (i.e., economic downturn) is particularly
newsworthy to journalists, since it combines two classic news values: novelty and negativity. This is empirically
confirmed by recent research finding positive effects of economic decline on the volume of economic news (Damstra
& Boukes, 2018; Van Dalen, De Vreese, & Albæk, 2016) while positive economic developments in terms of
recovery or growth do not trigger journalists to write more about the economy. A similar asymmetry is found for
the tone of news; negative economic trends lead to more negative coverage, while the opposite effect of an
improving economy fails to happen (Damstra & Boukes, 2018; Fogarty, 2005; Goidel & Langley, 1995; Soroka,
2006; Van Dalen et al., 2015).

2.3 | Explaining the negativity bias

In explaining the prevalence of negative news stories, many scholars point to the role of the media as “fourth estate.”
Traditionally, journalists are argued to fulfill a watchdog function in modern democracies; they scrutinize and control
governmental powers, rendering it responsive and responsible (Kantola, 2007; Whitten‐Woodring, 2009), a function
that can also be deployed to control business actors (Kalogeropoulos, Svensson, Van Dalen, De Vreese, & Albæk,
2014). From this perspective, it is only logical that negative trends receive more attention than positive
4 of 14 DAMSTRA ET AL.

developments: To wake up the citizenry, jounalists should ring the “burglar alarm” when the economy moves in the
wrong direction, so people can defend their interests in future elections (Zaller, 2003).
Research, however, shows that economic and financial journalists hold divergent views when it comes to this role
(Strauß, 2018; Tambini, 2010; Usher, 2012). Tambini (2010) finds that only a small minority of UK financial journalists
actually perceives themselves as watchdogs. Usher (2012) identifies two lines of reasoning (or “defense” as she puts
it) as brought forward by New York Times journalists who she interviewed. First, journalists primarily identify with a
“transmission” role: It is their task to provide accurate information, but it is up to the public to respond adequately
(Usher, 2012, p. 203). Second, journalists are hampered to perform as watchdogs because they do not have enough
access to necessary information. These arguments are in line with a recent study by Strauß (2018) who points to a
discrepancy between the watchdog role that journalists envision for themselves and their actual role enactment.
These findings touch upon a core challenge posed to economic journalists. The complex economic‐financial reality
combined with increasing institutional pressures makes investigative journalism a costly and risky endeavor, while
it is precisely through investigations and critical in‐depth news reporting that the watchdog role can be fulfilled
adequately.
News values theory provides another explanation for the prevalence of negative news. References to something
negative make a story more likely to be selected by journalists (e.g., Galtung & Ruge, 1965; Harcup and O'Neill, 2001)
because bad news tends to be consensual and unambiguous as well as unexpected, presupposing “a culture in
which progress is somehow regarded as the normal and trivial thing that can pass unreported” (Galtung & Ruge,
1965, pp. 69–70). Together, these features make negative phenomena more likely to be selected as news.
In addition, work on behavioral economics has shown how people are more responsive to negative compared to
positive information (e.g., Holbrook, Krosnick, Visser, Gardner, & Cacioppo, 2001; Soroka, 2006): They are loss
aversive. The psychological process behind this asymmetry is described as the negativity effect: The greater weight
assigned to negative as compared to equally positive information in the formation of judgments (Ahluwalia, 2002;
Tversky & Kahneman, 1973, 1974). As journalists are individuals too, their own (asymmetric) interests combined with
the (asymmetric) interests of their news‐consuming audience might lead them to perceive negative information as
more important (Soroka, 2006, p. 374).

2.4 | External factors

A number of external factors is identified that influence the relationship between the real economy and economic
news. First, on the level of the media organization, scholars point to endorsement policies by outlets as a possible
moderator of news selection processes. In the US, where many media outlets have a clear political leaning, democratic
media are found to stress negative economic conditions (e.g., high unemployment rates) more strongly when the
incumbent is a Republican (Larcinese, Puglisi, & Snyder, 2011). In the European context, evidence suggests a similar
effect of ideological orientation on the interpretation of economic news by journalists (Salgado & Nienstedt, 2016).
Also, the type of outlet could play a role: Popular (e.g., tabloids) and regional media outlets seem to emphasize
negative economic news more than quality and specialized media (Boukes & Vliegenthart, 2017).
Second, economic conditions might be of influence. Wu et al. (2002), for example, find that news is least reflec-
tive of the real economy during recessionary periods (1987–1990), when the prevalence of negative information
exceeds the (already gloomy) economic conditions. In fact, “the mass media reflected more of the public's perception
about the economic situation and less of the economic reality” itself (Wu et al., 2002, p. 30).
Finally, building on the idea of a limited carrying capacity by the media (Hilgartner & Bosk, 1988), Fogarty (2005)
looks at whether the presence of rival stories changes the relationship between the economy and coverage. He finds
that news reports dealing with the first Gulf War or with US fighting in Somalia indeed tend to suppress the amount
of economic news coverage, making the correlation between the real economy and economic news weaker (see also
Reese, Daly, & Hardy, 1987). In contrast, election campaigns serve as an amplifier of economic news, strengthening
the bond with the real economy (Fogarty, 2005).
DAMSTRA ET AL. 5 of 14

2.5 | Structural constraints

Quantitative research offers important insights into the structural biases distinguishing economic news from
economic reality. Qualitative research, additionally, lays bare the mechanisms of economic and financial news produc-
tion, critically assessing the factors at play that determine which issues receive attention in the first place, and how
these issues are covered in terms of framing.
Media content is not neutral. In fact, it is a social construct and, therefore, often ideologically colored. The vast
majority of the economic/financial press tends to support the neoliberal status quo, thereby failing to offer a wider
range of other perspectives to the public, most notably perspectives that critically challenge existing capitalistic struc-
tures (e.g., Berry, 2012, Berry, 2015, Berry, 2016; Chakravartty & Schiller, 2011; Damstra & Vliegenthart, 2016; Davis,
2006, Davis, 2011; Doyle, 2006; Durham, 2007; Duval, 2005; Jensen, 1987; Marron, Sarabia‐Panol, Sison, Rao, &
Niekamp, 2010; Philo, 1995; Philo, Miller, & Happer, 2015; Tambini, 2010; Tracy, 2012). In general, a certain bias
in the selection of news stories is inextricably linked to news production processes: (National) cultures, organizational
structures, ideological outlet profiles, and differential power of political and societal actors, as well as the choices by
individual journalists—all have an impact on the construction of news content (Vliegenthart & Van Zoonen, 2011). As
a result, news tends to be characterized by negativity, conflict framing, and an overrepresentation of the views of
those having political power (Bennett, 1990). However, the specific nature of economic news leads to an additional,
more issue‐related bias: Journalists are guided by certain considerations regarding the “utility and levels of financial
literacy” among their target audience (Doyle, 2006, p. 436). In other words, the high complexity of the economic
and financial world requires that journalists tailor their stories to their readership in terms of comprehensibility.
As a result, two types of financial journalism have emerged over the years: (a) specialist financial journalism
serving a selective audience of financial professionals and (b) generalist financial journalism that focuses on informing
the broader public (Schifferes, 2011). For mainstream, nonfinancial media, this implies that economic news needs to
be easy to grasp and entertaining (Clark, Thrift, & Tickell, 2004; Guerrera, 2009), which results in an overrepresenta-
tion of superficial news about well‐known companies and big money deals (Doyle, 2006; Tambini, 2010; Tumber,
1993), at the expense of more critical, in‐depth analyses key to investigative journalism. Additionally, with financial
markets becoming increasingly complex, journalists themselves are often lacking the specialized knowledge to criti-
cally assess financial products and practices (Davis, 2006; Doyle, 2006; Guerrera, 2009; Marron et al., 2010;
Schifferes, 2011; Schiffrin, 2015; Tambini, 2010; Tett, 2009; Usher, 2012).
Due to this increasing complexity, economic/financial journalists are often in a position of high source dependency.
AsTambini (2010, p. 159) puts it, “interested parties […] sometimes constitute the only repositories of relevant data and
(they) employ the main experts.” Therefore, journalists—themselves lacking both expertise and access—need to rely on
these elite sources, which generally do not bring forward radical critical perspectives. As a result, stakeholders—through
their PR services—are able to control information. This elite source dependency is empirically confirmed by many stud-
ies (Berry, 2015, 2016; Davis, 2000; Fahy, O'Brien, & Poti, 2010; Galbraith, 2004, 2009; Kollmeyer, 2004; Manning,
2013; Rafter, 2014; Reich, 2012; Strauß, 2018; Tambini, 2010; Thompson, 2013; Tracy, 2012) and comes at the
expense of the use of, for example, union leaders or workers as primary sources (Kollmeyer, 2004). Also compared with
other types of news reporting—political, territorial—economic journalists use least diverse sources (Reich, 2012).
Furthermore, the close ties connecting (financial) journalists to (financial) experts carries the risk of the former
being “captured” by the system of the latter. This can be illustrated by, for example, financial outlets receiving huge
advertising revenues from credit card companies (Davies, 2009; Davis, 2002, 2011; Kollmeyer, 2004; Marron et al.,
2010; Schechter, 2009; Tambini, 2010) or financial reporters “crossing the aisle” and start working for financial
corporations (Schechter, 2009). This close interconnectedness is argued to (partly) account for the fact that the news
media were caught by surprise when the 2008 financial crisis broke out and left many wondering why (almost)
nobody had seen it coming, including highly esteemed financial media (Berry, 2012; Fraser, 2009; Guerrera, 2009;
Fahy et al., 2010; Lashmar, 2008; Marron et al., 2010; Mercille, 2013; Schechter, 2009; Schifferes, 2011, 2012;
Tambini, 2010; Tracy, 2012).
6 of 14 DAMSTRA ET AL.

Furthermore, institutional pressures reinforce the tendency by the media to report in a way that is compatible
with dominant perspectives as put forward by (economic and political) elites. Media outlets themselves are commer-
cially driven enterprises as well (e.g., Davis, 2000; Doyle, 2006; Guerrera, 2009; Hamilton, 2009; Happer, 2017;
Knowles, Phillips, & Lidberg, 2017; Philo et al., 2015; Schechter, 2009). The professional environment in which jour-
nalists operate has become increasingly competitive, due to institutional pressures related to declining readerships,
insecure advertisement revenues, increased output demands, and the rise of free online data services. This has
resulted in a branch with high degrees of compartmentalization (Schifferes, 2011; Tett, 2009), in which “expensive
and risky ventures such as investigations are increasingly difficult to fund” (Tambini, 2010, p. 169).
The financial crisis (2008–2009) has served as a fruitful test case for the analysis of existing biases in financial and
economic news reporting. Often departing from the question why the media did not see it coming (e.g., Fraser, 2009;
Lashmar, 2008; Starkman, 2009), scholars scrutinized the way in which the crisis was covered (Arrese & Vara‐Miguel,
2016; Berry, 2012; Damstra & Vliegenthart, 2016; Happer, 2017; Pirie, 2012; Schifferes & Knowles, 2014) in multiple
contexts. It is concluded that media covered the crisis rather uncritically, depriving the audience from a diverse array
of possible solutions to it (Arrese & Vara‐Miguel, 2016; Berry, 2012; Happer, 2017; Mercille, 2013; Pirie, 2012). The
fact that even the most encompassing crisis of our times did not evoke more radical and critical responses under-
scores the dominance of the neoliberal paradigm in economic news reporting (Happer, 2017) and the difficulty for
journalists to forge new ways to analyze outside the prevalent market‐driven consensus (Arrese & Vara‐Miguel,
2016, p. 150).

3 | T HE E F F E C T S OF E C O N O M I C N E W S

3.1 | Media effects on consumer confidence

Exposure to economic news positively affects people's knowledge of this topic, especially for those citizens with few
—negative—real‐life economic experiences and those who have no alternative sources of information such as inter-
personal communication (Kalogeropoulos, Albæk, De Vreese, & Van Dalen, 2015). An extensive base of empirical
research shows how economic news is key to citizens' perceptions of the economy (e.g., Behr & Iyengar, 1985; Blood
& Phillips, 1997; Damstra & Boukes, 2018; De Boef & Kellstedt, 2004; Doms & Morin, 2004; Goidel, Procopio, Terrell,
& Wu, 2010; Hetherington, 1996; Soroka, 2014; Soroka et al., 2015; Van Dalen et al., 2016; Wu et al., 2002), while a
small subset of studies report no or minimal effects (e.g., Haller & Norpoth, 1997; Hopkins, Kim, & Kim, 2017; Lischka,
2016; Wu, McCracken, & Saito, 2004).
The relevance of economic news has repeatedly been demonstrated by its impact on consumer confidence. As a
measure that combines people's evaluations of their own financial situation with their assessments of the national
economy, consumer confidence captures economic sentiment in a rather complete way. A landmark study in this
domain is provided by Blood and Phillips (1995), who are among the first to systematically investigate this relationship
while controlling for the impact of the real economy. They found that the number of recession headlines in the New
York Times has a significant and negative effect on consumer confidence. In a follow‐up study (Blood & Phillips, 1997),
the same effect is found for general (negative) economic news in the same newspaper. Results are confirmed by
Doms and Morin (2004) who take 30 newspapers into account and apply their model to data covering 25 years
(1978–2003). Other studies find similar economic news effects, within and outside the US context (e.g., Alsem,
Brakman, Hoogduin, & Kuper, 2008; Goidel & Langley, 1995; Hollanders & Vliegenthart, 2011; Wu et al., 2002).
Research in which good and bad economic news is distinguished demonstrates that the public responds asym-
metrically to these messages. The negative effect of negative economic news is not accompanied by an equally strong
positive effect of positive economic news. Similar to the sensitivity among journalists to bad economic conditions, the
public is most responsive to negative economic information (e.g., Damstra & Boukes, 2018; Hester & Gibson, 2003;
Soroka, 2006). Negative news leads to more pessimism, while positive news does not cause the same degree of
DAMSTRA ET AL. 7 of 14

optimism among the public. However, negative news also leads to higher levels of internal economic efficacy, as
Svensson, Albæk, Van Dalen, and De Vreese (2017b) show. Negativity may trigger people's motivation to understand
and to use information to deal with possible threats.
In most measures, consumer confidence contains items asking people to judge the past and future state of their
national economy. More specifically, it asks whether they think the economy has or will deteriorate(d) or improve(d).
Specifying confidence on this time dimension yields additional, but also mixed insights into economic news effects.
Damstra and Boukes (2018) find that economic news matters for people's future judgments but not for their
evaluations over the economic past. By contrast, Soroka (2014) and Soroka et al. (2015) find media effects on people's
prospective but also retrospective judgments.

3.2 | Media effects on the economy

The “media malady hypothesis” posits that economic news might also have an impact on the economy itself. This idea,
famously coined in 1990 by The Washington Post (“Is the economy suffering from media malady?”), entails that by
paying attention to the possibility of a recession, the media might actually help to create one. There is some empirical
evidence supporting this hypothesis. Blood and Phillips (1997) report long‐term effects that they describe as
“uniformly and persistently” (but that were absent in their 1995 study). Wu et al. (2002) conclude that the amount
of recession‐related coverage in the New York Times influences real economic changes, at least in times when
economic conditions are bad. Huxford (2012) finds that UK and US journalists, by writing about the possibility of a
recession—even in times of economic growth—make the occurrence of an actual recession more likely. More recently,
research on (policy) uncertainty in economic news indicates consequences for stock market volatility and trends in
policy‐sensitive areas (Baker, Bloom, & Davis, 2016).
Financial journalism, similarly, might affect stock market movements, which provides another illustration of the
close interrelationship between financial journalists and financial professionals described above. Davis (2006) shows
how elite actors in the financial markets rely on economic news to make their decisions. This is in line with aggregate
level studies that examine the reflexive nature of stock markets, finding structural effects of (social) media coverage
(e.g., Boudoukh, Feldman, Kogan, & Richardson, 2013; Casarin & Squazzoni, 2013; Groß‐Klußmann & Hautsch, 2011;
Kleinnijenhuis, Schultz, Oegema, & van Atteveld, 2013; Strauß, Vliegenthart, & Verhoeven, 2017).

3.3 | Explaining economic news effects

The agenda‐setting literature provides the most dominant explanation for economic news effects; by emphasizing
certain issues over others, the media are able to influence public opinion (McCombs & Shaw, 1972). The impact of
mediated messages gets stronger when the obtrusiveness of an issue is lower (Iyengar, Peters, & Kinder, 1982; Tan
& Weaver, 2007). First coined by Zucker (1978), obtrusiveness can be defined as the amount of personal experience
someone has with an issue (Winter, 1981). When people have none or minimal first‐hand experience, the agenda‐
setting effect is strongest. Applied to the issue of the economy, Blood and Phillips (1997, p. 101) write:

Economic issues that audiences experience directly and dramatically, such as unemployment or recession
may leave less room for media effects (…). The general state of the nation's economic health may be a
less obtrusive issue, leaving editors with the opportunity (…) to raise concern when the public does not
anticipate or feel directly the effects of economic downturn.

Haller and Norpoth (1997, p. 573) use a similar approach when explaining the absence of media effects. They
consider the economy “a classic doorstep issue, capable of shaping public opinion through real‐world experience,”
leaving less room for media effects.
In contrast to the idea of stronger news effects in situations of low issue obtrusiveness, some studies indicate
that economic news effects are strongest in times of crisis, because detrimental economic conditions increase
8 of 14 DAMSTRA ET AL.

people's willingness to update their economic expectations (e.g., Carroll, 2003; Doms & Morin, 2004). Under “normal”
prosperous circumstances, economic expectations tend to be sticky: People have no incentive to regularly absorb
economic information and their expectations, therefore, tend to remain rather stable over time. However, in times
of crisis, people tend to update their information more frequently because (a) it is more likely to (accidently) come
across economic news due to higher volumes; and (b) consumers are more willing to read or watch economic news
items. In particular, dramatically negative headlines (“Recession possible!”) might be deemed relevant by the public,
because these suggest that the provided information is directly related to their own financial future (Doms & Morin,
2004; McCarthy & Dolfsma, 2014).
The hypothesis of stronger media effects in bad economic times is supported by several studies. Doms and Morin
(2004) find that consumer sentiment is most susceptible to media effects when coverage is high, which is in times of
economic distress. Similarly, Wu et al. (2002) conclude that media effects are strongest in times of downturn, suggest-
ing that people pay greater attention to economic news when the issue is most relevant to them. Goidel and Langley
(1995, p. 326) find most pronounced media effects when economic signals are mixed, and, subsequently, subject to a
variety of interpretations (which was the case during the US 1992 Elections). In contrast, Damstra and Boukes (2018)
do not find any differences in media effects for periods of economic growth versus decline.
Media dependency theory (MDT) provides another theoretical angle to understand the conditionality of media
effects. Originally proposed by Ball‐Rokeach and DeFleur (1976), MDT predicts that the impact of news is contingent
upon the level of audience dependency on media information resources: The higher this dependency, the greater the
likelihood that media information will influence citizens' cognitions, feelings, or behaviors. People might be more
dependent upon mediatized information when they have less real‐life clues or experiences to build their judgments
on. Therefore, media effects are stronger for people's sociotropic evaluations (judgments of the national economy)
compared to evaluations of their own economic situation (Boomgaarden, Van Spanje, Vliegenthart, & De Vreese,
2011). Kalogeropoulos (2017) shows that personal economic expectations are not influenced by economic news in
general, but only by more dramatic (i.e., tabloid) stories dealing with unemployment specifically. Similarly, economic
news is expected to have a bigger impact on people's expectations for the future than for their evaluations over
the past (Damstra & Boukes, 2018).
Also, higher levels of uncertainty make people more dependent on mediated information. Uncertainty can be
conceptualized as a subjective experience shaped by external circumstances, such as a crisis; however, uncertainty
can also be part of mediated information itself. A recent study by Van Dalen et al. (2016) looks into the impact of
uncertainty when this is explicitly mentioned in economic news articles, and finds a negative effect on consumer con-
fidence, above and beyond the impact of tone. Svensson, Albæk, Van Dalen, and De Vreese (2017a) investigate the
impact of ambiguous economic news and identify economic uncertainty as the mediator through which consumer
confidence is affected.

3.4 | Reversed causality?

Adding to the complexity of the relational framework, some studies suggest the possibility of reversed causality:
Public economic sentiments could potentially affect subsequent media coverage (e.g., Soroka et al., 2015; Stevenson,
Gonzenbach, & David, 1991; Wu et al., 2002). As Soroka et al. (2015) suggest, news reporting is partly a consumer‐
driven process, which might come with the incentive to reflect public concerns. The idea that public economic
pessimism causes more negative coverage is empirically confirmed by Soroka et al. (2015) as well as Wu et al.
(2002), although the latter finds the effect only to hold during recessionary times.

3.5 | Where to go from here?

Studying economic news, its antecedents and its effects, is key to our understanding of journalistic routines and the
formation of economic perceptions. To further develop our knowledge, several avenues for further research seem
DAMSTRA ET AL. 9 of 14

promising. First of all, quantitative research studying the triangle of the economy, economic news, and economic
perceptions needs to be integrated with research critically examining the construction of economic news. Some
contradictory findings coexist that call for further examination: Whereas the former tradition points to a preoccupa-
tion with negativity among economic journalists, the latter identifies the absence of critical perspectives. One expla-
nation for this apparent contradiction might be related to the tendency among journalists to focus on the short term
(Fraser, 2009, p. 80). The negativity bias among journalists, in that sense, might only imply writing more about unem-
ployment when it goes up compared to when it goes down. However, being critical in the short term, without
reflecting upon and questioning the overarching system, eventually leads to economic news reporting in which
negative trends receive only more superficial—and therefore uncritical—coverage.
Second, more individual‐level research is needed. Especially when it comes to the conditionality of economic
news effects, experimental research would help to understand which aspects of (negative) economic news provoke
the strongest effects, which citizens are most susceptible to these effects, and through which mediating mechanisms
these effects occur.
Finally, the overwhelming majority of studies rely on traditional conceptualizations of news media, with print
media being the absolute favorite. There is only limited research into differences across traditional media outlets
(Goidel et al., 2010). While these outlets are still highly relevant, recent research suggests that the content of online
economic news or on (social) media might be systematically different (see, for example, Schifferes & Coulter, 2013;
Soroka et al., 2017) and might have different effects as well. Further exploring this avenue is crucial to enhance
our understanding of the social world around us that is shaped by real economic conditions, by economic coverage
in an ever‐changing media environment and by people's economic perceptions.

FUNDI NG

The authors disclosed receipt of the following financial support for the research, authorship, and/or publication of this
article: Research conducted for this article was funded by a VIDI grant (project number: 016.145.369) from the Neth-
erlands Organization for Scientific Research awarded to Prof. Rens Vliegenthart.

ORCID
Alyt Damstra http://orcid.org/0000-0001-7753-018X
Mark Boukes http://orcid.org/0000-0002-3377-6281

RE FE R ENC ES
Ahluwalia, R. (2002). How prevalent is the negativity effect in consumer environments? Journal of Consumer Research, 29(2),
270–279. https://doi.org/10.1086/341576

Alsem, K., Brakman, S., Hoogduin, L., & Kuper, G. (2008). The impact of newspapers on consumer confidence: Does spin bias
exist? Applied Economic, 40(5), 531–539. https://doi.org/10.1080/00036840600707100

Arrese, Á., & Vara‐Miguel, A. (2016). A comparative study of metaphors in press reporting of the Euro crisis. Discourse &
Society, 27(2), 133–155. https://doi.org/10.1177/0957926515611552

Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics,
131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024

Ball‐Rokeach, S. J., & DeFleur, M. L. (1976). A dependency model of mass‐media effects. Communication Research, 3, 3–21.
https://doi.org/10.1177/009365027600300101

Behr, R. L., & Iyengar, S. (1985). Television news, real‐world cues, and changes in the public agenda. Public Opinion Quarterly,
49(1), 38–57. https://doi.org/10.1086/268900

Bennett, W. L. (1990). Toward a theory of press‐state relations in the United States. Journal of Communication, 40(2), 103–
127. https://doi.rog/10.1111/j.1460‐2466.1990.tb02265.x

Berry, M. (2012). The Today programme and the banking crisis. Journalism, 14(2), 253–270. https://doi.org/10.1177/
1464884912458654
10 of 14 DAMSTRA ET AL.

Berry, M. (2015). The UK press and the deficit debate. Sociology, 50(3), 542–559. https://doi.org/10.1177/
0038038515582158
Berry, M. (2016). No alternative to austerity: How BBC broadcast news reported the deficit debate. Media, Culture & Society,
38(6), 844–863. https://doi.org/10.1177/0163443715620931
Blood, D. J., & Phillips, P. C. B. (1995). Recession headline news, consumer sentiment, the state of the economy and presiden-
tial popularity: A time series analysis 1989‐1993. International Journal of Public Opinion Research, 7(1), 2–22. https://doi.
org/10.1093/ijpor/7.1.2
Blood, D. J., & Phillips, P. C. B. (1997). Economic headline news on the agenda: New approaches to understanding causes and
effects. In M. McCombs, D. L. Shaw, & D. Weaver (Eds.), Communication and democracy: Exploring the intellectual frontiers
in agenda‐setting theory (pp. 97–113). London: Lawrence Erlbaum Associates.
Boomgaarden, H. G., Van Spanje, J., Vliegenthart, R., & De Vreese, C. H. (2011). Covering the crisis: Media coverage of the
economic crisis and citizens' economic expectations. Acta Politica, 46(4), 353–379. https://doi.org/10.1057/ap.2011.18
Boudoukh, J., Feldman, R., Kogan, S., & Richardson, M. (2013). Which news moves stock prices? A textual analysis (No.
w18725). National Bureau of Economic Research. https://doi.org/10.3386/w18725
Boukes, M., & Vliegenthart, R. (2017). A general pattern of newsworthiness? Analyzing news values in popular,
quality, regional and financial newspapers. Journalism. Advance online publication, 1–22. https://doi.org/10.1177/
1464884917725989
Carroll, C. D. (2003). Macroeconomic expectations of households and professional forecasters. The Quarterly Journal of
Economic, 118(1), 269–298. https://doi.org/10.1162/00335530360535207
Casarin, R., & Squazzoni, F. (2013). Being on the field when the game is still under way. The financial press and stock markets
in times of crisis. PLoS One, 8(7), e67721. https://doi.org/10.1371/journal.pone.0067721
Casey, G. P., & Owen, A. L. (2013). Good news, bad news, and consumer confidence. Social Science Quarterly, 94(1), 292–315.
https://doi.org/10.1111/j.1540‐6237.2012.00900.x
Chakravartty, P., & Schiller, D. (2011). Neoliberal Newspeak and Digital Capitalism in Crisis. International Journal of Commu-
nication, 4(23), 670–692.
Clark, G., Thrift, N., & Tickell, A. (2004). Performing finance: The industry, the media and its image. Review of International
Political Economy, 11(2), 289–310. https://doi.org/10.1080/09692290410001672813
Damstra, A., & Boukes, M. (2018). The economy, the news and the public: A longitudinal study of the impact of economic
news on economic evaluations and expectations. Communication Research. Advance Online Publication, 1–25. https://
doi.org/10.1177/0093650217750971.
Damstra, A., & Vliegenthart, R. (2016). (Un)covering the economic crisis? Over‐time and inter‐media differences in salience
and framing. Journalism Studies. Advance online publication, 1–21. https://doi.org/10.1080/1461670x.2016.1246377
Davies, N. (2009). Flat earth news. London: Viking.
Davis, A. (2000). Public relations, news production and changing patterns of source access in the British national media.
Media, Culture & Society, 22(1), 39–59. https://doi.org/10.1177/016344300022001003
Davis, A. (2002). Public relations democracy: Politics, public relations and the mass media in Britain. Manchester, England:
Manchester University Press.
Davis, A. (2006). Media effects and the question of the rational audience: Lessons from the financial markets. Media, Culture
& Society, 28(4), 603–625. https://doi.org/10.1177/0163443706065035
Davis, A. (2011). Mediation, financialization, and the global financial crisis. In D. Winseck, & D. Y. Jin (Eds.), The political
economies of media: The transformation of the global media (pp. 241–254). London: Bloomsbury Publishing.
De Boef, S., & Kellstedt, P. M. (2004). The political (and economic) origins of consumer confidence. American Journal of
Political Science, 48(4), 633–649. https://doi.org/10.2307/1519924
Doms, M., & N. Morin. (2004). Consumer sentiment, the economy, and the news media. FRB of San Francisco Working
Paper. https://doi.org/10.2139/ssrn.602763
Doyle, G. (2006). Financial news journalism: A post‐Enron analysis of approaches towards economic and financial news
production in the UK. Journalism, 7(4), 433–452. https://doi.org/10.1177/1464884906068361
Durham, F. D. (2007). Framing the state in globalization: The Financial Times' coverage of the 1997 Thai currency crisis.
Critical Studies in Media Communication, 24(1), 57–76. https://doi.org/10.1080/07393180701214538
Duval, J. (2005). Economic journalism in France. In R. Benson, & E. Neveu (Eds.), Bourdieu and the journalistic field
(pp. 135–155). Cambridge, MA: Polity Press.
Fahy, D., O'Brien, M., & Poti, V. (2010). From boom to bust: A post‐Celtic Tiger analysis of the norms, values and roles of Irish
financial journalists. Irish Communication Review, 11(1), 4.
DAMSTRA ET AL. 11 of 14

Fogarty, B. J. (2005). Determining economic news coverage. International Journal of Public Opinion Research, 17(2), 149–172.
https://doi.org/10.1093/ijpor/edh051
Fraser, M. (2009). Five reasons for crash blindness. British Journalism Review, 20(4), 78–83. https://doi.org/10.1177/
0956474809356852
Galbraith, J. K. (2004). The economics of innocent fraud: Truth for our time. Boston: Houghton Mifflin Harcourt.
Galbraith, J. K. (2009). No return to normal. Economia Politica, 26(2), 191–201.
Galtung, J., & Ruge, M. H. (1965). The structure of foreign news. Journal of Peace Research, 2, 64–91. https://doi.org/
10.1177/002234336500200104
Goidel, R. K., & Langley, R. E. (1995). Media coverage of the economy and aggregate economic evaluations: Uncovering
evidence of indirect media effects. Political Research Quarterly, 48(2), 313–328. https://doi.org/10.1177/
106591299504800205
Goidel, K., Procopio, S., Terrell, D., & Wu, D. (2010). Sources of economic news and economic expectations. American Politics
Research, 38(4), 759–777. https://doi.org/10.1177/1532673X09355671
Groß‐Klußmann, A., & Hautsch, N. (2011). When machines read the news: Using automated text analytics to quantify high
frequency news‐implied market reactions. Journal of Empirical Finance, 18(2), 321–340. https://doi.org/10.1016/j.
jempfin.2010.11.009
Guerrera, F. (2009). Why generalists were not equipped to cover the complexities of the crisis. Ethical Space‐International
Journal of Communication Ethics, 6(3‐4), 43–49.
Hagen, L. M. (2005). Konjunkturnachrichten, Konjunkturklima und Konjunktur. In Wie sich die Wirtschaftsberichterstattung der
Massenmedien, Stimmungen der Bevölkerung und die aktuelle Wirtschaftslage wechselseitig beeinflussen. Eine transaktionale
Analyse. Köln: Halem.
Haller, H. B., & Norpoth, H. (1997). Reality bites: News exposure and economic opinion. Public Opinion Quarterly, 61(4),
555–575. https://doi.org/10.1086/297817
Hamilton, M. (2009). What we learned about the meltdown: Financial journalists saw the trees but not the forest. Columbia
Journalism Review, 47(5), 36–39.
Happer, C. (2017). Financialisation, media and social change. New Political Economy, 22(4), 437–449. https://doi.org/
10.1080/13563467.2017.1259301
Harcup, T., & O'neill, D. (2001). What is news? Galtung and Ruge revisited. Journalism Studies, 2(2), 261–280. https://doi.org/
10.1080/14616700118449
Harrington, D. E. (1989). Economic news on television: The determinants of coverage. Public Opinion Quarterly, 53(1), 17–40.
https://doi.org/10.1086/269139
Hester, J. B., & Gibson, R. (2003). The economy and second‐level agenda‐setting: A time‐series analysis of economic news
and public opinion about the economy. Journalism and Mass Communication Quarterly, 80(1), 73–90. https://doi.org/
10.1177/107769900308000106
Hetherington, M. J. (1996). The media's role in forming voters' national economic evaluations in 1992. American Journal of
Political Science, 40(2), 372–395. https://doi.org/10.2307/2111629
Hilgartner, S., & Bosk, C. L. (1988). The rise and fall of social problems: A public arenas model. American Journal of Sociology,
94(1), 53–78. https://doi.org/10.1086/228951
Holbrook, A. L., Krosnick, J. A., Visser, P. S., Gardner, W. L., & Cacioppo, J. T. (2001). Attitudes toward presidential candidates
and political parties: Initial optimism, inertial first impressions, and a focus on flaws. American Journal ofPolitical Science,
38(4), 930–950. https://doi.org/10.2307/2669333
Hollanders, D., & Vliegenthart, R. (2011). The influence of negative newspaper coverage on consumer confidence: The Dutch
case. Journal of Economic Psychology, 32(3), 367–373. https://doi.org/10.2139/ssrn.1430287
Hopkins, D. J., Kim, E., & Kim, S. (2017). Does newspaper coverage influence or reflect public perceptions of the economy?
Research & Politics, 4(4). https://doi.org/10.1177/2053168017737900
Huxford, J. (2012). Reporting on recession: Journalism, prediction, and the economy. The International Business & Economics
Research Journal (Online), 11(3), 343. https://doi.org/10.19030/iber.v11i3.6867
Iyengar, S., Peters, M. D., & Kinder, D. R. (1982). Experimental demonstrations of the “not‐so‐minimal” consequences of tele-
vision news programs. American Political Science Review, 76(4), 848–858. https://doi.org/10.1017/S000305540018966X
Jensen, K. B. (1987). News as ideology: Economic statistics and political ritual in television network news. Journal of Commu-
nication, 37(1), 8–27. https://doi.org/10.1111/j.1460‐2466.1987.tb00964.x
Ju, Y. (2008). The asymmetry in economic news coverage and its impact on public perception in South Korea. International
Journal of Public Opinion Research, 20(2), 237–249. https://doi.org/10.1093/ijpor/edn021
12 of 14 DAMSTRA ET AL.

Kalogeropoulos, A. (2017). Economic news and personal economic expectations. Mass Communication and Society. Advance
online publication. Doi: https://doi.org/10.1080/15205436.2017.1403629, 21, 248–265.
Kalogeropoulos, A., Albæk, E., De Vreese, C. H., & Van Dalen, A. (2015). The predictors of economic sophistication: Media,
interpersonal communication and negative economic experiences. European Journal of Communication, 30(4), 385–403.
https://doi.org/10.1177/0267323115582149
Kalogeropoulos, A., Albæk, E., De Vreese, C. H., & Van Dalen, A. (2016). News priming and the changing economy: How eco-
nomic news influences government evaluations. International Journal of Public Opinion Research, edv048. https://doi.org/
10.1093/ijpor/edv048
Kalogeropoulos, A., Svensson, H. M., Van Dalen, A., De Vreese, C. H., & Albæk, E. (2014). Are watchdogs doing their busi-
ness? Media coverage of economic news. Journalism, 16(8), 993–1009. https://doi.org/10.1177/1464884914554167
Kantola, A. (2007). On the dark side of democracy: The global imaginary of financial journalism. In Reclaiming the media: Com-
munication rights and democratic media roles (p. 192). Bristoll: Intellect.
Kleinnijenhuis, J., Schultz, F., Oegema, D., & van Atteveld, W. (2013). Financial news and market panics in the age of high‐
frequency sentiment trading algorithms. Journalism, 14(2), 271–291. https://doi.org/10.1177/1464884912468375
Knowles, S., Phillips, G., & Lidberg, J. (2017). Reporting the global financial crisis. A longitudinal tri‐nation study of mainstream
financial journalism. Journalism Studies, 18(3), 322–340. https://doi.org/10.1080/1461670X.2015.1058182
Kollmeyer, C. J. (2004). Corporate interests: How the news media portray the economy. Social Problems, 51(3), 432–452.
https://doi.org/10.1525/sp.2004.51.3.432
Lamla, M. J., & Lein, S. M. (2014). The role of media for consumers' inflation expectation formation. Journal of Economic
Behavior & Organization, 106(1), 62–77. https://doi.org/10.1016/j.jebo.2014.05.004
Larcinese, V., Puglisi, R., & Snyder, J. M. (2011). Partisan bias in economic news: Evidence on the agenda‐setting behavior of
US newspapers. Journal of Public Economics, 95(9–10), 1178–1189. https://doi.org/10.1016/j.jpubeco.2011.04.006
Lashmar, P. (2008). Subprime–The death of financial reporting or a failure of investigative journalism? The end of journalism?
Technology, education and ethics conference, University of Bedfordshire, 17–18 October.
Lewis‐Beck, M. S., & Stegmaier, M. (2000). Economic determinants of electoral outcomes. Annual Review of Political Science,
3(1), 183–219. https://doi.org/10.1146/annurev.polisci.3.1.183
Lischka, J. A. (2016). Overall summary and conclusions. In Economic news, sentiment, and behavior (pp. 95–107). Wiesbaden,
Germany: Springer Fachmedien Wiesbaden.
Manning, P. (2013). Financial journalism, news sources, and the banking crisis. Journalism, 14(2), 173–189. https://doi.org/
10.1177/1464884912448915
Marron, M. B., Sarabia‐Panol, Z., Sison, M. D., Rao, S., & Niekamp, R. (2010). The scorecard on reporting of the global financial
crisis. Journalism Studies, 11(2), 270–283. https://doi.org/10.1080/14616700903538413
McCarthy, K. J., & Dolfsma, W. (2014). Neutral media? Evidence of media bias and its economic impact. Review of Social
Economy, 72(1), 42–54. https://doi.org/10.1080/00346764.2013.806110
McCombs, M. E., & Shaw, D. L. (1972). The agenda‐setting function of mass media. Public Opinion Quarterly, 36, 176–187.
https://doi.org/10.1086/267990
Mercille, J. (2013). The role of the media in fiscal consolidation programmes: The case of Ireland. Cambridge Journal of
Economics, 38(2), 281–300. https://doi.org/10.1093/cje/bet068
Nadeau, R., Niemi, R. G., Fan, D. P., & Amato, T. (1999). Elite economic forecasts, economic news, mass economic judgments,
and presidential approval. The Journal of Politics, 61(1), 109–135. https://doi.org/10.2307/2647777
Philo, G. (1995). Television, politics and the rise of the New Right. In G. Philo (Ed.), Glasgow media group reader (Vol. 2) (pp.
198–233). London: Longman.
Philo, G., Miller, D., & Happer, C. (2015). Circuits of communication and structures of power: The sociology of the mass
media. In M. Holborn (Ed.), Contemporary sociology (pp. 444–470). London: Polity Press.
Pirie, I. (2012). Representations of economic crisis in contemporary Britain. British Politics, 7(4), 341–364. https://doi.org/
10.1057/bp.2012.15
Rafter, K. (2014). Voices in the crisis: The role of media elites in interpreting Ireland's banking collapse. European Journal of
Communication, 29(5), 598–607. https://doi.org/10.1177/0267323114537787
Reese, S. D., Daly, J. A., & Hardy, A. P. (1987). Economic news on network television. Journalism Quarterly, 64(1), 137–144.
https://doi.org/10.1177/107769908706400119
Reich, Z. (2012). Different practices, similar logic: Comparing news reporting across political, financial, and territorial beats.
The International Journal of Press/Politics, 17(1), 76–99. https://doi.org/10.1177/1940161211420868
DAMSTRA ET AL. 13 of 14

Salgado, S., & Nienstedt, H. (2016). Euro crisis and plurality: Does the political orientation of newspapers determine the
selection and spin of information? European Journal of Communication, 31(4), 462–478. https://doi.org/10.1177/
0267323116659977
Sanders, D. (2000). The real economy and the perceived economy in popularity functions: How much do voters need to
know? A study of British data, 1974–97. Electoral Studies, 19(2–3), 275–294. https://doi.org/10.1016/S0261‐
3794(99)00052‐9
Schechter, D. (2009). Credit crisis: How did we miss it? British Journalism Review, 20(1), 19–26. https://doi.org/10.1177/
0956474809104199
Schifferes, S. (2011). The future of financial journalism in the age of austerity. Inaugural lecture, 17 February. London: City
University. Available at: http://www.scribd.com/doc/49084191/The‐Future‐of‐Financial‐Journalism‐in‐the‐Age‐of‐
Austerity
Schifferes, S. (2012). Trust‐meltdown for business journalism. British Journalism Review, 23(2), 55–59. https://doi.org/
10.1177/0956474812450671
Schifferes, S., & Coulter, S. (2013). Downloading disaster: BBC news online coverage of the global financial crisis. Journalism,
14(2), 228–252. https://doi.org/10.1177/1464884912460171
Schifferes, S., & Knowles, S. (2014). The British media and the ‘first crisis of globalization’. In The media and financial crises:
Comparative and historical perspectives (pp. 42–58). London: Routledge.
Schiffrin, A. (2015). The press and the financial crisis: A review of the literature. Sociology Compass, 9(8), 639–653. https://
doi.org/10.1111/soc4.12288
Soroka, S. N. (2006). Good news and bad news: Asymmetric responses to economic information. Journal of Politics, 68(2),
372–385. https://doi.org/10.1111/j.1468‐2508.2006.00413.x
Soroka, S. N. (2012). The gatekeeping function: Distributions of information in media and the real world. The Journal of
Politics, 74(2), 514–528. https://doi.org/10.1017/s002238161100171x
Soroka, S. N. (2014). Negativity in democratic politics. New York: Cambridge University Press.
Soroka, S. N., Daku, M., Hiaeshutter‐Rice, D., Guggenheim, L., & Pasek, J. (2017). Negativity and positivity biases in economic
news coverage: Traditional versus social media. Communication Research. Advance online publication. https://doi.org/
10.1177/0093650217725870
Soroka, S. N., Stecula, D. A., & Wlezien, C. (2015). It's (change in) the (future) economy, stupid: Economic indicators, the
media, and public opinion. American Journal of Political Science, 59(2), 457–474. https://doi.org/10.1111/ajps.12145
Starkman, D. (2009). Blindness: The media and the meltdown. Columbia Journalism Review, 48(1), 24–31.
Stein, H. (1975). Media distortions: A former official's view. Columbia Journalism Review, 13(6), 37.
Stevenson, R. L., Gonzenbach, W. J., & David, P. (1991). Economic recession and the news. Mass Communication Review, 21,
4–19.
Stimson, J. A. (1991). Public opinion in America: Moods, cycles, and swings. Boulder: Westview Press.
Strauß, N. (2018). Financial journalism in today's high‐frequency news and information era. Journalism, Advance Online Pub-
lication, 1–21. https://doi.org/10.1177/1464884917753556
Strauß, N., Vliegenthart, R., & Verhoeven, P. (2017). Intraday news trading: The reciprocal relationships between the stock
market and economic news. Communication Research. https://doi.org/10.1177/0093650217705528
Svensson, H. M., Albæk, E., Van Dalen, A., & De Vreese, C. (2017a). Good news in bad news: How negativity enhances
economic efficacy. International Journal of Communication, 11(2017), 1431–1447.
Svensson, H. M., Albæk, E., Van Dalen, A., & De Vreese, C. H. (2017b). The impact of ambiguous economic news on
uncertainty and consumer confidence. European Journal of Communication, 32(2), 85–99. https://doi.org/10.1177/
0267323116677205
Tambini, D. (2010). What are financial journalists for? Journalism Studies, 11(2), 158–174. https://doi.org/10.1080/
14616700903378661
Tan, Y., & Weaver, D. H. (2007). Agenda‐setting effects among the media, the public, and congress, 1946–2004. Journalism &
Mass Communication Quarterly, 84(4), 729–744. https://doi.org/10.1177/107769900708400405
Tett, G. (2009). Silos and silences: Why so few people spotted the problems in complex credit and what that implies for the
future. Financial Stability Review, (14), 121–129.
Thompson, P. A. (2013). Invested interests? Reflexivity, representation and reporting in financial markets. Journalism, 14(2),
208–227. https://doi.org/10.1177/1464884912474201
Tracy, J. F. (2012). COVERING “FINANCIAL TERRORISM” The Greek debt crisis in US news media. Journalism Practice, 6(4),
513–529. https://doi.org/10.1080/17512786.2011.633789
14 of 14 DAMSTRA ET AL.

Tumber, H. (1993). Selling scandal': business and the media. Media, Culture & Society, 15(3), 345–361. https://doi.org/
10.1177/016344393015003002
Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5(2),
207–232. https://doi.org/10.1016/0010‐0285(73)90033‐9
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131.
https://doi.org/10.1126/science.185.4157.1124
Usher, N. (2012). Ignored, uninterested, and the blame game: How The New York Times, Marketplace, and TheStreet
distanced themselves from preventing the 2007–2009 financial crisis. Journalism, 14(2), 190–207. https://doi.org/
10.1177/1464884912455904
Van Dalen, A., De Vreese, C. H., & Albæk, E. (2015). Economic news through the magnifying glass. Journalism Studies, 18(7),
890–909. https://doi.org/10.1080/1461670X.2015.1089183
Van Dalen, A., De Vreese, C. H., & Albæk, E. (2016). Mediated Uncertainty: The negative impact of uncertainty in economic
news on consumer confidence. Public Opinion Quarterly, 81(1), 111–130. https://doi.org/10.1093/poq/nfw039
Vliegenthart, R., & Van Zoonen, L. (2011). Power to the frame: Bringing sociology back to frame analysis. European Journal of
Communication, 26(2), 101–115. https://doi.org/10.1177/0267323111404838
Wattenberg, B. J. (1985). The good news is, the bad news is wrong. New York: American Enterprise Institute.
Whitten‐Woodring, J. (2009). Watchdog or lapdog? Media freedom, regime type, and government respect for human rights.
International Studies Quarterly, 53(3), 595–625. https://doi.org/10.1111/j.1468‐2478.2009.00548.x
Winter, J. P. (1981). Contingent conditions in the agenda‐setting process. Mass Communication Review Yearbook 2 (pp. 235–
243). Newbury Park, California: Sage
Wu, H. D., McCracken, M. W., & Saito, S. (2004). Economic communication in the ‘Lost Decade’ news coverage and the
Japanese recession. International Communication Gazette, 66(2), 133–149. https://doi.org/10.1177/0016549204041474
Wu, D. H., Stevenson, R. L., Chen, H., & Güner, Z. N. (2002). The conditioned impact of recession news: A time‐series analysis
of economic communication in the United States, 1987–1996. International Journal of Public Opinion Research, 14(1),
19–36. https://doi.org/10.1093/ijpor/14.1.19
Zaller, J. (2003). A new standard of news quality: Burglar alarms for the monitorial citizen. Political Communication, 20(2),
109–130. https://doi.org/10.1080/10584600390211136
Zucker, H. G. (1978). The variable nature of news media influence. Communication Yearbook, 2, 225–240. https://doi.org/
10.1080/23808985.1978.11923728

Alyt Damstra is currently a PhD student at the Amsterdam School of Communication Research, University of
Amsterdam. Her research focuses on the causes and consequences of economic news coverage.

Mark Boukes (PhD, 2015) is postdoctoral researcher at the Amsterdam School of Communication Research, Uni-
versity of Amsterdam. His research focuses on media effects, in particular of soft news, infotainment, and eco-
nomic news.

Rens Vliegenthart (PhD, 2007) is a full professor Media and Society at the Amsterdam School of Communication
Research. His research interests are economic news effects, media‐politics relations, and media coverage of social
movements, election campaigns, European integration, and the economic crisis.

How to cite this article: Damstra A, Boukes M, Vliegenthart R. The economy. How do the media cover it and
what are the effects? A literature review. Sociology Compass. 2018;e12579. https://doi.org/10.1111/
soc4.12579
 WHAT ARE FINANCIAL JOURNALISTS FOR?

Damian Tambini

In order to understand why so little media attention was paid to risks in the banking sector in the
run up to the financial crisis, we need to understand the framework of law, regulation, self-
regulation and professional incentives that structure the practice of financial and business
journalism. This paper focuses in particular on what role financial journalists play in the system of
corporate governance, the ways in which law and regulation recognize that role, and the extent
to which this role is accepted and understood by financial journalists themselves. The first part of
the essay reviews recent debate on financial journalism and investigates the role of financial
journalism from a systemic perspective: looking at its role in corporate governance, and its impact
on market behaviour. I develop the notion that financial and business journalists operate within a
framework of rights and duties which institutionalize a particular ethical approach to their role.
The second half of the article, which draws more extensively on interviews conducted with
journalists and editors, asks how journalists themselves understand and describe their role and
what they see as the key challenges they face as they attempt to perform it. It emerges that there
is no consensus among financial and business journalists about their ‘‘watchdog’’ role in relation
to markets and corporate behaviour, and whilst the financial journalists interviewed tended to
agree on the key challenges they face, they are uncertain how to respond to them.

KEYWORDS business; conflict of interest; ethics; financial; journalism; regulation

Introduction: Financial Journalism * The Debate

Criticism of financial and business journalists is not new. They have faced their share
of public criticism both before and since the 2007 credit crisis. The charge sheet is a long
one: financial journalists are criticized for superficiality and for a failure to conduct
investigations (Davis, 2005; Doyle, 2006; Wilby, 2007) and for inappropriate news values
(Doyle, 2006). They are criticized for being insufficiently sceptical (Doyle, 2006), and
captured (Starkman, 2009). The following passage, from the Columbia Journalism Review
(Brady, 2003), focuses on the role of CNBC during the first dotcom boom and bust in the
United States:

Critics claim that CNBC’s on-screen personalities led the charge into the speculative
stocks of the 1990s, stocks that eventually imploded. There are professional questions, as
well, about the network’s cheerleading coverage of Wall Streeters who were extolling
stocks that those same analysts were privately calling ‘‘crap.’’ The Merrill Lynch analyst
Henry Blodget, for one example, had been a frequent guest on CNBC. His Internet stocks
all came crashing down, and eventually it was learned that he’d been recommending
stocks on-air that he privately called ‘‘junk’’ . . . Alan Abelson, the respected financial
columnist of Barron’s, comes down hard on the channel. ‘‘CNBC,’’ he says bluntly, ‘‘was a
product of the stockmarket mania. They contributed to it, and they ate off it’’. (Brady,
2003, p. 50)

Journalism Studies, Vol. 11, No 2, 2010, 158174

ISSN 1461-670X print/1469-9699 online
– 2010 Taylor & Francis DOI: 10.1080/14616700903378661
 WHAT ARE FINANCIAL JOURNALISTS FOR? 159

Whilst questions should be asked about the complex ethical conflicts and more subtle
conflicts of interest behind this ‘‘bubble’’ journalism, most see financial journalism’s
weakness as cock up rather than conspiracy. Gillian Doyle (2006, p. 433) questions the level
of training and skill among business journalists. Many of the financial journalists she
interviewed said that as financial products become more complex it is difficult to find
journalists with the expertise to adequately understand the material they are reporting on.
Aeron Davis’ research, based on interviews with fund managers, brokers, and other
interested parties in 20022004, similarly reports perceptions of a lack of expertise and of
critical reflection by journalists (Davis, 2007, pp. 1634).
Gillian Doyle argues that a lack of skills among journalists as markets become more
complex undermines journalists’ ability to hold companies to account (Doyle, 2006,
p. 442). According to a news editor interviewed by Doyle: ‘‘financial journalists are
generally good at analysing companies and interpreting and maintaining companies at
arms length. Where they are less good, however, is in pro-actively investigating stories*in
stepping back to see the wider picture and spotting things that deserve a closer look. This
is because they don’t have the time and the opportunity and perhaps the education and
training needed to be more pro-active’’ (Doyle, 2006, p. 442). Similarly, several financial
journalists and editors interviewed for this article raised the issue of the lack of specialist
training for financial analysis. ‘‘The people that are really skilled go and make loads of
money working in the financial sector. Not writing about it’’, one respondent said.
The challenges faced by financial journalists were well illustrated during 20079
when only a very few individuals, notably Gillian Tett of the Financial Times, spotted the
crisis coming. Financial journalism is accused of giving a partial view of the business world.
But is it a distorted one? Do the financial media, as Peter Wilby (2007) asserts, ‘‘present the
world through a middle aged, middle-class prism’’? Wilby’s charge is that in reporting
financial issues, for example house prices, there is a tendency to frame issues as though
what was ‘‘good news’’ was uncontroversial. As those who wish to buy, but not sell houses
know very well, price hikes are not good news for everyone. For those journalists that
aspire to ‘‘public interest’’ coverage, just what interest should they serve is a very complex
issue: should they serve investors? Or the ‘‘rationality’’ of the market? Only exceptional
individuals will actively want to be the one that burst the bubble.
Critics of the current state of UK financial and business journalism thus tend to focus
on the problem of a skills and resources gap. And whilst the shifting relationship of power
between political journalists and politicians is much discussed (see John Lloyd, 2004 and
Nick Jones, 1999), the similar standoff that occurs between financial journalists and their
sources has been subject to less discussion. One very real problem is that interested
parties*including corporate executives and analysts*sometimes constitute the only
repositories of relevant data and employ the main experts. With the help of proactive PR,
information can be controlled despite the fact that*as we have found*ultimately the
financial system is a public matter that affects us all. Dyck and Zingales describe the
relationship between financial journalists and their sources in terms of a quid pro quo
situation: access to information is granted; but only on condition that stories are presented
in the required manner (2003, pp. 16). Sources exert their control through granting/
denying of access, the potential for treating, threat of lawsuits.
The charges levelled against current financial journalism: of capture and of
superficiality, and of lack of skills, are of course based on the assumption that financial
journalists should play an independent, ‘‘watchdog’’ role. Since this is not a consensus
160 DAMIAN TAMBINI

view, even among journalists, it is worth making this explicit. Might the problem not be
that markets are increasingly complex, or that journalists are insufficiently funded? Perhaps
business and financial journalists themselves do not see themselves as engaged in ‘‘public
interest’’ reporting in the same way that political journalists do.
The interviews conducted for this project, perhaps surprisingly, showed a consider-
able lack of consensus about whether, and to what extent, business and financial
journalists should seek to serve a wider public interest. One way of examining this
question theoretically is to ask what it is that our corporate governance structure asks of
financial journalism. Obviously there are no formal, legal responsibilities placed on
journalists; but after high-profile failures such as Enron and Northern Rock, we might ask
how financial journalism fits in to a general framework of checks and balances on business.

Financial Journalism and Corporate Governance

Joe, Louis and Robinson report a 2002 survey finding that US board members ‘‘rank
negative press as the greatest threat to corporate reputation, ahead of corporate unethical
behaviour and litigation’’ (Joe et al., 2007, p. 4). Journalists thus have a potentially
powerful position if they choose to hold companies to account. But whilst political
journalists have a strong professional commitment to exposing wrongdoing and
corruption, our interviewees reported that the notion of a watchdog role is less
pronounced among business journalists, particularly where journalists see their main
role as supplying investors with market relevant information.
Understanding the role of financial journalism in a broader system of corporate
governance means understanding how financial journalism is involved in holding
corporations to account, and informing the public about the risks of the financial system.
Regulators, of course, hold businesses*including banks*to account, but they are the first
to admit that they cannot regulate every aspect of corporate behaviour. They rely also on
the public and the media working to expose wrongdoing and expose matters of public
interest.
Michael Borden (2007) has analysed the role of financial journalists from the
perspective of the overall system of corporate governance. His research focuses on the
United States but there seems to be no reason to expect the United Kingdom to differ.
From this perspective, it has been argued (Klausner, 2005, cited in Borden, 2007) that
corporate law has inherent limitations and that in order to understand failures of
regulatory systems, attention must turn to extralegal enforcement mechanisms. Borden’s
approach is to identify what he describes as ‘‘gaps’’ in corporate law, arguing that the key
issues of disclosure and investigation rely on the media. He sees the role of the media as:
‘‘Uncovering and deterring fraud, and acting as an informational intermediary that
catalyzes and informs legal action by Congress, the Securities and Exchange Commission
(SEC), the courts, shareholders, or private litigants’’ (Borden, 2007, p. 315). As Borden
points out, journalists encounter conflicts of interest and challenges in relation to each of
these roles. I return to this issue below.
This functional, systemic view of the role of financial journalists may well be rejected
by journalists who invoke a narrow or market-based notion of their responsibilities. Several
of the journalists interviewed for this research simply rejected the notion that they had
such ‘‘ethical’’ or ‘‘social’’ responsibilities. These ethical minimalists saw their ultimate
 WHAT ARE FINANCIAL JOURNALISTS FOR? 161

responsibility as being to respect the law and serve the shareholders of their companies,
not to plug gaps in the system of corporate oversight.
I will return to this disconnect between a systemic view of business journalism, and
the reality of professional practice below. In the following section I shift perspective,
looking at the direct and powerful impacts that financial news can have on market
behaviour and the implications of this for the regulation, role and responsibilities of
financial journalists.

The Effects of Financial Coverage: Reflexivity and Market Impact

Keynes compared financial markets to a beauty contest where the contestants’ behaviour
is based not only on their own beliefs but also on their expectations of the other
contestants beliefs . . . accordingly . . . the media is likely to play a disproportionate role
in asset pricing. (Joe et al., 2009, p. 2)

One reason that a peculiar ethics and regulatory framework applies to financial
journalism is that business news can have a very direct and powerful impact on market
behaviour*with the ‘‘city slickers’’ case the most pungent recent reminder. On one hand,
the fact that journalists may be in a position to abuse their influence has led to detailed
regulation, some of which will be examined in detail in the next section. On the other
hand, there is a more diffuse and less researched notion that journalists should avoid
‘‘panicking’’ markets, or contributing to irrational behaviour, a notion much debated after
the Northern Rock debacle.
Measurement of the impact of news on stock prices is a well-established field of
research which involves a number of distinct approaches. The research originates mainly in
discussions about what makes markets move*rather than discussions about what impact
changing media technologies might have. And there are specific literatures on policy
issues such as central bank transparency (Connolly and Kohler, 2004; Reeves and Sawicki,
2007). Some researchers treat events (announcements for example, release of information)
as ‘‘news’’, whilst others attempt to separate out the fact of coverage in news media as the
key variable, asking whether the fact of coverage has an independent and measurable
effect (Dyck and Zingales, 2003, p. 2).
There is, however, a danger of media centrism: of prioritising the impact of media
coverage beyond the range of other factors on market outcomes (see Dyck and Zingales,
2003). Barber and Odean (2006) find that individual investors tend to be net buyers of
shares on ‘‘high attention days’’. The important finding in this US-based research is that
the tendency on such days is for institutional investors to be net sellers of those stocks
whereas individual investors buy. The authors hypothesize that this is due to the limited
information available to investors and ‘‘bounded rationality’’. Other research into the
relationship between reporting and market behaviour examined the market impact of a
survey of the ‘‘Worst Boards’’ published in Business Week in the United States. Interestingly,
the results showed positive short-term share price gains even among companies identified
as the worst boards. The short-term gains did subsequently reverse, however (Joe et al.,
2009, p. 19). Other authors concern themselves with the problem of what influences
investment decisions and the extent to which news reporting might be a factor.
It is useful to keep in mind these two systemic views of the role of financial
journalists: first in terms of their role in corporate governance and secondly in terms of
their role in relation to markets and particularly capital markets when considering the
162 DAMIAN TAMBINI

responsibilities of financial journalists. On one hand, they indicate a wider watchdog role
for journalists in the system of corporate governance; and on the other, they show that the
reflexive nature of the relationship with markets requires a particular ethical approach.
In the following sections I describe financial journalism as a combination of various
hard won rights and privileges that are granted in recognition of the social role that
financial and business journalists are seen to play. This approach draws on Osiel’s (1986)
study of the professionalization of journalism in its understanding of the relationship
between law, self-regulation and professional practices (see also Hallin and Mancini, 2004).
Whilst journalists themselves, particularly in the United Kingdom often reject the notion
that they have institutionalized professional responsibilities, I argue that such a position is
untenable as it is possible to demonstrate that the legal and self-regulatory framework
within which journalists work sets out and reinforces such responsibilities. In order to
understand current challenges in the profession, it is useful to consider the longer-term
context: business and financial journalism has evolved a clear set of professional rights and
responsibilities which reflect (1) the role of financial journalism in the broader system of
corporate governance; (2) the reflexive relationship between news and markets; and (3)
the codification of the resulting set of roles and responsibilities in law and self-regulatory
codes.

Financial Journalism, Regulation and the Law: Formal Duties of Journalists

In this section I will look at duties that are much clearer and less disputed than the
broader ‘‘ethical’’ responsibilities discussed above. My concern is with the legal obligations
of business and financial journalists. In the following section I outline the legal privileges
that apply to financial journalists. Here is an incomplete list of the main duties of financial
journalists relating to market abuse.

1. Insider Trading
Trading on the basis of information that is not in the public domain. Notoriously
hard to define, this impacts on journalists when they may be party to private information
prior to publication, and may at that point take part in trades that would be illegal. Under
the Financial Services and Markets Act, Market Abuse can involve

behaviour [that] is based on information which is not generally available to those using
the market but which, if available to a regular user of the market, would or would be
likely to be regarded by him as relevant when deciding the terms on which transactions
in investments of the kind in question should be effected. (s118.2.a)

2. Market Manipulation
One variant of this, known as ‘‘share ramping’’, was at the heart of the Daily Mirror
‘‘City Slickers’’ case. Because of the strong influence that certain media can have on prices,
it is possible for certain players to impact prices through recommendation and thereby
profit by selling shares on in the short term. Readers who invest do so in inappropriately
inflated stock and are likely to lose money when prices correct.
 WHAT ARE FINANCIAL JOURNALISTS FOR? 163

3. Conflicts of Interest
All journalism has to face issues of conflict of interest, but such issues are particularly
pronounced in relation to financial journalism. The interest of the reader, investor or
market may be in conflict with the private interest of the journalist if, for example, the
journalist or an associate has a shareholding or some other stake in a company they are
reporting. The temptation may be to withhold information that could hurt the company in
question or publish information that favours it, or engage in profit-driven market
manipulation.

4. Non-disclosure
Where journalists do have an interest, they are obliged under relevant codes (such as
the Market Abuse Directive) to disclose the identity of the producers of the recommenda-
tion, and any interests that the producer might have in the recommended investment.
Most established financial news providers operate in addition a policy of internal disclosure
whereby any stocks held are disclosed to a key manager or editor who can monitor
whether the journalist is as a result placed in conflict of interest as regards stories that are
covered by that journalist.

For each of these four key ethical challenges there are layers of overlapping
regulation and self-regulation including:
. The Financial Services and Markets Act 2000.
. Industry codes such as the PCC Code and Guidance on Financial Journalism.
. The Investment Recommendation (Media) Regulations 2005 (Statutory Instrument 2005
No. 382).

There are, of course, many other ethical issues. Some of these (such as accuracy,
honesty) are covered by general journalism ethics codes, and some are contained within
specialist codes such as the Press Complaints Commissions’ (PCC) 2005 Best Practice Note
on Financial Journalism. In addition, most established leaders in financial news have their
own guidance and codes of conduct. These do cover issues relating to conflicts of interest,
and independence of journalists, but also deal with other issues such as whether stock
tipping is encouraged and working for other organizations.

Privileges of Financial Journalists

The law applied to journalists is in many respects the same as that applied to anyone
else. But in some respects the regime for journalists is different. On one hand, the courts
rely on the self-regulatory bodies such as the PCC to implement the rules, and this raises
questions about the level of oversight and enforcement, particularly in the light of the
extremely low level of PCC activity in this area, and the fact that it is almost always
complaints-driven.1 In the light of the exemptions for journalists by the Market Abuse
Directive and the lack of PCC activity in this area, ethical responsibilities lie with journalists
and their employers. Journalists were placed outside of the scope of some key aspects of
the EC Market Abuse Directive*in recognition of the role they play in corporate
governance*and the fact that they operate their own codes of conduct. And on the other
164 DAMIAN TAMBINI

hand, journalists do have some informal immunity (for example in terms of their ability to
protect their sources) in the light of the role they play in corporate governance.
Journalists are therefore treated as a special case, and in the United Kingdom they
enjoy a system of formal and informal regulatory and legal privileges. On one hand, because
of the particular role that news reporting plays, journalism is recognized in European
Convention on Human Rights jurisprudence as worthy of special protection (Castendyck
et al., 2008, p. 46). Whether the fact that courts tend to afford a lower level of protection to
commercial speech than political speech may be relevant to the framework for financial
journalism: it may be that journalists who are obviously fulfilling a public interest role are
more protected by free speech rights. Where issues of free speech are likely to arise, in the
United Kingdom as in the United States, is in relation to source protection (Osiel, 1986). UK
financial regulators have developed informal and formal procedures that go beyond the
protection afforded by the European Court in terms, for example, of the protection of
sources. This means that whilst non-journalists (and we might include bloggers in this
category*though this is less clear) could be obliged to reveal sources to a regulator,
professional journalists under the PCC or Ofcom regimes are much less likely to be. Research
on the historical emergence of these privileges and duties is beyond the scope of this essay,
but it is useful to note two cases which illustrate the slow formalization of one journalistic
privilege: the right to protect sources.
Following a 2006 dispute with the Wall Street Journal over a case relating to
Overstock.com, the US regulator formalized its approach to working with journalists. Policy
Document SEC 34-53638 sets out a set of rules and procedures that the SEC should follow
before they subpoena a journalist to force her to reveal her sources. SEC officials should:
try to obtain information first from alternative sources, determine if the information really
is essential to the case, and should contact the journalist’s legal counsel in the first
instance rather than the journalist directly, in order to ascertain how important the
information is, and the extent to which other sources have been exhausted. In announcing
this new doctrine the SEC director was quick to point out that the SEC strongly supported
freedom of the press. Cox argued that his agency ‘‘relies on aggressive investigative
journalism to uncover wrongdoing in companies. Therefore, the SEC should do nothing to
chill that work.’’ Cox said ‘‘Financial journalists need to understand that the SEC considers
them vital partners in our mission’’ (Orange County Register, 6 March 2006).
In the United Kingdom, the equivalent moment in which a line in the regulatory sand
was drawn was in relation to the Interbrew case, in which the Guardian newspaper found
itself in contempt of court after refusing to hand over documents relating to a leaked story
about a merger involving a large drinks company. In this case too, the regulator (UK
regulator, the Financial Services Authority) established a doctrine relating to protection of
sources, but, in the case of the United Kingdom, this remains informal and unwritten.
Both regulators, in establishing these doctrines, recognized the public interest
functions that journalists can play, such as holding companies to account and
investigating illegal behaviour. Insofar as they do provide these benefits they should be
helped by regulators rather than hindered, for example, by scaring off potential sources;
hence journalists are granted privileges of source protection.2
Protection of sources is only one aspect of the privileges that are extended to
financial journalists in recognition*and this is the crucial point*of their role in corporate
governance and the wider public interest. The majority of privileges that financial
journalists enjoy are in fact those enjoyed by all journalists, and include the notion of
 WHAT ARE FINANCIAL JOURNALISTS FOR? 165

qualified privilege as reflected in the ‘‘Reynolds defence’’ in defamation cases. In a

defamation case brought by the Prime Minister of Ireland against the Sunday Times, it was
established that journalists should be permitted protection of speech if they worked
ethically: if journalists work without malice, on a matter of public interest and were not
reckless. Lord Nicholls set out a 10-point test of responsible journalism, adding that:

The press discharges vital functions as a bloodhound a well as a watchdog. The court
should be slow to conclude that a publication was not in the public interest and,
therefore, the public had no right to know especially when the information is in the field
of political discussion. Any lingering doubts should be resolved in favour of publication.
(Reynolds vs Times Newspapers Ltd [1993] 3 ALL ER 961).

Whilst judges do tend to err on the side of free speech, the key implication here is
whether financial journalists that reject both bloodhound and watchdog roles should
enjoy privilege, and whether bloggers and others might also benefit.
So whilst interviews for this project uncovered a somewhat patchy notion among
journalists of any social or ethical responsibility to act as a watchdog, it is in recognition of
this role that journalistic privileges have been granted. Whether, and how rights and duties
might be conditional on one another, for example, is a question that is too broad to be
addressed in this short article. The interviews conducted for the project tried to elucidate
exactly how journalists viewed their role, and the challenges they faced in the attempt to
fulfil it. It is to this material that we now turn.

Key Challenges for Financial Journalism

Between September 2007 and July 2008 researchers conducted more than 30 in-
depth interviews with leading business and financial journalists, their editors and their
lawyers.3 The research focused primarily on the United Kingdom, with some US material
included for comparison. The aim was to investigate the ethical and professional concerns
of financial and business journalists, and the views of professionals on the key challenges
facing the profession. The following sections of this paper report on the journalists’ views
of these key challenges.
Some of the challenges facing financial journalism are not new. The need for
enhanced training and skills for financial journalists, and the unremitting daily struggle to
treat stories with appropriate scepticism are the enduring themes of the trade, dating back
to the emergence of financial journalism in the mid-twentieth century. But according to
those interviewed for this report, new communications technology adds to these
pressures and poses new challenges.

Speed
Pressure for increased productivity has prompted journalists to write more stories in
less time than before. Some things have got easier, such as the availability of data online
and accessibility of sources, but, on the other hand, the expectation is that material will be
published as soon as possible, regardless of print deadlines or broadcast bulletins. Most
journalists agree that this leads to intense professional pressures: both in terms of the
degree of senior editorial oversight before publication and in terms of the extent to which
additional sources can be accessed and verification standards maintained. Many
166 DAMIAN TAMBINI

respondents claimed that journalists were forced as a result to rely on a narrower range of
established news sources such as PR companies.

According to the editor of a Web-based business news service:

Our readers want information at 6.00, 7.00 or 8.00 in the morning . . . On the newspaper
the moment when a piece of news has been delivered to, say, the news editor, it’ll
go through the whole process of . . . news editing, sub editing, copy proof, whatever, go
through that process and sending to the print site, put it on the page. That’ll take two,
three hours, OK [on our site], because we’re a very small team using quick, light, web-
based technology, the production process takes about two or three minutes. So, it’s fast,
ultra-fast. That again changes the way you write.

The processes through which facts are verified, judgements of news value reached,
and reports are selected for publication are likely to have significant consequences for
individual companies, investors, employees and potentially for the broader economy.
There is a trade-off between speed and attention to ethics and it is one where financial
journalism has yet to find a new equilibrium of accepted practices. Getting the balance
wrong could lead to Financial Journalism as a profession becoming irrelevant. According
to a leading Fund Manager:

There is this . . . vicious downward circle: you have fewer journalists paid less with less
time and they don’t have the luxury of spending the time you need to come up with
information that is required. So it becomes less useful to people like me. We ignore it
increasingly and it becomes sort of marginalized.

These pressures of time are not peculiar to business journalists, but are of course
widely noted tendencies of contemporary journalism. Coupled with some of the other
trends reported by interviewees, however, the increased pressures on journalists’ time may
be undermining the ability of business and financial journalists to fulfil an effective public
interest function.

Complexity
Financial stories are more complex and specialist than ever before. In the hand
wringing following the collapse of Enron, some journalists admitted that the degree of
complexity in the structure of Enron’s business baffled them. Those covering the credit
crunch and the Northern Rock stories also required specialist knowledge if they were to form
an independent view. The lack of skills of this type among journalists adds to the reliance on
intermediaries and news professionals to ‘‘interpret’’ and explain stories for journalists.
According to BBC Business Editor Robert Peston, the financial media could have
done more to foresee some of the problems resulting from the credit crunch and
complexity is part of the problem:

The financial press has typically focused too much on equity markets and not enough on
debt markets . . . For many months, I was very concerned about the explosive growth of
CDOs [Collateralized Debt Obligations] and I tried to explain them through my reporting.
Doing so was a challenge, when even bankers creating the CDOs were unable to describe
them in terms that make sense to non-specialists.4
 WHAT ARE FINANCIAL JOURNALISTS FOR? 167

Whilst non-journalist stakeholders interviewed all agreed that complexity was a

problem, there was some dissent from this view in the interviews conducted with
journalists. Perhaps because of professional pride, they tended to point to some of the
strengths and successes of the profession. Others were more ready to argue that the
complexity of business and financial markets is putting a strain on reporting.

Strategy
Increasing pressures of speed, complexity and productivity add to the constant
challenge for journalists: namely to ensure that they are not used in the service of
someone else’s interests, but report in the public interest or at least the interests of their
readers. Business and financial PR has become much more important in the field in recent
years.
Professional strategy advice, in the form of financial PR, has become a high-margin,
rapid-growth industry in recent decades. In 1986, British companies spent £37 million on
financial PR. A decade later the annual figure had risen to £250 million (Michie, 1998, p. 26).
The evidence is that the past decade has seen similar or perhaps larger rates of growth.
Industry sources estimate that financial PR consultancies can command fees up to 1 per
cent of the bid values in merger and acquisition deals (Miller and Dinan, 2000).
The current credit crisis is considered to be the greatest challenge of the industry
and the professionals predict that the merger business will pick up only at the end of the
decade. Even so, the financial PR industry as a whole managed a revenue increase in 2007.
On PR Week’s top 150 UK PR consultancies league, listed companies’ fee income saw an
average 22 per cent increase (PR Week, 2008). The industry is dominated by a few agencies.
Brunswick tops the league in Mergermarket’s 2006 table of pan-European PR advisers after
advising on 146 deals worth £177.8 billion (Mergermarket, 2007). Brunswick, the largest
financial PR company in the United Kingdom had almost a third of FTSE 100 companies on
its books. Finsbury, Financial Dynamics, Citigate and Maitland hold the spots from the
second to the fifth, all advising on deals worth over £100 billion.
One editor with a long experience in the United Kingdom saw the rise of financial PR
as the single most important change to have taken place in recent years:

In the last ten, twenty years I suppose the biggest change has been the rise of the
financial intermediary, financial public relations services. They are putting up barriers to
information. I think they were always around but they’ve developed and become much
more sophisticated. When I first came across them they were really kind of press cutting
services. But now they are really strategy advisors. And there are some company directors
that do not talk or answer phone calls without consulting them. And they have
enormous power. In many ways, they set the agenda. They are the access point. They are
making these people available for interviews or they don’t make them available for
interviews. They release information in a, what’s the word, in a way which is carefully
orchestrated to happen . . . Things are very controlled in a way compared with the way it
used to be . . . the free flow of information has been interrupted and the kind of
information we get can be very sanitized. It’s very hard getting to the bottom of a story.

One former financial PR professional claimed that there was increasing co-
dependency between PR and journalists, as journalists are under time pressure to get
stories, and PR now controls access to the larger companies that control most of the larger
168 DAMIAN TAMBINI

stories: ‘‘the papers couldn’t exist without financial PRs pushing stories to them everyday
because they just don’t have many stories’’.
Journalists are, of course, aware of such strategies. The business editor of a national
newspaper admitted: ‘‘I love the leaks. Some of the leaks are obviously done to protect
insider shares or to manipulate the share price. There is no question in my mind about
that. But it is much more difficult to do today than 10 years ago’’. There is a clash here
between different aspects of professional and ethical responsibility on the part of the
journalist. The journalist must get the story, and the leak is great news from that point of
view. Presumably, if the story is big enough, who cares that the journalist is being put to
instrumental use. In that context, the journalist may reason, perhaps the fewer questions
asked about why the leak has been made, the better.
The more seasoned journalists reveal a distaste for dealing with PR when pressed on
the matter.

Because if PR give it to you it means they want something. I don’t particularly like it. If
people give me stories I will be happy but I will stand them up. I try not to be used or
manipulated. I don’t want to be used. A lot of PR companies try to trade with journalists
so it is always very subtle. They say ‘‘we will give you this now’’ then they might want
something nice written about their clients. It does happen. But I don’t like it.

According to one former editor of a national newspaper: ‘‘some financial PRs simply
tell whoppers . . . Friendship is a potential corruptor so PR must be kept at arms’ length’’.
London financial news is particularly susceptible to capture by PR according to one
financial journalist who had worked in several countries ‘‘people are spoon-fed here in
London. The financial PR industry is very developed. In Hong Kong journalists have direct
access to people operating in the market’’, ‘‘PR can be a big problem for journalists. They
[PR] selectively release information and then can block any further access. They can deny
access to company briefings, AGMs and profit warning briefings’’.
This would seem to support Gillian Doyle’s description of business news production
according to which ‘‘corporations vie with each other for the attention of a target audience
mostly composed of investors. In so doing, they dominate or ‘capture’ business and financial
news agendas to the exclusion of all other interests’’ (Doyle, 2006, p. 435; see also Davis, 2005).
Whilst problems of spin and bias do create challenges for journalists; one very real
problem is that interested parties*including corporate executives and analysts*do
sometimes constitute the main repositories of data and the main experts. Dyck and
Zingales describe the relationship between financial journalists and their sources in terms
of a quid pro quo situation, and one analogous to recent critical views of political
journalism: access to information is granted; but only on condition that stories are
presented in the required manner (Dyck and Zingales, 2003, pp. 16).
The combination of increasing complexity and increasing impact of communications
professionals is a powerful double whammy for financial journalists. According to a
leading business editor:
Editor: Well, I think, you know, there is a risk that any journalist can swallow lines from
the . . . public relations people and so on but you need to be sceptical. But you know it’s
about picking all the information hopefully from the source, and not to take it all so
seriously.
Interviewer: With all the complexity you talked about, has it become more difficult to do
that?
 WHAT ARE FINANCIAL JOURNALISTS FOR? 169

Editor: It is more difficult. Yeah. But, you know, there is a lot of going on which you don’t
understand and which we can’t get at because of that complexity. That does make it a bit
harder. But you know, what we are reporting on most of the time is takeovers, and
companies’ results, regular trading statements, and so on. We are all writing about the
same statement. You need to ask all the right questions.

Sustainability: Business Models for Financial and Business News

Many interviewees harked back to a golden age of financial journalism in which a
few players (the Financial Times in London; the Wall Street Journal in New York) enjoyed a
privileged monopoly provision as specialist business news providers. Supported by
‘‘tombstone’’ announcement advertising by large corporate clients and steady sales, with
little serious competition, times were easy. In the protected environment the professional
ethics and responsibility of the profession were fostered and there was the financial
stability to fund more investigations and longer-term risks.
The contemporary scene is quite different according to those interviewed.
Competition from new entrants, some driven by new technology, and specialist
subscription news and information terminals such as those provided by Bloomberg and
Reuters, have long ago upset the comfortable monopoly of the business press.
Increasingly, previously bundled services providing data, information, news, analysis and
comment are unbundled. Much of the value derived in financial and business news,
particularly in the press, is now in analysis and comment rather than data, information and
news, as updates are provided around the clock and, increasingly, as a free service online.
Many of the journalists interviewed stressed that there is still considerable doubt about
the sustainability of new business models for financial journalism in the new competitive
environment. Intensified competition leads to questions about what in fact the market will
provide. Whilst demand for quality business news remains high and business news
readers’ demographics are valuable to advertisers, some aspects of business journalism
may suffer. In particular, expensive and risky ventures such as investigations are seen as
increasingly difficult to fund:

The huge investment of energy and uncertain outcome associated with investigative
reporting means that, for most financial media in the UK at least, this is supported only
on an occasional basis rather than as a routine activity. So long as this remains the case,
the opportunities for media to play a role in uncovering frauds such as Enron will be
limited. (Doyle, 2005, p. 443)

A senior editor of a national UK financial news outlet agreed that:

Putting two or three people onto a project for a month where at the end of it you might
get nothing in terms of material is something that we would think very hard about doing,
because it is expensive . . . We used to have a small investigative unit, we don’t really
anymore.

A lack of resources would seem likely to impact on quality and, in particular, accuracy.
Standards of verification and sourcing vary outlet by outlet. Very few outlets will commit
to the industry gold standard of two named sources for each story*for the simple reasons
that sometimes one person in the right position is enough to verify a story, particularly if it
involves that person*and time is scarce. It appeared that journalists are aware of the
market impact of their reporting*both its impact on individual companies and on market
170 DAMIAN TAMBINI

sentiment more broadly. When journalists were questioned about whether this would
affect their verification of a story there was a mixed response. Some indicated that they
might be less inclined to publish a story at all until they were very sure of its veracity if
they thought it may have an immediate impact on job losses, for instance. Others
admitted that they might be inclined to adopt higher verification standards if the story
was likely to have an immediate market impact.

Regulation and Information

Defamation law was singled out as a key problem by several of those interviewed, as
was the problem of the lack of publicly available information. Reform of the United
Kingdom’s plaintiff-friendly defamation law is a demand made by all journalists, not just
business journalists. But many argue that business journalism faces particular challenges,
in part, because of the imbalance of resources between struggling media companies and
large companies with larger budgets for legal fees.
The law impacts not only in relation to structuring the profile of liability risk for
publishers. It also structures the access to the basic materials that journalists transform
into news. According to one interviewee, ‘‘one of the key challenges for financial
journalists is access to information’’. In the view of these journalists ‘‘what is publicly
available information in the UK that journalists can get hold of does not compare well to
the US or any other country. That surely has a role to play in relation to financial
journalism’’. Whilst freedom of information law has had an impact on access to data held
by public authorities, journalists need better access also to that held by private bodies.

Professional Closure: Who is the Financial Journalist?

To claim that the status of the business journalist comes with rights and
responsibilities begs the question ‘‘who is a financial journalist’’? Whilst in the past it
was relatively clear who was a financial/business journalist since they worked for the
established news media, the rise of bloggers, social media, new kinds of newsletters and
other news services, undermines the informal professional definitions. There has always
been pseudo-journalism in the form of tip sheets, rumour reports, and newsletters, and
many bloggers do aspire to being financial journalists, describing themselves as such, but
existing outside the ethical and professional*and to an extent, legal*constraints of the
profession. The results of the interviews suggest that financial and business journalism is
more than a job, or an activity. Like other specialist beats it is a set of rules of thumb,
formal rules and an ethical attitude, albeit one that varies in some respects between
outlets and a great deal between countries.
Online financial news should be separated between online versions and initiatives of
old media*which tend to observe the same codes and standards; and pure play online
financial news and information. This latter group appears to exist outside the existing
framework.
Where broadcasting and newspapers once were the crucial media in terms of their
market impact, new media now play a significant part. One editor recounts the case of a
report on a rumour on his purely online news messaging service:

Editor: There are rumours of private equity interest in a company called X. Now if it was
true that the private equity group was going to buy X it would be on the front page of
 WHAT ARE FINANCIAL JOURNALISTS FOR? 171

the newspaper because it would be confirmed, checked news. It would be a big story.
But at the moment it is just among the market chatter. So, traditionally, this sort of
information would be within the market reports . . . Because we are working online in
this instant messaging format, we print the same material but it HAS instant effects.
Normally, the story which comes to the newspaper is printed in the middle of the night,
turned over by the news wires. By the morning, people can take a view, a quite leisurely
view on whether it’s true or not true. Or the story might have moved on in some way.
When you print it live in IM conversation, nobody has any time to check. And so the story
can have a sort of exaggerated effect in terms of moving the prices. That brings with it
huge responsibilities. Because if the story is wrong you can be moving prices falsely. If
you say something is true which is not true . . . And it means you have to be 100 per cent
squeaky clean. Because people automatically believe you can be guilty of manipulating
the stock market. So you have to be completely open. You have to write your doubts of
the story . . . You have to be make it very clear to the reader what sorts of information
you are talking about, how firm the information is and literally you have to tell the reader
everything you know. If there’s any sense you’re holding back the information you
immediately look like you are manipulating the market in some way. You might not
actually doing anything bad but the perception would still be there. That means we
could never be seen to have any investment of our own.
Interviewer: So you have to be very clean.
Editor: One hundred per cent, squeaky clean.
Interviewer: That means you don’t own any stocks.
Editor: No. I only have debts.

The site being discussed is in fact subject to the PCC code as it is operated by a
national newspaper. Others are not, and as the interviewee acknowledges, this could lead
to pushing the regulatory and ethical boundaries. ‘‘We abide by all the values which go
with this newspaper . . . Yet at some point, somebody . . . if [the site] sat under someone
else’s umbrella, we could be abused because the technology allows you to speak to a lot
of people’’. The implicit assumption here is that the (self)-regulatory framework that
professional print and broadcast journalists are subject to is an effective foil against abuse
of journalistic power, for example through market abuse. There is a need for more clarity
about who is operating within the professional and ethical framework of financial
journalism, particularly with regard to Internet content.

Conclusions
Financial and business journalists, like other journalists, sometimes deny that they
are part of an organized ‘‘profession’’. But this paper has sought to show that whilst
financial journalists are reluctant to accept it, they do have a clear institutional role in the
broader financial system. A simple way to understand this role is to see it as a framework
of rights and duties that have been developed in the context of legal and regulatory
disputes and which form the institutional framework which governs and shapes
professional practice. In return for the social function they perform, financial journalists
are granted professional privileges.
Interviews conducted for this research support the view that many financial and
business journalists lack awareness about the professional and institutional framework
within which they operate. They hold a range of opinions about their ethical responsibilities
172 DAMIAN TAMBINI

and broader governance role. Interviewees’ responses also show that financial journalism is
under intense pressure because of the challenges of increased complexity of financial and
business news, together with industry changes that put pressure on the funding of
investigations and the time available to professionals in fulfilling their duties. The powerful
role that strategic PR has come to play in the financial and business journalism sector
constitutes another key challenge. And in addition the profession faces two key strategic
questions. One is how to respond to the question of professional closure as bloggers
and other new media services compete with established financial news sources. Another is
the question of what role financial news journalism seeks in the broader settlement for
corporate governance. As the regulatory response to the financial crisis of 20079 is
designed, debate on the appropriate balance between legal and extralegal enforcement will
entail a debate about the role of public*and therefore journalistic*oversight. The
privileges extended to financial journalists, and the duties that are expected in return,
should be part of that debate.
This could be an opportunity to revisit a broader debate about what role journalists
should play in the overall framework of corporate governance: not only unearthing cases
of fraud, but providing the balanced and sceptical news and comment that deflates
bubbles and helps avoid market irrationality. In the current environment, pressures of time
and resources are in danger of undermining business journalism in general, and the ability
of financial journalists to find a way through the current impasse. The long-standing
pressures on business journalism, such as sustainability, source dependency and pressure
from PR, are exacerbated by the economic pressures that undermine risk taking, together
with the increased complexity of financial markets and the pressure for rapid publication.
The response to this impasse was beyond the scope of the interviews conducted for this
phase of the research, but we might speculate about possible ways forward. Journalists
could respond by seeking regulatory support to enable them to fulfil their role, for
example by reducing defamation risk. Radical solutions are being discussed about new
ways of funding journalism, and these will inevitably entail judgements about what
constitutes good journalism, and whether business journalism qualifies. Given the range of
the challenges they face, journalists will need to work together and pool resources if they
are to strike a new compact about their rights and duties in the new environment, and to
whom these rights and duties should be extended.

ACKNOWLEDGEMENTS
An earlier version of this essay was published as a pamphlet by Polis/London School of
Economics in December 2008. I am grateful to Charlie Beckett, director of Polis, and the
participants in two workshops organized by Polis for comments. I am also grateful for
Isabelle Cao Lijun, Terence Kiff, Eva Knoll, Judy Lin and Gladys Tang for research
assistance.

NOTES
1. Interviews were carried out with the PCC director and data on official complaints reveals
a lack of complaints against this article of the code. In the first 10 months of 2007, there
were two complaints: one did not breach the Code and the other was dropped by the
complainant. In 2006 there were three, of which two did not breach the Code and one
 WHAT ARE FINANCIAL JOURNALISTS FOR? 173

was dropped. In 2005 there were four, two of which were not pursued by the
complainant while two accepted some offer of action by the editor (information supplied
by the PCC).
2. I am grateful for information provided by former Wall Street Journal general counsel
Stuart Karle and Howard Davies, Director LSE and former Director, Financial Services
Authority.
3. Methodological note: semi-structured interviews were conducted mainly by the author,
and some were conducted by researchers working with him according to a semi-
structured interview guide focusing on the role of the business journalist and challenges
faced in performing that role. They lasted between 30 and 65 minutes and were recorded
and transcribed. Transcripts were analysed for the main themes they focused on, and the
key challenges identified form the structure of the following report. Interviewees
consisted of the most senior financial and business journalists in the United Kingdom,
some of whom requested anonymity which has been granted to all interviewees for
consistency. The list of interviewees is available from the author. (Additional comparative
material has been provided as background from interviews conducted with financial
journalists in New York and Hong Kong which will be published separately.)
4. Robert Peston quotes are from an interview conducted by Terence Kiff for an MSc
dissertation, Department of Media and Communications, London School of Economics,
July/August 2008. I am grateful to Terence for supplying the transcript.

REFERENCES
BARBER, BRAD M. and ODEAN, TERRANCE (2006) ‘‘All That Glitters:the effect of attention and news on
the buying behavior of individual and institutional investors’’, EFA 2005 Moscow Meetings,
http://ssrn.com/abstract460660.
BORDEN, MICHAEL J. (2007) ‘‘The Role of Financial Journalists in Corporate Governance’’, Fordham
Journal of Corporate and Financial Law XII, pp. 31270.
BRADY, RAY (2003) ‘‘Makeover; CNBC Fell from Grace When the Bubble Burst. How does it look
now?’’, Columbia Journalism Review November/December.
CASTENDYCK, OLIVER, DOMMERING, EGBERT and SCHEUER, ALEXANDER (2008) European Media Law,
Dordrecht: Wolters Kluwer Law and Business.
CONNOLLY, E. and KOHLER, M. (2004) ‘‘News and Interest Rate Expectations: a study of six central
banks’’, Research discussion paper 2004-10, http://www.rba.gov.au/rdp/RDP2004-10.pdf.
DAVIS, AERON (2005) ‘‘Media Effects and the Active Elite Audience: a study of media in financial
markets’’, European Journal of Communication 20(3), pp. 30326.
DAVIS, AERON (2007) ‘‘Economic Inefficiency of Market Liberalisation: the case of the London
Stock Exchange’’, Global Media and Communication 3(2), pp. 15778.
DOYLE, GILLIAN (2006) ‘‘Financial News Journalism: a post-Enron analysis of approaches towards
economic and financial news production in the UK’’, Journalism 7(4), pp. 43352.
DYCK, ALEXANDER and ZINGALES, LUIGI (2003) ‘‘The Media and Asset Prices’’, Working paper, Harvard
Business School.
HALLIN, DANIEL C. and MANCINI, PAOLO (2004) Comparing Media Systems: three models of media and
politics, Cambridge: Cambridge University Press.
JOE, JENNIFER, LOUIS, HENOCK and ROBINSON, DAHLIA (2009) ‘‘Managers’ and Investors’ Responses to
Media Exposure of Board Ineffectiveness’’, Journal of Financial and Quantitative Analysis,
44, pp. 579605.
174 DAMIAN TAMBINI

JONES, NICK (1999) Sultans of Spin. The media and the New Labour government, London: Orion.
KLAUSNER, MICHAEL (2005) ‘‘The Limits of Corporate Law in Promoting Good Corporate
Governance’’, in: Jaw W. Lorsch, Leslie Berlowitz and Andy Zelleke (Eds), Restoring Trust
in American Business. Cambridge, MA: American Academy of Arts and Sciences, pp. 9198.
LLOYD, JOHN (2004) What the Media Are Doing to Our Politics, London: Constable and Robinson.
MERGERMARKET (2007) ‘‘Press Release: Mergermarket’s Year End 2006 House League Tables of
Financial PR Advisers to European M&A’’, http://cnc-ag.com/pdf/en/Press-Release-for-PR-
Advisers-Q4-2006-Europe.pdf.
MICHIE, DAVID (1998) The Invisible Persuaders: how Britain’s spin doctors manipulate the media,
London: Bantam.
MILLER, DAVID and DINAN, WILLIAM (2000) ‘‘The Rise of the PR Industry in Britain 19791998’’,
European Journal of Communication 15(1), pp. 535.
OSIEL, MARK J. (1986) ‘‘The Professionalization of Journalism: impetus or impediment to a
‘‘watchdog’’ press?’’, Sociological Inquiry 56(2), pp. 163282.
PR WEEK (2008) ‘‘2008 Top 150 PR Consultancies’’, 24 April.
REEVES, RACHEL and SAWICKI, MICHAEL (2007) ‘‘Do Financial Markets React to Bank of England
Communication?’’, European Journal of Political Economy 23, pp. 20727.
STARKMAN, DEAN (2009) ‘‘A Timely Academic Study Asks the Right Questions’’, The Audit. A Blog of
the Columbia Journalism Review, January, http://www.cjr.org/the_audit/post_153.php.
WILBY, PETER (2007) ‘‘How to Play Footsie With Younger Readers’’, MediaGuardian, 19 March.

Damian Tambini, London School of Economics and Political Science, Houghton St, London
WC2A 2AE, UK. E-mail: [email protected]
 THE NEW BREED OF BUSINESS
JOURNALISM FOR NICHE GLOBAL NEWS
The case of Bloomberg News

David Machin and Sarah Niblock

News providers such as Bloomberg’s multiplatform service and innumerable business-to-business

magazines are flourishing despite the hugely challenging economic climate for journalism. They
are catering for a new type of global audience that demands a different editorial strategy. Rather
Downloaded by [University of Pretoria] at 19:44 15 November 2012

than writing news for local markets they produce for a global professional readership. This paper
interrogates the nature of this global news style through linguistic analysis, supported by
interviews with journalists. The paper raises questions about the continued efficacy of
‘‘traditional’’ models of journalism practice and notions of audience.

KEYWORDS editing; globalisation; news agency; news writing; reflexive

Introduction
While many observers are now in agreement that traditional forms of news and
journalism are in downturn due to a combination of factors*advertising, market
pressures, deregulation, new technologies and changing audience culture*there are
exceptions as in the case of the global finance and business news agency Bloomberg.
Bloomberg appears to be particularly attuned to these new pressures and is producing
a growing quantity of general news that is specifically targeted at a global business
community. Bloomberg’s subscriber-based model for financing its business service has
secured enough revenue to enable the company to expand its general news operation. It
is now providing tailor-made news for a growing range of mainstream outlets, filling some
of the gaps in content created by the downturn in revenue. This paper’s main focus is on
Bloomberg’s general news-writing approach, not its business and finance service. We
compare Bloomberg general news stories with content from mainstream outlets, including
Thomson-Reuters and the British Guardian, and we identify a marked difference. In the
stories we analysed, we found Bloomberg’s approach to be much clearer, fact-based,
multi-sourced and without ‘‘local’’ subjective inflections. We interviewed Bloomberg staff
and studied a recent copy of their style guide, and found that their new writing approach
is carefully orchestrated to appeal to a global readership. Although we question the
implications of news produced for a business audience. The emergence of news agencies
was intertwined with the market. Therefore we wished to delve deeper into Bloomberg
News to see whether applying its global business news style to general news is as positive
as it seems.

Journalism Studies, Vol. 11, No 6, 2010, 783798

ISSN 1461-670X print/1469-9699 online
– 2010 Taylor & Francis DOI: 10.1080/14616701003760543
 784 DAVID MACHIN AND SARAH NIBLOCK

Methodology
In December 2009, Bloomberg’s chairman Peter Grauer told ft.com of the company’s
mission to be the world’s most ‘‘influential source of news’’.1 We have chosen to analyse
Bloomberg specifically because of its relatively rapid rise to prominence and its detailed
attention to news style. We examine Bloomberg’s public website, as opposed to its
subscriber-only service, for reasons of feasibility and to allow us to examine breaking news
in real-time. For our textual analysis, we chose a major breaking news story of global
interest*the death of musical artist Michael Jackson*to compare how different local and
global news providers culturally locate the story to cater for their different target
audiences. We felt this story best illustrated the extent to which mainstream UK, US and
global news ‘‘brands’’ apply a degree of value judgement and interpretation to news
stories whereas Bloomberg runs them very straight and does not assume prior knowledge
or opinion on the part of their readers, who could live anywhere in the globe. As the
Downloaded by [University of Pretoria] at 19:44 15 November 2012

Jackson story was US-based, we were interested to see whether this US-based company
appeared to be catering for a largely US business community. We also compared coverage
of another global story, the predicted swine flu H1N1 pandemic, and found similar
patterns emerging. Finally, we look briefly at two other texts in order to show the way that
business imperatives can influence the way that stories are prioritised and which elements
are emphasised.
To carry out our textual analysis we draw on Halliday’s (1985) outline of clause
relations, basic lexical analysis (Fairclough, 2000) and appraisal theory (Martin and White,
2005). The first assesses the degree of complexity in writing style, specifically the linkage
and ordering information with ideas. The second draws attention to applied generic
discourses such as information or entertainment. The third indicates levels of journalistic
interpretation in texts.
Examining the products of news providers simultaneously demands an exploration
of the processes and practices that make that news (Machin and Niblock, 2006). Textual
analysis alone is not sufficiently revealing. We contacted Bloomberg editorial staff to
gauge their reflections on our observations. These interviews, coupled with examination of
Bloomberg’s reflexive approach to house style, were revealing in that they exposed the
global branding imperative lying beneath this carefully formulated editorial strategy. All of
our interviewees wished to remain anonymous.
Accordingly, our route through the material is interdisciplinary. First, we analyse the
context, both historic and current, of the emergence and power of news agencies in order
to situate Bloomberg against its rivals such as Thomson-Reuters. Then we explore
Bloomberg itself, the working environment for journalists and its driving editorial
imperatives which are revealed through style book analysis and interviews. Finally, we
undertake our comparative linguistic analysis of Bloomberg’s coverage to illustrate how
‘‘process drives content’’ (Machin and Niblock, 2008).

The Rise of Market-driven News

The success of Bloomberg’s strategy becomes understandable when seen in the
light of the contextual shift in the news industry. Deregulation from the 1990s onwards
has led to increasing commercial competition between news media (Bourdieu, 1998;
Hallin, 1996) which led to downsizing through merged news operations. This has led to
a disappearance of titles, increased syndication of material and also to waves of
 NEW BREED OF BUSINESS JOURNALISM 785

redundancies and much smaller news teams (Machin and Niblock, 2006). Remaining
editorial staff have far fewer resources for gathering their own material or even for routine
checking. The situation has been compounded by a significant downturn in advertising
revenue as companies turn to alternative, cheaper promotion routes through the Internet.
There has been a corresponding growth in press offices and public relations departments
which now feed reporters and news rooms with pre-packaged material. There has also
been a similar growth in news agencies which operate to repackage and recycle news
which they then sell on (Machin and Niblock, 2006).
News corporations are seeking ways to salvage titles with targeted news. Machin
and Niblock (2008) looked at the way one title, the UK regional morning newspaper
Liverpool Daily Post, had re-launched and re-branded, to seek out specific smaller
advertising niches. In 2009 another UK regional title, the Birmingham Post, shifted away
from addressing a wider public to targeting the business sector. The success of targeted
Downloaded by [University of Pretoria] at 19:44 15 November 2012

news, at least in the United Kingdom, is evident in a report published by OC&C Strategy
Consultants in November 2009. The list of the country’s largest media groups ranked by
revenue is dominated by companies that charge their customers. Those whose profits
depend primarily on advertising*including broadcasters such as ITV and Channel 4*
have fallen down the league table during the worst recession in the industry for a
generation. At the top of the list is Bloomberg’s UK rival Thomson-Reuters, which until
recently was the leading provider of global finance analysis and news. In the United
Kingdom, The Economist magazine has had a slow but steady increase in circulation
according to the Audit Bureau of Circulation (July to December 2009) in sharp contrast
with mainstream newspapers. In the United States, the situation for print outlets has been
tougher, with a Conde Naste launch, Portfolio, closing soon after it opened. But the online
business-targeted sector appears to be growing in prominence, with Bloomberg leading
the way.
Bloomberg News is the rapidly expanding arm of the established US Bloomberg L.P.
(Limited Partnership) financial data company. It comprises a global text-based news
service, a television station, radio and podcast service, an Internet site and printed
publications including a magazine and books. Founded in 1981 by the current Mayor of
New York City Michael Bloomberg, the company provides financial data, analysis and news
to financial and business organisations globally through the Bloomberg Terminal.
Bloomberg Professional subscribers pay a set monthly fee to receive Bloomberg’s services
via a dual-screen desktop terminal ‘‘Native Client’’, referred to as ‘‘The Bloomberg’’ by staff.
The machine comprises a bespoke colour-coded Bloomberg keyboard that enables instant
access to global business data. Subscribers are also provided with a username and
password that enables them to log-in to the service remotely wherever they are in the
globe over smart phone handsets.
The Bloomberg news operation was launched in 1991 to compete fully with the
Dow Jones News Service and Reuters, as it was before it merged with Canadian media
giant Thomson. Bloomberg states:

Even in its embryonic state, the Bloomberg system was already a news machine.
Although it provided only numbers, graphs and charts, it delivered the most valuable
news a money manager could use: process, relative values, and trends. And that news
wasn’t coming second-hand from any wire service, newspaper, magazine, or electronic
broadcast. It was presented as it happened. By contrast, by the time anyone read
a newspaper report on the price and yield discrepancies that create investment
 786 DAVID MACHIN AND SARAH NIBLOCK

possibilities, it was too late. The buying or selling opportunity had probably vanished.
(1997, p. 75)

Bloomberg reports more than 100,000 users in North America, and more than
150,000 in the rest of the world. In July 2008, Merrill Lynch agreed to sell its 20 per cent
stake in the firm back to Bloomberg, for a reported $4.43 billion, valuing the firm at
approximately $22.5 billion.2 With 2300 people, Bloomberg News employs one of the
largest editorial staffs in the world. The journalists work out of 135 bureaus, 30 of which
are located in the Asia-Pacific region alone to reflect the growing economy in that area.
At the time of writing, 10 papers around the world, including the Spanish-language
edition of the Miami Herald and Tages-Anzeiger, the second-largest daily in Switzerland,
run branded Bloomberg News pages. Interviews we conducted with senior staff from the
BBC World Service and BBC News pointed to their own retreat from attempting to cover
international events due to the need to control costs and the ability of competitors such as
Downloaded by [University of Pretoria] at 19:44 15 November 2012

Bloomberg to provide this much cheaper. In this way, the Bloomberg news service is
growing in status off the back of a failing mainstream newspaper and news industry. While
‘‘traditional’’ corporations, such as News Corp, have been exploring methods of charging
for online content, Bloomberg already has a profitable business model that does not rely
on charging for content or competing for advertising revenue which has provided the
biggest challenge for existing news outlets.
Wall Street Journal reporter Matthew Winkler was handpicked by Michael Bloomberg
to devise the service and its driving ethos, The Bloomberg Way. Here the particular style of
news delivery, one which emphasises fast delivery of core information, was to be part of a
marketing strategy to attract further uses to the core financial services. Bloomberg wrote:

Our purpose was to do more than just collect and relay news; it should also, ethically,
advertise the analytical and computational powers of the Bloomberg terminal by
highlighting its capabilities in each news story . . . More retrievals meant more rentals,
which meant more revenue, which in turn meant we could afford more reporters and
have more news, and so on. Accordingly, every initiative*the magazine, television,
radio*is valued not for the revenue it brings in but for its contribution to making the
core Bloomberg product, the terminal, more indispensable. (1997, p. 83)

One important feature of this process is a reversal of an established news

convention; that international events are given a local inflection in order to fit with local
news frames (Galtung and Ruge, 1965). Bloomberg specialises in connecting the local to
the global by locating all events within the global market system, highlighting their
relevance to trade, investment and broader economic patterns.

News Agencies and the Market

The first news agencies started in the late 1840s in Germany (Wolff), France (Havas)
and the United Kingdom (Reuters). Other national agencies followed, but these three
major agencies monopolised the flow of news and formed a cartel that divided up the
world in a way not dissimilar to how power-building nation states in that same period
formed their colonial Empires. In this arrangement the big three agencies had monopoly
access to the national agencies in their territories, and these national agencies in turn (and
therefore also the newspapers that relied upon them) could only buy news from that
global agency. These agencies reported factually, in contrast to the politicised print media,
 NEW BREED OF BUSINESS JOURNALISM 787

pioneering a ‘‘journalism of information’’ (Boyd-Barrett and Rantanen, 1998, p. 7).

Emphasis was placed on new-ness and speed. The cartel collapsed when, in 1934, UPA
(United Press Association) refused to join and began its own global operations. The other
major American agency, AP (Associated Press) followed suit. From this moment, the major
news agencies began to compete with each other and the United States, rather than
Europe, became the major player. The new global agencies that started in the late
twentieth century were all American: Knight-Ridder, Dow Jones and Bloomberg.
From their origins, the news agencies provided not only news to the press, but also
business intelligence to financial brokers and business people. They were among the
pioneers of market-driven global media communication as their practices synthesised
economics, culture and politics. Their founders had all worked in banking prior to
establishing their agencies, which were based close to or within the Stock Exchanges of
London, Berlin and Paris. They saw news as a commodity, supplying traders with the
Downloaded by [University of Pretoria] at 19:44 15 November 2012

opening and closing prices of the stock exchanges as swiftly as possible, to enable them
to keep ahead of their competitors. The news agencies of today have not changed
considerably in this respect (Boyd-Barrett and Rantanen, 1998, p. 62). In the late 1990s
more than 90 per cent of Reuters’ revenue came from financial services.
In 2000 Reuters was operating at twice the revenues of Bloomberg whereas by 2006
they were roughly the same (Loomis, 2007). While Reuters merged with Thomson in 2008,
Bloomberg continued with its own strategic acquisitions, buying up Business Week in 2009
with the precise plan of expanding its terminal users and website subscribers. One of our
interviewees pointed to this as clear evidence of the Bloomberg vision that the future of
news provision would be on the Web and for the niche rather than general market.

The Bloomberg Newsroom

Bloomberg’s newsrooms are meant to mirror the global financial market they serve,
with grand city centre locations, bold design and an atmosphere of unswerving dedication
to the business. For instance, its impressive London bureau is based in adjoining buildings
in Finsbury Square, near the financial heart of the City. Visitors and staff enter through
what was originally a sedate gentleman’s club designed by Giles Gilbert Scott into an ultra-
modern environment that works on every sense. Security-staff direct all arrivals up an
escalator straight into a busy communal space offering free food and drink. The ready
supply of refreshments ensures staff members remain in the building and are not tempted
too far from their workstations. Set over several floors, the bureau spreads over into a
futuristic, metal and glass Norman Foster creation. There are no partitions between
workstations or indeed offices, though clear glass is used to provide discreet meeting
spaces and quiet zones for the broadcast production suites which are in constant use.
Different departments are colour-coded, divided up into harder working zones and soft
areas with sculptural seating. Tropical fish aquaria offer a soothing backdrop to frenetic
activity as journalists strive to break stories before their rivals. Their concentration is
punctuated by regular audio jingles and the flicker of neon screens. The staff are smartly
dressed in suits and predominantly young.
While the London bureau is not a 24-hour operation*the news service switches to
other countries depending upon the hour of day, journalists are at their desks by 7 am,
familiarising themselves with the markets. The news team is divided into different sections
including industries, markets, economy as well as non-financial ‘‘beats’’ such as law,
 788 DAVID MACHIN AND SARAH NIBLOCK

environment, science, sports, arts and culture. There is inbuilt competition amongst each
team as journalists strive to achieve the lead story in each section. Each new recruit
undergoes a period of training in the in-house protocol The Bloomberg Way. This style
guide was written by the founding editor-in-chief Winkler to govern every minute detail of
the crafting of copy, and is not publicly available.
Amongst our interviewees were two Bloomberg financial reporters, who could not
be named to protect their identities. A direct request to interview the head of training had
earlier been declined. The reporters, who underwent full training in the Bloomberg Way,
identified the abiding principles that are constantly reinforced in the workplace. We look
at these closely as they help us to understand the nature of the news texts that we analyse
in the next section:
. Accuracy.
. The importance of real time.
Downloaded by [University of Pretoria] at 19:44 15 November 2012

. Control of editors.
. Preparation.
. Internal competition.
. Audience monitoring.
. Precise use of language.

Our interviewees said that factual accuracy was drilled into trainees as being of
paramount importance. All stories needed to be referenced by two named sources which
were to be placed in the first two paragraphs. This meant that often stories would not be
run by Bloomberg that other outlets might carry. The interviewees said that they found
this frustrating as they would often have trouble finding a second source prepared to go
on record. Veracity was, they were drilled, crucial to the brand image. But on the other
hand, they admitted that this added to a sense of veracity and reliability of the stories that
Bloomberg carried.
Bloomberg, in keeping with most newsrooms, maintains a calendar of future,
predicted events, such as company annual reports. The interviewees said that it was
practice to draft two stories to have on hold for the announcement of event outcomes;
one to be used if it was positive the other if it was bad, each including interviews from
experts that explained each eventuality and why it had happened. This was important in
order for the up-to-date nature of Web news. One interviewee who had since moved on
from Bloomberg to a rival agency said that Bloomberg appeared to be ahead in
the realisation that news production had to be geared to needs of the Web for up-to-date
material. Much of their daily work involved the continual update of their stories. One
interviewee who had worked for a number of other agencies beforehand commented that
it was only possible thanks to the heavy resourcing and staffing of the Bloomberg news
operation.
Internal competition is maintained at Bloomberg through reporters striving to have
their work in the main top 10 headlines on the portal at any one time. But one interviewee
explained: ‘‘Stories that get into the top 10 get much more attention from editors and you
will see these change a lot on the terminal, having frequent updates’’. Bloomberg uses
users’ accounts to the terminal to observe which stories people are reading, and will
develop or repeat these stories. Several interviewees pointed quickly to the way that
Bloomberg had also realised that the Internet provided the opportunity to observe what
clients want, and adapt to this in real-time. One interviewee, who had worked for other
 NEW BREED OF BUSINESS JOURNALISM 789

agencies, did mention that this attention to client needs, for him, raised the issue of news
being written and developed not in the first place for citizens, but rather for niche groups.
This is a trend we have observed elsewhere through research into branding newspapers
and radio news (Machin and Niblock, 2006, 2008). One interviewee marked this as a key
difference between writing for Bloomberg and for other agencies he had later worked for.
He said that the Reuter’s style was very different for the financial and general news, where
the latter was aimed at a broad range of clients, such as radio, tabloids and broadsheets.
Bloomberg, he viewed, had been the first to adapt to the trend away from clients being
willing, or having the finances, to simply opt into feeds as characterised the former
‘‘wholesale’’ pattern of agency operation.
The international nature of Bloomberg is key to explaining the massive control of
editors over all details of stories. One reporter told us that his completed story would be
first filed to his own bureau editor who would text-edit where appropriate and return it to
Downloaded by [University of Pretoria] at 19:44 15 November 2012

him to check the changes. The story would then be filed to the editor of the region’s main
bureau who may make further changes. If the story was likely to make a lead, then there
might be a phone conference with editors across the region. The control of editors over
reporters’ copy became even more acute when preparing drafts for features. One reporter
said: ‘‘Everyone dreaded this’’. He would draft a number of paragraphs of a story. Then it
would go out to regional editors in two bureaus before being sent for inspection to the
head office in New York. At each point it would be sub-edited and requests for additional
reporting were made to the journalist. The absolute precision required meant that the
reporter had to even go back to interviewees to ask them to rephrase terms like ‘‘drab’’
which were too vague for a global audience: ‘‘And at each stage it goes back through all
the editors who rewrite’’.
Bloomberg texts have trademark specificity of information. They also tend to avoid
clichés and stereotypes as these too are culturally specific. One interviewee told us: ‘‘If I
was a foreign correspondent in for a British newspaper working in, say, Sydney, I would
always look for stories that fitted the stereotypes held by the British, such as the idea that
people in Australia drink a lot or get eaten by crocodiles. But in the Bloomberg universe
these clichés cannot be relied upon as a person in Malaysia, or a Malaysian person working
in a bank in London may not share the same reference points’’.

The Bloomberg Style

Bloomberg has been clear about the nature and aims of its news language style
emphasising directness, simplicity and accessibility of core information. Paul Addison,
Bloomberg’s London-based head of training, did tell us: ‘‘We’ve always been a global news
service, proud of our global style of journalism and it’s been an extremely successful
model’’. This mandate to write news that works for audiences in any location is
emphasised and described in The Bloomberg Way, which begins: ‘‘Bloomberg News is a
global news organization, and our style must be rigorous enough to reach every reader
with the same message, free of ambiguity’’. It urges simplicity and clarity:

Economics, markets, companies and industries are subjects little understood, much less
appreciated. The public*our readers, viewers and listeners worldwide*suffers the
consequence of journalism’s traditional ignorance of these subjects and journalism’s
arrogance in reveling in its ignorance. The reporter who hasn’t covered economies,
markets, companies and industries is deficient in knowing the ways of the world.
 790 DAVID MACHIN AND SARAH NIBLOCK

The use of the word ‘‘but’’ was allegedly banned by Winkler, along with ‘‘however’’
and ‘‘despite’’ as it forces readers to deal with conflicting ideas in the same sentence.
Winkler elaborates in The Bloomberg Way:

Determine the key piece(s) of information. Failing to include the most important facts in
the theme, or including too many facts, makes it difficult to attract readers’ attention.
Include the ‘‘why’’ along with the ‘‘what.’’ Without providing the explanation as part of
the theme, the quotation and details don’t help the story.

Example of the Bloomberg Branded Style: The Death of Michael Jackson

Bloomberg news copy differs in language style, grammatical structure and content
Downloaded by [University of Pretoria] at 19:44 15 November 2012

from other mainstream news services, specifically Reuters and the British Guardian,
according to our analysis. The comparison with the other major news brands identifies
Bloomberg’s specificities as well as highlights the local inflections in other brands’
respected for their neutrality. For this we draw on three approaches from linguistics:
Halliday’s (1985) categories of clause relations are used in order to measure degrees of
grammatical complexity in the stories; Fairclough’s (2000) Critical Discourse Analysis is
used for basic lexical analysis; Appraisal Theory (Martin and White 2005) allows us to
show levels of journalistic interpretation in texts. The Jackson story allows us to best
illustrate the extent to which many news ‘‘brands’’ apply a degree of value judgement
and interpretation to news items. Conversely, Bloomberg’s treatment does not assume
prior knowledge or opinion on the part of their readers, who could live anywhere in the
globe. It assumes readers may not have heard of Jackson. In addition to copy text, we
analyse headlines, clause structures and lexical content in comparison with other news
providers.

Bloomberg Version
Michael Jackson Pronounced Dead at Hospital, L A Times reports

Singer Michael Jackson was pronounced dead at a Los Angeles hospital today, the Los
Angeles Times reported, citing city and law enforcement sources.
The singer wasn’t breathing when paramedics arrived at his home in the wealthy
neighborhood of Bel Air at about 12:26 p.m., the newspaper reported on its Web site,
citing Captain Steve Ruda. Jackson was taken to UCLA Medical Center.
Jackson, 50, became a musical icon as front man for the Jackson 5 family music act
in the 1960s and later was a top-selling solo performer with hits such as ‘‘Thriller’’ and
‘‘Billie Jean.’’ He is as well-known for his highly publicized trial and acquittal in 2005 on
child molestation charges.
The singer was attempting a comeback and had been rehearsing for sold-out
shows at London’s 20,000-seat O2 arena scheduled, starting in July. In May, the
organizers delayed some of the 50 performances to give the singer more time to
prepare.
 NEW BREED OF BUSINESS JOURNALISM 791

Headlines
Bloomberg headlines are highly descriptive and always appear as information rather
than the promise of a narrative or a teaser. On the same day the Guardian used ‘‘Michael
Jackson Dies’’. Reuters used ‘‘King of Pop Michael Jackson is dead’’ and the Washington Post
‘‘Michael Jackson, ‘King of Pop,’ dead at 50’’ which it took from the Associated Press feed.
Many of these treatments use pop culture honorifics (‘‘King of Pop’’, for example) in
headlines serving to place the stories into the ‘‘entertainments’’ genre. Bloomberg simply
states factually ‘‘Michael Jackson Pronounced Dead at Hospital’’. Only the Guardian is
equally as directly informative although its ‘‘Michael Jackson Dies’’ does suggest something
more of a teaser with its simple single noun/verb clause lacking in further detail.

Opening Sentences
Downloaded by [University of Pretoria] at 19:44 15 November 2012

The Bloomberg report begins with a clear opening theme explaining what is at
stake, backed up with support. As stated by Winkler, the first paragraph should state the
most important detail up front without delay. Bloomberg places great store on opening
sentences as providers of core information rather than setting up narratives. The simplicity
of Bloomberg’s opening sentence can be seen through comparison with the Guardian
opening paragraph:

American pop music legend Michael Jackson died of a heart attack in a Los Angeles
hospital today, just weeks before he hoped to resurrect his four-decade long career with
a series of sold-out shows in London.

This sentence is much more complex. Drawing on linguist Michael Halliday (1985,
pp. 2002219) who was interested in clause relations in language we can explain the
difference between these two sentences and how these influence the relative ease of
readability and pace of information. Halliday was interested in the way that clauses follow
on from each other in order to build on information provided in those before them in
different ways. He offered three ways in which subsequent clauses can do this:
elaboration, extension and enhancement. He later developed on these, but they are
sufficient for our purposes here:
. Elaboration restates, providing equivalent information. We learn no additional informa-
tion. Such clauses often start with ‘‘for example’’, ‘‘for instance’’, ‘‘in particular’’, ‘‘at this
moment’’.
. Extension adds or varies the meaning of the first clause by providing extra information.
Here the meaning of the first clause can be modified. So a first clause might tell us a
person has died and the second that he was bizarre, or innocent. This therefore varies
how we read the first clause. The meaning of the death is modified. Such clauses often
start with ‘‘and’’, ‘‘but’’, ‘‘alternatively’’.
. Enhancement is where circumstantial information that is relevant to the first clause is
given in the following clause. So this is to do with time, place, condition etc. Such clauses
often start with ‘‘then’’, ‘‘before that’’, ‘‘soon’’, ‘‘in other respects’’.

The first sentence of the Bloomberg text contains the first clause: ‘‘Singer Michael
Jackson was pronounced dead’’ which is then followed by the subordinate clause ‘‘at a Los
 792 DAVID MACHIN AND SARAH NIBLOCK

Angeles hospital today’’ that provides enhancement telling us where this took place. It is a
pretty simple clause structure. The first sentence of the Guardian text above is different.
We have a longer ‘‘head’’, which is the noun group, ‘‘American pop music legend Michael
Jackson’’ compared to Bloomberg’s shorter and less evaluative, ‘‘Singer Michael Jackson’’.
This longer head is placed into the opening clause ‘‘American pop music legend Michael
Jackson died of a heart attack’’ telling us he has died, then an enhancement clause ‘‘in a Los
Angeles hospital today’’ telling us where this happened and when, followed by another two
extension clauses ‘‘just weeks before he hoped to resurrect his four-decade long career’’, and
‘‘with a series of sold out shows’’ and further enhancement, ‘‘in London’’. This is a much
more complex clause structure than in the Bloomberg case, bringing in more information
through both extension and enhancement that Bloomberg would save for later
paragraphs, specifically paragraph four.
The opening sentence of the Reuters text shows even more complexity in its clause
Downloaded by [University of Pretoria] at 19:44 15 November 2012

relations:

Pop giant Michael Jackson, who took to the stage as a child star and set the world
dancing to exuberant rhythms for decades, died on Thursday after being taken ill at his
home, the Los Angeles Times said.

There are three embedded clauses ‘‘who took to the stage as a child star ’’, ‘‘and set
the world dancing to exuberant rhythms ’’ and ‘‘for decades’’ within the dominant clause
‘‘Pop giant Michael Jackson . . . died on Thursday’’. The embedded clauses are linked by
extension where the second of these ‘‘and set the world dancing to exuberant rhythms’’
brings additional information after the conjunction ‘‘and’’. Following the completion
of the dominant clause we have another enhancement ‘‘after being taken ill at his home’’.
This is a far more complex clause structure and presents much more enhancement and
additional information. Halliday’s categories help find evidence for Bloomberg’s own
assertion that opening sentences should be simple, providing a direct opening theme.
Moving on to the second paragraph, Bloomberg’s style book guides that here we
should find quotation from an authority on the subject who gives credence or validates
the first paragraph. In the Jackson case we find precisely this:

The singer wasn’t breathing when paramedics arrived at his home in the wealthy
neighborhood of Bel Air at about 12:26 p.m., the newspaper reported on its Web site,
citing Captain Steve Ruda. Jackson was taken to UCLA Medical Center.

Reuters also carries a quote but includes the basic information that Bloomberg
placed in the first paragraph:

‘‘Pop star Michael Jackson was pronounced dead by doctors this afternoon after arriving
at a hospital in a deep coma, city and law enforcement sources told The Times,’’ the
newspaper reported on its website.

The Guardian does something similar, producing a more elaborated version of what
Bloomberg placed in its first paragraph:
Jackson was taken to the University of California at Los Angeles medical centre, and
paramedics administered cardiopulmonary resuscitation in the ambulance. He arrived at
the hospital in a coma and was reported dead about three hours later.
 NEW BREED OF BUSINESS JOURNALISM 793

Bloomberg avoids placing any broader contextual information at the start of the
story. It is only specifically what has happened as the news event that appears in the first
paragraph and a substantiation of this in the second.
The importance of the third paragraph in the Bloomberg style book is to spell out
the significance of the information that has been imparted in paragraphs one and two,
while paragraph four provides further illuminating factual detail. Looking to the third and
fourth paragraphs of the Jackson text above, what we find is that paragraph three
provides a short summary of who Jackson was in simple sentences without embedded
clauses. There is also an assumption that the reader may not have extensive previous
knowledge of Jackson. This same information was placed much higher up in the Guardian
and Reuters texts. Only paragraph four of the Bloomberg text places the events of his
death in the narrative of the come-back tour.
Downloaded by [University of Pretoria] at 19:44 15 November 2012

Entertainment Lexis
There are other important stylistic differences between the three texts. We find
difference also in basic lexical choices in the writing. The Bloomberg text refers to Jackson
as ‘‘Singer Michael Jackson’’ and ‘‘Jackson’’. In contrast Reuters use pop honorifics/cliches
in the form of ‘‘Pop star Michael Jackson’’, ‘‘Pop Giant’’, ‘‘King of Pop’’. The Guardian uses
‘‘American pop music legend’’ and ‘‘King of Pop’’. Bloomberg avoids these ‘‘entertainment
and lifestyle’’ style terms.

Language of Evaluation
In the Bloomberg text we find an absence of what linguistics have called the
‘‘language of evaluation’’ (Iedema et al., 1994; Martin and White, 2005). These writers
sought to provide a framework for the analysis of the evaluative aspect of news reporting.
This draws on a paradigm known as ‘‘appraisal theory’’ and aims to account for the
variation in the mechanisms by which attitudinal positions can be conveyed and by which
the reader can be positioned to favour or disfavour a particular viewpoint. These features
are often less evident to the reader as they do not appear as obvious opinion. Such
techniques are common in creating drama and human interest.
In tabloid-style reporting, emotional reactions to events are used to evaluate a
person positively or negatively. The Guardian notes Jackson’s death came ‘‘just weeks
before he hoped to resurrect his four-decade long career’’. The evaluations here are ‘‘hoped’’
and ‘‘just’’. Additionally, giving readers access to a person’s mental world also has an effect
of humanising a story. The fact of ‘‘hoping’’ adds human feelings and tragedy. The term
‘‘just’’ is therefore also an important evaluation, implying the sad timing. This also allows
the journalist to link in other events to create a narrative of failure and hopes of renewal of
which this story is just one part.
We also find language of evaluation in the following sentence from the Guardian:
‘‘Although in the last two decades his reputation was sullied by accusations of child
molestation and his bizarre public behaviour’’. The words ‘‘sullied’’, and ‘‘bizarre’’ are what
appraisal theorists term ‘‘appreciation’’ and are the more obvious ways that journalists
provide assessments of states of affairs and processes in terms of their social significance.
Such evaluative terms are absent from the Bloomberg text. It does mention the child
 794 DAVID MACHIN AND SARAH NIBLOCK

molestation but refers to it in the sentence ‘‘well-known for his highly publicized trial
and acquittal in 2005 on child molestation charges’’. The text makes no attempts at
dramatization and clearly mentions the acquittal from the charges. Likewise in the Reuters
text we find the use of hyperbole and rhetorical tropes as in the sentence he ‘‘set the world
dancing’’. Again such techniques are avoided by Bloomberg.
As we were told by our interviewees, all of these evaluations cannot be used in
Bloomberg texts. In the first place they cannot be specified or justified. A phrase like ‘‘set the
world dancing’’ would have to be described in terms of concrete record sales. In the second
place such evaluations can carry cultural inflections and values that may not be recognised
across all the Bloomberg users. During training, reporters were continually told to check if
their stories contained any word that might be culturally specific and if so to remove it.
Downloaded by [University of Pretoria] at 19:44 15 November 2012

Swine Flu in the United States

We now look more briefly at Bloomberg’s reporting of the rise of HINI swine flu cases
in the United States, comparing this with the headlines and opening sentences of two
other agency treatments. This comparative analysis enables us to delineate further
Bloomberg’s distinct approach compared with other similar global agencies.

Bloomberg Version
Swine Flu Dominates in U.S. Where 98% Test Positive (Update1)

Swine flu is responsible for about 98 percent of the influenza cases tested in the U.S.,
overshadowing other strains in a population with little natural resistance to the new
virus, a U.S. study found.
The new flu, H1N1, is widespread across 11 states and circulating in parts of 19
others, according to a report by U.S. Centers for Disease Control and Prevention scientists
presented today in Atlanta. The number of seasonal flu cases has declined as swine flu
spread after it was first identified in April.
Scientists have used laboratory tests to confirm 27,715 cases of swine flu in the
U.S., and as many as 1 million people may have been sick and not had testing, the CDC
said. Widespread flu is unusual in the U.S. at this time of the year.
‘‘We’re all tightening our belts*there isn’t anybody that does not anticipate that
we’re going to be dealing with this virus in a serious way this fall and winter,’’ said
William Schaffner, an influenza expert at Vanderbilt University School of Medicine in
Nashville, Tennessee, in an interview at the conference.

The Bloomberg formula is again carefully followed. The headline is direct and
provides full information. The opening sentence is a simple clause structure and highly
descriptive as will become clear when we look at the other news treatments. The second
paragraph provides the sourcing of the information and the third and fourth paragraphs
expand on these.
Looking at the headlines and opening sentences from Reuters and the Associated
Press feeds we find something very different.
 NEW BREED OF BUSINESS JOURNALISM 795

Reuters
New H1N1 flu not going away: U.S. health agency

More than 1 million people in the United States may have been infected with the new
H1N1 swine flu, U.S. health officials said on Friday, and infections continue to rise.

Associated Press
US swine flu cases may have hit 1 million

Health officials estimate that as many as 1 million Americans now have the new swine flu.
Lyn Finelli, a flu surveillance official with the Centers for Disease Control and Prevention,
Downloaded by [University of Pretoria] at 19:44 15 November 2012

voiced the estimate at a vaccine advisory meeting Thursday in Atlanta.

Both of these feeds use sensationalist headlines or opening lines which suggest the
disease is now reaching epidemic proportions. The Associated Press uses a metaphorical
trope in the form of ‘‘hit’’ which suggests something that possesses momentum and which
has collided. Reuters adds a menacing subordinate clause ‘‘and infections continue to
rise’’, for which they give no evidence but which invites less attention as it is placed in this
way in the sentence. Linguists have observed that this is a typical rhetorical strategy for
downplaying some facts while foregrounding those that are placed at the start of the
dominant clause (van Dijk, 1985). The Associated Press qualifies the nature of the facts
with ‘‘voiced the estimate at a vaccine advisory meeting Thursday in Atlanta’’, again using
the subordinate clause to ‘‘bury’’ this information at the end of the long sentence. Reuters
also use the modal verb ‘‘may have been’’ to indicate that the level of infection is not a
hard fact. So both Reuters and the Associated Press eventually come around to telling us
what the Bloomberg text places right at the top; that this is an estimate and that it appears
that swine flu is replacing other strains of flu. Bloomberg does not overplay the drama.
Interviewees said that both these other feeds would simply be rejected by the Bloomberg
editorial process.

News Selection Criteria and the Politics of Market-led News

This close comparative analysis of the Bloomberg treatment of stories reveals the
recurring characteristics of Bloomberg’s global news style. Stories follow a four-paragraph
lead approach that stresses facts, insists on official verification, delivers context and avoids
culturally specific emotive responses. The story does not assume prior knowledge on the
part of the reader, even though the target audience is an actual or implied international
community of business people and financiers. Nor does it patronise; by avoiding qualifiers,
adjectives and other emotive devices, the information is delivered simply and concisely in
order to cram in as much factual detail as possible in the given space. In essence, this
appears to exemplify good practice; the niche business journalism model transferred to
mainstream news would appear to work successfully for a global audience. However,
a different impression emerges when we examine stories that have a more political
dimension. This is an observation confirmed by our interviews.
Bloomberg.com’s lead story on the general UK news section of its website at 10.30
am on 8 July was headlined ‘‘London Postal Workers Commence Three-Day Strike Over Royal
 796 DAVID MACHIN AND SARAH NIBLOCK

Mail Job Cuts’’. The first paragraph states: ‘‘London postal workers began a three-day strike in
a dispute over workforce reductions at state- owned Royal Mail Group Plc.’’ which, true to
Bloomberg style, relays the key factual angle of the story, although one of our interviewees
pointed out that this was clearly a first draft as the word ‘‘postal worker’’ would have been
changed to ‘‘mail workers’’ as indeed it quickly was as postal was too locally specific. The
story gets a very low billing on the BBC website, appearing as a minor story on the UK-
wide section of their website. Reading further into the story, it could be deduced that the
news selection criteria applied when giving this story top billing are to do with its status as
a business story. In paragraph six, Bloomberg continues:

The U.K. government last week postponed a plan, opposed by unions, to sell a stake in
Royal Mail to an investor to help improve competitiveness. The company has suffered
a 10 percent decline in annual postal volumes, while in London 20 percent fewer items
are being delivered daily than two years ago.
Downloaded by [University of Pretoria] at 19:44 15 November 2012

The underlying inference is that management’s capitulation to unions has led

directly to the current crisis. This clause ‘‘to help improve competitiveness’’ is unqualified.
In linguistic terms this is an undefined presupposition. The broader discourse signified by
this clause is the insertion of ‘‘state-owned’’ in the first paragraph. It is taken for granted on
the Bloomberg terminal of course that private business is good and state involvement is
bad. In this case it is clear that Bloomberg branding means placing the interests of
business in its general news item. Yet in the branded language and format style the
directness and simplicity of clauses creates a sense of pure information in the manner of
the Jackson story. Fairclough (2000, p. 14), in his study of the kind of language used by
Tony Blair’s New Labour, emphasised that language style can also be important in
connoting particular kinds of values and identities despite the nature of the discourse this
style carries. Other writers have observed that genre, as well as language style in media,
can be a template which appears neutral but yet which too can appear to naturalise
contents (Machin and van Leeuwen, 2007). Here the genre of the ‘‘information bulletin’’, as
opposed to say ‘‘narrative’’ can contain deeply ideological material formatted as simply
information. There is a long history of politicians and propagandists using particular styles
and genres in order to persuade audiences their speeches were other than pure ideology
(Bell and Van Leeuwen, 1994; Leitner, 1980).
In a similar way, on the same morning, Bloomberg’s Science section foregrounded
the ‘‘swine flu’’ pandemic, which has the potential to disrupt the economy severely if
enough people are affected by the virus in coming months. Several of the site’s stories
were about swine flu. The BBC’s lead science story was different, that researchers in the
United Kingdom claim to have created sperm from stem cells, and did not feature on the
Bloomberg site until much later in the day. At that current point in time it was clear that
this story was more social and medical than economic. It has therefore less value to
Bloomberg’s targeted global business community.
The Arts and Culture section is revealing of the extent to which Bloomberg seeks to
address directly specific local markets and particular times of the day. These stories can be
uploaded more quickly but then edited as soon as it becomes more relevant to speak to
the global users. The lead morning story on the section was London-based, to appeal to
the business community arriving for work:

Christie’s Sells $32.7 Million of Art in London Auction as Market Shrinks

 NEW BREED OF BUSINESS JOURNALISM 797

A London auction ended with the sale of 20.3 million pounds ($32.7 million) of art last
night as the market for traditional paintings continued to shrink.

The selection of this as the leading arts story also coheres with the business
imperative of Bloomberg’s global branding of news. The lead story is as much news
because of the scale of the money involved. This angle is emphasised over and above the
nature of the art itself. The unifying global angle is, therefore, the financial aspect of the
story rather than the cultural. By the end of the day in London, as the New York business
day was well under way, the story order had shifted to lead on an interview with a Harvard
scientist-turned-author. Most of the stories that were around that morning were still on
the list at the end of the day, but displayed with a different running order that caters more
to a US market. The interest in the Michael Jackson story quickly moved on to issues of the
value of his estate and the matter of his inheritance and the related legal issues.
Our interviewees confirmed our observations that stories had in the first place to be
Downloaded by [University of Pretoria] at 19:44 15 November 2012

thought about in terms of the business audience. One said ‘‘we are only interested in
the occupation of Palestine, for example, if it might be of interest to the financial markets’’.
He acknowledged that this raised serious issues about the growing power of Bloomberg
as a global provider of news. And particularly this global ‘‘community’’ of users of the
terminal, holding much power over the flow of wealth around the planet, are experiencing
the world of events only in terms of the interests of making money.

Conclusion
Bloomberg’s model of news production has allowed it to continue to grow while
many other news outlets look to slim down and are losing money. Bloomberg has been able
to embrace shifts in technology and changing cultures in both news consumption and news
agency/client relations, giving it a market advantage over its competitors. If the Bloomberg
model is the future of news then this calls us to reconsider the existing work on news values.
In earlier papers we have considered the shift away from news for citizens to news for
consumers (Machin and Niblock, 2007) and for niche markets. In each case it was clear that
earlier models of news values had to be reconsidered. With the shift from print-based
journalism to the Web there will be the broader need to address less localized and more
niche markets who are task driven rather than entertainment driven and who may indeed
not have entered through the ‘‘front door’’ but through search engines. This will have
implications for news style and content. Along with the business imperative these are new
challenges to our models of journalism that certainly require our increased attention.

NOTES
1. See http://www.ft.com/cms/s/0/b18d45e0-e296-11de-b028-00144feab49a.html.
2. See http://www.guardian.co.uk/business/2008/jul/18/merrilllynch.jpmorgan.

REFERENCES
and VAN LEEUWEN, THEO (1994) The Media Interview, Kensington: New South Wales
BELL, PHILIP
Press.
BLOOMBERG, M. R. (1997) Bloomberg by Bloomberg, London: Wiley.
 798 DAVID MACHIN AND SARAH NIBLOCK

BOURDIEU, PIERRE (1998) Television and Journalism, London: Pluto.

BOYD-BARRETT, OLIVER and RANTANEN, TERHI (Eds) (1998) The Globalization of News, London: Sage.
FAIRCLOUGH, NORMAN (2000) Analysing Discourse: textual analysis for social research, London:
Routledge.
GALTUNG, JOHAN and RUGE, MARI (1965) ‘‘The Structure of Foreign News: the presentation of the
Congo, Cuba and Cyprus crises in four Norwegian newspapers’’, Journal of International
Peace Research 1, pp. 6491.
HALLIDAY, MICHAEL A. K. (1985) Introduction to Functional Grammar, London: Edward Arnold.
HALLIN, DANIEL C. (1996) ‘‘Commercialism and Professionalism in the American Newsmedia’’, in:
M. Gurevitch and J. Curran (Eds), Mass Media and Society, London: Arnold, pp. 24364.
IEDEMA, RICK, FEEZ, SUSAN and WHITE, PETER (1994) Media Literacy, Sydney: Disadvantaged Schools
Program, NSW Department of School Education.
LEITNER, GEORGE (1980) ‘‘BBC English and Deutsche Rundfunksprache: a comparative and
Downloaded by [University of Pretoria] at 19:44 15 November 2012

historical analysis of the language of the radio’’, International Journal of the Sociology of
Language 26, pp. 75100.
LOOMIS, CAROL J. (2007) ‘‘Bloomberg’s Money Machine’’, Fortune, 5 April, http://money.cnn.com/
magazines/fortune/fortune_archive/2007/04/16/8404302/index2.htm.
MACHIN, DAVID and NIBLOCK, SARAH (2006) News Production: theory and practice, London:
Routledge.
MACHIN, DAVID and NIBLOCK, SARAH (2007) ‘‘News Values for Consumer Groups: the case of
Independent Radio News, London, UK’’, Journalism 8(2), pp. 184204.
MACHIN, DAVID and NIBLOCK, SARAH (2008) ‘‘Branding Newspapers: visual texts as social practice’’,
Journalism Studies 9(2), pp. 24459.
MACHIN, DAVID and VAN LEEUWEN, THEO (2007) Global Media Discourse, London: Routledge.
MARTIN, JAMES and WHITE, PETER (2005) The Language of Evaluation: appraisal in English, London:
Palgrave Macmillan.
VAN DIJK, TEUN A. (1985) Handbook of Discourse Analysis, 4 vols, New York: Academic Press.

David Machin (author to whom correspondence should be addressed), JOMEC, Cardiff

University, Bute Building, King Edward VII Avenue, Cardiff CF10 3NB, UK. E-mail:
[email protected]
Sarah Niblock, Journalism, Brunel University, Uxbridge UB8 3PH, UK. E-mail:
[email protected]
 FINDING A GOOD FIT I Journalism and Social Media

What Is Journalism's Place in Social Media?

'Bringing our journalistic values to these environments that have
captured the imagination of millions is one of the most promising
ways we have of serving that interest.'

BY GENEVA OVERHOLSER

I
f our focus on social National Association of Hispanic
Geneva Overholser # kdmcmeet Bill Gannon speaking of "the super-lisa's" -
Lisa Stone and Lisa Williams. Cooll
media is primarily about Journalists convention, a young
July 27 dt 2:32pm • vU Twitter • Comment - Ulce how to use them as woman cried out: "Michael Jack-
l a C4tter-Ann M«hd4vi likes this. "tools" for journalism, we son died!" Using my iPhone, I
I Write a comment.,. | risk getting it backward. Googled "Michael Jackson died."
Social media are not so Several reports showed up—all
Geneva Overholser Text works better than audio and video because we deal
in soundbites and want it quickly searchable: paidcontent's Rafat Ali #kdmcmeet much mere tools as they from years long-gone. His was
July 27 ât l:4&pm • via Twitter - Comment - like
are the ocean we're going a much-rumored death. So I
/"A^
^ ^
Mary Wennersrrum Ask them how a non-proñt like us
can really use social media as «ffectivety as they? Tell
to be swimming in—at checked Twitter, and found the
^ '^ them the economy is killing us!
July 27 at 2:32pm
least until the next chapter TMZ report—couched in some
I Write a comment...
of the digital revolution skepticism from my tweeps. On
comes along. What needs to the Los Angeles Times, where
Geneva Overholser RaFat Ali at kdmc bd mtg: to write for us, journalists have
to speed It up. And bring in international news! #kdmcmeet
our attention is how we're Jackson was still in a coma. Now
Jyly 27 «t li-Öpm • v i * Twitter • Comment • Like going to play roles that the flight was leaving. Not until I
Geneva Overholser Paidcontent's Rafat All at KDMC board meeting: I just got bring journalistic values landed did I get the confirmation
on Twitter #omnimeeting
July 27 n l:3Sprn • via Twitter • Comment ' Like
into this vast social media I itched for: the Times, quoting
territory. the coroner.
Geneva Overholser Lisa stone at knight dig media center bd mtg sez blogher
folks are overwhelmingly interested in hard news # omnimeeting It is essential to begin But what if TMZ had quoted
July 27 A l;33pm • via Twitter • Comment • like
by understanding various the coroner? Would I have
Myla Reson loundi accurate
July 27 at 1:37pm
social media sites and the stopped there?
ways they can enhance This raises questions about
I Write a comment...
the work journalists do. what verification means in this
Geneva Overholser #omnimeeting with great group of knight digital media A regular perusal of sites age of social media. And what is
center board members. Hearing what Berkeley and we at use annenberg are
doing like lOOOOwords.net and journalism's role in making sure
July 27 at 1:06pm • via Twitter • Comment * like savethemedia.com is a information is verified? It strikes
Ú Thomas GoflF likes this.
great way to do this. But me that most people don't care
tAfrite a comment...
how do we move beyond as much about who publishes
acquainting ourselves with news (or what are often rumors)
^ Geneva and Riyadh iNytimes are now hiends. ccrrrxn:
this world and actually fig- first these days as they do about
¿¡^ Geneva and Ruth Kevess-Cohen are now Brends. ure out how to "use" it for whether the sites they rely on
2 more simdar stories journalism, which requires have it right when they want it.
^ Geneva commented on her own status.
understanding its nature Now, as we all know, news and
Joe Saltzman Thanks for kind words today. It's been a trying few weeks and and impact on participants information need to be on the
it's nice to know it's appreciated. See you in Boston if not before. (Our panel is
and on public life? platform we're checking, wher-
What does it mean to ever we are.
journalists, for example, Being there and being accurate
Geneva Overholser's Facebook page. that people are in large are how journalistic credibility is
measure obtaining, and brought to the social media ocean.
shaping, their informa- Yet many legacy media have fallen
tion so differently than behind in delivering this one-two
they have in the past? punch combination. While it's a
In June, as I got on the given that there will always be
plane to fly back from the a need for reliable verification.

Nieman Reports | Fall 2009 5

Journalism and Social Media

what must be better understood is hov^^ ourselves. Our job is to keep an eye practice—the new sensibilities required
people seek out news and information on the public interest. Bringing our of them now that they will swim there
and how they learn through their use journalistic values to these environ- as journalists.
of social media. ments that have captured the imagi- Integrating the questions and issues
Recently, the MacArthur Foun- nation of millions is one of the most and tools into everyday classroom dis-
dation's John Bracken and I talked promising ways we have of serving cussion is critical. When the focus is
about the process by which an online that interest. on journalistic ethics, the geopolitical
community or group digests an event Too often, it seems, those of us implications of social networks' role
and comes to an understanding of it who've been about building commu- belong in that discussion. In lessons
in real time. This happens among Fa- nity through our journalism seem to revolving around entrepreneurial
cebook friends or people whose tweets assume a kind of "how dare they?" journalism, there needs to be woven
we follow or folks who create new attitude toward those who construct into the conversation the issue of
records of events on Wikipedia. The communities through social media. how journalists handle their personal
question well worth asking is where We've got to get over that. People are engagement in social networks. Along
journalism fits in this fast-emerging vastly more powerful now as consumers with this would come discussion of
and ever-changing social media and and shapers of news. The less loudly how they "brand" themselves for a
digital ecosystem. journalists applaud this development, future that is likely to include a lot
During a June conference, "Beyond the further behind we'll be left until of independent activity.
Broadcast 09,"' held at the University we fade to irrelevance. At Annenberg, we've now hired
of Southern California's Annenberg Accuracy, proportionality and fair- digital innovators and observers—
School of Journalism, conversations ness, as time-honored journalistic val- Andrew Lih, author of "The Wikipedia
ranged from the information needs ues, are well worth adoption by those Revolution," Robert Hernandez, who
of communities to democratizing conversing through social networks. executed the vision for The Seattle
the language of online storytelling, Useful, too, would be journalism's Times' Web site, and Henry Jenkins,
from maintaining editorial quality (albeit imperfect) emphasis on includ- who directed MIT's Comparative Media
to enabling dialogue and the future ing a broad range of voices. Cool as a Studies program. Using their ability
of public service media. Each topic lot of these social networks are, they to weave experiences and knowledge
discussed was central to the future of can be extremely cliquish. Witness the into our curricula, we know that social
journalism. Yet, never in the three days prevailing Twitter discussions about media will become integral to what
we were together did I once hear the whither journalism, often filled with is taught in our journalism classes.
word "journalism" mentioned. From more strut than substance, lacking both Timely discussions of emerging ex-
there I went to a conference at MIT, historical and international context and amples of social media's influence
where the organizing theme was "civic begging the question: If the Web is on journalism and vice versa must
media." In many of these situations, all about democratization, how come continue, as well.
I find myself using the term "infor- everybody in the debate sounds like The journalism academy has another
mation in the public interest." In all a 19-year-old privileged male? important role to play. It's the natural
these cases, however much journalistic home for substantial analysis and re-
values and practices might be evident, In the Classroom search exploring the impact of social
the term itself is absent. media on learning, on the processing of
Finally, how do we bring social media information, and on the civic dialogue.
Journalism: The Missing into the academy? So far, we at An- As journalists come to understand the
Ingredient nenberg have done it patchily by bring- nature and value of information being
ing in folks to do series of workshops gathered and conveyed through vari-
I'm not suggesting that journalism—as for students and faculty. We've had ous social networks, they will not only
a word, a concept, and a craft—has regular discussions with digital media act more effectively in this new and
gone away or is no longer important. innovators throughout the year. One vital world. They will also enhance the
I'm saying that those of us who ground challenge, of course, is that people's prospects for journalism's long-term
ourselves in what we know to be an level of understanding and comfort is survival. •
ethically sound and civically essential all over the place. Moreover, when the
mode of information gathering and students learning about social media Geneva Overholser, a 1986 Nieman
information dissemination have to find are 18-year-olds, most are already Fellow, is the director of the University
a way to be in these conversations- swimming comfortably in these wa- ofSouthern California's Annenberg
whatever we call the conversations or ters. Yet, they do need to ponder—and School of Journalism.

See the conference agenda at http://bb2OO9.uscannenberg.org/images/uploads/

agenda_print.pdf.

6 Nieman Reports | Fall 2009

 Finding a Good Fit

Social Media: The Ground Shifts

Social networks serving as Web services, not sites, ^create nev^ challenges
for journalists, news organizations, and media companies that are only now
starting to embrace social media.'
BY RICHARD GORDON

W
hen the history of online
To Join tha unvBnaUon, log In with Facebook Connactl
journalism is written, it uill
be hard to ignore the biggest newsmixer
mistake made by news organizations
and media companies: thinking of
the World Wide Web as primarily a
one-way broadcasting or publishing L. Letters to the Editor
medium. Add your voice to tbe marketplace of ideas. Offer a thoughtful point of view is 250 words or less.
Back in 1996, when I was the first
online director for The Miami Herald
Publishing Company, I was as guilty of
this misperception as anyone. Our team Editor Highiights
created discussion boards but hoped
Let the acquisition happen VeraSun should resist th^ temptation of
they'd require no attention from our in reply to: VeraSun should resist the temptation of
staft". We didn't think that cultivating byKyanMul
by Brim Boysr The authors make the foDowing statement in their
community or moderating discussions I Most Ingram Managers hold a rainy day fund. artide. "But the processes, methods and tools for
were appropriate or necessary roles for ' and il would be great to hedge against aS bets, but developing flexible strategic plans and adapting to changes
the best of option theory will not forecast or protect against have not been operationalintd adequately to be applied to
a journalist. And we ignored evidence uncerUintie« such et iabor unrest, subcontractor maBagement of dynamic project uncertainty. Project
right in front of us—our own behavior bankrupt^, acts of God... planning,...
as online users—that the most powerful 7 iDomhi, 3 wnla 1(0

and persistent driver of Internet us-

age was the value of connecting with Newsmlxer.us was created hy graduate students at the Medill Sehool of Journalism at
other people. Northwestern Universitj- to test new ways for users to couinient on news stories.
Today, with commenting opportuni-
ties available on almost any kind of will likely welcome and appreciate their Facebook ID instead of a site-
content Web site, and with Facebook this transformation, but it will create specific login. Beyond that, Facebook
and Twitter empowering new forms of new challenges for journalists, news Connect allows other sites to shape
interpersonal communication online, organizations, and media companies users' experiences through profile
it's hard to find a news organization that are only now starting to embrace information, such as their list of Fa-
that's not trying to tap into what we social media. cebook friends.
once would have called "online com-
munities" and now more typically refer Facebook and Twitter Twitter, because it makes tweets
to as "social media." available through an easily available
So this may not be the ideal time The two forces driving the latest evolu- Application Programming Interface
to suggest that the social media land- tion of interpersonal communication (API), has enabled the creation of an
scape is continuing to be transformed online are now well known: Facebook enormous variety of applications that
in ways that journalists and news and Twitter. Savvy journalists and me- tap into its ever-grovvñng database of
organizations will find confounding. dia leaders recognize how important 140-cbaracter snippets without requir-
Online communities and social net- these sites are, but many have not ing the user to visit Twitter.com.
works, which historically have been noticed what I think are their most
formed on Web sites, are instead significant attributes: Last year, Forrester Research analyst
becoming Web services that shape Charlene Li predicted: "... in the future,
people's digital lives across many sites Facebook, through a service called social networks will be like air." It will
and many communication channels. Facebook Connect, now allows any seem "archaic and quaint," Li wrote,
As online users and consumers, we other Web site to log in users with that we had to go to a Web site to "be

Nieman Reports | Fall 2009 7

Journalism and Social Media

n Login I Facebook with comparable tools such as Twit-

terific for users of mobile phones. As
(. B http://w\vw.facebook.com/login.php?return_session- l&nocf with Facebook Connect, Twitter is
enabling people to connect without
facebook visiting its "Web site.
There are other services trying to
capitalize on the same basic concepts-
Connect News Mixer with Facebook to interact with your friends on this such as OpenID, a service enabling
site and to share on Facebook through your Wall and friends' News log-ins to multiple sites using the same
Feeds. This site will also be able to automatically post recent activity ID, and Friend Connect, Google's effort
back to Facet>ook. to compete with Facebook Connect.
Google is also a force in the Open-
Social consortium, which is trying to
Bring your friends and info facebook develop a commonly accepted toolkit

Publish content to your Walt n for connecting the social Web.

News Mixer
I

'
XI.
I can't pretend to know how all this
will evolve, which social interaction
Email: tools will become the most popular,
and whether social networks will ever
Password: really become "like air" online. But
some of the implications are becom-
ing clear: i
By proceeding, you are allowing News Mixer to access your information and you are
agreeing to the Facebook Terms of Use in your use of News Mixer. By using News
Mixer, you also agree to the News Mixer Terms of Service. • Web sites that have built their audi-
ences by enabling user participation
have new opportunities to do so by
Sign up for Facebook Connect Cancel leveraging social networks people
have established elsewhere.
• Social network IDs—typically based
onreal names—might enable higher-
Using Facebook Connect, anyone with a Facebook account can log onto newsmbccr.us and
quality interaction than we've seen
post questions, answers, quips and letters to the editor.
on news sites where the identity of
those who comment is often shielded
by anonymity.
social." At the time, it wasn't easy to The revolutionary idea behind • Content sites may find themselves
find the evidence that Li's prediction Facebook Connect is this: Facebook challenged in growing audience
would come true any time soon. Bnt is encouraging other sites to cre- engagement becanse their users are
now, changes at Facebook and Twitter ate more engaging nser experiences interacting mostly through their so-
are bringing the future more clearly by leveraging the Facebook "social cial networks instead of on separate
into focns. graph"—without needing to visit Face- Web sites.
Facebook officially launched Fa- book.com. This approach is completely • An increasing amount of content
cebook Connect in December, after counter to the thinking of traditional shared on Facebook and Twitter con-
several months in wbich a few sites news organizations, which have been sists ofWeb links that search engines
were invited to test it. Today, Facebook reluctant even to link to other sites cannot see or index. This poses for
says more than 15,000 sites have for fear that users will click away and Google the most serious threat yet
implemented the service, including not come back. to achieving its corporate mission:
YouTube, CNN, Digg and Microsoft's Meanwhile, Twitter has become a "to organize the world's information
XBox Live service for gamers. While widely recognized (and sometimes and make it universally accessible
this means online users are becoming ridiculed) phenomenon not because of and useful."
accustomed to being offered the option Tv\itter.com,asite experienced through • As Facebook and Twitter increase
of logging in with their Facebook ID, a Web browser, but because of add- their ability to understand users and
they might not grasp just how novel ons such as Twhirl and Tweetdeck. their behavior, they could become
this service is by the standards of This software for personal computers formidable advertising platforms-
traditional media thinking. manages people's Twitter experience, competing with original-content

8 Nieman Reports | Fall 2009

 Einding a Good Eit

sites but also potentially comments that allow people

becoming useful partners What are people saying right now? to leave feedback in a quick,
in selling and delivering to-the-point form. They're
targeted advertisingon news modeled after Twitter and
and media Web sites. I (Private) WONDERS if quips
instant messaging.
too should be related to an
To illustrate some of the op- article block Letters to the Editor: A very old
portimities that are presented re: Museum returning to Czech VII idea, but with a few new twists.
by the new social landscape, News Mixer calls on letter writ-
I can point to News Mixer, a 1 day, 21 hours ago ers to "add your voice to the
Web site prototype developed marketplace of ideas. Offer a
by a class that I codirected Claudio Luís Vera rT thoughtful point of view in 250
last year (with my colleague with himself, most of the time. words or less." Once written,
Jeremy Gilbert) in the journal- letters are treated equivalently
ism master's program at the re: Museum retuminQ to Czech Vil
to articles in News Mixer. Each
Medill School at Northwestern 3 weeks, 1 day ago letter gets its own page, and
University. (News Mixer can be people are allowed to write
explored at news mixer, us.) Claudio LUIS Ver.3WONDERS letters in response. Wlien a
The six students in the letter is particularly insightful,
if quips aree related to an an editor can use the News
class'—including two software
developers who were earning individual story. Mixer content management
their master's in journalism re: Museum retumino to Czech system to designate it as an
through a "programmer-jour- "editor highlight." These then
nalist" scholarship program 3 weeks, 1 day ago appear on the home page, in-
funded by the Knight News termingled with news articles.
Challenge —were asked to (Private) lj^:jVi fortunate to The idea is to encourage and
come up with approaches to stumbie upon this excelient reward the most thoughtful
"conversations around news." Site responses.
They concluded that news site
re: Museum retuming to Czech VII
comments often didn't work News Mixer has heen widely
well. The quality of conversa- 1 month, 1 week ago praised, described as "an inno-
tion was poor, and the vast vative community news frame-
majority of users rarely par- Users write Twitter-stjle equips and comments, which appear
dongside the main story. work" (by the influential blog
ticipated. They also noted that Read/Write Web), a "cool new
news sites have applied little project" (Editor & Publisher),
creative thinking to the chal- and "a great piece of innova-
lenge of building user participation. All thereby potentially drawing them to tion" (blogger/consultant Mark Potts).
they've done is offer an "open-ended participate as well. The software code that powers News
comment box." In place of the open-ended comment Mixer has been made available on an
The students designed News Mixer box. News Mixer offers three ways of open-source basis, and several compa-
to improve the user experience. Eirst, commenting: nies are experimenting with it.
it uses Eacebook Connect, which, of Whatever happens with News Mixer,
course, means people can log in with Questions and Answers: Displayed social media are changing in funda-
their Eacehook ID. Beyond that, the site like annotations in the margin of an mental ways. Journalists, newsrooms
highlights comments from each user's article, readers can ask a question and media companies ignore these
social network, meaning that every user about any paragraph of the article—or changes at their peril. •
has a different—and personalized— respond to questions left behind by
experience. Also, every time people other people. Richard Gordon is an associate profes-
post to News Mixer, they are given the sor and director ofdigital innovation
option of cross-posting that comment Ouips: Visible as a small talk-bubble at Medill School of Journalism at
to their Eacebook feed, exposing it to in a live feed on the home page and Northwestern University.
friends who are not using News Mixer, on article pages, quips are short-form

The students—Brian Boyer, Ryan Mark, Angela Nitzke, Joshua Pollock, Stuart
Tiffen, and Kayla Webley—documented their experience and findings in a blog and a
comprehensive report available at www.crunchberry.org.

Nieman Reports | Fall 2009 9

Journalism and Social Media

Blogs, Tweets, Social Media, and the News Business

'Merely because a technology is popular with some users and journalists does
not mean that its use will be beneficial to the news enterprise as a whole.'
BY ROBERT G. PICARD

gies to employ. Most importantly, the other purposes, especially in creating

J
udging from their widespread
adoption, it's hard to find a tech- decisions reached will vary for differ- interactions that strengthen the brand
nology that news organizations ent news enterprises based on their and form and maintain relationships
don't embrace. Read the Los Angeles circumstances and needs. that bond users of various platforms
Times on Kindle. Watch ABC News on to news organizations. If these are
YouTube. Leave a comment on a blog Determining Technology's the primary benefits of contemporary
about media and marketing from the Value technologies, news organizations must
Chicago Sun-Times. Listen to apodcast become much more sophisticated in
of "On Science" from National Public News organizations are operating with their thinking about them and how
Radio. Participate in adiscussion board constrained budgets in highly dynamic to achieve those benefits.
hosted by The Washington Post about markets.' Clear strategies must govern Each platform requires clear and
college admissions. Receive SMS news all uses of journalistic, financial and distinct strategies, as does the overall
about the Dallas Cowboys from The human resources allocated for these use of multiple platforms. If interac-
Dallas Morning News. Get features technologies. Merely because a tecb- tions are the goal, the reason for each
from Time on a PDA and tweets of nology is popular with some users interaction needs to be clearly delin-
breaking news from CNN. and journalists does not mean that eated. And what should it accomplish?
The mantra for news organizations its use will be beneficial to the news What messages and images should it
is to be anywhere, anytime, on any enterprise as a whole. project of the news organization? How
platform. But is this strategy really a Here's a sensible first question to are the benefits of those interactions
good idea? In an era when the busi- raise: How will the use of a given to be measured?
ness models for news are stressed, technology generate money? Even if the value turns out not to
hard thinking should be done in as- And if its uses don't generate be measured in financial terms, clear
sessing the opportunities that various money—or, at the very least, pay for goals ought to be set fortb in terms
technologies present. It isn't the time their full costs—one needs to have an of return on the investment—such as
merely to be copying what others are exceptionally clear answer as to why the effect on brand equity, number of
doing. it is being used at all. Reasons can be unique users served, and the move-
Tough questions must be asked to found to use some without full cost ment of nonusers to paid products.
figure out which of the new technolo- recovery, but those should be based These goals should be articulated and
gies is beneficial for journalism and on strategic thinking and informed pursued, and performance in reach-
the business of journalism. Is each choice, not on technological hype and ing them measured. When forming
one equally useful? What are the real exuberance. stronger relationships is the goal,
costs in staff time and the operating In the decade and a half since the clear strategies need to be stated. How
costs to be on the various platforms? Internet emerged as a viable medium, personalizing communications across
What is actually achieved for the news and the decade since mobile communi- platforms will happen also needs to
organization in beingthere? Does every cations became practicable, questions be considered.
news organization need to be active on ofhow content providers can effectively Methods for measuring and evalu-
all of the platforms? Finally, how can earn money from either have remained ating performance have to be devel-
a news organization achieve optimal prominent. The lack of truly effective oped. These should be used to track
benefit across platforms? revenue models to support the gather- the effectiveness of any of these new
The answers we find might lead ing and distribution of news has led approaches to determine whether
to deciding which of these technolo- many to argue that providing this serves the money spent and other resources

In the Winter 2006 issue of Nieman Reports, Picard wrote an article entitled "Capital
Crisis in the Profitable Newspaper Industry," in which he observed that this crisis had
arrived "at a time when the newspaper industry is struggling, too, to respond to changes
in technologies, society and in how consumers use media." His article can be read at
www.niemanreports.org.

1O Nieman Reports | Fall 2009

 Finding a Good Fit

used were warranted and whether the

technology was effectively used. What
At the Crossroads of Technology and People
are the effects on the print product?
With online content? With the news
PERSONAL
organization, as a whole? Have existing INTERACTION
products been supported or harmed?
Have beneficial business opportunities
emerged?
Such managerial challenges posed
by these technologies should not deter
their use. There are, of course, risks
also associated with a decision not to I .
engage in some or all of these tech-
nologies. This is the time for neither LOW INVOLVEMENT, HIGH INVOLVEMENT,
inertia nor indecisiveness when it FLEETING CONTACT EXTENDED CONTACT
comes to making such decisions.

Understanding the Benefits

Clearly, there is benefit to a news
organization in interactive commu-
nication with users. By using online
tools, journalists get information,
ideas and feedback. And if they do
interact consistently with readers and INFORMATION
\iewers, they develop a different type PROVISION
of relationship than the arms-length
connection that traditional mass com- The factors shown in this diagram have important business implications. For a news
munication created. organization to earn moneyfi-omusing these soeial media tools, the aeti\ities related
For users, social media and blogs to the high involvement with extended contact (\ isihle in the lower right) are more
offer anyone the opportunity to express likely to generate greater payments from audiences and advertisere than those in other
themselves and to connect with persons quadrants. The\ also affect the extent to which relationship development and bi-anding
of like mind or interests. These digital benefits can be obtained. Relationships are established and maintained best througb
tools provide an easy (Httle to no cost) highly involved personal interaetions (upper-right quadrant). Some branding benefits
way for members of the public to take oeeur tbrougb ubiquitous contacts of all kinds, but tbe most beneficial ones are obtained
part in discussion with larger groups through regular eontatt that tends to result from uses in tbe quadrants on the right, /m-
of people and draw attention to issues age and text by Robert Picard.
and topics that traditional news media
might have overlooked.
For news organizations, however,
this is a two-edged sword. In many worthy pastime; others conclude they The ability to create relationships
instances, the content that news are a waste of time. They are more with and among users is among the
organizations produce (at a cost) is important to some people than to oth- widely touted benefits of social media
distributed by others, thus removing ers. Not everyone wants to be or will tools. Even so, achieving this goal has
the need or desire for many people be equally wired, communicating, or yet to be shown to be very effective at
to seek out the original sources of sharing their opinions and the details maintaining or producing better overall
the information. This circumstance, of their lives. Some persons find the use of the news products, which is
of course, threatens the commercial communications technologies more the primary revenue source for nevre
model because of its deleterious effects rewarding in business; others empha- enterprises. In short, relationships
on revenue and cost recovery. size personal benefits. Consequently, don't necessarily translate into greater
M illions of people use new technolo- many of these technologies serve only economic value.
gies, yet in this time of exploration and a fraction of the entire digital audi- Understanding the function and use
experimentation, the users of these ence, in most cases from five to 20 of social media is critical in making
digital tools react to them in different percent. This, too, must be factored business decisions. In general, the
ways. Somefindthem highly useful and in as media enterprises realistically functions range from information
satisfying; others find them worthless assess the potential of the opportuni- provision to personal interaction and,
and disappointing. Some find them a ties they seek to create. when they are used, the result can be

Nieman Reports | Fall 2009 n

Journalism and Social Media

low involvement and fleeting contact

or high involvement, which can lead Technology Diminishes Journalists'Value
to extended contact. [See diagram
on page 11.]
It is still early when it comes to In May, Robert Picard wrote a piece in terms. Witb each new layoff or pa-
the use of these technologies by news The Christian Science Monitor titled per closing, they tell themselves
organizations. Already, however, we can "Why journalists deserve low pay." that no business model could
find some indications of the effective- The crux of his argument was that adequately compensate the holy
ness of these interactive, social and the social value created by journalism work of enriching democratic
instant messaging technologies. isn't enough to payjournalists' salaries society, speaking truth to power,
They tend to be more beneficial for and keep news organizations solvent. and comforting the afflicted.
national and large metropolitan news In arguing his case, Picard points out Actually, journalists deserve low
organizations than they are for smaller that economic value for journalists' pay. Wages are compensation for
local ones. This is because they offer work arose out of "the exclusivity of value creation. And journalists
the competitive advantages of making their access to information and sources, simply aren't creating much value
the brand omnipresent in the face of and their ability to provide immediacy these days. Until they come to
the myriad of competing alternative in conveying information." That value, grips with that issue, no amount
sources of news and information. he contends, "has been stripped away of blogging. Twittering, or micro-
When their use is more targeted by contemporary communication de- payments is going to solve their
on building effective personal rela- velopments." Here is how he began failing business models. •
tionships with readers, listeners and his piece:
viewers, they appear to be more useftil To read Picard's article, go to www.
for smaller local news organizations. Journalists like to think of their csmonitor.com/2009/0519/p09s02'
There, the contacts can be more indi- work in moral or even sacred coop.html
\'idual and intimate, and the volume of
contact is generally not as overwhelm-
ing as for large organizations.
There is a clear and growing body behooves all of us, however, to careftilly Robert G. Picard is a fellow at the Reu-
of evidence that news organizations' obsei-ve and evaluate their develop- ters Institutejor the Study of Journal-
Web sites produce some benefits from ment and effects. Then, we need to ism at the University of Oxford. He is
various activities. Less evidence has use what is learned to gauge whether editor of the Journal of Media Busi-
been found to show that social media and how a particular tool provides ness Studies and author of 23 books
activities do likewise, especially for real benefit to a news organization or on media economics and management
newspapers. It is perhaps too early if it is depleting resources—financial topics. His blog can be found at www.
to judge given that experimentation and human—that could be used more themediabus iness.blogspot. com.
with social media is in its infancy. It effectively in other ways. •

An Antidote for Web Overload

With a hunger for explanatory guidance amid the raging storm of Web news
flashes, a journahst stresses context to attract digital users. i
BY MATT THOMPSON

F
or the longest time, whenever I after day I'd fruitlessly comb through tainable only through years of reading
read the news, I've often felt the the stories for an explanation of their news stories and looking for patterns,
depressing sensation of lacking relevance, history or import. Nut grafs accumulating knowledge like so many
the background I need to understand seemed to provide only enough infor- cereal box tops I could someday cash
the stories that seem truly important. mation for me to realize the story was in for the prize of basic understand-
Day after day would bring front pages out of my depth. ing. Meanwhile, though, with the
wath headlines trumpeting new de- I came to think of following the advancements of the Web and cable
velopments out of city hall, and day news as requiring a decoder ring, at- news, the pace of new headlines was

12 Nieman Reports | Fall 2009

The
Changing
World of
Business Journalism
By Jay Stuller

A
ll of us icarn to write in the second grade," basketball
coach Bobby Knight once quipped, "but most of us
go on to other things." UTiile aimed at sportswriters,
knight's insult likely evokes empathctic laughter from exec-
utives, many of whom think much the same of journalists
attempting to cover their company or industry. As someone
who earns a living in the discipline of writing—and who in the
past endured plenty of rants from high-school and college bas-
ketball coaches—I'm less amused.
The dynamics behind Knight's remark, however, are fas-
cinating. Americans may be reading fewer daily papers, and our
attention spans may be shrinking, but we continue to rely on
writers.
Along with supplying citizens with useful information on
vita] issues, news organizations serve as a check on abuses of
power that law enforcement might overlook, including mis-
deeds in government, by the clergy, and, of course, by busi-
ness. An upbeat CNN spot about a new product can boost a
company's reputation with customers and investors, while
a Bloomberg exposé about toys colored witb lead paint—or a
revelation of suspicious disclosure as
 Even well-trained Well, it might be someone who learned to write in the sec-
ond grade and failed to go on to other things—which would be

reporters get just worth a chuckle were it not for the fact that business is now
front-page news. After all, it was a young Fonune magazine
writer named Bethany McLean who, back in 2001, began
as excited—and as poking around the numbers of a high-flying Houston-based
corporation and at first thought it inconceivable that the com-
blinded—by novel pany's executives would engage in fraud. But when she wrote
a feature headlined, "Is Enron Overpriced?", that corporation's

trends as any entre- subsequently spectacular, criminal, and now iconic flameout
not only dominated business reports but resonated through-
out North American culture and beyond.
preneur or investor. The thing is, we are not only a nation of investors but ac-
tive participants in a highly competitive global economy that
in some dimensions seems to be running askew. We're acutely
quantity and brevity compromises understanding. Has society aware that the fortunes of an individual industry matters to
and the profession unraveled to the point where Mad Money's far more people than its employees, since the ripple effect of,
manic Jim Cramer—arguably perched at a far end of the jour- say, a mortgage crisis cuts deep across economic sectors and
nalistic continuum—has an influence equa! to that of the lat- through entire regions. Moreover, there's a pervasive dread
est issue of Foitiim-} These are frightening thoughts indeed. concerning what will happen next, and a hunger for someone
Boo-yah, as Cramer might say. prescient to hand out clues.
Unfortunately, the press hasn't done well in the early-
"Who'll Protect the Public?" warning department. After all, why didn't the business press
In an attempt to offer informed perspective on questions catch on to the dotcom bubble before it popped? Where was
that probably have few concrete answers, this article incor- the reporting on the risks of subprime lending, which in ret-
porates two somewhat different stories wrapped into one. The rospect seem obvious? Why didn't journalists ask whether
first deals with the state of business journalism in America, a diverting corn crops to motor fuels might hit global food sup-
field that is fragmenting like Pangaea, only in accelerated rather plies harder than any climate change? The truth is that even
than geologic time. 1 he second part addresses the often-con- well-trained reporters get just as excited—and as blinded—
tentious relationship between businesses and the media. by novel trends as any entrepreneur or investor.
I was asked to write this assessment mainly because of a ca-
reer that includes more than thirty years in corporate com- An Entropie Devolution
munications, mostly at Chevron. That experience allowed me Was it ever different? Was there ever a Golden Age of
to see and craft features about operations around the world, business journalism, perhaps when Peter Drucker and Ed Mur-
write speeches for the chairman of the board, deal with out- row combined to deliver timely reports replete with truth,
side journalists, and eventually sit on the leadership team of an justice, and the American Way of earning an honest profit?
operating company with 26,000 people and about $8 billion in Not in this part of the known universe.
capital employed, an exposure to the w hite-hot innards of the "But there was a time in the 1980s when business journal-
business. Over the same three decades, 1 spent nights, week- ism in the United States was a growth area," says Tom Rosen-
ends, and vacations writing articles on a wide range of topics stiel, a former Lo.r Angeles Times media critic who now beads
for the likes oi Playboy, Smithsonian, Reader\f; Digest, Aiidulmn, the Project for Excellence in Journalism, affiliated with the
and this magazine. I even co-authored a book on the business Pew Research Center. "The business sections ot newspapers
of the wine industry. were profitable and growing. Journalism schools were packed
U^en it comes to business and the press, I've been on and with students who wanted into the field, and for a time the
appreciate the viewpoints of both sides. profession flowered. And then things stagnated."
And it's critical that business reporting be both better and The 2001 recession put a huge crimp in the personal-finance
better-understood than ever before. As Northwestern Uni- field, which had funded advertising that supported newspa-
versity journalism professor George Harmon pointed out in pers and business mag-azines, suggests the University of Mis-
a post on the website of the Donald W. Reynolds National souri School of Journalism's Martha Steffens, who holds the
Center for Business Journalism: "Sixty percent of the voters school's Society of American Business Editors and Writers
are now investors. They must manage their own retirement chair in business and financial journalism. As online services
nest eggs. If companies' books are deceptive, if analysts are and T V channels devoted to business developed, the need for
compromised, if mutual funds are sneaky, if the Securities stock listings in newspapers faded, eliminating a major com-
and Exchange Conunission is undermanned, who'll protect ponent of the section's reason for being. "The entire business
the public?" model for newspapers changed," Steffens explains. "Reporters

42 TheConference Board Review July/August 2008

 problem is, without local reporters out on heats—working
contacts and attending meetings—a great deal of original news
is simply not being uncovered.
"In this sense, there really is devolution in business report-
ing, and entropy throughout the industry," Rosenstiel says.
"The real downside of this trend is that local papers don't have
the staff or finances to report on business developments. Peo-
ple are stretched thinner and pushed toward general-inte rest
areas. But the business sections are where the warnings of
emerging financial issues would first appear. The mortgage-
crisis story is something that would have arisen in North Car-
olina long before it reached New York and national status.
The national media is very dependent on local reporting and
what's found on the wire services."
In fact, as the Pew Eoundation report added, "More effort
keeps shifting toward processing information and away from
original reporting." Tn other words, bloggers and TV reports
tend to simply repackage and recycle information that's de-
veloped by the remaining conventional newsgathering organ-
izations. And their lively presentation puts pressure on tradi-
tional media to eschew reportage and move straight to analy-
sis and opinion.
"Ask the thousands of business journalists who have lost
their jobs to newspaper cutbacks and they'll tell you the Golden
Age is not only over but has been burned anti pillaged," says
Jon Hindman, former managing etiitor of California CEO and
currently editor of bizSatiDiego Magazine. "The Internet is
the major culprit. Why wait for the morning edition when
you can see the same news online shortly after it happens?
Luckily, business owners, executives, and entrepreneurs are
well-read and have insatiable appetites for knowledge. Maga-
zines still have the ability to fulfill those needs and go in depth
into stories, versus hlogs and other media that just scratch
tbe surface."
Augmenting the obvious first-tier publications—The Wall
were either sent packing or were moved into the metro sec- Street Journal, Fortune., Forbes^ BusinessWeek, The New York
tion. WTiat we're really seeing now is a shifting of jobs, away Times—are excellent magazines that have a more specific focus,
from conventional business sections and journals and into including ii^wW (technology) and Fa.ft Company (leading-edge
more specialized jobs, such as narrowly focused newsletters and firms). Inc. fills a void on entrepreneurs and smaller compa-
btisiness-to-business information sites." nies, while regional publications such as the vSeattle-based
In its 2oo8 overview analysis of the news media, the Project Washingtm CEO serve particular areas with business analysis
for Excellence in Journalism found these trends both promis- and reporting.
ing and deeply troubling. Newspaper circulation has dropped In terms of raw newsgathering, the new Thomson Reuters,
2.5 percent within the past year, with advertising revenue created in April, offers a powerful combination of journalism
falling about 7 percent. Some daily papers have dumped their and data for which traders and corporations pay good money.
business sections altogether. And why not, since readers are Thomson began its life publishing newspapers seventy-eight
turning to television, websites, and blogs where they can get years ago, while Reuters got its start in 1851, transmitting
the "same" information faster and for free? stock prices from London to Paris via a telegraph cable laid
Some press critics contend that websites and blog-s have de- on the floor ofthe English Channel. Reuters alone brings
mocratized reporting, busting a centralized iron grip of elite 2,400 journalists to a merger that should have revenues of
editors and reporters. Consumers can now turn to thousands about $13.4 billion, twice as large as its next biggest com-
of niche information sources. Even traditional pui)lications petitor. That would be Bloomberg and its vast offerings of
such as BusinessHl'ek have robust and financially healthy web- paid information services and free news found on radio, the
sites, built on articles written by well-trained and well-paid Internet, publications, and television.
professionals and sufficient advertising to support them. The These two operations bring vast amounts of material to

Julv/August 2008 The Conference Board Review 43

 those who have the appetite to look for it. Sorting out what are uninformed; if you do read the newspaper, you are misin-
it all means is another matter. formed.' Insert the word blog in place of newspaper, and you
know my exact stance on the blogosphere."
Emotion vs. Analysis Bloggers unaffiliated with mainstream media are like pa-
Charles Fombrun, a former professor of management at parazzi. Their "take" on any given company or topic is a snap-
NYU's Stern School of Business and now CEO of the New shot that may generate passing interest, not unlike the latest
York-based Reputation Institute, believes that the quaht\' of photo ot Britney Spears. As my media-relations friend ex-
business journalism has deteriorated, but he agrees with Hind- plains, "Bloggers tend to focus on very narrow issues that are
man about a bifurcated industry. "The problems are not so of personal interest to themselves. They rarely travel and in-
much in writing," Fombrun observes, "as in the emphasis on vestigate a topic in person or in depth." Journahsts working
the sound bite." for mainline outlets and posting shorter versions of stories on
Television news is, almost by definition, more about emo- their employer's website probably shouldn't be lumped in with
tion than analysis. And yet: Walk into any trading house or the general bloggers, wbo contribute more background noise
corporate trading department, and CNBC or some other than original music.
news-oriented station will be playing on screens. Again, there's That noise can, however, irritate and even provoke changes
a segment of the business audience that needs raw information, in corporate behavior. After a particularly distasteful encounter
and CNBC now reaches about 95 million U.S. households. with Dell customer service, Jeff Jarvis devoted a great deal of
(The nine-month-old Fox Business Network channel is avail- space on his BuzzMachine blog to blasting the company. He
able in 35 million households, but the most recent official count and other bloggers with similar experiences kept after Dell
turned up only 6,300 weekday viewers.) While occasionally for nearly two years. Last year, the company began assigning
useful, TV coverage of business is little more comprehensive technicians to work directly with bkïggers, followed up quickly
than what's found in wire-service reports, and thus faces ques- and publicly when problems arose with some computers' bat-
tions about its gravity and relevancy. teries, and launched a site that facilitates interactive dialogue
"There's too much in business that's happening to(j quickly with customers.
lor a sound bite to convey enough information," Fombrun Then again, some of the noise is original, although it's
says. "There are high-quality journalists out there, obviously. worth questioning whether any particular site is really re-
It's just that for each good one there seem to be about a dozen porting news. Last year, the London Times rated "the 50 best
who are not." business blogs," and one of its choices was Wal-Mart Watch.
In fairness, not everyone in a competitive field gets a job Waging a highly transparent jihad again.st the world's largest
that can showcase his or her skills. And there are two prime retailer, Wal-Mart Watch has clearly had some influence on
reasons—money and time—that excellent financial journal- its target's environmental and business practices. But dubbing
ism can be found in almost every issue of The Economist, For- an anti-corporate advocacy site a business blog seems to blur
tune, Biisim'ssîVeck, and The Wall Street JonrnaL These publi- purposes and intents—even if readers interested in business
cations pay competitive salaries and give skilled journalists— and finance are sa\'\'y enough to parse advocacy from neutral
some of whom have MBAs^—weeks and even months to pore reporting.
over io-K and lo-Q filings, analyze proxy statements, and
speak with a couple dozen sources before writing an article. The Instant Information Age
F-ditors and fact-checkers ensure that each piece is accurate Yet another criticism of legitimate mainstream journalism
and readable. Leaders in businesses or industries that are cov- is that the national press focuses unduly on the large corpo-
ered may or may not like what's revealed, but the product is rations that make up less than 2 percent of American busi-
undeniably high-quality. nesses. As retired BusinessWeek managing editor Mark Morri-
Still, that qualit)- is hardly permanent, and many see an ero- son told Reynolds Center writer Kanupriya Vashisht: "High-
sion even at venerable mainstream publications. "I'm just not profile companies like Apple, (îeneral Motors, or Home De[K)t
seeing the same appetite among business journalists to tackle have broad followings and get high readership. They are also
complex stories," says a friend who works in media relations easier stories to do than finding that interesting story about a
at a large industrial firm. "A complicated story is going to take smaller business and demonstrating its urgency or usefulness."
lots ot time to develop and more space to tell than advertising It's true tbat national audiences are inherently more in-
can support. We still pitch the kinds of ideas that journalists terested in the Boston Red Sox than in the Toledo Mud
like to tackle. But today, their editors often just say no." Hens. Publications are thus more inclined to cover the firms
that grah the attention of the most investors, consumers, and
Where Are the Gatekeepers? readers.
This brings us to a segment of the business press where Morrison believes that business coverage bas never been
there are few editors to serve as gatekeepers and enforce qual- better. "(Bjusiness used to be the backwater of coverage, with
ity' and accuracy: the world of bloggers. As Hindman observes: only a few organizations covering it in depth," he told Vashisht.
"Mark Twain once said, 'If you don't read the newspaper, you "There was no real television coverage to speak of either,

44 TheConference Board Review July/August 2008

 W.Tl.MVS ' " ' * *

company is not shown in a completely positive light, then they ence analysts, investors, consumers, and even the price of a
want retribution." public firm's stock. Just ask the owner of a new restaurant,
Or there's an implicit threat that a reporter just might not or the producer of a Broadway show, what a bad review does
get an invitation to a company's next big product release— for business. And it's plainly evident to me that news organi-
something that, when issued by a rock-star firm such as Dis- zations all too often headline stories critical of a company or
ney or Apple, a tech reporter can't afford to miss. ''I find it industry with an assertion made by a plaintiff's lawyer or
completely frustrating when public-relations people attempt activist group, while burying tbe company's response many
to control every message and the direction of every story you paragraphs below. VVbetber the charge is real or manufac-
attempt to do about their employer," says another friend tured—and make no mistake, there are cases in which flimsy
who is a veteran T V reporter in the San Francisco Bay Area, claims are no more than organized shakedowns—the fall-
a crack general-assignment journalist who brings a fresh and out is real.
fairly well-informed mind to business stories. "Some are worse In turn, corporations continually court media attention in
than politicians. And tbey don't really know wbat constitutes an attempt to get the kind of coverage that serves as a third-
a legitimate news story. If you offend tbeir superiors, there's party endorsement of the firm's product or service. W^Tiile
always the possibility that they'll cut off access, which puts serving as executive editor of the now-defunct Culifornia CEO,
the reporter in an awkward position. If people at these cor- I received dozens of press releases each week from PR firms,
porations only understand the concept of takeaway value— asking that we interview this or that CEO or write about
which is the general feeling a viewer holds, and is much dif- a project or product. Tbere probably isn't a company of any
ferent from the one or two facts upon which executives an- size out there that doesn't have someone tracking its media
grily fixate—they'd interact with media with much more coverage. And it's the rare executive who doesn't regularly
equanimity." read The Wall Street Journal^ several oí the major magazines,
and a daily clip file with copies of stories about her company
Public Engagement or industry, information that's essential for running a busi-
Companies are understandably sensitive about their treat- ness. Ignoring press coverage is like failing to brush your teeth
ment by journalists, since media reports can xiltimately influ- before a date.

46 TheConference Board Review Julv/Augu5t 2008

 While I've seldom done much muckraking ¡ournalism—
or at least stuff that could put people in jail—I know that I've
Savvy journalists
angered a few executives and delighted others. In my hooks
and freelance magazine writing, sourees who treat me well
usually receive commensurate coverage: honest interpreta-
don't require
tions, with less-than-flattering points put in appropriate eon-
text. Since I was a spare-time mainstream journalist, my for-
head-coaching or
mer employers figured I could work with others of my ilk.
For a brief time in the late 1990s, I was asked to lead a small
executive experience
group within Chevron's Public Affairs department that would
proactively reach out to the media and offer the company's
executives as sources for stories, so that through these rela-
to be effective
tionships the public might come to better understand the in-
tricacies of the energy business. The effort was a miserable
observers and critics.
failure. Publications were interested, but Chevron's executives
were reluctant to step into the bright lights. every thing you can legally reveal," Rosenstie! says. "If you're
It wasn't that they had anything to hide. It's just that the open with the media and have a good message, they'll likely
possibility of a wide-ranging interview that strayed from give you the benefit of the doubt when something goes wrong
agreed-upon facts about Chevron and its specific place in the and push comes to shove."
oil business ran against an inherently low-key and modest cul- This is plainly what has transpired at De Beers, the world's
ture. To many at Chevron, Lord John Browne's speeches about largest diamond company—a firm that long operated with
BP going "beyond petroleum" were disingenuous, greenwash- more secrecy than the National Security Agency. Battered by
ing before that term was even coined. I also think Chevron's hostile NGC^s, news exposés, and even movies about diamond-
executives saw the error-prone media in much the way Ohio trade bloodshed, the company changed its business model,
State football coaeh Woody Hayes viewed the forward pass: how it works with the comitrj^ of Botswana—the world's largest
Out of four potential outcomes—a drop, reception, intercep- diamond supplier^and, not least, how it deals with the press.
tion, or sack—three were bad. As Time recently reported, "De Beers now has a small army
Chevron's attitude toward the media has since greatly of public relations experts keen to produce executives for jour-
changed, as has that of chairman Dave O'Reilly, once as hes- nalists," and has opened its operations for governments, NGOs,
itant to spend much time with reporters as any of his col- and reporters alike to see up close.
leagues. He is now an active voice in public discourse about W-liile this epitomizes extraverted behavior, it also appears
the environment, energy, and social development. "We just aligned with Fombrun's assertion that a company can't just
weren't ready for that kind of engagement a decade ago," be open with the press "without having a number of system-
O'Reilly told me during a chance meeting in San Francisco a atically built programs in place to address a range of risks."
couple of years hack. "Now it's clear that we need to explain The firms that most successfully manage their reputations,
ourselves and the consequences of producing energy. It's too he explains, have professionals dedicated to corporate social
important an issue for us not to participate in the discussion." responsibility, others to environmental issues, and still others
This new behavior is what the Reputation Institute's to government policy. The best deal well with the media, since
Charles Fombrun calls the "extravert" model for dealing with journalists are the conduit to all other stakeholders, adver-
media and other stakeholders. "The old style of refusing saries, and potential friends.
to comment, of tightly screening the media and attempting to VMiiie oil companies are convenient scapegoats for ail sorts
control all interactions, is the introvert model," he explains. of things outside the control of individuals and governments
"Some firms can still get away with controlling all of their and thus always walk on shaky ground. Chevron today has all
messages and access to executives. But given the changes of those systems and relationships that Fombrun mentions—
in the journalism business, that strategy may no longer be as well as a willingness to take the bruises and grudging agree-
so effective." ment that comes from openly interacting with journalists.
Sure, most of us learn to write in the second grade. But if
The Visible Company there's any takeaway value from what's scribbled above, it's
With dozens of news outlets operating around the clock that there's a great difference in quality across the profession,
and hloggers who can magnify the implications of just about just as there is in law, accounting, management, and college bas-
any report, controlling emerging issues is almost impossible, ketball. Moreover, savvy journalists don't require head-coach-
adds Tom Rosenstiel of the Project for F-xcellence in Journal- ing or executive experience to be effective observers and crit-
ism. The only remedy is to adopt what he describes as the ics. In fact, a bit of distance actually enables the writer to bet-
"constituency" model, which is identical to Fombrun's extra- ter select and interpret what's most important to the reader—
vert approach. "You need to be transparent about just about even if it means telling the old coach to put a sock in it. &

July/August 2008 The Conference Board Review 47

 By Gregory J. Millman

FEI@75 ence for business news than ever before, and a greater capac-
ity to deliver it. Financial executives, especially public com-
pany CFOs, are often in the forefront of those supplying infor-

No Longer Just mation, be it filtered through analysts or investor relations

departments.
Indeed, today's business press does have a real impact on

: Business
business, perhaps greater than ever. Sometimes the influ-
ence is overt, as happened earlier this year when press cov-
erage of a professor's research into backdated options
spurred intensified regulatory interest and a stock market

Journalism response. Sometimes, the influence is subtle.

One study, for example, found that press coverage alone
can influence auditors' opinions on a company. Presented

Takes Off with information about companies that had defaulted on their
loans, auditors were more likely to issue a negative opinion
if the press had cov-
ered the default.
"What was startling
about this research is
reader of the business nev^sfrom the 1930s in a time Technology, public that there was no new
capsule and spirit him to today's world, and his head would information in the
truly be spinning. A world of gray type and subdued cover- appetite and far more press, just a repeti-
age has evolved into splashes of color everywhere, charts tion of information
^nd graphs, talking or even shouting heads on cable TV (think sophistication in available in the audit
Mad Money's Jim Cramer on CNBC) and dramatically more delivery have conspired work papers, yet audi-
attention on the world of business and commerce. Even that tors were more con-
bastion of literary excellence, The New Yorker, has a regu- to radically transform servative once they
iar business column. saw an article," says
Like virtually everything else, business journalism has been
the face of business
Jennifer Joe, assistant
transformed by technology. Computers replaced lead type; journalism in recent professor of Account-
color presses created whole new palettes. Television evolved ing at the Georgia
from a small, gray box to high-definition and plasma. Cor- decades. That's been State University's
respondents, many hired less for their knowiedge than their
looks, now chatter with executives and analysts on cable TV
both good and bad, Mack Robinson Col-
lege of Business.
programs. Even now, the Internet now seems to be the future with many in the Sometimes the
of much of communication in an attention-deficit world in
influence shapes how
which depth is often disappearing. profession itself business people see
That's not to say, however, that serious and important sto- bemoaning a focus on themselves and their
ries about business aren't being done. They remain a staple businesses, and lasts
of major newspapers like The Wall Street Journal and The entertainment instead for years. George
New York Times, as weli as the major business magazines
like Fortune, Forbes and BusinessWeek. There's a bigger audi- of information.
Gendron, who edited
Inc. magazine through

18 .ANCIALEXECU. October 2006

the 1980s and '90s, created a publishing phenomenon, a hit A New Focus on Making Money
with advertisers and readers — not just a magazine, but a With peace and prosperity came
community. Before Inc. came on the scene, no magazine was a focus on careers and money
addressing the needs and concerns of entrepreneunal busi- making, and an explosion in
ness. interest in business. Marshall
"Six months ago, I get off a plane and I hear this guy shout, Loeb, former editor of Fortune.
'George! George Gendron? I was number 152 on the Inc. Money, and the Columbia Jour-
500 in 1995!' It's like we're blood brothers or something," nalism Review, and currently a
Gendron says. For two decades, Inc.'s intensely loyal read- senior columnist with Market-
ers supported not only an advertising bonanza but also a Watch from Dow Jones, says, " I think
healthy conference business. the material covered in the business
section of Time at that time was very
The Inc. phenomenon is one of the latest developments
well done. We had many individual
in what is actually a very long history: after all, business writ-
business people on the cover; maybe
ing has been around almost as long as writing itself. Some
eight times a year out of 52 -
of the first cuneiform tablets were financial reports. In his
issues there was a business per-
new book. Profits and Losses: Business Journalism and Its
son on the cover." Time even :.
Role in Society. University of North Carolina journaiism pro-
named General Motors President
fessor Chris Roush relates that lenders set up a network of
Harlow Herbert Curtice its Man
correspondents to file reports on prices and political condi-
of the Year for 1955.
tions as early as the 1500s.
Interest in prices and market moves seems to have been But the celebration of business
the main driver of business coverage through the 1 9th cen- personalities, which accelerated
tury, and as the Industrial Revolution roiled, the press rolled rapidly by the '80s, had a down-
along with it. The first American business newspaper side. It spread easily and perva-
appeared in 1793, Julius Reuters founded his international news sively into every nook and cran-
agency in 1849 and The Wall Street Journal started publish- ny of business journalism, crowd-
ing in 1889. For most of that history, business reporting ing out arguably more important
addressed a narrow audience of specialists. stories. Arguably, it has had pro-
Then, as the 20th century debuted, the broader public took found repercussions at many com-
at least a fleeting interest in what muckrakers were stirring panies, with lionized chief execu-
up. Ida Tarbell scrutinized the Standard Oil Corp. in a series tives riding herd on passive boards
that ran for 19 months in McCiure's magazine. In articles and making iil-considered deci- j^
that later became books, Lincoln Steffens's Shame of the Cities sions, especially acquisitions;
exposed business and government corruption and Upton Sin- financial executives, the conscience
clair's The Jungle tackled the meatpacking industry. of their companies, may have found
Yet for reasons still not entirely clear, the heyday of muck- the control function slipping from
raking lasted only a few years. By the second decade of the their grasp.
20th century, it had faded from the scene. Then came the David Cudaback, former editor of
1930s, the decade of depression, and then the '40s, the Institutional Investor, sees business
decade of war. The public had a lot on its mind besides busi- and financial journalism to some
ness. It wasn't until the '50s that business coverage began degree "complicit" in creat-
to come into its own. ing a celebrity culture sur-

October 2005 19
 th
Anniversary

rounding executives. Founded in 1967 to cover the mon-

ey management business, the magazine had expanded its How Financial Executive
scope so broadly that by the mid-'70s, little in finance was Viewed the Communications Effort
beyond it.
"The premium was on story-telling and personalities,
The explosion of business news, especially in the past
and on the international side, celebrating finance minis- generation, hasn't been a core subject for EEI or Finan-
ters and heads of syndicated lending," says Cudaback. cial Executive — but it has been touched on time and
"People loved it. Advertisers loved it and readers loved it, again in connection with investor relations and the
and you couldn't be too outrageous. But I never wrote a information disseminated to analysts and stockholders.
story asking, 'Will Brazil or Nigeria or Hungary be able to The biggest source of the publicity wave for corpora-
repay all those recycled petrodollars they borrovi/ed?'" tions, the emergence of the celebrity CEO, arguably
Complicit may not be too strong a word. It is rare for goes back quite a few decades. After all, if that doesn't
the press to raise troubling questions during any boom, define Henry Ford or John D. Rockefeller, what does?
whether it was Latin lending in the '70s or the tech stocks But it was in the 1980s and '90s, especially, when
more modern versions of the chief executive become
in the '90s. And every one in the press knows why. After
glorified in magazines tike Fortune, BusinessWeek and
all, if it's true that the press impacts business, it's even truer
Forbes. There were names like Lee lococca at Chrysler,
that business impacts the press. Michael Eisner at Walt Disney, James Robinson 3rd at
Bob Teitleman, editor of The Deal, observes, "As the bub- American Express and Walter Wriston at Citicorp. Fea-
ble burst, you had all this recrimination. Why didn't we tures and profiles highlighted their strategies and pow-
know about Enron? Why didn't you tell us about tech er; the CEO and the finance suite, in contrast, rarely gar-
stocks? People forget that if you had written about it, if nered much ink.
you wrote story after story about why these tech stocks It's probably in the evolution of corporate reporting
were duds, you wouldn't be writing any more. That's not and investor relations that finance, and especially the
what the audience wanted, and it's not what advertisers public-company CFO, have had the biggest impact on
wanted, either." the news that makes it to the business press, television
and cable channels. Certainly, the situation these days is
a far cry from what it was like back in the '30s.
Cheerleading Is a Popular Choice
In the October 1935 issue of The Controller, an arti-
There can be tension in business journalism as well cle, "What Is the Most Satisfactory Form of Reports to
between printing what people should know and what they Shareholders?", noted: "It seems to be the experience
want to know. Cheerleading is often not only more prof- of our leading companies, and doubtless of others,
itable, but also more popular. "We wrote and wrote on that they get from stockholders very few inquiries
the stock market bubble, and one day it broke, and peo- indeed for more information than is contained in the
ple said, 'Why didn't you warn us?' We did warn them, annual report.., it is only after some action of the
but nobody wanted to hear us," recalls Newsweek's Wall board that has excited their attention, or something
Street editor, Allan Sloan. "The high-tech companies, the has gone wrong, that they will for a brief time become
genius CEOs, that was a much better story than the one inquisitive."
that said this is coming to an end." By 1964, security analysts were clearly demanding
more of the finance executive's time. William A. Crich-
Idealists have a noble view and high expectations of the
ley of Diamond Alkalai, writing in the July issue of
press as a force in society. Business journalism historian
Financial Executive, urged members not to "wait for
Chris Roush speaks of the business press as "a watchdog
the analyst to seek you out; go seek him out. Don't go
on corporate America," for example. Researchers in Ein- so often you wear out your welcome, and above all,
land, a country formerly under strong Soviet influence, cred- don't hide when the results are poor... These specialists
it the "increasing professionalism of the business journal- want to know the bad news also. They're in the busi-
ness for the long pull, and they have memories like the
proverbial elephant."

20 JANCIALEXECU. October 2006

 The power of the business press drew notice in an ists" for pushing politics and government in
August 1974 article, "Seven Steps to Better Investor the direction of "western-style open financial
Relations." It noted that "feature articles in For- reporting standards and a more critical pub-
tune, Bus/nessl/I/ee/r and elsewhere reach not only lic scrutiny of business issues." The World Bank
the analysts, but their clients as well. Such articles institute sponsors courses to train young busi-
are part of the effort to provide continued visibility ness journalists in developing countries "to
of the corporation to its various financial publics —
operate as effective reporters in a democratic
security analysts as well as customers, creditors and
present shareholders." society and within a market economy."

Disclosure, and the growing demand for corpo- Yet in the U.S., a different model of the busi-
rate information, were reviewed in a June 1980 ness press is ascendant. Robert Dilenschnelder,
article, "Corporate Disclosure in the 1980s." The author founder of the PR and investor relations firm
noted that "the historical pattern of 'more and The Dilenschneider Group, says, "I think the
more' — which some seem to equate mistakenly business media are less influential today."
with 'more is better' — can be illustrated by com- Marshall Loeb adds, "Surely much of the
paring the space used for financial disclosure in a business press is spending less of its
typical 1970 annual report, as opposed to the space resources getting to the deep and compli-
used for a 1979 annual report. That space has proba- cated stories."
bly doubled or more."
Media critic Marek Fuchs of
In the March/April 1992 issue of Financial
theStreet.com faults business journalists
Executive, Joe Rodgers, executive vice president and
CFO of Quantum Corp., related how the role of for their lack of business experience,
investor relations had grown at his company and business understanding or even interest
become structured so that the company could send a in business, "Very few grow up with any
consistent message to investors. Rodgers confessed interest in business, and it shows all over
that he was spending 40 to 50 percent of his time on the place," he says. Yvette Kantrow. who
various elements of investor relations, including writes a closely watched column on media
meetings with individual institutions and analysts. matters as executive editor of The Deal,
By late 2000, even as a red-hot stock market points out that after the experience of
began to cool, clamor erupted over the perception Enron, "You would think that people would
that some analysts were getting privileged informa- Second-Lien
want the business press to be more serious,
Lending
tion from companies. A new rule. Regulation Fair '
Rides a to crunch numbers. But nobody wants to
Disclosure, or Reg FD, required that all investors be Gusher read it, unfortunately, or not a big enough
made equally aware of potentially market-moving
information. audience. A lot of people bemoaned the state
of business journalism, but it went farther,
Jim Davis, senior vice president and CFO of Tul-
sa-based Parker Drilling Co., told writer Gregory fluffier."
Millman in Financial Executive early in 2001 that Jim Michaels, editor emeritus of Forbes,
compliance with the rule may expose companies to oth- sees in the move to the Web not only a threat to adver-
er legal risks. "If you put out a forecast, whether in a tising dollars but also a force in the dumbing down of jour-
press release or webcast or whatever, if you don't caveat nalism. "In a magazine, you have to give readers what they
every statement you make, you run the risk that some want or they won't take it, but you also give them things
enterprising shareholder or attorney is going to compare
they may not be passionate about but ought to know,
actual results with forecasted results and sue you if actu-
al doesn't meet forecast," Davis said. "On the Web, everything is driven by hits, and if It does-
n't get hits, you won't run it. So what are they hit on? Look
Fortunately for CFOs, that blizzard of suits has never
materialized. at anybody's website, and usually they'll list the five or 10
— Jeffrey Marshall

October 2006
 most popular stories of the day. ings on corporate finance. However, in the 1970s, he turned
Look at what they are: women are his attention to the press, arguing that it is economically
sexier than men, new study rational for people to merely tolerate information as an acci-
shows; eating tomatoes protects dental by product of the entertainment they seek in the press.
you from breast cancer; some Jensen drew heavily on the work of the jaded Sage of Bal-
movie star and her husband go to timore, H.L- Mencken, who in the early decades of the 20th
Namibia to have a baby. I'm not century wrote that the newspaper with aspirations to prof-
kidding you!" itability should pander to the simple minds and baser
George Gendron notes, instincts of the masses, scaring them with threats and then
"There are hugely significant reassuring them with simpiistic and unchallenging remedies.
St)c ^Vur jjork <Bmt» scoops that highly ambitious Jensen's analysis suggested that it would be economically
journalists in the past would have irrational for people to seek anything but entertainment from
ioved to tackle, and they're not even the press. After all, a rational economic actor would recog-
being done. It's not a question of nize that nothing he or she did as an individual could affect
being done badly — people don't the outcome, so investing resources in a serious considera-
bother pitching them any more." tion of issues doesn't pay.
"In addition," Jensen wrote, "Peoples' intolerance of ambi-
Medicine and Sugar guity causes them to demand answers to questions; includ-
One high-minded view of business ing those that are unanswerable. As a result, the media is
journalism sees it as making some generally in the business of providing simple answers to com-
compromise with such public tastes plex problems whose answers are unknown, and it must do
by offering the medicine of infor- so in an entertaining way."
mation in a sugar coating of enter- Although Jensen published his articles on the press in the
tainment. Now that the Web makes '70s, they were prescient. Indeed, his analysis neatly accounts
it possible for readers to take the for every great business scandal story of the past few decades.
sugar without the medicine, serious "Michael Milken, what he did for the economy and the world
journalism is under threat. But
of finance was remarkable, and he ended up being pilloried
what if serious journalists were
as a crook, which he isn't," says Jensen. "You see what's
kidding themselves all along?
being done with Wal-Mart. Here's a company that has con-
What if providing information
tributed more to consumers getting low prices and an amaz-
wasn't ever their real job? There's
ing selection of goods, even in the boondocks, and provid-
some dispassionate econom-
ing work for people on the margin of the labor force. Now,
ic analysis to support the
they've become a national icon of evil."
argument that the public nev-
People will get the kind of press that they demand, or settle
er looked to the press for
nformation. for. If people are really looking for entertainment, it makes sense
when the press stokes and strokes the public mood instead of
Michael C. Jensen, Jesse digging and prodding to get obscure, difficult, expensive-to-
Isidor Straus Professor of Busi- unearth but momentous facts. If people are really looking for
ness Administration, Emeritus, entertainment, it maizes sense that journalists
it the Harvard Business
don't invest time in learning to read financial
:>chool, is best
reports or understand the trade-offs involved in
known for his writ-
a free market economic system.

October 2006
 It even makes sense if the press spends one decade build- aged to weather the industry storm by focusing on a nar-
ing up celebrity CEOs, and the next decade attacking CEOs row audience that does demand quality, competence and seri-
who get paid like celebrities. That's a game H.L. Mencken ousness of purpose. If such audiences expand or multiply,
would have understood perfectly well — indeed, he wrote it's reasonable to expect that one way or another the press
the playbook. will be there to serve them.
It's hard to find much justification for a noble view of the And in the larger sweep of history, business coverage has
press's role, or for optimism that business journalism will raise improved in many ways. Loeb says it is "a hell of a lot bet-
its standards. Yet, it's not impossible. Author and historian ter than it was 50 years ago or even 25 years ago." That may
W, Joseph Campbell, author of the new book. The Year that be one of the few points on which Loeb and his former Forbes
Defined Journalism: 1897 and the Clash of Paradigms, sees archrival, Jim Michaels, agree. "I joined Forbes in June of 1954,
grounds for encouragement. and business journalism was very much a backwater,"
Michaels says. "Newspapers would put their drunks and
Events in that pivotal year, Campbell says, defined jour-
burned-out cases on the business page. The New York Times
nalism for the next century; newspapers were struggling
would almost never put an economic or investment story on
against a background of new communication technologies
the front page — you could go weeks and weeks without
and fickle public tastes. Scrambling for solvency, newspa-
seeing it. The business media was pretty small."
pers were laying off reporters in droves. Out of the turmoil,
a new model of journalism emerged. "The rip tide of That's no longer true, of course. It's much larger, and more
change has swept American journalism in the past, and we've fragmented as well, with the growth of investor-oriented mag-
emerged the better for it," he concludes. azines like Money and Smart Money, and the slew of tech-
nology titles (like Wired) that have sprung up in the past
A New Form of Creative Destruction? decade. Trade magazines, too, have emerged and grown to
That could happen again in the new century. Creative fill perceived voids in specialty subjects.
destruction at the beginning of the 20th century resulted in And then there is television. Channels like Bloomberg and
industry consolidation and the formation of great media CNBC haven't been with us that long, but they are filling
empires. Creative destruction in this century may result in the airwaves will all kinds of data, much of it arguably short-
their dissolution, but it's possible that breaking up media con- lived. Some of the analysis that used to appear only in print
glomerates could lead to a more efficient and effective jour- has now moved to the Web, where it has far more immedi-
nalism industry. acy. The Web has also abetted the emergence of journalists
Meanwhile, the school of hard knocks may already have as quasi-celebrities, as authorities whose views you can call
begun the job of educating the audience to greatness. A pub- up with a quick click of a mouse.
lic shocked to discover that it couldn't believe what it read During the technology bubble, CEOs and CFOs were lin-
in the papers about Enron and WorldCom and tech stocks ing up to tout their stories, and their stocks, on cable. That
may simply have turned to entertaining fluff in a transient phenomenon has cooled, but surely there will be another
fit of pique, as a respite.^ to forget, the way an adolescent wave of business information, another surge of excitement
turns from a heartbreaking summer romance. — perhaps from somewhere we can't even yet envision.
Any day now, the audience may return, more mature and For financial executives, the challenge will be to sort out
wiser, to demand and reward incisive, competent, deep and the noise and the chaff, and understand the best ways to
challenging business journalism, the kind that requires mas- glean information they need and to communicate their sto-
sive investment of time and money and the willingness to ries to stakeholders.
risk legal challenges. Readers may be on the verge of toss-
ing the sugar aside to go straight for the medicine. Gregory J. Millman ([email protected]) is a freelance writer
A few business publications, such as The Deal, have man- in New Jersey and a frequent contributor to Financial Executive.

October 2006 23
LIONEL BARBER 146

Post-Crisis Britain: What Is to Be Done?

PROVOCATIONS AND PRESCRIPTIONS FOR THE BRITISH ECONOMY
Address by LIONEL BARBER, Editor, The Financial Times
Delivered at the British Venture Capital Association Dinner, London, England, March 1, 2010

T hank you, Simon, for that kind introduction. Your

Royal Highness, my Lords, Ladies and Gentlemen, it
is an honour to address such a distinguished audience.
flation to the rest of the world. Despite the accumulation of
personal wealth, fuelled in part by a sharp rise in house pric-
es, there was rather less to Cool Britannia than met the eye.
Journalists are marginally more popular these days than Today, the financial services sector stands massively if
bankers and MPs, but I come before you tonight as a temporarily discredited. The cost of the bail-out of Britain’s
man of print, an endangered species. But for the record, banking sector is close to £90 billion. The UK government
this particular journalist has no intention of joining the has back-pedalled vigorously from its earlier advocacy of
dinosaurs down the road at the Natural History Museum, “light touch regulation”. There is considerable uncertainty
at least not just yet. about our tripartite regulatory framework involving the
Tonight, I would like to say a few words about the vital Treasury, Bank of England and the FSA, one of the centre-
role that the private equity and venture capital industries pieces of Gordon Brown’s reforms as Chancellor.
play in wealth creation in this country. But please forgive More broadly, the crisis has marked the collapse of an
me if my remarks are broader in scope. I want to talk not intellectual edifice which assumed that economic actors
only about the financial services sector but overall prospects behaved rationally and that markets would be both ra-
for the British economy. It may be a cliché but it is certainly tional and therefore efficient. We now know that markets
no exaggeration that our country stands at a crossroads. can be both irrational and massively inefficient. So we find
By using the word “crossroads”, I am not floating a sly ourselves living in a very different economy: substantial, if
reference to the general election just weeks away. I do not temporary extension of state intervention; and borrowing
possess any inside information on the precise date for poll- on a scale normally associated with war-time.
ing day, nor can I say much about the merits of the Labour The dramatic shift in our circumstances has yet to be
or Conservative parties. Indeed, anything I say on that absorbed by the political class. And it comes at a time
count will be open to misinterpretation, a classic cast of the when the balance of economic power is moving markedly
media being quoted out of context, as it were. As to which from west to east. I have watched this shift of power from
party the Financial Times intends to endorse, well that is a west to east from different vantage points, first as a foreign
collective decision to be taken at a future date. Really. correspondent and latterly as editor. I have come to the
The reason I believe we are at a crossroads lies in the view that the increasingly relative importance of Asia and
consequences of the economic crisis for Britain, especially other emerging markets is real and sustainable.
in the light of the shifting balance of power in the world This is not to write off the US which remains the num-
from east to west. The wider challenge is how to turn ber one economic, military and political power, whatever
the severe recession into an opportunity for the British the current debate about ungovernable America or the
economy, to use it as political cover to make some hard but precipitate decline in President Obama’s standing. Just two
necessary choices about where should seek comparative days in Washington last week confirmed for me the erosion
advantage in a world shaped by relentless competition. of his authority. It is merely to underline the emergence of
The global financial crisis has claimed many victims but a multipolar world in which China, India, Brazil, the oil-
the biggest casualty was the notion that Britain—and here rich Gulf states will play an increasingly influential role.
of course I mean the City of London—enjoyed an innate Their influence will be largely but not exclusively at the
superiority over its counterparts on the European conti- expense of the developed economies, notably a ponderous
nent. Britain was deemed to be superior because its econ- European Union.
omy was dynamic, flexible and open. Light-touch London China deserves a few words. In the last 12 months or so,
was the global hub attracting the smartest talent, the best the Chinese have become increasingly assertive. Some say
French chefs and the richest Russian oligarchs. In Mervyn this assertiveness reflects the communist party’s concerns
King’s phrase, Britain enjoyed the “Nice” decade, a period about economic growth which is tied inextricably to the le-
of non-inflationary consistent expansion of the economy. gitimacy of the regime. Others detect a sense in Beijing that,
That at least was the theory. In practice, the UK during just as Theodore Roosevelt spoke just over a century ago of
the Blair-Brown boom was more like a large hedge fund, America’s Manifest Destiny, China’s moment has come.
benefiting from a period of low interest rates and cheap What is clear is that the end of the 20th century coin-
credit, thanks in part to Mr Greenspan in Washington and cided with the end of the story of China as a pure foreign
the comrades in Beijing where low-cost labour exported de- investment play. The new century marks China’s impact as

APRIL 2010
147 VITAL SPEECHES international

an international economic actor on the rest of the world. base, not just through procurement but also through tax
This impact ranges from the contest for commodities in policy. The danger for the UK is that we continue to oper-
resource-rich Africa and Latin America, to the rise of mul- ate a hands-off policy regarding foreign bids and takeovers
tinational Chinese companies looking for foreign acquisi- while at the same time adopting fiscal measures which ei-
tions, and the establishment of a maritime navy with the ther discourage inward investment or damage prospects for
ambition to the secure control of sea-lanes in the Pacific start-ups or mature companies which operate in the UK.
and Indian oceans. Sir John Rose of Rolls-Royce, one of the few world class
China is now the world’s largest exporter, supplant- manufacturers in this country, has spoken eloquently about
ing Germany; China is the world’s largest importer of raw this risk. Many other leading businessmen see things the
materials; the Chinese consume more cars than the Ameri- same way. There is no point in putting up a “For Sale” sign
cans. On IMF data, the share of China and India in world in Britain, if there is little or no prospect of replacing those
GDP at purchasing power parity will rise from 7 per cent to companies with our own.
18 per cent between 1992 and 2010. The US share in the Let me now turn to the financial services industry. Now
latter year is 19.6 per cent. as one of my FT colleagues remarked impishly the other
In London, we are slowly waking up to the new power- day: it may seem strange for Britain to seek comparative ad-
shift. The Pru’s bid to acquire the Asian assets of AIG, the vantage in the world’s most irresponsible industry. But the
fallen American insurance behemoth, is testimony to the serious point is that the financial services sector is still enor-
untapped potential of the Asian consumer. HSBC’s decision mously important to the economy. It employs vastly more
to relocate its chief executive Michael Geoghegan to Hong people outside London than inside the City. A host of other
Kong is another hint of things to come. So is the decision services industries such as lawyers and accountants rely on
of legendary investor Anthony Bolton to step out of retire- the financial services eco-system for their well-being.
ment and move to Hong Kong to set up funds specialising Equally, it seems fairly obvious that we allowed the
in Chinese equities. financial services sector to become too large relatively to
So what do these trends mean for the British economy? the rest of the economy. So while banking and financial
In my view, they make it imperative that we identify those services accounted for 27 per cent of all corporate tax take
sectors and industries where we can make a difference in for government at the height of the boom in 2007, the
the global market place. Once we have identified these “an- cost of the ensuing bust to the taxpayer is now close to
chors”, both private equity and venture capital have impor- £100bn. Although some of that money will eventually be
tant roles to play as growth engines. recouped as the government disposes of its equity stakes in
What might those anchors be? Here are five suggestions, Lloyds and Royal Bank of Scotland, it is still a terrible price
none of which is particularly original but which nonethe- to pay—and it accounts for the political backlash against
less constitutes areas where the British can aspire to excel- bankers and the fat target of bonuses.
lence: financial services, pharmaceuticals, aerospace, the However, there is a real danger of the backlash going too
low carbon economy, and higher education. far. The FT supported, reluctantly, the special tax on bonuses
Incidentally, I have deliberately left out the creative in- on the grounds that banks’ profits were benefiting from an
dustries, on the grounds that I am, so to speak, parti pris. implicit government guarantee and extraordinarily favour-
In our own modest way, the FT has sought to achieve a able trading conditions based on record low interest rates.
leadership position, building a brand with the authority But this last levy must be a one-off. Governments will be
and sweep to challenge other global media organisations, tempted to take further measures, if only because of the dire
albeit in a niche at the top of the end of the market for state of public finances. They do so at their peril. More un-
business and financial information and analysis. predictability is likely to lead to a slow exodus from the City.
Now talk of “anchors” may prompt accusations of London does enjoy unique advantages because of its
“Bennery”, picking winners in a 1970s-style industrial geographical location in the centre of the world’s time
policy. But it is surely time to move beyond such carica- zone, the supremacy of the English language and the rule
tures. Having worked as a journalist for 10 years in the US, of law. But other financial centres—New York, Dubai, Sin-
I have witnessed first-hand how the US government exerts gapore and Shanghai, let alone Paris and Frankfurt—are
a profound influence over industry. Look at government competing for similar business. This government—and the
procurement and its impact on the defence and aerospace next—should avoid taking any unilateral measures which
industry. Not for nothing did Dwight Eisenhower invoke put Britain at a disadvantage.
the phrase of the military-industrial complex. Look at the So where does that put private equity? First, the indus-
role of the Small Business Administration. Look at sundry try should be congratulated for improving their communi-
legislation such as the Jones Act which protects merchant cation to the general public. Now that wasn’t too difficult,
shipping. I could go on. was it Simon? Let’s be clear: private equity has undoubtedly
Other governments in emerging market countries have served as an engine of growth. The industry’s reputation
equally understood how they can shape their economic rests on the claim to be good corporate citizens enjoying

VITALSPEECHESINTERNATIONAL.COM
 148

a superior operating performance to publicly listed com- achieved global scale? Where are Britain’s Googles, Yahoos
panies. But if I may engage in provocation, the question and Twitters. OK, we had Bebo—but they just sold out, ad-
remains, how far are you prepared to go? mittedly at a handsome price.
If deals, especially at the big cap end, involve piling The obvious answer is that the US market alone offers
companies high with debt which weakens them in good scale. But we should also look at other factors, starting
times, inhibits their ability to invest in growth, drains the with our universities, the hubs of innovation. By my count,
public purse of corporation tax by substituting debt for only two of the top 20 universities in the world are British,
equity, then that claim is in jeopardy—(especially if the exit America is home to 17 of the others and California alone
involves a sale through Swiss holding companies without has three of the top ten. Our top universities have long
payment of tax). been wary of incubating commercial innovation or promot-
The second, related challenge is to demonstrate that ing world class business schools. And while there are signs
private equity’s claim to superiority rests on operational of attitudes changing, there is a genuine need to forge clos-
performance rather than financial engineering based on er relationships between business and our universities to
favourable debt and capital markets. Given the dramatic stimulate the development of intellectual property, properly
fall in global fund-raising in 2009 compared to 2008, and and efficiently enforced through patent law.
the overall decline in deal value (despite signs of an up-tick In this respect, I look forward to the results of the
in the fourth quarter), the industry still has something to Browne review of higher education funding which should
prove. The third challenge is succession: we have seen one help to strengthen the independence of universities. I
or two tensions as founding partners have either exited or also welcome the pre-Budget’s adoption of a “patent box”
been “exited”. The fourth challenge will be to manage rela- which ringfences incomes derived from patents and gives
tions with stakeholders ranging from trade unions, sover- them more favourable tax treatment. The arrangement has
eign wealth funds and pension fund trustees in a post-crisis already been introduced in Belgium, the Netherlands and
world in which the financial services sector faces greater Switzerland and could be an important stimulus for invest-
scrutiny. And the fifth and final challenge will be to deal
with a tougher regulatory framework.
In this context, the EU’s Alternative Investment Directive
is profoundly misguided, if not vindictive. It targets private
equity and hedge funds which, despite dire predictions on
the European continent, were not responsible for the global
financial crisis. The causes, as any reader of the FT will
know, were a toxic combination of leverage, lax regulation,
conflicted ratings agencies, and global imbalances, notably
between excess spending in the US and excess savings in
China and other Asian countries. While this directive is still
subject to modification, it is still onerous. In the words of
one private equity boss: a headache rather than handcuffs.
Let me now turn to the venture capital industry which,
if properly harnessed could and should play a vital role in
the revival of the British economy. No doubt there is much
to be done in terms of tax breaks to encourage investors to
back young and growing companies. More generous treat-
ment for research and development, say; or raising Enter-
prise Investment Scheme allowances to a 50 per cent tax
write off with the upper limit raised to £1m per annum.
But to engage (again) in a bit of provocation: why is
it that Britain has produced few start-ups which have

APRIL 2010
150 VITAL SPEECHES OF THE DAY

The Business of Journalism: A View from the Frontline

“A WHOLE WORLD OUT THERE TO BE EXPLORED”
Address by LIONEL BARBER, Editor, Financial Times
Delivered as the Hugh Cudlipp Lecture, London College of Communication, London, England, Jan. 31, 2011

T hank you Lady Cudlipp, trustees, and students of the

London College of Communication for inviting me
here tonight…. 
was also home to many fine journalists: reporters and edi-
tors such as Neal Ascherson, Chris Baur, Harry Reid, Jim
Naughtie, and later Andrew Marr. 
I come before you as a man of print, not the spoken Today, the Scotsman is a tabloid; it sells 45,000 copies
word. A broadsheet editor determined to follow the trusted and that page of dedicated foreign news has disappeared.
maxim: all power tends to corrupt, power point corrupts North Bridge is now a five star boutique hotel with a gym,
absolutely.  poetic justice for generations of journalists raised on ciga-
I come from a family of journalists. So does my younger rettes and whisky. 
brother, Tony. Our father left school at 15 and started as a As a cub reporter, I devoured books about journalism.
copy boy on the Leeds Weekly Citizen before graduating One tome sticks in my mind because it sat for many years
to the Cadburys’ News Chronicle, the Sunday Times and the on my father’s many bookshelves at home in London.
BBC World Service. Frank Barber was a blunt, self-educat- Hugh Cudlipp’s memoir Walking on the Water captured for
ed Yorkshire man, a dedicated sub-editor who never met me the thrill of the news business. The prose is economic,
a paragraph he couldn’t cut. He regarded the news busi- funny and splendidly irreverent. One paragraph toward the
ness not as a profession but as a vocation. My own route to end of the book is particularly notable and quotable. 
journalism was more circumspect. At Oxford, a young man “Knowing what is going on is the lure of journalism.
called Mark Thompson turned down an article I proposed Explaining to vast audiences what is going on is the art.
for Isis magazine. Now I know why people complain about Influencing, or trying to influence, what is going on is the
editorial bias at the BBC. After many—too many—job self-imposed mission.”
rejections, I won a place on the Thomson regional newspa- Cudlipp’s dictum just about sums up my own credo,
pers training scheme in Newcastle and several shorthand though I might quarrel with the last point about media
tests later joined the Scotsman in Edinburgh.  influence, especially in the light of the latest, pressing ques-
Back in 1979, the Scotsman sold 91,000 copies. It car- tions about journalistic ethics in this country. I will return
ried a page of foreign news. 20 North Bridge, an imposing to that subject later. 
Victorian building overlooking Waverly station, housed For the moment, I want to talk about the business of
printing presses which thundered through the night. It journalism today, specifically the role of the mainstream

VSOTD.COM
152 VITAL SPEECHES OF THE DAY

Baghdad bureaus, as we at the FT among other news catching innovation compared to their stodgy US rivals.
organisations know, are very expensive. But so are Beijing, But they have essentially applied 20th century solutions
and Washington, and Moscow, and Berlin, and Paris, and such as new design, formats and aggressive marketing—to
Johannesburg. For the FT, which has more than 100 staff a 21st century problem, primarily fragmented audiences,
foreign correspondents, these bureaus are essential. They new advertising platforms, and massive digital storage ca-
are part of the DNA of our news organisation. pacity through so-called cloud computing.
For others, they were once a vital source of news. Now, In the age of the personal computer, the Mac or the
because of financial pressures and relentless cost cutting, iPad, people are more likely to identify themselves as en-
they can be no longer for many sections of the mainstream abled consumers rather than as passive readers of a daily
media. So the foreign bureaus go—and a window on the newspaper. So what is the way forward for the news busi-
world slams shut. ness and how has the Financial Times managed this perilous
In the summer of 2009, I modestly predicted that most transition from print to digital?
major news organisations would be charging for content Ever since its foundation in 1888, the FT, with its roots in
within 12 months. Charging, I argued, would not only the City of London, has been a specialist newspaper not a gen-
plug the revenue gap; it would also help to re-establish eral newspaper. Sir Gordon Newton, our greatest editor, who
value in their news product. sat in the chair from 1949 to 1972, once defined the FT’s mis-
This past year, pay walls have gone up around content sion as reaching those people who influence or seek to influ-
that was previously free. News International has been a no- ence decisions in business, finance and public affairs around
table convert. This year, pay walls will appear around the the world. This is indeed the essence of FT journalism.
content of the New York Times and, as the FT has reported, As our coverage of the global financial crisis shows, we
the Daily Telegraph too. connect the dots, between the sheikhs in Dubai, to the oli-
The hope in this is that people will wish to continue to garchs in Russia, to the central banks in Beijing, Frankfurt,
read the content that these organisations provide—and will London and Washington.
subscribe. The risk is that they will simply go elsewhere— Now, we do not always hit the ball out of the park. Like
to a free news site, like the BBC—or indeed, any major many other news organisations, we were, with two notable
broadcaster. exceptions, too slow to highlight the risks ahead of the
For the BBC and others, a free website is an obvious and bursting of the credit bubble. Commentators such as Mar-
relatively cheap addendum to their main purpose of stream- tin Wolf and Gillian Tett correctly identified the dangers
ing news and entertainment on screen to a mass audience. in global financial imbalances and exotic debt instruments
In this respect, I was pleased to see that the BBC has at such as credit default swaps. But we did not always give
last begun to recognise the economic threat that BBC on- them quite the front or full page exposure they deserved.
line poses to newspapers, particularly those in the regions. Overall, the challenge for all news organisations is to ex-
The sharp cuts in the BBC’s online budget go some, if not ploit the power of the brand across all platforms, from print
all the way, towards redressing the balance. Further steps in to digital. The FT’s strategy can be summed up in five points.
this direction, including relaxing restrictions on cross me- First, we doubled the price of the newspaper on the
dia ownership in the provinces outside London, should be retail stand in Britain and raised cover prices elsewhere
considered by the government. around the world. The price hike had little impact on sales,
For those publications adopting pay walls, the strategy but generated substantial extra revenue. More important, it
represents a big leap into uncharted territory. Those which sent a powerful signal to the market and to our own jour-
remain free or substantially free, have another kind of nalists that the FT was a premium product.
hope: that the very large audiences they are able to garner Second, we rapidly developed our subscription busi-
through freely available content will boost sales—or at least ness, both digitally on ft.com and in newspaper form. That
slow the decline of the print edition. The other gamble for way we reduced our dependence on the casual purchaser
the free content camp is that they can gather sufficient ad- in favour of the loyal subscriber. Coincidentally, we shifted
vertising to provide the editorial budget which they need the terms of debate here in the UK away from the febrile
to sustain a major newspaper. New offerings such as online confines of the monthly ABC circulation figures to a broad-
dating services may also boost the bottom line. Now it is er and more meaningful definition of audience, based on
true that digital revenues are increasing rapidly, albeit from both print and digital consumers.
a relatively low base. The question is whether the migra- Third, we swung firmly behind the principle of charg-
tion will occur in sufficient volume and at sufficient pace to ing for content. At the height of the dotcom bubble, we
compensate for the decline in print. havered between charging for business news while offering
For all these extenuating factors, the broader criticism general news for free. In practice, the distinction, at least
is that the British newspaper industry has mismanaged its for FT readers, was meaningless. So we came up with an
own decline. ingenious compromise.
Yes, British broadsheets and tabloids have displayed eye- From 2007, we started charging for all content, albeit

VSOTD.COM
LIONEL BARBER 153

based on a meter model. Users would be given a limited ment, the new balance of power between the mainstream
number of free articles to entice them into first registering journalist and other non-traditional aggregators of news,
and later signing up for subscription. analysis and commentary?
Four years on, the meter model has proved to be an Now there may be some in the audience who find it
industry pioneer and an unequivocal success. FT.com now surprising for a newspaper editor to dwell so long on the
has more than 3.2m registered users and more than business side of the news business. But in my judgement
200,000 paid subscribers. Other publications, including newspaper editors need to be actively involved in strategic
the New York Times, are now adopting or about to adopt decisions affecting the business. Many on the commercial
similar meter models. side would appear to agree.
Fourth, we abandoned or revised arrangements which In the past decade or more, many journalists with a
allowed other news providers or aggregators to sell our background in business journalism have gone on to be
content to third parties in return for a fee. In future, we national newspaper editors. Peter Stothard and Patience
determined, we would sell direct to our customers. And we Wheatcroft, my old colleagues from the Sunday Times
would aggressively pursue any party seeking through cook- Business News section, as well as James Harding, Will Lew-
ies or sharing of password to gain access to our content for is and Robert Thomson from the Financial Times.
free. Yes, believe it or not, some people do still think there I am tempted to suggest that the FT should henceforth
is free lunch with the FT. be renamed the GE School of Journalism given the number
Fifth and finally, we made significant changes in the of first-rate former FT journalists now occupying the com-
newsroom which complemented our commercial strategy. manding heights of British journalism.
Back in 1999, the FT pioneered the concept of the inte- Of course, there will always be thick red lines between
grated newsroom. We put all web journalists on the same editorial and commercial. We at the FT are more than mind-
contracts as print colleagues. And we required all journal- ful of anything which could compromise the integrity of our
ists to work both for the print and digital channels. More journalism or our reputation, our most valuable asset.
than a decade later, we have a fully flexible and integrated The case for close co-operation remains unanswerable.
news operation in which reporters and editors work seam- In these revolutionary times, I am tempted to quote Ben-
lessly in print and online. jamin Franklin on the signing of the Declaration of Inde-
These changes have put us in the best possible position pendence. “We must all hang together or assuredly we will
to develop new niches, with more depth and focus to at- hang separately.”
tract new audiences such as FT Alphaville, our award-win- Let me now turn to more current sources of controversy,
ning financial blog or FT Tilt, our new emerging markets notably the WikiLeaks phenomenon and the phone-hack-
service, or our prize-winning iPad application which has ing scandal. While each is very different and each raises
brought in extra revenue and subscriptions. And, inciden- important questions for public policy, there is a single
tally, I believe the tablet is the most exciting technological common thread: the transformational power of technology
development in recent years, a game-changer because it which is rendering media laws and practice obsolete.
has all the feel of a newspaper and the advantages of being First, a few words on the WikiLeaks affair. The two
a dynamic interactive device. industrial scale data-dumps included vivid, if partial US
Let me be very clear: The FT approach does not neces- military dispatches from the front-line in Afghanistan and
sarily lend itself to being adopted by others. We have a Iraq followed by 250,000 classfied diplomatic cables from
distinct advantage because we are both a high-end niche US embassies around the world. Set alongside each other,
product but with weight, global reach, and tradition. they look like the scoops of the century. But as both Alan
We live in a time of great experimentation. There are no Rusbridger, editor of the Guardian and Bill Keller, editor
universal media models, let alone silver-tipped bullets. Each of the New York Times, have recounted: managing the story
news organisation must determine how to distinguish itself and Mr Assange was far from straightforward.
in an increasingly fragmented market, where the consumer Keller describes Assange as a character out of a Stieg
is far more discerning and powerful than ever before. Larsson novel who was “elusive, manipulative, volatile and
Technology cuts both ways. It allows third parties and ultimately openly hostile to the New York Times and Guard-
journalists to slice and dice content to better fit the de- ian.” That will not surprise too many journalists accus-
mands of the consumer. Technology allows the use of con- tomed to dealing with tricky sources, but in this case, other
tent to be measured according to traffic generated. This in equally challenging ethical, legal and practical problems
turn means journalistic supply and, crucially, demand can presented themselves.
be measured in real time. These included how to deal with a US government com-
In theory, these advances threaten to undermine the tra- mitted to protecting classified information; how to conduct
ditional role of journalist as gatekeeper and arbiter of what a cross-border investigation encompassing other media
constitutes news. In practice, the pass has already been organisations; and how to disentangle the newsworthy and
sold. The question is what are the new terms of engage- compelling from tens of thousands of computer-stored

APRIL 2011
154 VITAL SPEECHES OF THE DAY

data. In this respect, the Daily Telegraph’s handling of its

Westminster expenses scoop, while still a formidable logis-
tical challenge, tends to pale by comparison.
Both Keller and Rusbridger have done a public service
by revealing the decision-making behind the WikiLeaks
story. Demystifying the editorial process may offend the
traditionalists, but at a time when all established institu-
tions face calls for greater openness and transparency this
is surely the right path forward.
Keller’s observation that Assange was primarily a source
is highly pertinent. That plain fact should tamp down the
fevered debate over whether WikiLeaks spells either the
end of diplomacy or a new age of journalism. Like Keller, I
believe it does neither.
Cablegate caused enormous, if temporary embarrass-
ment to the US government. Thanks to careful redaction
on the part of the news organisations involved, there was
little discernible damage to national security. (That may not
have been the case with the earlier data where unredacted
passages may have betrayed the identity of Afghan or Iraqi
nationals assisting the American military occupation).
So while official reprisals may still follow, I am inclined
to side with my FT colleague Gideon Rachman who wrote,
half tongue in cheek, that the Obama administration
should pin a medal on Mr Assange. By and large, the cables

VSOTD.COM
 155

Indeed it took a foreign newspaper—the New York There is a case for rebalancing the right to privacy and
Times—to break fresh ground after an investigation lasting the protections offered by Britain’s overly onerous libel laws
many months. For all that period and more, a conspiracy which are weighted in favour of the well-heeled plaintiff.
of silence ruled Fleet Street. But Westminster should also tread carefully with regard to
As for News International itself, the management failed privacy, lest the rich and famous, on and off the football
to follow the advice its newspapers would have given busi- field, become untouchable.
ness or any other public figure in similar circumstances: More interesting, perhaps, would be to consider wheth-
own up rather than cover up, come clean rather than sur- er it is feasible to introduce curbs on newspaper bribery
reptitiously paying off aggrieved celebrities such as the of employees or other institutions and organisations. This
publicist Max Clifford. may not be unreasonable given the strictures on corporate
The suspicion must remain that News Corporation as- behaviour laid down in the new Bribery Act, though I see
sumed that it enjoyed enough power and influence in Brit- tonight that the government is delaying enactment after
ain to make the phone hacking controversy go away. lobbying by business.
Now, thanks to the overwhelming opposition of its news It would be infinitely more preferable, of course, for the
industry rivals to its bid for BSkyB, that influence is under profession to conduct a rigorous collective self-examina-
threat as never before. tion. Journalism is not perfect, nor was it ever meant to be.
News Corporation can argue, with some justification, But we have allowed our standards to lapse. Let us hope
that opposition to its BSkyB bid is motivated by base com- we have not left it too late.
mercial interests rather than a high-minded concern over Ladies and Gentlemen, whatever its current difficulties,
media plurality. the mainstream media in Britain has much to be proud off.
Yet the concentration of broadcast and print power Despite its preponderance of power in this country, the
which would result from a fully combined BSkyB and BBC remains a world-class brand. Its journalism is rightly
News International’s titles is troublesome, especially in ranked among the best.
the light of still unresolved questions about the extent of Rupert Murdoch remains one of the leading innovators
phone hacking at the News of the World. The bid deserves in the news business. His drive to establish a new paid-for
proper scrutiny by the authorities. Promises about editorial culture in the UK digital business deserves applause.
independence for Sky should be judged in the light of re- And while Britain’s popular press may be gossipy, raucous
peated assurances that the phone hacking was the work of and sensationalist, it reflects at its best, the national mood
a lone actor at the News of the World. and the aspirations of the majority of its readers, as Paul
In the final resort, failure to clean house at all news or- Dacre, one of Britain’s most successful editors (and most in-
ganisations would leave the mainstream media in Britain fluential moral arbiters) noted in an earlier Cudlipp lecture.
at risk of retribution in the form of statutory regulation. Finally, as I mentioned at the beginning of this lecture,
Many MPs are itching to retaliate for the humiliation of media companies across the emerging world are either be-
the expenses scandal, but statutory regulation would be a ing formed or are growing rapidly.
grave step in the wrong direction. Press freedom is woven British media companies could be exporting their brands,
into the fabric of our nation. We do not want to go down insights, talent and technology, just like the advertising busi-
the same road as countries such as Argentina, Hungary and ness before them. As the FT discovered more than a century
South Africa which have adopted or are about to adopt ago, there is a whole world out there to be explored.
new laws curbing press freedom. Democracy, it should be That’s the new frontier in the business of journalism.
remembered, is not just about holding elections. Let’s go for it! 

APRIL 2011
 Adrianna Kezar and Hannah Yang argue that financial literacy is both an important life skill
and a critical intellectual competency.

By Adrianna Kezar and Hannah Yang

THE IMPORTANCE
OF FINANCIAL LITERACY

J
AMES was a university sophomore who thought to citizenship, and as a critical intellectual competency,
he had his finances in order. But the credit is an essential component of a college degree.
card he had opened the preceding year was The President’s Advisory Council on Financial
maxed out and he could only pay the mini- Literacy advocates that postsecondary students learn
mum balance, if that, each month. He had about finances as basic knowledge for citizenship.
already spent the money his parents gave him The council defines financial education as “the pro-
for the month, and the month had just begun. cess by which people improve their understanding of
These stresses began to weigh on him every day; they financial products, services and concepts, so they are
affected his mood, his energy, his motivation, and his empowered to make informed choices, avoid pitfalls,
studies. He started to sleep in and miss his classes. Soon, know where to go for help and take other actions to
he was too far behind in his classes to pass them, and improve their present and long-term financial well-
worse yet, he didn’t care. James ended up withdraw- being” (p. 35). Financial literacy, the council argues,
ing from his classes, losing his financial aid, and going should be part of a complete liberal arts education.
deeper into debt. By engaging in financial literacy activities, students
What is educators’ responsibility for students like hone critical thinking, judgment, and other skills of
James? In this article, we argue that campus communi- a responsible citizen. These activities reach beyond
ties must play a more active role in developing finan- acquisition of basic skills, such as balancing a check-
cial literacy than they currently do—and not just by book, to involve complex understandings of credit
providing counseling in moments of emergency. We and debt, philosophical decisions about appropri-
argue that financial literacy, as a life skill, as a requisite ate risk, and judgment in making consumer choices.

Published online in Wiley InterScience (www.interscience.wiley.com).

© 2010 by American College Personnel Association and Wiley Periodicals, Inc.
DOI: 10.1002/abc.20004

15
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
 By engaging in financial literacy activities, students hone
critical thinking, judgment, and other skills
of a responsible citizen.
During college is typically the time when most stu- lege students confessed to making mistakes with their
dents take their first key financial actions, including finances. Also, about one-third of responding first-
applying for loans, choosing among financial lenders, year students said that they were financially unpre-
understanding interest rates, budgeting for tuition and pared to manage their money at college. According to
living expenses, choosing whether to work and how Angela Lyons in 2004, low-income students are even
much money to save, and whether to acquire a credit more at risk to drop out for financial reasons because
card. In some academic disciplines such as economics they have no safety net. And as William Tierney, Zoë
and business and some cocurricular experiences such Corwin, and Julia Colyar discuss in Preparation for Col-
as entrepreneurship clubs, higher education has taken lege, low-income students typically grow up having
a role in financial literacy. But delivery of this educa- less access to financial knowledge than their higher-
tion is uneven and unsystematic. We believe that stu- income peers. Financial education may help some of
dents like James can benefit from receiving education these students better manage their money, provide
about personal finances through a first-year seminar, them with important financial tools, and help them
a money management office, or workshops offered stay in college.
through a financial aid office. If one accepts that financial education can be a
While many educators may believe that colleges key component of learning in college and that stu-
already address financial literacy or that students learn dents who possess practical competence in personal
about these issues at home or in high school, the evi- finance are more confident and academically success-
dence is overwhelming that most college students ful, what kind of financial education is available to
are financially illiterate and continue to score low on them? How is it offered, and is it provided to at-
financial literacy surveys. For example, Haiyang Chen risk populations, particularly those from low-income
and Ronald Volpe tested 924 students from fourteen backgrounds?
college campuses across the nation on financial literacy In the remainder of this article, we explore
and only 53 percent answered the questions correctly. current financial education practices on college
The survey explored topics such as saving, borrow- campuses, make recommendations to educators on
ing, investing, and insurance. When presented with developing financial education on their own campus,
hypothetical scenarios, the least knowledgeable college and conclude with a review of best practices in finan-
students made incorrect decisions. The authors hypoth- cial education.
esize that college students who did not do well on this
test will most likely make similar mistakes in their daily
lives. More recently, Brenda Cude, Frances Lawrence, Adrianna Kezar is an associate professor at the University of
Angela Lyons, Kaci Metzger, Emily LeJeune, Loren Southern California and associate director for the Center for
Marks, and Krisanna Machtmes used quantitative and Higher Education Policy Analysis. Her research specializes in
qualitative methods to assess the financial management diverse students, faculty and staff, leadership, governance, and
organizational issues on college campuses.
skills of college students. They confirmed the finding
that college students are not managing their finances Hannah Yang is a research associate at the University of
well and recommended that college campuses address Southern California with the Center for Higher Education
Policy Analysis. She has worked in academic advis-
student deficits in this area. ing and received her Masters in Education specializing
As well as being an intellectual competency, in postsecondary education and student affairs from the
financial literacy can increase the odds that students Rossier School of Education at the University of Southern
will stay—and succeed—in college. A 2007 study at California.
Buffalo State College found that college students have
an average of $1,000 in credit card debt. A 2006 study We love feedback. Send letters to executive editor Jean M.
commissioned by KeyBank and conducted by Har- Henscheid ([email protected]), and please copy
ris Interactive found that 75 percent of first-year col- her on notes to authors.

16
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
 C URRENT P RACTICES use a locally developed curriculum to provide most
IN F INANCIAL E DUCATION
of the financial education in TRIO programs. They
deliver the financial education in an in-person group

O UR INTEREST in financial education emerged from

a three-year study on Individual Development
Accounts (IDAs) funded by the Lumina Foundation
format, and they address topics such as money manage-
ment, budgeting, and avoiding debt. Less than half of
TRIO programs that offer financial education evalu-
for Education (http://www.usc.edu/dept/chepa/ ate student learning and program effectiveness. Of the
IDApays/). An IDA is a matched savings account (the TRIO programs that do not offer financial education,
match is provided by the federal government and the 86 percent would like to offer it to their students. Some
nonprofit agency; the match rate depends on how respondents said that they were unsure how to design
much each entity is willing to contribute) that allows or deliver such information and that they needed more
low-income individuals to save toward postsecondary information on financial education programs.
education, home ownership, or a first business. In Also, of the TRIO programs that did not currently
addition to matching savings, the IDA includes a finan- offer financial education but would like to, 45 percent
cial literacy component. One research question was said that their institution does not offer financial edu-
whether this kind of education was offered on college cation and 25 percent responded that they did not
campuses. Up to that point, no national or regional know if their postsecondary institution offers financial
survey of financial education in postsecondary institu- education. The respondents who said their institution
tions had been conducted. In order to get a better idea did offer financial education typically identified the
of the financial education landscape for low-income financial aid office as the department responsible for
students, we surveyed one of the main entities serv- such programs. Although some financial aid offices are
ing low-income student populations—TRIO pro- beginning to incorporate financial literacy education,
grams. Although TRIO programs at the time of the most address narrow topics (for example, repayment
study were not mandated to offer financial education, obligations and plans, interest, and terms and conditions
some permissible services include assisting students of loan packages) as part of entrance and exit counsel-
with financial aid applications, providing information ing offered for federal loan recipients.
concerning financial assistance for college, personal Examples of Financial Education for the Gen-
counseling, and connecting students with activities not eral Student Population. After finding that effective
generally accessible to disadvantaged individuals. financial education is not consistently offered to all low-
Portions of our research project included sur- income students, we looked deeper to see whether col-
veying TRIO programs to determine whether finan- lege campuses were providing financial education to the
cial education is offered to low-income students and general student population. We found that some cam-
researching the types of financial education options puses provide an optional personal finance session dur-
that are available. Some of the more than 1,400 TRIO ing freshman orientation or as a seminar included in a
programs, which serve 866,000 students, are located University 101 course. Some campuses offer a personal
in high schools (for example, Upward Bound, Talent finance course through their business department or have
Search) in order to encourage and facilitate access to financial aid counselors who are trained to provide finan-
college; other programs (Student Support Services) are cial advice in addition to entrance and exit counseling.
located on college campuses in order to retain students For example, the Financial Aid and Scholarship Depart-
and help them achieve success. Additional details about ment at California State University, Northridge (www.
the survey are available at http://www.usc.edu/dept/ csun.edu/finaid/) began its financial literacy efforts four
chepa/IDApays/. years ago. Through an array of opportunities, students
Financial Education in TRIO Programs. engage in learning through individual counseling, Web
Half of all TRIO programs surveyed currently offer pages, and presentations and other campus events. The
some sort of financial education. The financial educa- primary intellectual skill taught to students in this pro-
tion is usually offered to first-year students through an gram is making informed decisions about reducing costs
optional workshop. TRIO staff members most often and financing their college education without sacrificing

Half of all TRIO programs surveyed currently offer some

sort of financial education.
17
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
 Some campuses provide an optional personal finance
session during freshman orientation or as a seminar
in a University 101 course.
their academic focus or crippling their financial future. services range from reducing debt to money manage-
For example, financial aid counselors are invited to make ment. Presentations are provided on topics such as liv-
presentations in University 100 (first-year experience ing on a student budget, establishing credit, reducing
courses) classrooms each semester and to students in debt, planning for expenses after college, and examining
the Educational Opportunity Program’s summer Bridge pre-marital finances. Presentations are delivered in such
Program. Quoting the adage “If you live like a profes- places as first-year student orientation, academic classes,
sional when you are a student, you will live like a stu- student organizations, and local school systems. The pro-
dent when you are a professional,” counselors encourage gram also hosts an annual Financial Education Week to
students to focus on “needs” while in college and defer promote financial well-being. Select volunteers who are
“wants” to later in life. Counselors teach students how upper-division or graduate students in personal financial
to budget and explain the benefits of borrowing through planning provide all services. Volunteers have completed
low-cost government loans rather than high-cost credit core courses and receive extensive training each fall in
cards. In addition, each spring, a campuswide event addition to ongoing training via continuing education.
known as Matador Dollar Days uses information booths The staff includes a faculty director, two graduate stu-
and free lunches to attract some 1,000 students. Booth dents, a student coordinator, and approximately twenty-
topics include financial aid, scholarships, debt manage- five student volunteers.
ment, career choices, and loans.
The next step planned by the Financial Aid and
Scholarship Department at California State Univer- R ECOMMENDATIONS FOR E NHANCING
sity, Northridge, is full deployment of Financial Lit- F INANCIAL L ITERACY
eracy 101, a commercial product that, according to the
vendor’s Web site (http://www.decisionpartners.org/
financial_literacy.htm), “combines a robust curriculum
tailored to the needs of students with a learning model
T HE FINANCIAL LITERACY AND EDUCATION COMMISSION’S
game plan for financial literacy calls on postsecond-
ary institutions “to consider ways to raise the finan-
designed to actually prevent financial problems before cial literacy levels of their students to help them avoid
they start.” A faculty member pilot-tested the product financial hardship due to mismanagement of credit and
and reported that students embraced it. The tool is now money” (p.95). We suggest beginning this endeavor
more widely available to other faculty and students. by creating a campuswide team that draws on exist-
Other campuses have created departments that offer ing resources and on offices that understand financial
student money management services separately from the education. (This effort may entail bringing in outside
financial aid office. For example, Texas Tech Univer- agencies if inside resources are limited.) The team
sity has taken an active role in improving the financial could include individuals from the following areas:
literacy of its students through Red to Black (www. faculty with expertise on finances and financial liter-
r2b.ttu.edu), an outreach arm of an academic program acy; programs for new students; residential education;
in personal financial planning (www.pfp.ttu.edu). The financial aid; on-campus credit union or bank; business
name represents the school’s colors and the program or education departments; student support office; and
goal to help students learn how to get out of the red in academic advising office. The group could be given
their personal finances. The impetus for creation of the the task of examining methods for integrating finan-
program in spring 2001 was anecdotal evidence from cial education into the institution’s curriculum, cocur-
faculty and administrators of unacceptably high levels riculum, and services. The team could also consider
of student debt and other financial problems. Red to faculty and staff development in regard to financial
Black provides free and confidential financial counseling education and increasing financial education programs
and education for the Texas Tech community. Services for low-income students. Many resources on financial
include sessions for individuals or couples and presen- education programs are available online; one impor-
tations or workshops. Issues that lead students to seek tant resource to help the team to think systematically is

18
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
 “Get Financially Fit: A Financial Education Toolkit for about/press_release/rs_press_release/061120_gl_uw_
College Campuses,” available at http://www.newy- financial_education_report.html).
orkfed.org/regional/Fin%20Ed%20Toolkit%20for%20 Cocurriculum. Some campuses incorporate
College%20Campuses.pdf. This tool provides easily financial education in their cocurriculum by including
accessible information on building a successful finan- it in first-year student orientation or as a workshop in
cial education program, from choosing an appropriate residence halls, a women’s resource center, or student
type of program to marketing the program effectively. support services. For example, the Office of Student
It also provides institutions with important financial Services at Boston College created Successful Start,
education topics to include in their program. The tool a financial literacy program that offers workshops on
provides models and best practices of programs to help all aspects of financial management (see http://www.
team members begin their discussion. bc.edu/offices/stserv/meta-elements/pdf/brochure.
In this section, we highlight some considerations pdf). Most colleges and universities that incorporate
for financial education programs in the curriculum, the financial education in freshman orientation offer it as a
cocurriculum, student services, and staff and faculty stand-alone session. Some institutions have campus fac-
development services. ulty or staff with a background in finance facilitate the
Curriculum. In its 2008 Annual Report to the workshop. Others invite off-campus financial experts
President, the President’s Advisory Council on Finan- from local banks or private companies to speak to stu-
cial Literacy recommended that the U.S. Depart- dents and parents about a financial topic—for example,
ment of the Treasury and the U.S. Department of budgeting for the first year in college.
Education work together to require a university or Services. To incorporate financial education into
college course in financial literacy. Although inte- campus services, an institution might involve the finan-
grating financial education into a curriculum may cial aid office, the on-campus credit union or bank,
seem daunting, the potential payoff is great because or the academic advising office in offering financial
financial education would allow students to apply education to students. Financial education can include
their learning and change their behaviors early in brochures, online resources, workshops, and expert
their financial life. Institutions could start small by speakers. For example, Brigham Young University
offering a financial education element in their first- (BYU) created Financial Path to Graduation, an online
year experience course and then take on larger tasks tool to help students calculate how much they expect
like offering financial education as an option in gen- to make in the future and, given this information, what
eral education requirements or integrating the intel- debt burden seems safe to assume. While this software
lectual competency of financial literacy into existing is not available to the public, other campuses that are
courses. The University of Wisconsin–Madison and considering creating a similar program can view the
Great Lakes Higher Education Guaranty Corporation BYU model at http://saas.byu.edu/depts/finaid/docu-
developed a three-credit-hour financial education ments/fp2g.pdf. For more examples of online financial
class and pilot-tested it during the spring semester education programs, see the University of South-
of 2006. According to the programs’ assessments, ern California’s financial education resources list at
students exhibited a marked and sustained improve- http://www.usc.edu/dept/chepa/IDApays/resources/
ment in two cash management behaviors: creating financial_resources.pdf.
a budget and keeping a spending diary. Budgeting Faculty and Staff Development. A campus-
and tracking spending require students to do more wide financial education team can also help develop
long-range thinking and reflection about their activi- and deliver training for staff and faculty in order to
ties, which enhances critical thinking and judgment. give them the necessary resources to incorporate
The curriculum has been made available for use financial education into the curriculum, cocurriculum,
by other educational institutions in various formats and services of their institution. Professional develop-
(see https://www.mygreatlakes.org/about/content/ ment may also involve presentations on the various

Financial education would allow college students

to apply their learning and change their behaviors early
in their financial life.
19
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
 financial education endeavors or programs occurring using active, experiential, and problem-based learn-
on the campus, on other college campuses, or in the ing techniques. Active and experiential learning uses
community. For example, the National Endowment personal involvement and experiences that engage
for Financial Education’s CashCourse (http://www. students directly with the content. When students are
cashcourse.org/) is a college financial education pro- allowed to describe their own financial issues as well
gram that is available to institutions. Training for staff as review other financial scenarios (problem-based
and faculty may help develop broader campus support learning), they apply what they have learned and
for financial education. Ongoing conversations about actively construct their own learning about finances.
this type of financial learning can translate into higher These methods depart from the traditional lecture
rates of financial literacy across the campus commu- style of teaching, allowing students to participate in
nity and among faculty, staff, and students. the instruction process, enrich learning by sharing
their experiences, and use real-life scenarios as part of
B EST P RACTICES problem-oriented instruction. For example, accord-
IN F INANCIAL E DUCATION ing to Kavous Ardalan’s 2006 article, one instructor
taught finance by using the Wall Street Journal (con-

S TUDIES of financial education programs have identified

three important components in producing positive
learning outcomes among students: timing, teaching
temporary topics) in a group assignment (having
people share experiences from their day-to-day life
in groups). This assignment allowed the students to
methods, and program evaluation. interact, work in groups, and relate finance terms to
When to Teach Financial Education: real-life examples.
Teachable Moments. A teachable moment in Evaluating Program Effectiveness. Evaluating
financial education occurs when a person is about to program effectiveness is especially important because
make a specific financial decision. For college stu- financial education programs have had a mixed his-
dents, a teachable moment might occur in their first tory in regard to their impact on increasing knowl-
year when they sign up for their first credit card or edge and improving financial choices of participants.
when they begin to manage their money on their In the past, many financial education programs have
own; in their second year when they make their first been criticized for their poor evaluation procedures,
major purchase, such as a car; or in their third year including issues with data reliability, research design,
when are working and need advice on work-school measurement, and interpretation of results. Collect-
balance or how to pay taxes. A teachable moment ing program evaluation data related to student learn-
for graduating seniors might occur when they need ing, attitudes, and behaviors will allow designers and
to understand what the terms of their loan say about deliverers of financial education to make data-driven
paying it off and how to plan for their financial changes as necessary. On many campuses, the office of
future. When financial education is introduced at institutional research, program evaluation, or student
these critical times in students’ lives, they are bet- learning assessment can provide assistance in evaluat-
ter prepared and more motivated to tackle financial ing a financial education program.
issues. We recommend that institutions consider Recently, the President’s Advisory Council
offering financial education in every year of college on Financial Literacy recommended that the U.S.
on the financial topics that are most relevant to stu- Department of the Treasury implement an honor roll
dents’ age and year in school. This type of education program among colleges and universities to encour-
reinforces financial education concepts over the four age best practices in financial education. Outside of
years of a student’s college career. this formal recognition, educators can learn a great
What Methods to Use: Active and Experi- deal by contacting colleagues on other campuses.
ential Learning Techniques. Financial education Institutions that house a successful financial literacy
experts recommend diversifying teaching methods by curriculum with positive results from assessment of

Having access to resources for increasing financial literacy

can give students motivation and confidence that may
spread to their academic and out-of-class pursuits.
20
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
student learning outcomes and program evaluation
Notes
are encouraged to share them with others by pub-
lishing or presenting at professional conferences or Ardalan, K. (2006). Learning styles and the use of the
Wall Street Journal in the introductory finance course.
association meetings. Academy of Educational Leadership Journal, 10(2), 1–21.
We believe that having access to resources for Buffalo State College. (2007, October). Financial literacy key
increasing financial literacy can give students motiva- to prevent college student credit card debt. Retrieved from
tion and confidence that may spread to their academic http://www.newswise.com/articles/view/534061
and out-of-class pursuits. In contrast to the opening Chen, H., & Volpe, R. P. (1998). An analysis of per-
sonal financial literacy among college students. Financial
vignette involving our fictitious student James, we Services Review, 7(2), 107–128.
invite you to imagine Jane: a junior who recently vis- Cude, B., Lawrence, F., Lyons, A., Metzger, K., LeJeune,
ited her university’s new student money management E., Marks, L., & Machtmes, K. (2006). College stu-
services department to enroll in a workshop on how to dents and financial literacy: What they know and what
budget. She decided to use the new services because we need to learn. Proceedings of the 33rd Conference of
the Eastern Family Economics and Resource Management
she continually ran short of money to pay for food dur- Association (pp. 102–109). Eastern Family Economics and
ing the last week of the month and wanted to learn Resource Management Association.
how to live within her means. She was accustomed Financial Literacy and Education Commission. (2006).
to asking her mother for money, but her mother had Taking ownership of the future: The national strategy for finan-
recently been laid off from her job because of budget cial literacy 2006. Washington, DC: U.S. Department of
the Treasury.
cuts. So Jane took the matter into her own hands. After KeyBank and Harris Interactive. (2006, August). One-third
the second month of practicing her new budget, she of college upperclassmen admit being financially unprepared
even had a little money saved. The skills she learned in as freshmen. http://www.harrisinteractive.com/news/
budgeting her money have also allowed Jane to more allnewsbydate.asp?NewsID=1108
effectively budget her time. Her friends now ask her Lusardi, A. (2008). Financial literacy: An essential tool for
informed consumer choice? Cambridge, MA: Joint Center
how she has become more motivated to study and still for Housing Studies, Harvard University.
have time to work and volunteer at the nearby school. Lyons, A. C. (2004). A profile of financially at-risk college
She thinks about their question and replies, “I received students. Journal of Consumer Affairs, 38(1), 56–80.
financial education.” Educators’ role is to step up to President’s Advisory Council on Financial Literacy. (2008).
the challenge of providing financial education, to add 2008 Annual Report to the President. Washington, DC:
U.S. Department of the Treasury.
this much-needed component to the student experi- Tierney, W., Corwin, Z., & Colyar, J. (2005). Preparation
ence, and to offer this highly relevant way to deepen for college: Nine elements of effective outreach. Albany: State
students’ learning and development. University of New York Press.

21
ABOUT CAMPUS / JANUARY–FEBRUARY 2010
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
Copyright © 1999. All rights reserved.
 Here's How To Use The News
And Tune Out The Noise
By Jason Zweig
Money, 27 no7 63-4, July 1998

I hate to seem as if I'm raining on my own parade, but recent events have me wondering: Is there
such a thing as paying too much attention to the financial press? Are investors today better informed
than they used to be--or have they become too well informed?
Last December, Warner-Lambert stock lost 18.5% of its value, or $7 billion, in a single day when a
British company said it would stop selling a Warner-Lambert diabetes treatment. But over the next
three months, Warner-Lambert sold $138 million worth of that drug--plus $1 billion worth of others--
and the stock gained a third, outperforming the market by nearly three to one.
In May, the stock of Entremed, an obscure biotech company, shot from $12 to $85 in a day when
the New York Times reported that two of the firm's drugs showed promise as cancer cures. Fidelity
Select Biotechnology, a fund that specializes in similar stocks--but didn't hold Entremed--jumped 1%
that day as its holdings rose in sympathy. Then the reality sank in that the drugs have worked only on
mice; the stock shrank back below $30, and the Fidelity fund lost value for the week. Only a few days
after it broke the front-page news, the New York Times ran two articles scolding investors for not
realizing that Entremed's prospects were not that bright after all.
In both cases, traders who acted on the first burst of news ended up kicking themselves. Why?
Because these days, news reaches everyone so swiftly that it's almost impossible to beat the
stampede. It wasn't always this way.
Back in 1790, as soon as Alexander Hamilton released his plan to reorganize U.S. debt, crafty bond
speculators sailed south from New York in sleek ships that outraced the good news on land. Those
speculators snapped up bonds from uninformed small investors at 20{cents} to 25{cents} on the
dollar, and within days, they were able to double their money. Likewise, in 1815 financier N.M.
Rothschild made a fortune buying English bonds after his elite private couriers slipped him the first
word that the British had defeated Napoleon at Waterloo.
In Hamilton's and Rothschild's time, news took days to travel from Paris to London or New York to
Philadelphia, giving clever investors a chance to get the word and act on it before anyone else. But
today, over the Internet and CNBC, news flits from Jakarta to Chicago in nanoseconds--and
professional and amateur investors alike can follow every twitch in a stock as closely and easily as
intensive-care doctors monitor changes in a patient's pulse.
Mind you, it's still possible to get wind of big news before most people do. This May, the Internet
chat rooms were rife with rumors that Tyco International was about to acquire U.S. Surgical. If you'd
pounced on U.S. Surgical when the rumors first surfaced, you could--in theory--have earned more than
25% in just 12 trading days.
But in truth, investing is rarely that easy: First, the Tyco rumor was fueled by what appears to be
inside information--not the kind of thing you often can get hold of legally. Second, for every online
rumor that turns out to be true, there are scads of them that turn out to be false. Datek, the Internet
brokerage firm, says in its ads: "Big newsnity. Points 779 brobe bromade in a
the financial media tend to isolate recent changes, rather than put them in context. In fact, the flow of
the news makes trends seem likely to persist just when they are most likely to reverse. Think, for
example, of the glowing media coverage that Iomega, Oxford Health and Cendant got as their stocks
were shooting almost straight up--and how, once the stocks stumbled, nobody in the press could find
anything good to say about them anymore. Or consider fund managers Gary Pilgrim of PBHG and
Garrett Van Wagoner of the Van Wagoner funds: After huge gains in 1995 and early 1996, they were
written up as if they could walk on water wearing lead boots. Now the media often treat Pilgrim and
Van Wagoner as if they're simply all wet.
That's because reporters, like most humans, fall into the trap of assuming that we can predict future
results by analyzing recent patterns. Thus we tend to reinforce the notion that "when you're hot, you're
hot--and when you're not, you're not." Unfortunately, a stock is no more certain to keep rising just
because it has been going up lately, nor is a mutual fund more likely to beat the market this year
because it did so the past few years. In fact, finance professors have amassed overwhelming evidence
proving the opposite.
Also, the press usually focuses on the numerical amount of a price change, rather than on its value
in percentage terms (which is what really matters). Thus a TV reporter may exclaim: "The market is
dropping--the Dow is down 100 points!" even though, at the recent 9000 level of the Dow Jones
industrial average, that's barely a 1% drop.
Now think how odd it would sound if the weatherman on the same TV station hollered, "It's getting
colder--the temperature has fallen from 91{degrees} to 90{degrees}!" That too is roughly a 1% drop.
When we watch the market, much of what seems like news turns out to be nothing more than noise.
A year ago the press was nearly unanimous in declaring Southeast Asia to be one of the world's best
long-term investments; next, when the Asian Tiger markets collapsed last fall, you were advised to bail
out; then, when those markets bounced up early this year, the coverage waxed bullish again; and now,
with Asia in retreat, the news is back to bearish. Trying to follow all this is enough to give you whiplash-
-and to distract you from the key question: If Asia was a good long-term investment a year ago, isn't it
an even better value today at half the price?
Listen to Charles Ellis of Greenwich Associates, the distinguished investment management
consultant: "The typical stock price changes by at least 4% between its high and low each day. Since
there are roughly 250 trading days per year, that implies a total price change of 1,000% per year. But
the price of most stocks actually changes less than 15% per year on average, which means that more
than 98% of all the movement is just flutter, or noise."
So how can you tune out the noise?
Stop checking your watch. Many people would panic if they did not know, day by day or even
moment to moment, the exact prices of their investments. This impulse is understandable: It's your
money. But the more you check your investments, the more they'll seem to bounce up and down.
By contrast, you probably don't check the value of your biggest investment, your house, on a daily or
weekly basis. Does that prevent your house from rising in value over time? Does it make you a poorly
informed real estate investor? Of course not. And you should think of your portfolio the same way.
Personally, I check my mutual funds four times a year--no more, and no less.
How much trouble can you get into by obsessing over short-term price changes? Plenty. Recent
research by a team of economists and psychologists compared allocations between one stock fund
and one bond fund among two groups of investors: those who evaluate their portfolios monthly and
those who look at their accounts once a year. The monthly group watched the stock fund heave up
and down 12 times, while the yearly group saw it change only once, at year-end.
The monthly group, fixating on the interim volatility of the stock fund, moved money into the lower-
earning bond fund; the yearly group stuck with the stock fund, ending up with twice as much money in
equities. "The {investors} with the most data did the worst in terms of money earned," wrote
researchers Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz in the Quarterly
Journal of Economics last year. The lesson: Stop checking your watch so often.
Investing is a marathon, not a sprint. Entremed, that little biotech company with the promising
cancer cure, may well be the next Pfizer. But history shows that the company that comes up with a
breakthrough is not always the one that profits. After all, the fax machine was pioneered by Western
Union, commercial air travel by Pan Am, the VCR by Ampex and the personal computer by Commodore.

31
All of these innovative firms lost out to the copycat companies that followed them. That's why you
should never rush to buy a stock "on the news"; if the breakthrough is that great, the company has
years of growth to come, and you can take your time evaluating it. And that's where the press can
come in handy.
Finally, remember the difference between the weather and the climate. On any given day, it can be
warm and sunny or dark and rainy. But in the long run, the climate is more predictable. Investing is like
that too: Just as June tends to be warmer than January and August sunnier than April, over longer
periods investment fluctuations smooth themselves into more foreseeable patterns. Although the
market news can be alarming on any day--or, as in the 1970s, awful for several years--over time it will
turn more comforting as the value of your investments grows.

32
 A Catechism of Economic Cliches
By Rob Norton and Trishia Welsh
Fortune, January 13 1997, Vol. 135, Issue 1

Make no mistake: When Journalists pen screeds about markets and the economy, trite phrases
abound
We process a lot of financial and economic journalism here at FORTUNE. For starters, there's the
stuff we write--page after page of it. Then there's the stuff we read: cubic yard upon cubic yard, arriving
around the clock via E-mail, snail mail, and all modes in between. As we look back on each year's
worth, a question suggests itself. Are there as many cliches in business journalism as we suspect? The
answer: There are cliches aplenty. To wit:
How many economists agree with the journalist? Most economists.
What kind of economists agree with the journalist? Mainstream economists.
What words often precede a journalist's main thesis? "No one is suggesting that..."
What kind of men decline to be interviewed? Deeply private men.
Who will be affected by our failure to address whatever looming fiscal crisis is being written about?
Our children and our children's children.
How do companies get higher returns? Companies rack up higher returns.
How do they get money? They rake in money.
Into what do they rake it? Into their coffers.
How do companies spend money? They shell it out, fork it over, or pony it up.
How do companies prepare for increased sales? They ramp up for increased sales.
How do sales decrease? Sales slump.
What kind of returns get written about? Eye-popping returns.
What kind of returns do good companies earn? Fat returns.
What kind of returns do bad companies earn? They earn pitiful returns.
What kind of moves do newsworthy companies make? Stunning moves.
What kind of wrinkles do journalists like best? New wrinkles.
How are agreements made? Agreements are struck or hammered out.
What about strategies? Strategies are mapped out.
What kind of tech stocks get written about? Highflying tech stocks.
Who are the most admirable investors? Sharp-eyed investors.
What do sharp-eyed investors do? Sharp-eyed investors clean up.
What kind of investors sell their stocks? Skittish investors.
What kind of spirits do investors possess? Animal spirits.
What wagon do investors climb onto? The bandwagon.
What kind of ride does the market take? A wild ride.
What kind of declines happen to markets? Steep declines.
Into what kind of funk does the market fall? Into a deep funk.
What's wrong with consumers? Consumers are strapped.
How do prices increase? Prices soar.
How else? They skyrocket.
How do they decrease? They plummet.
How else? They nose-dive.
Where is inflation these days? Inflation is nowhere to be seen.
Where is the Fed? The Fed is on hold.
Between which two hazards must the Federal Reserve chairman steer the ship of monetary policy?
Between the Scylla of inflation and the Charybdis of recession.
Will FORTUNE writers in general, or this writer in particular, use any of these cliches in the coming
year? To be sure.

33
Media History, Vol. 9, No. 2, 2003

‘City Slickers’ in Perspective: the Daily Mirror,

its readers and their money, 1960–2000

DILWYN PORTER, University College Worcester

On Wednesdays the thoughts of Daily Mirror readers turn to money. A weekly feature,
‘Mirror Money’, sometimes running to eight pages, sits at the very heart of the
newspaper. It exhibits the key characteristics of contemporary popular financial journal-
ism. The edition published on 26 January 2000 was fairly typical. John Husband, the
Mirror’s City editor, was identified at the top of the first page of what was, in effect, a
weekly financial supplement. ‘HERE’S TO A BONNY Y2K’ ran the headline over his
by-lined article, alongside an appealing colour photograph of a baby. The approach was
brisk and businesslike: ‘Let’s kick off with our nine-point plan to get your finances in
order.’ Stories were heavily personalized. Another article by Husband in the same issue,
designed to alert readers to the advantages of the tax-free Individual Savings Account
(ISA), featured Maureen Millward, 24, from Bolton, a recently promoted process analyst
working for Kelloggs, who had ‘stepped up her savings with a shares ISA’. There was
also a celebrity angle supplied by Andy Robinson, former England rugby international,
who had done rather well with an ISA managed by Jupiter. A nice balance was struck
between championing the interests of Mirror readers and alerting them to investment
opportunities. ‘Our campaign to ban endowment mortgages is gathering pace’, it was
claimed, on reports that Lloyds TSB, NatWest and Barclays were dropping this
controversial financial product. Elsewhere a stockbroker, Justin Urquhart Stewart,
advised readers to buy shares in Kingfisher, the UK’s largest non-food retailer. Three
years later, despite the dramatic transformation in the investment climate since 2000, the
‘Mirror Money’ formula remains largely unchanged.
But the Mirror’s financial coverage at the millennium was not confined to Wednes-
day’s centre pages. Apart from intermittent stories supplied by Husband and others for
the news columns, the paper offered a page of City news and comment each day. From
May 1998 to February 2000, when it was replaced by the relatively sober ‘Financial
Mirror’, this was the domain of the ‘City Slickers’, Anil Bhoyrul and James Hipwell, the
latter pictured replete with red braces, who relayed share tips and insider gossip, urging
Mirror readers to ‘pile in’. A short item published on 7 April 1999 is indicative of their
style.
Slicker hears that Monument Oil & Gas could soon be taken over … Our
friends in the City think so too, and have pushed up the shares 5p to 47p. It’s
not too late to get in—they could go to 60p soon.
The implications were clear: Bhoyrul and Hipwell were on familiar terms with insiders,
with people who counted. As far as stocks and shares were concerned they were ‘in the
know’ and well placed to supply readers with information that would enable them to give
ISSN 1368-8804 print/ISSN 1469-9729 online/03/020137-16 © 2003 Taylor & Francis Ltd
DOI: 10.1080/1368880032000105906
138 D. Porter

the City gents a run for their money. On 11 February 2000, with the techMARK-100
index reaching heights that conventional market wisdom suggested could not be long
sustained, the Slickers reflected in characteristically gung-ho fashion on their ability to
pick winners in the new technology sector.
SLICKERS SAY: We’ve been banging on about these companies for 18
months and anyone who has followed our advice has done very well—despite
what the moronic Sun and newspaper for bores, The Guardian, say.
Anticipating the downward adjustment that was to take place shortly afterwards they
continued to exude confidence, predicting that any correction would be ‘a minor blip not
a market crash’. In the very short term, as indicated in an earlier version of this article,
written in July 2000, this proved correct, though any reader holding on to shares bought
on their advice at the height of the dot.com boom would since have had good cause to
question their judgement [1]. It soon became clear, however, that there were other causes
for concern relating to the Mirror’s City Slickers. The most important of these was their
apparent disregard for those provisions of the Press Complaints Commission (PCC)
Code of Practice that were designed ‘to ensure that readers receive disinterested advice
and information and that (financial) journalists and those connected with them do not
profit as a result of publication’ [2].
The Mirror’s financial coverage thus stood at a point where old-style City journalism,
first featured during the nineteenth century as a daily ‘money article’ written by a
specialist ‘City editor’, merged with the tradition of popular journalism derived from
Alfred Harmsworth’s Daily Mail of 1896. The intention here is to set ‘Mirror Money’
and ‘City Slickers’ in this wider historical context. At the same time the burden of
responsibility falling on the shoulders of journalists who write about money for a
relatively unsophisticated audience will be explored. Financial journalists, as any reading
of the Mirror confirms, do not merely report and comment; they also advise people on
what to do with their money. This brings expert journalists and inexpert readers into a
special relationship which, as far as the Mirror is concerned, had been developing since
Derek Dale became its first post-war City editor in March 1960. Dale’s brief was ‘to give
guidance’ and ‘to translate the jargon of the City into language that all will understand’
(4 March 1960). His successors, Robert Head and John Husband, appeared to take the
same view of the City editor’s role. In the late 1990s, ‘City Slickers’, the Mirror’s first
venture into what has been called the ‘fill your boots’ style of financial journalism,
seemed to break with this combination of accessibility and prudence. After he had been
dismissed in February 2000, Bhoyrul recalled that when he and Hipwell had first joined
the Mirror, the editor, Piers Morgan, ‘told us the opportunity was there to reinvent
business journalism and I think we did that’ [3]. The outcome of a subsequent PCC
adjudication, indicating a number of instances in which its code had been breached,
suggested that this reinvention, if that is what it was, was highly problematic. A
preliminary assessment of the Slickers and their niche in the history of the popular press
seems justified.

Popular Financial Journalism Before 1960 [4]

For much of the nineteenth century the ‘money article’, though featuring in most daily
newspapers, represented journalism at its dullest and least enterprising. It often amounted
to little more than a list in paragraph form indicating the movement of prices on the
various London markets. In the second half of the century there was an expansion in the
 ‘City Slickers’ in Perspective 139

supply of useful financial intelligence stimulated by the advent of international cable

communications and the proliferation of limited liability companies. At the same time
the growth of Britain’s financial sector and the emergence of a significant number of
private investors generated demand for news from and comment on the markets. These
developments prompted a transformation of financial journalism starting with the
imported ‘Yankee bounce’ of Harry Marks’ Financial News in 1884. Over the next 20
years or so ‘New Financial Journalism’ began to prevail over what the News called
‘eighteen-hundred-and-fast-asleep conservatism of the old school’ [5]. The aim, apart
from supplying a more rapid and efficient news service for people who were ‘something
in the City’, was to reach out to the increasing number of private investors, many of
whom were of relatively modest means. One estimate put their number at around
250,000 by 1906. It was the duty of the ‘new financial journalist’, according to Charles
Duguid, later City editor of the Daily Mail, ‘to make the dry bones of finance live’ for
the City clerks, country clergymen, retired colonels and small shopkeepers who now
took an interest in stocks and shares [6].
The conventions of New Financial Journalism, at once more relaxed and more
demanding, were important when it came to writing about finance in the popular press
after the 1890s. Newspapers like the Daily Mail (1896), the Daily Express (1900), the
Daily Mirror (1903) and the Daily Sketch (1909) featured financial news from the start,
not least because it helped to attract company advertising in the form of prospectuses for
new share issues and reports of annual general meetings. Though it was often difficult
to enliven reports from the City, especially when the markets were uneventful, the lighter
tone and more attractive layout that Marks had brought back from New York in the
1880s were readily assimilated into the popular format. ‘By reason of its very nature’,
admitted Duguid in 1903, ‘the City page may always be the dullest and most forbid-
ding … but it is rapidly becoming less so’ [7]. The most important development,
however, in terms of making financial news and comment accessible to a wider
readership, was an acknowledgement of the idea that, in this respect, the function of a
newspaper was not simply to inform readers but also to advise them. This meant building
a relationship of trust with readers who often knew little about investment and were at
risk in the shark-infested waters of the City of London. The Daily Mail’s first City editor
promised ‘to interpose between the inexperienced and the loss of their money’ and urged
readers ‘to get in the way of asking our advice before they act’ [8].
In this situation it was critical, if financial journalism was to secure its place in the
popular press, that bona fide journalists and papers should find ways of keeping the
rackety side of City life at bay. It was clear by this time that not every City editor and
financial journalist was devoted selflessly to the pursuit of truth. One by-product of stock
market booms in the late Victorian era was the emergence of the so-called ‘bucket-shop
press’, an illegitimate parody of respectable financial journalism. Seductively entitled
weekly and monthly circulars, such as the Oracle, the Financial Who’s Who? and the
Golden Age, were used by unscrupulous brokers and company promoters to sell
worthless securities at a premium to readers with more money than sense. This nuisance
persisted until 1939 when the Prevention of Frauds (Investment) Act gave the City
of London Police the powers it required to bring the worst excesses of the ‘bucketeers’
to an end [9]. There were, in addition, endless opportunities for financial journalists
to turn a dishonest penny or two simply because the price of a particular security
might be driven up or down as a consequence of what appeared in the press. City editors
grew wise to the peculiar sensitivities attached to the practice of their craft and
journalists who wrote about stocks and shares in the press would certainly have been
140 D. Porter

aware of an ethical dimension to their work [10]. The journalist determined ‘to write his
own book’, seeking to inflate the price of shares he wanted to sell or to deflate the price
of shares he wanted to buy, remained something of a problem. A growing sense of
professionalism, however, appears to have kept this tendency in check and over the
course of the twentieth century readers came to trust the integrity of the experts who
brought them news from the City or advised on finance generally. The financial
journalist, as Paul Bareau, then editor of the Statist, observed in the 1960s, was ‘always
in a position in which he could profit by speculative operations based on the views he
expounds’. From time to time some had failed to maintain the required standard of
integrity; ‘they have been the very rare exception’ [11].
The New Financial Journalism, progressively adapted to fit in with changes in the
layout and house-style of the more popular dailies, shaped the development of financial
journalism at this level through to the late 1950s. Middle-market titles, like the Mail, the
Express and the News Chronicle, with a significantly higher proportion of small investors
in stock market securities among their readers than the Mirror and the Sketch, gave City
editors more scope to be innovative in terms of style and presentation. By the end of the
1930s headlines had become more arresting, economic analysis more accessible, market
reporting more concise and share tipping more blatant and ubiquitous. As the convention
of anonymity was progressively abandoned a City editor, like Oscar Hobson at the News
Chronicle, could become a newspaper personality in his own right, developing a
distinctive style and rhetoric. Financial journalism was less important in the more
downmarket titles and it changed more slowly. Typically, in the Daily Mirror of the late
1930s, a six-paragraph article by ‘Our City Editor’ would appear at page 24 or
thereabouts along with a selection of Stock Exchange closing prices. This would take up
less than half the space on a page that was often shared with racing news and selections
supplied by ‘Bouverie’, the paper’s resident tipster. The uneven distribution of personal
wealth among the readerships of the various newspapers probably constrained the
development of the Mirror’s money article in this period. Its City coverage was one of
the first casualties of war in 1939. In a newspaper bought by countless small savers but
few small investors this was only to be expected. As war transformed news values
virtually overnight it was enough to advise readers facing an uncertain future: ‘LOOK
AFTER YOUR SAVINGS BOOKS’ (6 September 1939).

‘Keeping Up with the Joneses’: post-war affluence and the money page
The apocryphal 1930s story about the clerk on a weekly wage of £5 retiring with £5000
in the bank is relevant here. His enviable position could be accounted for, it seemed, by
a lifetime of thrift and sobriety and his wife’s prudent housekeeping. And, oh yes, … an
aunt had died recently and left him £4957 [12]. The chances of a clerk or a manual
worker amassing a significant lump sum for investment were slim. Even though average
real incomes were rising in the inter-war period there was often little to fall back on
when the proverbial rainy day arrived. By 1960, when the Daily Mirror resurrected
regular and systematic coverage of City affairs for the first time since 1939, 15 years of
full employment and rising real incomes had transformed this situation. This had fuelled
an unprecedented boom in consumption in the late 1950s as goods once categorized as
luxuries—cars, televisions, refrigerators and washing machines—became more afford-
able. As a recent historian of consumption has observed: ‘In the long haul from poverty
to affluence, this was the great leap forward’ [13]. Financial institutions, with unit trusts
like M&G and Save and Prosper to the fore, competed vigorously to attract the attention
 ‘City Slickers’ in Perspective 141

and savings of the newly affluent worker. The expansion of financial product advertising
in the press created a greater incentive for newspapers to address readers as potential
investors. In this new climate popular financial journalism ‘provided a sympathetic
editorial background to the financial institutions’ campaigns to tap the growing savings
of the nation’ [14].
Adjustment to the new conditions of affluence was easier for newspapers that leaned
politically to the right. But the left-of-centre Mirror, selling around 4.5 million copies
each day, was the UK’s largest circulation newspaper by a considerable margin and
especially well placed to assist financial institutions anxious to establish market share
among working-class savers. The absence of City coverage after 1945 suggested editorial
acquiescence in the notion that stocks and shares were not for the likes of those that read
the Mirror. ‘IF I HAD A FORTUNE’, a feature based on readers’ letters in 1950, was
indicative.
Thirty thousand pounds! (wrote Mrs B. of Wealdstone) I should be scared stiff
if I had half that. I don’t think I could sleep or eat. What a worry! No, just give
me father’s fiver on Fridays as always and I’ll be satisfied. [15]
But, by the end of the 1950s, even the Labour Party was beginning to recognize that
something had changed. ‘Daily newspapers’, noted the Labour Research Department in
1959, ‘devote considerable space to news from the City and recently there has been a
lot of talk about “encouraging the small investor” and “creating a shareholder’s
democracy”’ [16]. The Mirror, competing daily for circulation and advertising revenue
with newspapers that were already cultivating the small shareholder, did not simply
acknowledge the significant socio-economic shift that had occurred; it embraced it with
enthusiasm. On 4 March 1960 the decision to appoint Derek Dale as City editor to write
every Wednesday about stocks and shares was explained thus:
The Mirror recognises that there has been a revolution in the savings habits of
Britain. No longer is The City the exclusive domain of Big Money.
Press commentators were quick to recognize the significance of the Mirror’s new
commitment to financial journalism. Granada’s influential What the Papers Say, accord-
ing to a report in the Mirror, attributed it to ‘the evidence that more and more people,
many of them factory workers and clerks, are buying stocks and shares’ (11 March
1960). Perhaps the most novel aspect of the Mirror’s coverage was the use of a strip
cartoon, ‘Keeping Up with the Joneses’, featuring a married couple, ‘Joe and Prudence
Hope’, and their self-appointed financial adviser, ‘Uncle Forsyte’. Its first appearance so
soon after the departure of the scantily attired ‘Jane’, so popular with the Mirror’s
readers in the armed forces during the Second World War, seemed to suggest the passing
of an era. The coincidence, according to Paul Bareau, was ‘highly significant given the
faithful reflection of popular taste which that newspaper provides’ [17].
Dale’s weekly feature, simply headed ‘Stocks and Shares’, spread over three or four
columns in the Mirror’s centre pages. Readers were drawn in by a headline leading them
into Dale’s opening paragraph. This often consisted of advice for the inexperienced or
nervous small investor delivered in plain words and short sentences. News that a falling
stock market had prompted some small investors to cash in prompted the headline ‘MY
ADVICE TO UNIT-TRUSTERS—DON’T SELL’, and a string of supporting points. ‘Far
from thinking of selling, the sensible unit trust investor should be BUYING at the
present moment’ (11 May 1960). Company news, wherever possible, had a human-
interest angle. A story offering readers ‘A PEEP INSIDE BOSSES’ PAY PACKETS’
focused on Frederick Donner, chair of General Motors (owners of Vauxhall), whose
142 D. Porter

salary, calculated at £3800 a week, was 5 times more than President Eisenhower’s and
20 times more than Prime Minister Harold Macmillan’s. It was a mark of Dale’s
confidence in the moderation of the newly affluent British worker that he felt able to
advance a case for reducing taxes on high earnings in order to retain the services of ‘the
men who make British industry tick’. Acknowledging that ‘the chap earning £8 a week
won’t have much sympathy for the “plight” of a top director earning £8,000’ he argued,
nevertheless, that ‘it is the workers who suffer if inferior men are making decisions at
the top’ (25 May 1960). Some £8-a-week Mirror readers might have allowed themselves
to be distracted at this point by the large photograph of pop star Adam Faith’s first screen
kiss on the adjacent page.
Dale did not ‘talk down’ to his readers but he sensed that many of them required some
fairly basic information. An article headed ‘HOW TO SHOP FOR YOUR SHARES’
explained how the Stock Exchange worked and advised readers who had not bought
shares before on how to get in touch with a stockbroker (18 May 1960). A particular
strength of Dale’s journalism was his ability to make links between the remote science
of investment and the everyday experience of Mirror readers. His very first article
incorporated an item headed ‘Nothing Like a Cuppa’ recommending Brooke Bond shares
at 15 shillings as ‘a first class investment for the man, or woman, prepared to buy—and
hold’ (9 March 1960).
Here goes your first lesson in investment.
DON’T TRY TO BE TOO CLEVER.
There is always a profit to be made from the thing that is fundamental.
And there is nothing more basic to the national character than—a ‘cuppa’.
A few weeks later the thought that many readers had spent Easter Monday ‘getting
stuck in to the back lawn with a mower’ prompted a plug for Qualcast.
The Englishman’s pride is his lawn … The average life of a lawn-mower is ten
years. Five million lawns—a new mower every ten years—that means a market
for 500,000 lawn-mowers a year.
And the biggest part of that business goes to Qualcast of Derby—the largest
manufacturer of lawn-mowers in the world …
It was important to demystify finance, to convince Mirror readers, male and female,
that the City was for them. An item in the same edition on the Thomas Tilling Group,
makers of Pyrex and Pretty Polly nylons, pointed out that it had more women than men
shareholders. ‘Women are shrewd investors and I endorse their faith in the Tilling
company’ (20 April 1960).
The Mirror went to some lengths to promote an active two-way relationship between
its City editor and his readers. Part of Dale’s article each week, ‘You Ask’, was devoted
to answering queries. Simultaneously the Mirror established an Advice Bureau: ‘What-
ever the amount—whatever the problem—we will do our best to help you.’ Readers
were assured that experts would answer letters ‘in language you can understand’ (16
March 1960). By 1968 the bureau was dealing with almost 25,000 letters a year [18].
There was a link here with mainstream financial journalism where it was a long-
established tradition for City editors to give investment advice to individual readers. The
Financial News of the 1880s found space daily to publish ‘Answers to Correspondents’
and had invited readers who sought a personal reply from the editor to apply enclosing
a postal order for 2s. 6d. Though some published queries were undoubtedly spurious and
the advice given not always disinterested the idea caught on; both the Mail and the
 ‘City Slickers’ in Perspective 143

Express at the turn of the century had encouraged readers to write to the City editor. The
free service offered by the Mirror after 1960 helped to keep successive City editors and
their staff in touch with the everyday concerns of readers in so far as they related to
money. Financial journalism in the Mirror has been shaped by a sharp awareness of the
particular concerns and interests of its predominantly working-class readership. ‘The
Daily Mirror’, it was noted in a review of financial journalism in the 1960s, ‘remember-
ing its sense of responsibility to the masses, is rather reminiscent of Dorothy Dix and
those other columnists famous for emotional problems’. Not only was news and advice
conveyed in simple language, there was also ‘a strong sense of guardianship of the
purses of the readers’ [19].

Building a Relationship with the Reader

Changes to the title of the Mirror’s money article over the 20 years from 1960 suggest
that the relationship between City editor and readers became closer. Dale’s original
‘Stocks and Shares’ was replaced in the mid-1960s with Robert Head’s ‘In the City’. By
1970 Head was writing about ‘Your Money’. Under both Dale and Head the coverage
was largely City focused with company news predominating, though Head was more
inclined to discuss financial policy and the economic situation in general. Given the
limitations of space it seems significant that so many of the companies Head chose to
write about had a news value that was quite independent of their standing in the City.
On 5 March 1965, for example, he opened his article on page 19 with an item headed
‘NORTHERN SONGS HIT A LOW NOTE’, reporting that shares in Brian Epstein’s
company, the Beatles’ music publishers, had slumped. ‘You just can’t get away from
those Beatles’, he wrote. ‘While they soak up the Bahamas sunshine with Donald Zec
(the Mirror’s show business correspondent) … I report that back in the City a chill is
cast over their fortunes.’ Head also continued Dale’s practice of alerting readers to shares
in companies that they would encounter in the High Street. ‘Next time you are in Marks
and Spencer’s’, he advised, ‘have a look at their fruit squashes’; he then went on to
recommend buying shares in the firm that made the plastic bottles in which the squash
was sold. ‘At 9s 6d each … the shares look interesting’ (9 March 1965).
These methods may well have helped to attract the attention of readers as they grazed
their way through the multifarious feast provided daily by the Mirror and underlined the
message that the small investor had every right to be in stocks and shares. When Oliver
Stutchbury, managing director of Save and Prosper, declared in 1965 that nobody with
less than £20,000 should open a personal portfolio, Head mounted a vigorous defence
of the little guy who wanted to ‘think big’ rather than ‘play it safe’. What about Nicholas
Harvalis, a humble soda-jerk from Omaha, Nebraska, who had studied the financial
papers in his local public library and invested every spare cent in shares? Hadn’t he been
worth more than $160,000 when he died in 1950? And, closer to home, there was Ron
Regan, a Portsmouth dock labourer, who had amassed £10,000 since the war by backing
his own judgement (9 March 1965). This tendency was counterbalanced by Head’s
recognition that saving for a deposit on a house was likely to be a more pressing concern
for many of his readers. Here he had nothing to offer but blood, toil, tears and sweat.
‘Dogged month-by-month saving is the only way’, he warned, but ‘where you save is
vital’. He went on to explain patiently that an account with a building society was
preferable to a biscuit tin when it came to finding a safe place for hard-earned savings
(3 March 1965).
144 D. Porter

By the 1970s the emphasis was changing. ‘Your Money’ now often appeared more
than once a week and its focus began to shift from the City to more mundane
preoccupations. At the start of the decade City news predominated; it was very much the
first duty of the City editor to explain ‘How Prices are Moving’ and to offer some
explanation for the state of the market. ‘Shares started the week with a bang … mainly
because an outfit called the National Institute of Economic and Social Research has
called on the Government to pump some more inflation back into the economy’ (3 March
1970). Some traces of the speculative fever of the late 1960s survived but Head was not
slow to remind readers that City punters who chose to ride on the back of the Australian
nickel boom that it would eventually collapse. Shares in Tasminex, ‘which boomed to
£45 a month ago when workmen digging a cellar nearby claimed to have found nickel
were looking very tarnished yesterday’ (4 March 1970). With the company’s shares then
standing at just over £3 it seemed that little had changed since the late nineteenth century
when the City’s definition of a gold mine had been ‘a hole in the ground owned by a
liar’.
After the watershed year of 1973, when an economy already overheating as a result
of Anthony Barber’s expansionist budget of 1971 was subjected to the massive external
shock of rising oil prices, there was a change of tone. With inflation running at 25% by
the end of 1975 and the IMF knocking at the door the Mirror’s financial coverage
reflected the prevailing gloom. ‘Your Money’ was now set in a broader editorial context
where features on the stretched budgets of working-class families were commonplace.
‘YOUR SHRINKING POUND’ (10 March 1975), focusing on the Attewell family from
Barking, was fairly typical.
On paper, the Attewell family are better off than a year ago. Their income has
gone up by more than their household expenses.
That is in line with Government figures which show average earnings up 29
per cent and the cost of living up by just 20 per cent.
But statistics seldom tell the full story …
The full story was that Barry’s overtime had been cut, thus the Attewells ‘had to make
changes in their lifestyle—just to keep pace with inflation’. With unemployment levels
reaching over 1 million for the first time in the post-war era the activities of movers and
shakers in the golden square mile probably seemed increasingly remote and irrelevant as
far as many Mirror readers were concerned. Some contemporary observers perceived a
gaping chasm that would have made life especially difficult for the City editor of a
popular left-of-centre tabloid. Unemployment touched 1 million in January 1972, the first
time it had reached that level in the post-war era. It seemed odd, when these figures were
announced, that the Financial Times ordinary share index should surge to 500, its highest
point for 3 years. ‘The otherwise arid statistics seemed to say a lot about how important
values within a capitalist society tend to diverge’ [20].
Though share prices collapsed for a time in the mid-1970s, those who had wealth were
still better placed to protect their capital than most Mirror readers. Inflation might have
been, as Home Secretary Roy Jenkins argued in 1975, ‘Britain’s greatest menace since
Hitler’ but it was not so bad if one could afford to invest in Krugerrands. These could
be stashed away in order to avoid Denis Healey’s projected Wealth Tax. Writing in
March 1975, Head reported ‘strong demand for gold coins’ along with the intelligence,
derived from the manufacturers, that ‘private people are buying more safes’. He assumed
that readers of ‘Your Money’, who had every reason to be concerned by the erosion of
their own small savings, would make the connection, especially when the interest on
 ‘City Slickers’ in Perspective 145

building society accounts was subject to a 7.5% ceiling (7 March 1975). In the meantime
the Dorothy Dix side of Mirror financial journalism came to the fore with an emphasis
on the advantages of inflation-proofed securities, like ‘Granny Bonds’, available to
old-age pensioners, and on explaining the real cost of personal loans touted by finance
companies. ‘Some people may be happy to borrow money at 42 per cent … But I still
urge you to think three times before doing so’ (4 March 1975). As economic policy
issues came to dominate the political agenda Head’s skill in exposition was often utilized
in general news coverage or special features. The complexities of Monetarist and
Keynesian economics were addressed in typically common-sense fashion with a glossary
designed to cut through the jargon. A recession was defined simply as ‘when you lose
your job’ (5 March 1980).
It was significant that the Mirror should look to Head to guide readers in this way.
By the 1980s a special report by the paper’s City editor carried real weight. It was not
simply that he possessed expertise in a specialist subject recognized as increasingly
important in terms of news value. What also counted was the City editor’s special
relationship with the paper’s readers. Financial journalists over the years have often
alluded to this relationship and to the burden that comes with it. For Kenneth Fleet, chief
City editor for Express newspapers, writing in 1983, the faith that readers invested in
Fleet Street’s leading financial writers was ‘remarkable’; it merited ‘a corresponding
responsibility and complete integrity’ [21]. In the context of popular financial journalism
building this relationship has involved empathizing with readers, developing a working
knowledge of their particular requirements and servicing them accordingly. Head,
interviewed in 1988, was strongly motivated by this aspect of his work, explaining that
he had once turned down a move to the Daily Telegraph on account of a phone call from
a Mirror reader in Bradford.
She had just inherited £2,000 and did not know what to do. She did not even
know the name of a bank, not even the Halifax Building Society. I couldn’t
believe it and I thought, bloody hell, if that’s the job that needs to be done,
then the hell with traditional City journalism, P/E ratios and tycoons. The lady
from Bradford is the reason I have stayed here so long. [22]
It is important to note that adult financial literacy, embracing ‘a working knowledge
of financial institutions, systems and services’, continues to give cause for concern.
According to Ron Sandler, former chief executive of Lloyds and author of a recent
government-sponsored report on the savings and investment industry, ‘the standards of
financial literacy in this country are woeful’ [23].
Some evidence is available that allows historians to explore the nature of this special
relationship. Letters from Mirror readers to Robert Head, along with copies of his
replies, have survived and are accessible to researchers. This collection, held at the
Mass-Observation Archive, covers only January–June 1981, but even a small sample of
the thousands of letters it contains is sufficient to illustrate the two-way relationship
between Head and his readers, the high regard in which he was held, and the care taken
to justify their trust in his judgement. Herein lies a fragmented but compelling picture
of the lives of working-class people in Britain on the edge of the great shake-out of
industrial labour that occurred in the 1980s, of people characterized by ‘an uneasy sense
that changes outside their personal world will not match the comforts within it’ [24].
Head found himself dealing with the queries of those already redundant and those made
anxious by the threat of redundancy, of the elderly widow wondering how best to cope
on her pension, of those with some savings who had been offered the chance to buy their
146 D. Porter

council house, and of parents anxious to put something away for their children. Their
personal worlds were some distance from the City but through Head, to whom they often
confided intimate details of their lives, it was possible to make a connection. Head’s
replies, and those of John Husband who assisted him, offered humane and practical
advice appropriate to the reader’s particular circumstances, dignifying their fears and
hopes through the application of expertise in finance. This evidence, in short, suggests
that the idea of a special relationship between the Mirror’s City editor and his readers
has real substance [25].

Popular Financial Journalism in the Age of Sid

Over the 15 years or so since 1984 the context in which popular financial journalism
operates has been significantly modified. Very few of those who wrote to the Mirror for
advice in 1981 were shareholders or were contemplating buying shares. If they asked,
Head tended to steer them away from the stock market. Personal share portfolios were
largely a middle-class phenomenon; only about 18% of all shareholders in 1983 were
drawn from the working class. This situation was transformed by the Conservative
government’s privatization policy in the mid-1980s. The sale of shares in British
Telecom, the Trustee Savings Bank, British Gas and British Airways raised the
proportion of the total population owning shares from 5% in 1983 to 23% in 1987, a
trend that was later reinforced by demutualization in the building society and life
insurance sectors. At the start of the 1980s only 3 million people in the UK owned
shares; by the start of the 1990s there were 10 million. Significantly, the largest increase
in numbers of individual share owners was to be found amongst the C1, C2, D and E
categories, where readers of the Mirror and its rival tabloids, the Sun and the Daily Star,
were most likely to be found. Indeed, it has been observed that ‘the profile of readers
of the Sun and the Mirror, in terms of age and class, reflected almost exactly the profile
of new shareholders appearing in the wake of privatisation’ [26]. The decision to launch
the weekly ‘Sun Money’ feature in 1987 was clearly a response to these changes. So,
too, was the attempt by the News of the World to recruit one-time pop star Adam Faith,
now actor and entrepreneur, as its City editor. Faith later recalled that David Mont-
gomery, the editor, ‘knew exactly what ordinary people were about and who I wanted
to write for’. Though he did not take up Montgomery’s offer Faith was later to be found
‘bashing out pearls of financial wisdom’ in the Daily Mail [27].
It is important to recognize the limits of this transformation. ‘Popular capitalism’ was
something of a mirage. Buying a few shares in public utilities at knock-down prices, as
Neal Ascherson argued at the time, was ‘nothing to do with normal private investment
in shares as practised by the old middle classes’ [28]. Though the Thatcher and Major
governments widened share ownership through privatization, ‘most of us remained at
best simple “Sids”—essentially passive investors who would hang on to one or two
stocks’ [29]. Moreover, growth in the number of people directly owning shares was not
sustained; it slowed in the 1990s seeming to reach some kind of plateau at around 10
million. ‘Privatisation’, it has been argued, ‘had little effect in progressing the strategy
of popular capitalism’ [30]. The cult of the equity remained insecurely embedded in
British popular culture.
There were, however, some indications that this was changing by the end of the
decade. The Mirror’s restyled financial section, now called ‘Mirror Money’, reported a
surge in the number of ‘investment clubs’. These had ‘mushroomed from 300 to 4,000
in two years’, a movement which the Mirror had actively encouraged (21 July 1999).
 ‘City Slickers’ in Perspective 147

Online and telephone stockbroking operations cut the cost of access to a market where
highly fashionable dot.com stocks offered the prospect of quick and substantial profits.
These simultaneous developments appear to have attracted a new wave of small
investors while modifying, to some extent, the attitudes of the ‘Sids’, previously content
simply to hold their shares in privatized utilities or to sell them quickly for a windfall
profit, but now inclined to trade more actively. At the same time there was an expansion
in media activities related to financial services. ‘Everywhere you look’, noted Emily
Bell, business editor of the Observer, ‘there are new media aimed at this market, all
striving to capture the attention of Britain’s burgeoning share-trading community’ [31].
Having hosted a Channel Four series unblushingly entitled Dosh, Adam Faith went on
to launch the Money Channel in February 2000, available 24 hours a day to cable and
satellite television subscribers, its declared intention being ‘to demystify the subject for
the ordinary punter’ [32].
Throughout this period of social change the Mirror’s weekly money article maintained
its reputation for giving careful and prudent advice. ‘Your Money’ could hardly ignore
privatization and encouraged readers to buy shares on the favourable terms offered at
flotation. When the share price almost doubled on the first day of trading the Mirror
greeted the dawning age of the small shareholder with a smile: ‘TELECOMMANIA!
Investors ring up big profits’. Acknowledging that ‘owning shares means taking risks’,
Head continued:
The courage to take risks, however, is one of the things that could make Britain
great again.
I advised readers to buy Telecom shares. Now I tell you to hold on to them.
Over the years they’ll do you proud.
In tone and content ‘Your Money’ trod a fine line between enthusiasm and circum-
spection. A paragraph alerting readers to the forthcoming privatization of British
Airways was followed by another commenting favourably on new unit trusts available
from the Equitable, ‘Britain’s oldest life insurance company’, then considered to be one
of the safest places in which to invest regular savings. ‘If they are as good as their
Pelican Trust, which has more than quadrupled small investors’ money since it was
launched in 1969, the new ones will be worth backing’ (4 December 1984). For those
tempted to join the gold rush there were safer and more reliable vehicles than ordinary
shares.
This message was underlined when the stock market crashed in October 1987, an
event prompting the Mirror to give its City editor a full page to reassure small share
owners on the morning after ‘THE DAY THE CITY WENT BANG’. Head’s advice
maintained the steady line so evident in his replies to reader’s letters 6 years earlier.
There was no reason to panic, ‘most shares were still THREE times higher than they
were six years ago and TEN times up on the pit of 1974’. Further on in the same edition
‘Mirror Money’ was in characteristic form:
Too many people were lulled by the great Stock Exchange boom of the 1980s
into thinking that buying shares is a one way ticket or gravy train.
But as I’ve warned repeatedly, shares are a risk. And nobody should buy until
they’ve bought their own home, have loads of life insurance, a decent pension
plan and at least three month’s wages safely tucked away in a bank, building
society or National Savings.
The small features in that day’s ‘Mirror Money’ underlined the point—‘Make that
pension work’, ‘Get in on a council house deal’, ‘Trust in your units’ (21 October 1987).
148 D. Porter

Thereafter it was reinforced intermittently whenever temptation beckoned. When Bar-

clays issued a press release indicating the advantages of shares as a hedge against
inflation Husband struck a characteristic note of caution. ‘Only when you have a nice
little rainy-day fund safely tucked away should you start putting money into shares’ (7
March 1990). Money coverage in the Mirror during the 1990s acknowledged that readers
might well have an interest in shares. Closing prices were listed and a hotline was set
up to enable readers to check on their stock market investments. The emphasis, however,
was increasingly on consumer aspects of finance. By the end of the decade ‘Mirror
Money’ could describe itself as ‘The eight-page guide to all your personal financial
problems.’ Campaigning features—‘FAIR PENSIONS NOW’, ‘BAN ENDOWMENT
RIP-OFFS’—were much in evidence, as were reports of how the Mirror had helped
readers who had been badly treated by banks and building societies (1 December 1999).

The Rise and Fall of ‘City Slickers’

But, by this time, financial journalism in the Mirror had developed a new face. At the
start of 1998 total weekly coverage consisted of ‘Mirror Money’ supplemented by a
daily contribution from Clinton Manning (‘Manning’s Money’) featuring company news.
This changed on 11 May when Manning was replaced by ‘City Slickers’—‘THE
COLUMN BOSSES WILL FEAR’. Exactly what they had to fear was apparent after
only a cursory glance at page 27. Bhoyrul and Hipwell were not likely to be leading the
Mirror’s readers to the barricades but they were prepared to brazen it out with the City’s
‘pinstripes’ who, Adam Faith claimed, had brought his efforts to make ordinary punters
rich to such an embarrassing end in the late 1980s [33]. The lead story on the first ‘City
Slickers’ page, on ‘secret’ merger talks between supermarket giants ASDA and Safeway
set the tone. ‘ASDA and Safeway both deny the meetings are taking place. Well, they
would, wouldn’t they.’ Tapping instinctively into the casino culture of the securities
market at the millennium they set out their stall as tipsters from the outset: ‘If you fancy
a punt, why not have a few quid on JJB Sports … Slicker reckons JJB shares can only
go up.’ This was backed by some useful intelligence derived from JJB’s chair, Dave
Whelan, ex-Blackburn Rovers, who had informed them that ‘the new Brazil shirt is
selling like hotcakes’.
It typified the Slickers’ approach. Punters, on the outside, were being offered
intelligence that seemed to derive from reliable inside sources in a familiar quick-read
format. There was, it seemed, nothing to stop the Mirror reader from joining the City
toffs at the party. One of Bhoyrul and Hipwell’s ‘boardroom tales’ concerned Ian
White-Thompson, a director of MG, who had seen the value of his recently purchased
shares rise by 70% after the company announced plans to trade non-ferrous metals on
the Internet. ‘Tip of the day’ followed through in style (11 February 2000):
Why not follow the lead of Ian White-Thompson and buy a few shares in
metals trader MG? The company is attracting serious interest, not least from
some investors we know in Monaco, and the word is that MG’s share price
should move sharply higher over the course of the next year.
The Slickers, in full cry, were a sight to behold. It was as if they had reinvented the
roaring 1980s for the benefit of would-be punters who read the Mirror. Bhoyrul and
Hipwell seemed to embody the aggressive egalitarianism of Ian Dury’s ‘Romford scholar
in eurodollars’ on the floor of the international futures exchange in the reign of Mrs
Thatcher. They were, like him, ‘sharper than a knife’ when it came to ‘wedge’ [34].
 ‘City Slickers’ in Perspective 149

Bhoyrul cheekily ‘expressed dismay’ when he was not listed amongst the UK’s 200
richest Asians (7 April 1999). The first ‘Slickers’ page of the new millennium was
perhaps the high point of its brief but spectacular career. Under the headline ‘SLICK-
ERS. . 159% SLACKERS. . 59%’ they awarded themselves ‘the silver medal’, claiming
that their 1999 share tips had outperformed all but those recommended by the Sunday
Times; ‘the bronze went to the Sunday Telegraph with a workmanlike 75 per cent gain’.
There was some fun to be had at the expense of their former employer, Sunday Business,
with a portfolio ‘made up of some of the worst dogs that have ever been allowed to bark
in the stock market’. Its 50,000 readers, they concluded, ‘would almost have been better
off getting burgled’. Underlining the message that the Slickers were on familiar terms
with people who counted, Alan Sugar and Richard Branson were congratulated on the
knighthoods they had been awarded in the New Year honours list. ‘What do we call you
guys now? Sir, Sir Al, Sir Dickie? Let us know mateys’ (5 January 2000).
The demise of ‘City Slickers’ in the Mirror a few weeks later and the decision to sack
Bhoyrul and Hipwell brought this episode in the history of financial journalism to a
dramatic conclusion. Stock Exchange surveillance appears to have prompted inquiries
into shares bought by Piers Morgan in Viglen plc, Sugar’s computer hardware company,
in January 2000. Though the Mirror’s editor subsequently denied that he had bought
Viglen knowing that Slickers were about to tip them for a rise and was cleared by an
internal inquiry he was sufficiently embarrassed by the allegations to sell the shares and
donate his profits to charity. This episode appears to have drawn attention to the Slickers
themselves and allegations regarding further breaches of the PCC Code of Practice. More
specifically, it was alleged that price-sensitive information had been passed on privately
in advance of publication to both Morgan and, on an earlier occasion, to Tina Weaver,
his deputy editor. A second set of allegations related to purchases of shares by Bhoyrul
and Hipwell just prior to the publication of favourable comment in ‘City Slickers’,
enabling them to profit from an upward movement in prices. If true, these represented
a further breach of the code which advised that it was inappropriate for financial
journalists to buy or sell shares or other securities ‘about which they have written
recently or about which they intend to write in the near future’ [35].
As rumours circulated, the Mirror was subjected to a barrage of embarrassing
publicity, much of it coming from its red-top rival, the Sun.
Tell your friends … tell your family. If you’re standing in the pub reading this
tell the bloke next to you: YOU CANNOT TRUST THE MIRROR.
They are a bunch of SPIVS.
The Mirror is a paper that rips its readers off by tipping stocks which have
already been bought by its staff.
David Yelland, the Sun’s editor, could not resist the opportunity to claim the moral
high ground: ‘Encouraging readers to buy low-worth shares at sky-high prices is robbing
them of hard-earned cash’ [36]. Morgan’s counter-attack, utilizing the front page to
accuse the Sun of ‘rank hypocrisy’, quickly ran out of steam (6 February 2000). ‘City
Slickers’ gave way albeit temporarily, to ‘Financial Mirror’, edited by Clinton Manning,
a safe pair of hands who was unlikely to trouble the PCC. The Mirror added an ironic
twist to its own tale of misfortune by publishing an article by Sir Alan Sugar, no less,
‘on why the crazy dot.com bonanza has to end soon’ (15 March 2000). By this time an
inquiry conducted by the paper’s owners, Trinity Mirror, had already concluded that
action was required and the company had revised its procedures to ensure compliance
with PCC guidelines. This was described in a statement issued later by the company as
150 D. Porter

a ‘rigorous internal regime relating to sharedealings which goes much further than the
Code of Practice’ [37]. As if to underline the point that a lesson had been learned the
Mirror’s daily City coverage was, within a few months of the Slickers’ demise, being
supplied by Suzy Jagger, the journalist who had first broken the story of Morgan’s
Viglen shares in the Daily Telegraph [38].
The PCC adjudication acknowledged the steps taken by Trinity Mirror to set its own
house in order. Morgan was found to have breached the code twice in relation to share
purchases, though only on a technicality in relation to his stake in Viglen; it was also
indicated that he had failed to exercise adequate supervision over ‘City Slickers’. There
was no finding against Weaver, though Bhoyrul and Hipwell were judged to have
departed from PCC guidelines when they had spoken to her about shares in Booth
Industries, tipped in July 1998. As to shares purchased by Bhoyrul and Hipwell
themselves and subsequently given favourable publicity in ‘City Slickers’, the PCC
concluded ‘that there were repeated and flagrant breaches of the Code’. This sorry saga
had cast a shadow over financial coverage in the Mirror, previously regarded as ‘an
operation of extreme probity’. Sought out by the Sun, a dismayed Robert Head had
commented: ‘When I was there the rule was that no one in the city office could buy, sell
or own shares’ [39].
Meanwhile Bhoyrul and Hipwell, parodied in Private Eye as ‘Anil Wind’ and,
inevitably, ‘James Tipwell’, had resurfaced in Mohamed Al Fayed’s Punch [40]. Their
‘City Slickers’ page, aimed at young, Internet-wise investors looking for a quick return
on glamorous high technology stocks, had sat uneasily with the more circumspect style
of popular financial journalism with which the Mirror had been associated for 40 years.
‘We had created a monster that was out of control’, Bohyrul subsequently admitted, in
a statement quoted in the PCC adjudication. On 1 December 1999 the Slickers, with
characteristic brass-neck, had commented in the Mirror on the shares of Pacific Media
in which dealing had been temporarily suspended.
We could give you a really technical explanation of why this happens but we
can’t be bothered—the bottom line is you’ll make loads of wonga. What the
hell more do you need to know?
A week later, on 8 December, ‘Money Mirror’ was congratulating itself for the part
it had played in saving the Leek United, a small building society, from ‘carpet-baggers’
and alerting Co-op customers to their £10.5 million Christmas dividend. Readers were
invited to draw the conclusion that ‘mutuality pays’. They had every reason to be
confused. In the end the Mirror could not have it both ways.

Correspondence: Dilwyn Porter, University College Worcester, Henwick Grove,

Worcester WR2 6AJ, UK. E-mail: [email protected]

NOTES
* The author wishes to acknowledge the support of the Wincott Foundation for his research into the history
of financial journalism.
[1] See Dilwyn Porter, ‘Play it Safe or Think Big?: the Daily Mirror, its readers and their money,
1960–2000’, London School of Economics, Business History Unit, Occasional Paper, No. 1 (2000).
[2] http://www.pcc.org.uk/adjud/press/pr150402.htm, Press Complaints Commission (PCC), ‘The Mirror
Adjudication’ (15 March 2000).
[3] ‘We’re History’, Guardian (21 February 2000).
 ‘City Slickers’ in Perspective 151

[4] For popular financial journalism before 1960 see Dilwyn Porter, ‘Where There’s a Tip There’s a Tap:
the popular press and the investing public, 1900–60’, in Peter Catterall, Colin Seymour-Ure and Adrian
Smith, eds, Northcliffe’s Legacy: aspects of the British popular press, 1896–1996 (London: Macmillan,
2000), 71–96.
[5] Financial and Mining News (24 April 1884).
[6] Charles Duguid, How to Read the Money Article (London: Pitman & Sons, 1901), 2–3.
[7] Charles Duguid, ‘City Editing’, Sell’s Dictionary of the World’s Press and Advertiser’s Reference Book
(London: Sell and Co., 1903), 132–33.
[8] Daily Mail (4 May 1896).
[9] Karen Newman, Financial Marketing and Communications (Eastbourne: Holt, Reinhart & Winston,
1984), 62–64.
[10] See Dilwyn Porter, ‘City Editors and the Modern Investing Public: establishing the integrity of the new
financial journalism in late nineteenth-century London’, Media History, 4 (June 1998), 49–60.
[11] Paul Bareau, ‘Financial Journalism’, in Rodney Bennett-England, ed., Inside Journalism (London: Peter
Owen, 1967), 160.
[12] Tony Mason, ‘Hunger … is a Very Good Thing: Britain in the 1930s’, in Nick Tiratsoo, ed., From Blitz
to Blair: a new history of Britain since 1939 (London: Weidenfeld & Nicolson, 1997), 11–12.
[13] James Obelkevich, ‘Consumption’, in James Obelkevich and Peter Catterall, eds, Understanding
Post-war British Society (London: Routledge, 1994), 141.
[14] See Newman, Financial Marketing, 146–53, 185–93.
[15] Daily Mirror (10 January 1950). An Edinburgh reader, in the same edition, wrote that he would use his
hypothetical fortune to buy houses for ex-servicemen and their families ‘who, like mine, have been
compelled to live in one small room’.
[16] The Poor Man’s Guide to the Stock Exchange (London: Labour Research Department Publications,
1959), preface.
[17] Bareau, ‘Financial Journalism’, 153.
[18] Jeremy Tunstall, Newspaper Power: the new national press in Britain (Oxford: OUP, 1996), 359.
[19] Sheila Black, ‘In the City’, in Vernon Brodzsky, ed., Fleet Street: the inside story of journalism (London:
MacDonald & Co., 1966), 143.
[20] Richard Spiegelberg, The City: power without responsibility (London: Quartet Books, 1973), 1–2.
[21] Kenneth Fleet, The Influence of the Financial Press (London: Worshipful Company of Stationers and
Newspapermakers, 1983), 7.
[22] Mihir Bose, ‘Fallen Stars of the City Pages’, Business (March 1988).
[23] See Sandie Schagen and Anne Lines, Financial Literacy in Adult Life: a report to the NatWest Group
Charitable Trust (Slough: National Foundation for Educational Research, 1996). For Sandler see ‘Ron’s
Going Back to School’, Guardian (15 March 2003).
[24] Philip Whitehead, The Writing on the Wall: Britain in the seventies (Michael Joseph/Channel 4, 1985),
413.
[25] Mass-Observation Archive (University of Sussex), Large Collections, Daily Mirror Letters, Financial and
Investment Advice (January–June 1981).
[26] Benjamin Calvert, The popular financial press, privatisation and popular capitalism in Britain during the
1980s, PhD thesis (Coventry, 2000), 211.
[27] Adam Faith, Acts of Faith: the autobiography (London: Bantam Press, 1996), 246–53. Faith later
operated as a financial consultant with a number of high-profile clients. When his business failed in the
late 1980s, Michael Winner, a dissatisfied client, commented ruefully that ‘Adam Faith is to financial
advice what Frank Bruno is to English literature’. See Faith’s obituary, The Times (10 March 2003).
[28] Neil Ascherson, Games with Shadows (London: Radius, 1988), 101–102.
[29] ‘Suddenly Britain has Become a Nation of Exuberant Shareholders’, Independent (11 December 1999).
[30] Calvert, The Popular Financial Press, 214.
[31] ‘Slickers Fuel the Casino Culture’, Observer (6 February 2000); for the new media see also ‘Take a
Tip—and steer clear of the wide boys’, Guardian (12 February 2000).
[32] ‘A Nice Little Earner’, The Express: get up and go! (February 2000). When the Money Channel folded
in May 2001 Faith was reported to have suffered a loss of £32 million. See The Times (10 March 2003).
[33] For the demise of the ‘Faith in a Million’ investment fund promoted by the Mail on Sunday see Faith,
252–53. Faith claims that ‘the boys in the City got cold feet’, causing the project to be abandoned 2 days
before it was due to be launched.
[34] For the ‘Romford Scholar’ see Ian Dury’s ‘Futures Song’ in Caryl Churchill, Serious Money (London:
Methuen, 1987), 61–62. ‘How hard I dredge to earn my wedge, I’m sharper than a knife …’
152 D. Porter

[35] For details of these allegations and the outcome of the PCC investigation see PCC, ‘Mirror Adjudication’.
[36] ‘Scandal that Taints Mirror’, Sun (5 February 2000). For an account of the tabloid war between the Sun
and the Mirror see ‘Are These the Most Deranged Men in Britain?’, Independent (9 February 2000); see
also ‘In the City’ and ‘Mirror Mirror on the Make’, Private Eye (11 February 2000).
[37] See ‘Morgan Stays Despite PCC Censure Over Share Dealing’, Press Gazette (12 May 2000).
[38] ‘Morgan to Offer Jagger Financial Mirror Editorship’, Press Gazette (2 June 2000).
[39] Tunstall, Newspaper Power, 359; for Head’s comments see ‘Mirror Editor’s Share Deal Raised in the
Commons’, Sun (3 February 2000).
[40] Private Eye (11 February 2000). For an update on Bhoyrul and Hipwell see ‘The Insiders’ Story’,
Guardian (26 July 2000).
Chapter Nine

On the dark side of democracy: the

global imaginary of financial journalism
Anu Kantola

Introduction
Economic globalization and market liberalization have challenged national
politics and political imaginaries during the last 20 years. With the rise of the
market liberalization and market-oriented policies the faith of the nation state
has become a matter of intense discussions (e.g. Hirst and Thompson, 1996;
Strange, 1996; Habermas, 1999; Hardt and Negri, 2000).
In the new globalized condition, states are seen as competing on the
‘hypermobile’ capital (Warf, 1999) and tackling the increasing power of the
multinational corporations as transnational multinationals and international
finance capital have become increasingly influential in politics (Schmidt, 1995;
Sklair, 2002). The state has been seen to evolve to a competition state (Cerny,
1990: 220–47) or an entrepreneurial state (Harvey, 1989: 178; Warf, 1999: 239),
which tries to appear as an appealing place for investments by lowering taxes,
providing cheap, flexible, or skilful labor, industrial sites or parks. The new global
condition for the state and national democracies has been labelled for instance as
flexible capitalism (Harvey, 1989, 2001), supermodernity (Auge, 1995) or
hyperglobalization (Hay, 2004: 520).
With regard to democracy, the greatest worry has perhaps been whether a
progressive separation of power from politics will take place (e.g. Bauman, 1999:
24–31, 120; Habermas, 1999). These worries have been enhanced by the problems
of politics and public communication (Blumler, 1995; Franklin, 2004; Louw, 2005).
These processes might mean that representative democracy and its institutions
are weakening. Or to be a little more cautious, at least it seems like the scope
and spaces of democratic politics and processes are currently under negotiation
due to the processes of globalization (e.g. McNair, 2000; Dahlgren, 2001).
The aim here is to examine the role of journalism in these processes. As it is
well known, journalism has a crucial role to play in modern mass democracies.
Journalism offers information on political issues, gives an opportunity to bring
up new political issues, creates opportunities for an ongoing dialogue and acts
as a watchdog of the decision-makers. Moreover journalism contains a view of
the world, a social cosmology or a political imaginary by which our societies and
life are imagined (Anderson, 1983; Gonzaléz-Veléz, 2002; Taylor, 2004: 50). As
Benedict Anderson (1983: 14–49) has pointed out, modern polities are to a
certain extent imagined communities. Polities and political life are maintained

192
 ON THE DARK SIDE OF DEMOCRACY

through public arenas where the citizens of the polity do not actually meet, but
rather imagine themselves belonging to a common community. Journalism can
thus be understood as an imaginative exercise, which formulates social and
political imaginaries. Modern polities are imagined through the endless stream
of everyday journalistic texts; by the news, articles, columns, comments, and
leaders which describe, analyze, interpret, debate, and contest the political.
Historically, journalism has had a particularly central role in building up
national imaginaries by having tight connections with national imaginaries and
democracies. As the global economy has been liberalized and the premises of the
nation state have been questioned, journalism has a role to play in this process as
well. As political imaginaries are changing and globalized political imaginaries
are created (Cameron and Palan, 2004), it can be assumed that these global
imaginaries are reflected also in journalism and, moreover, that journalism has a
role in their construction.
In his sense, especially the role of financial journalism, and the role of the
Financial Times (FT) in particular, form an interesting subject of study. Most
on the media as well as on journalism is still very much nation-based and
directed to national readership. There are, however, also media, which have been
increasingly internationalized and can be seen as a constitutive for the new global
imaginaries. International financial journalism can be seen as reflecting these
new political forces and imaginaries of mobile finance capital. The aim here is to
understand the role of international financial quality journalism by describing
the political rationality of the FT. The analysis concentrates on the ways the FT
apprehends national democracies. How does international financial journalism
treat national democracies? How are the national imaginaries rewritten by
internationally oriented financial journalism?

Forerunner of globalization
The FT has its roots firmly in the United Kingdom but the international scope
has been a central one for the paper right from the start. The paper was founded
in the late 1880s together with the Financial News, as London was emerging as
the financial capital of the world markets and the enhancing Stock Exchange
of the British Imperium provided a promising potential readership as well as
advertisers for a financial newspaper (Kynaston, 1988: 1–2.). The birth of the
paper thus took place in the heydays of British imperialism and colonialism,
which has had a strong impact on the paper. The scope of the paper was global
as the FT – already in the early twentieth century – boldly announced having ‘the
largest circulation of any financial newspaper in the world’ and the emphasis on
the global view was substantiated in for instance the ‘Empire Section’, published
weekly from 1910 (Kynaston, 1988: 61–5).
During the twentieth century, the FT has been a forerunner of contemporary
financial globalization by paying increasing attention to the internationalization

193
RECLAIMING THE MEDIA

of the economy. A strong developmental work regarding the paper’s foreign

news took place after the Second World War (Kynaston, 1988: 148–49). A foreign
department was founded in 1951 (Kynaston, 1988: 213) and from the 1960s
onwards internationalization became, in David Kynaston’s (1988: 373) words,
‘the single major direction of the newspaper’. The paper was billed in early 1970s
with a slogan ‘Europe’s business newspaper’. The stringer network had 100
stringers around the world and the number of full-time foreign correspondents,
almost 30, was larger than in any newspaper, with the exception of the New York
Times. Moreover, there were regional specialists based in London but travelling
frequently (Kynaston, 1988: 375–6). In 1979, the FT launched an international
edition printed in Frankfurt and to highlight the increasing internationalization
of finance a section titled the ‘World Stock Markets’ appeared (Kynaston, 1988:
421–4).
By the beginning of the twenty-first century, the FT represents a branch of
journalism trying to convey the news to the internationally oriented investor. The
paper claims to reach more senior decision-makers than any other international
title across Europe. In opinion leader surveys, the FT has proved to be the most
widely read international daily amongst the most important opinion formers
in government, business, the media, academia, and international organizations
(Financial Times, 2005a). The FT has also been ranked as the most widely read
international business title among Europe’s senior business people, and the
paper has increased its circulation especially in the Asian countries. (Financial
Times, 2005b).
Thus it is interesting to look at the political imaginary of the FT as it
apprehends national democracies around the globe. How does international
financial journalism treat national democracies? How are the national imaginaries
rewritten?
The empirical material consists of the FT coverage on national parliamentary
elections from 2000 to 2005. The material covers 32 general parliamentary
elections between 2000 and 2005 and consists of the most notable national
economies in the world, i.e. the OECD countries in combination with the most
notable economies outside the OECD. The countries included are Mexico, Italy,
United Kingdom, Norway, Poland, Denmark, Portugal, Ireland, France, the Czech
Republic, Sweden, Slovakia, Germany, Turkey, the United States, Austria, the
Netherlands, Finland, Iceland, Russia, Greece, Spain, India, Canada, Japan, and
New Zealand. Six countries had two elections during the researched period and
both elections are included.
The research material, 219 stories of which 23 are leading articles, was
gathered during a period of a fortnight (1 week before and 1 week after the
respective election). All the stories that have the election and the political
situation as their main theme were included [1]. The election stories were
retrieved from the FT.com website archive. The stories that had appeared in

194
 ON THE DARK SIDE OF DEMOCRACY

the printed edition, either in the United Kingdom or in the FT European

edition were included and stories that have appeared only on the FT.com
website were excluded. In order to concentrate on the FT’s journalism, stories
written by an ‘outsider’, i.e. a writer noted for other affiliation than the FT,
were excluded.
The historical hard core of FT’s journalism perceives the world through the
lenses of international capital analyzing the prospectuses for investments. And
as business can be done in every walk of life and is affected by politics, social,
and cultural life, financial journalism has never restricted itself solely to the
world of finance. In 1945, the new editor Hargreaves Parkinson described the
challenge of the paper showing how the investor’s point of view had become a
relevant issue for men and women ‘in every walk of life’:

A great body of readers, men and women in every walk of life, find that, in this
difficult mid-twentieth century world, questions which used to be the exclusive
concern of the economist and the business man exert a profound influence on
their daily life. Never have readers been do avid for guidance on everything
bearing on full employment, inflation, taxation, the future of Government
controls and similar problems. (Cited in Kynaston, 1988, 153.)

The study of the election coverage of the FT from 2000 to 2005 shows that
the paper covers national politics widely around the world. Albeit the paper was
interested in the financial issues, but also issues such as welfare, taxation,
healthcare, unemployment, immigrants, populism, wars, and civil unrest, voting
practises and frauds as well as the individual politicians were covered. In the
election stories analyzed the main themes were:

 Stories concentrating on the prospective popularity, success, and tactics of the

various parties and prime minister candidates
 Stories on politics from the point of general economic policies concerning fiscal,
monetary, and welfare policies
 Stories on the reactions of the financial world: the investors, business leaders,
stock exchanges, and exchange market reactions and
 Stories on the non-economic election issues, such as the war on Iraq, immigration,
populism, or terrorism.

Reporting democracy
When looking at the election coverage stories, it became clear that the FT
often positions itself in favor of democracy and calls for enhanced democracy.
The countries and elections are evaluated by standards of democracy. In the
more ‘consolidated’ democracies of Western Europe, the FT’s most important
indicator of democracy is the voter turnout. For instance, in Italy the turnout of

195
RECLAIMING THE MEDIA

80 per cent is greeted and framed positively in the name of democracy as ‘a great
day for democracy in Italy’ [2]. Democracy is also in the Dutch elections
presented in a positive light as the election result is endorsed ‘The old arrogant
style of the main parties has been forced to give way to more democracy. That is
a positive benefit’ [3].
The non-western countries are often assessed by their ability to conform to
the western standards of democracy. India is praised in a leading article on its
2004 elections ‘The sheer size of an election in India, with all its chaos and
exuberance, is a magnificent and humbling spectacle, which rightly commands
respect across the world’ [4].
The Mexican election results in 2000 are greeted as a revolution, as ‘a
transition from one-party rule to pluralist democracy’ which ‘completes
Mexico’s long transition from one-party dominance to pluralist democracy,
adding political maturity to a more competitive market economy’. The defeat of
the leftist Institutional Revolutionary Party is greeted with satisfaction as a step
towards ‘political maturity’, i.e. the western style of democracy of changing
governments [5].
Democracy and elections are also celebrated in the case of Japan in 2005 as
an enthusiastic voter is interviewed in an analysis story:

Although not herself a supporter of Mr Koizumi, she argues that he has

performed a big service to those who aspire to a more robust and transparent
democracy. ‘This is a marvellous moment, something for which Japanese
democracy has been waiting for half a century’, Ms Hama says. ‘In this election,
people have to say what they mean and mean what they say. They can’t get away
with being wishy-washy – something unprecedented in Japanese politics’ [6].

Prime Minister Koizumi is praised in a FT leader for his efforts to transform

Japan into a western-style democracy:

Just as post-war Japan has never wholeheartedly adopted western

competitive capitalism, so it has never been a western-style competitive
democracy except in its structure. By challenging the old factions in the LDP,
gathering power in his own hands at the centre of the party, insisting on an
ideological election platform and fighting a televisual campaign, Mr Koizumi
has become a political moderniser [7].

In Turkish elections, the defeat of the ruling party is greeted as a

revolutionary act of the voters. It is described in a positive tone by using the
voices of the man-on-the street:

‘We needed a clean-out of the old system,’ said Behic Ozek, 50, a businessman.
Candan Ersoy, a 28-year-old child-minder, agreed. ‘The best thing about this

196
 ON THE DARK SIDE OF DEMOCRACY

election is that we won’t have to see the same ugly old faces any more, and that
the new government, at the end of its term in office, will not be able to say ‘oh
we were not able to keep our promises because we lacked a parliamentary
majority’ [8].

In the Russian elections, the election story describes the dismal state of
the Russian democracy with a worried tone:

On the whole, Russians probably did freely express their choices on Sunday.
But the system they voted for remains far removed from a western-style idea
of democracy centred around a strong parliament that counters the power of
the executive. Low voter turnout of barely 50 per cent coupled with a sharp
rise in protest votes ‘against all’ to 5 per cent show that a significant proportion
of the Russian electorate feels disenfranchised. Voters are increasingly
disengaging from the political process little over a decade after totalitarianism
collapsed [9].

In a leader on the Russian, elections the worries over democracy are expressed
in a clear way:

For Vladimir Putin, the Russian president, Sunday’s parliamentary election

was a triumph. But for the cause of political freedom in Russia it was a serious
defeat. The forces of authoritarianism marshalled by the Kremlin have pushed
further into territory once occupied by democracy [10].

Thus the FT clearly carries the flag of western democracy when assessing
the elections. The ideals of the western democracy are used when analyzing the
election results and the principles and practises of the western democracy are
supported and recommended for the non-western countries.

Call for reforms

Beside democracy, another common theme in the research material is the
constant and insatiable emphasis on reform, which seems to be the cornerstone
of the political imaginary of the twenty-first century FT. The idea of reform is
a central element in modern political imaginaries. The story of progress and the
idea of revolution as a way to a progressive society are central myths of
modernity (Taylor, 2004: 176). Alan Touraine sees the modern world saturated
by the idea of revolution. The idea of a struggle against an ‘ancient régime’ is a
central element in the idea of revolution, which triumphed in the West during
the eighteenth and nineteenth centuries and spilled over to the Soviet and
Chinese revolutions (Touraine, 1990: 122–3). Liberalism, most notably in the
French revolution, alongside Marxism, forms a system of thought based on the

197
RECLAIMING THE MEDIA

idea of revolution. The old system has to be dismantled and a new system
introduced. This seems to be the case also with the political imaginary of the
FT. Twenty-first century financial journalism joins the modern political
programs of reform.
The notion of reform appears in the research material over 300 times, and it
is the most common theme related to politics and elections. The political
communities are assessed by their ability and readiness for reform and change.
The politicians are classified as pro-reform or anti-reformist, and their actions
are evaluated by their readiness for reform or alternatively by their capability for
reform [11]. The news stories and commentaries are posed from the point of
the necessity of reform. Are the parties reformative or anti-reformative? Will
the election result help the reformers? Are the reformers winning? Can the
anti-reformative winners still become reformers?
As a new government faces its new term, the commentaries are often framed
as summing up a list of reform or change challenges [12]. Politicians are evaluated
by their capability to enforce reforms as well in Mexico as in Germany [13].
Often the reform is a given, an unquestionable key for solving large-scale
societal, political, and economic problems. For instance, when Silvio Berlusconi
wins the Italian elections in May 2001, his main challenge is formulated in an
analysis story by pondering ‘Berlusconi’s commitment to reform’ and by
framing his first task, backed by the authority of international economists:

He comes to office with a largely untried team taking charge of an economy

that has underperformed all of its main European Union partners for the last
five years. Growth last year reached 2.9 per cent but international economists
urge structural reforms to sustain the performance in the medium term [14].

There is a call for general reforms, such as structural reforms or liberalizing

reforms, which seem to be linked to the overall economical liberalization and
privatization of the national economy. Moreover, there is a host of more specified
reforms such as tax reform, labor market reform, public sector reform,
regulatory reform, land reform, reform of the welfare state, the public sector, the
health and social services, and the labor market. Most of these reforms, thus, fit
together with the tradition of market liberalism. During the last 20 years, there
has been a liberal call for change and transformation of the state and welfare
system, tax policies, and social policies in political talk (Clarke, 2004: 11).
Judging from the research material, the FT seems to join the call of the late
twentieth century for market-oriented reforms. As the reforms are addressed,
the state and public sector seem to be most in the need of reformatory actions.
The reforms seem to point almost without exception to the decreasing role
of public funding and taxes in the economy. Having a history as a paper of
the international investor and emphasizing financial discipline, the FT follows

198
 ON THE DARK SIDE OF DEMOCRACY

up on its tradition and consequently applies market liberalism to countries

worldwide by framing its election stories, columns and leaders in terms of
liberal economic reforms and emphasizing the primacy of fiscal discipline over
welfare spending.
For instance, in the case of the Portuguese election in 2005, the new Prime
Minister José Socrates announces that his target is a ‘Nordic social democracy’.
The FT clearly delineates in a news story what that means in practice for
Portugal ‘tough reform and austere approach to public spending’. This will
mean in concrete terms cuts in the public sector:

Disciplining expenditure will involve cutting back an army of 700,000 public

employees with a wage bill equivalent to 15 per cent of gross domestic product.
Mr Socrates says he will cut 75,000 public sector jobs in four years without
imposing redundancies [15].

The massive cuttings of the public sector employment are presented as a

simple and an unquestionable route to ‘Nordic prosperity’ for Portugal, a country
with an already much smaller public sector and higher unemployment than the
Nordic countries.
In the Japanese elections in 2005, the state is described in rather bleak terms
in a ‘Lex Column’:

For all the talk of reform and smaller government, the state reaches into much
of Japan. Government fingerprints are on everything from the lottery to
universities, telecoms to railways. The government has slashed funding to
special public corporations – essentially subsidised entities – but will still
channel $35bn their way this year. These groups waste resources and their
management is hobbled by the practice of amakudari, whereby government
officials ‘descend from heaven’ into cushy pre-retirement postings [16].

The discourse of reform has also a strong Anglo-Saxon element, which is

reflected for instance in the way Germany is seen. From the FT’s perspective,
Germany is clearly the country most badly in need of a structural economic
reform. In the 2002 elections after the red–green government had won, the FT
points out the need of reform. In an analysis story, Germany is seen as a failing
economy [17] and the election leader on Germany gives firm guidance how to
interpret the election results:

In a country chronically averse to change, Mr Schröder campaigned on a

platform of minimal economic reform, with his challenger offering little better.
But it would be a tragedy for Germany and Europe if the chancellor-elect now
interpreted this near dead heat as a mandate for further drift [18].

199
RECLAIMING THE MEDIA

In a similar vein in the context of the 2005 elections, the FT interprets in a

news story the failure of the conservative Angela Merkel of not gaining a definitive
majority with dismal tones by seeing the result as sending ‘shockwaves around the
European Union’ and leaving ‘supporters of economic reform in despair’ [19].

Roll over elections! The master plan of economics

When the elections result is backing economic reformers or the parties that are
counted as reformatory, the FT stories can be written rather easily. Countries,
which seem to pass the test of economic reform and democracy, are treated
favorably. Thus, for instance, India is labelled in a pre-election story in 2004 as
‘the new star of Asia combining democracy and economic growth’ [20].
In Eastern Europe, the Slovakia’s centre-right government is getting a positive
coverage as the result is described as a phoenixlike performance. Slovakia is
noted as one of the very few post-communist countries that has won a re-election
‘while pushing through tough reforms’, and the results are seen as a very positive
indication:

The new government should be welcomed by foreign investors and financial

markets. It will be more coherent than the current fractious left-right coalition,
allowing it to press ahead with painful budget cuts and reforming the public
sector [21].

However, when the election result is in conflict with the economic reformers,
financial journalism becomes a tricky task and the reasonable voice of journalism
is used to establish the order between the discourses of economy and democracy.
The most common way of positioning the economic reform as primary over
democratic discourses is to present the economic reform program as an
inevitable and unquestionable ‘task’ or ‘sole option’ for politics. This task or
challenge is stated as a matter of fact in similar ways in both the news stories
and the more opinionated leaders and columns.
The journalistic voice of the FT seems also to have a clear sense for ‘right’
policies and a clear conception on what is to be done in different countries –
despite the election result or the voters’ will. The economic reform is the
premier issue that has to be taken care of, and only after that there is space for
democracy and politics. For instance, in Slovakia in a 2002 news story, the major
task of politics is claimed to be ‘in the fiscal area which will not be very popular’.
Thus ‘there will need to be a consensus on economic reform’ [22].
In many cases the election result is openly questioned, and in some cases the
FT even seems to invalidate the election results by maintaining that the policy
programs, which have been defeated in the elections, should still be
implemented. For instance in India, the problems start with the outcome of the
2004 election, which wipes out the reformers [23] and their ‘genuinely liberal

200
 ON THE DARK SIDE OF DEMOCRACY

economic reforms’ [24]. The defeat of the reformers is discussed in an extensive

article, which brings out the various interpretations of the reform [25]. Finally,
the FT commentary story ends with the following conclusion:

In the short run, India’s economic reformers will be discouraged by yesterday’s

decisive verdict. But once the shock has been digested the conclusion might as
easily favour more comprehensive economic reform [26].

Also Sweden needs to rethink its policies. Social Democrats have won the
elections with a clear anti-reformative program, as the FT describes:

There has been no confusing Mr Persson’s message. Improving schools, social

services and the public health service go before any tax cuts. The main
opposition party, the conservative Moderates, who proposed large tax cuts, had
a disastrous result, losing around a third of its support [27].

Despite the election results and Persson’s victory, Sweden is getting a clearly
contradictory piece of advice. In a rather definitive and even threatening tone,
the FT concludes that the new prime minister should implement policies that
have just been defeated in the elections. The FT picks up the loosing agenda of
tax cuts and recommends the prime minister to move on with them despite the
election results:

But he [Mr. Persson] needs to do more if Sweden is to reverse its long slide from
near the top to the middle of the world prosperity league. He should cut taxes -
among the highest in Europe - to stop the corporate exodus and to foster small
business. He could pay for this by streamlining public services and pruning
welfare abuse. These moves should be on the agenda for his new term [28].

A similar negligence of the election results is visible in the 2002 Czech

elections. As Vladimir Spidla, a clearly articulated leftist, has won the elections,
the FT news story notices that the new prime minister ‘obstinately resisted
fundamental reform as minister and pledged to defend the welfare state during
the (election) campaign’. The FT then formulates in an analysis story the main
challenge for the new prime minister ‘[t]he question is can he also transform
himself into a reforming leftwing premier?’ The FT leader reminds the new
Czech government on the primacy of economic discipline despite the election
promises on welfare spending:

The new government must recognise that sound public finance comes first,
followed by further economic restructuring. Otherwise the gains of the past few
years will be lost, as will recent success in attracting foreign investment [29].

201
RECLAIMING THE MEDIA

After the German red-green victory in 2002, it is warned that if the government
should fail to make economic reforms its priority, the poll’s result could have an
adverse effect on growth. Ludwig Georg Braun, president of the assembly of the
German Chambers of Commerce calls for a reform ‘master-plan’ focused on
higher labor market flexibility, lower non-wage labor costs, modernization of the
social security system, and a working education system [30].
This idea of economic reform as a master plan of politics is a central element
in the political imaginary of the FT. The political community is described as a
primarily economic community, and the complicated political issues are
simplified and presented as having simple economic answers. The actual
contents of these reforms are, however, often discussed vaguely. Rather they are
thrown into the text as black boxes, reasonable solutions that float over the
struggling polity as if the problems of society had a simple economic solution
and as if there was a uniform and unquestionable understanding of the laws and
functions of the economy. The question is not how to make an economy
successful, but rather whether a society is willing to make the economy
successful as the way to economic prosperity consists of a clearly delineated and
well-known package of actions. The task of journalism is not to describe or
discuss the various alternative solutions to a given country’s problems but
rather to assess whether the voters and politicians are bright enough to adopt
the reasonable solution entitled economic, liberal, or fiscal reform.

Problem with the democratic process: the voters

The clash between the discourses of economic reform and the discourses of
democracy is also clearly seen in the ways the voters are positioned. The ‘will of
the voters’, deduced from the election results, forms one of the backbones of the
democratic process. However in the researched election coverage stories, the FT
does not show a great respect on their voice as voters are described rather seldom
in positive light.
Somewhat exceptionally the German correspondent interprets in his column
the ‘will of the voters’ in a favorable way ‘Germans are ahead of their politicians
in their willingness to accept reforms and change. All they need now is leaders
with the courage to put that into practice’ [31]. But especially in cases where the
election result does not support economic reforms, the voters are labelled in
unfavorable ways by questioning their reasonability and motives. Voters are also
often characterized being lead by emotions and instincts rather than reason. They
are considered emotional in opposition to the rationality of the rational economic
reforms. A leader describes the situation after the Czech election in 2002:

Reformist governments have struggled to win elections in ex-Communist central

and Eastern Europe. Voters, angry with the pain of economic restructuring,
have generally voted for a change of government when they have had the
chance [32].

202
 ON THE DARK SIDE OF DEMOCRACY

Besides being ‘angry’, voters are ‘against change’ [33], ‘instinctively reform-
shy’ and ‘alarmed’ [34], ‘taking revenge’ [35], ‘venting their anger’ [36], ‘spoilt’
[37], their ‘fears are exploited’ [38], and, in the French case, they have ‘superficial
distrust’ of global capitalism [39].
In France, the FT leader formulates a clear recipe challenging the voters’
priority:

The government may be tempted to pour its energies into law and order – the
voters’ priority – and do little else. That would be a mistake. Consequently the
leader lists a variety of ‘unavoidable’ reforms such as tax cuts, the reform of
the ‘bloated’ bureaucracy and privatization [40].

The problems of the political system are often seen to lie within the irrationality
of the electorate and framed in terms of irrational populism and nationalism.
Alongside with the problems of populism [41] and ‘hard-nosed’ nationalism [42],
the notion of xenophobia is mentioned as a problem, at least in Italian, Danish,
Swedish, Russian, Austrian, Turkish, and Indian political life [43]. Sometimes,
especially in the rare stories where voters are interviewed – thus including the
‘real voice’ of ‘the man on the street’ – they are described as passive bystanders,
not interested in politics [44] and dissatisfied with politics in general.
In many cases, the inevitable reforms and the voters are seen as oppositional.
In Russia ‘the biggest problem for Putin is that modernization has to enter a stage
where reforms really hurt’ [45]. In an US election story, it is stated that the true
problems of the economy cannot be discussed in elections, as the solutions would
see Americans worse off and ‘this is the problem with the democratic process’
[46]. In Germany, the problem of the unreasonable and also morally suspect
voters is clearly delineated in an analysis story on the 2005 election. The article
takes off by saying ‘no one doubts that Germany needs radical tax reform’, but:

There lies the great dilemma. It seems that you cannot win a German election
if you promise too much reform, even if all the party leaders know that pensions,
the health service, the labour market and tax system need radical action [47].

The voters are criticized for being troubled by self-interest and for not
warming up to the idea of a flat tax:

Yet Prof Kirchhof’s flat tax solution is too radical for German voters to
swallow. Most benefit from tax breaks and they do not want to lose them.
Mr Schröder and his allies have exploited the fears by portraying the professor
as a threat to the entire German social contract [48].

Voters are, thus, depicted as self-interested economic men, who are not
capable of understanding the reasonable logic of reform. The real issues cannot

203
RECLAIMING THE MEDIA

be discussed in the public election debate, as voters would not back them up.
Democratic politics are thus caught in the gridlock of the unreasonable voter.
Consequently, in some cases it is made clear that the government has to act
despite the ‘will of the electorate’. For instance, the analysis story as well as the
leading article on the 2002 Czech elections suggest that economic reforms should
be implemented even when they are adverse to the election-winning manifestos.
As the reforms do not pass in elections, they need to be implemented just after
the new government has been elected and well before the next elections.
The Prime Minister Spidla is recommended to immediately go on with an
unpopular reform well before the next elections, as the ‘main challenge’ of the
new prime minister is to cut the budget deficit and ‘to reform the welfare state,
particularly the loss-making state pension system’. The immediate pension
reform is urged by a US think tank professor concluding ‘[t]he only time a new
government can do it is one to two years after the election’ [49].
The primacy of economic reform thus rolls over democracy. If the voters do
not back the reform, it is to be implemented long before new elections take place
and the elected politicians are to act against their election promises. In cases
where the election results are in discrepancy with the ideas of the economic
reform, the former gives way. The perception of voters is formulated by the
financial journalistic discourses in ways, which do not hamper the primacy of the
economic reform.

Sad truth about politics

The antidemocratic tone of FT’s financial journalism is also visible in the ways
national politics are described. National politics, which are the primary arena of
democracy, are often treated with cautious criticism. At times, it looks like the
sceptical discourse of the watchdog journalist and of the market liberalist
suspicious of state, find each other and form a particular discourse of political
cynicism, which is directed towards anti-reformatory politics. For example, in a
post-election story on the German elections, the new prime minister is blamed
for flowery language and described sceptically because he might not implement
the liberal market reforms the FT supports:

While fitting for a morning-after speech, such flowery language gives few
answers to the key question hanging over Germany’s new government: whether
the chancellor will use his renewed mandate to introduce the far-reaching
reforms needed to kick-start the weak economy and restructure the country’s
creaking pension, health and social welfare systems [50].

Most often the suspicion with politics seems to be linked with the national
element of politics. The logics of globalizing capital and weakening of the nation
state seem to be reflected in the discourse of the FT and its suspicion towards
national politics. Politics often gets a somewhat dubious sound, as a way of dealing

204
 ON THE DARK SIDE OF DEMOCRACY

with things. There is lots of suspicion with regard to the ‘old’ national interest
groups. This is related to the perspective of the global investor, who favors the new
globalizing economy:

From the point of view of foreign investors, the crucial point is that economic
reform, deregulation, privatization and the opening up of India to the world
through lower tariffs and fewer trade barriers are likely to continue [51].

This point of view seems to contribute to the rather negative tone towards
nationally based politics and economies. The post-war national systems are
seen in a negative light. The old nationally based politics are often depicted in
a negative tone and seen as opposed to economic reform. In the Turkish case, a
tough fiscal policy and the ‘cleaning up of the banking system’ are seen as
foundation for a much ‘healthier’ economy. However it is warned that ‘There is
a danger that partisan politics might again be allowed to subvert transparency
and genuine competition in the marketplace’ [52]. In Japan, the pro-market
reform, the ‘lionheart’ Prime Minister Koizumi is seen battling against the
‘political machine’ [53].
In the coverage of the Mexican elections in 2000, the until-then hegemonic
Institutional Revolutionary Party is characterized as ‘the world’s longest-ruling
political dynasty’ [54]. Mexican society is hampered by ‘oligopolists’ and ‘special
interest groups’ [55]. The German interest groups are described as ‘antediluvian’
[56]. Japan is hampered by ‘pork-barrel’ politics [57]. Politics, still very much a
national activity, is characterized as ‘partisan’, as an antidote to something
unpartisan and neutral. Politics incline towards ‘political horse trading’ [58] and
‘ideological zigzags’ [59].
After the German election 2005, the unfortunate election result is seen in
terms of an opposition between politics and economic sensibility: ‘As of today, the
politically most likely and economically least sensible option is a grand coalition
of some sort’ [60].

Strong leaders wanted

As democracy, voters, elections, and politics pose problems for economic
reformers, the solution is often seen in strong leadership. Strong leaders are
sought and wanted in order to drive through the necessary liberal reforms and
they are praised for their actions – at least as long as they are also economic
reformers along the lines of the FT. Japan’s Junichiro Koizumi fits the picture.
In the case of the Japanese election in 2005 a column starts:

Junichiro Koizumi is the type of leader markets love: one with overwhelming
public support and a mandate for reform. Japan’s stock market yesterday
added its vote of approval to his landslide election victory, hitting a four-year
high [61].

205
RECLAIMING THE MEDIA

In another story, the following comment is made: ‘many voters find attractive
the idea of a leader standing up for what he believes in and daring to take on the
sacred cows of the LDP’. The analysis is enhanced by quoting an informant:

‘Koizumi is taking on the ancien régime,’ says one person who has worked
closely with the prime minister. ‘He’s the only one with the guts to do it. People
like him for that’ [62].

As the voters act somewhat irrationally, strong leadership, a semi-antithesis

of democracy, is seen as the way to solve the problems of democracy. In the UK
elections, the dilemma is summarized by a columnist, who compares the
first-past-the-post and the proportional voting systems vice versa economic
reforms:

But if we think of democracy as a decision rule, the issue is a little more

complicated. At times when radical reform is needed, such as in the Britain of
the late 1970s, first-past-the-post enables a government such as Margaret
Thatcher’s to take unpopular initiatives and allow the electorate to vote
subsequently on the results. In Germany today the combination of proportional
representation, plus the need on many issues to get a majority of the regional
governments as well, puts a brake on needed reform [63].

In a similar tone, the prospect of UK politics is described in 2005 as depending

on the capability of leading politicians and warns that a considerable part of the
labor MPs are ‘hardened rebels’ who could pose a threat to reform:

Tony Blair and Gordon Brown forged a powerful alliance in the election
campaign in order to put Labour back in power. The central question in British
politics now is whether that co-operation will continue – or whether we will soon
be back to the old squabbles of the past. If co-operation between the prime
minister and the chancellor carries on with the same intensity seen recently, then
Labour has a chance of pushing through a third-term reform programme [64].

The idea is not about respecting the views of the elected MPs but rather about
hoping that opposing voices are silenced in the face of the ‘united front’.
In the case of Mexico, the Mexican president is compared unfavorably with
the determinate leadership of President Reagan:

Mr Reagan set an agenda with a limited number of clear priorities and hired
effective ‘enforcers’ to work for him. Mr Fox appointed a politically diverse yet
inexperienced cabinet with no clear ‘enforcer’ and failed to lay out a clear
agenda [65].

206
 ON THE DARK SIDE OF DEMOCRACY

In the Polish elections in 2001, the result is interpreted as unfortunate as

it ‘has left the country facing political uncertainty just when it needs strong
leadership to prepare for European Union accession’ [66]. In Sweden, the
referendum on adopting the Euro and joining the EMU is seen as a matter of
party leadership. In a pre-referendum story in 2002, where party leaders clearly
supported the Euro but voters were divided, the FT sees that ‘A strong and
united SDP is seen as being best able to persuade sceptical Swedes that joining
the single currency is in the country’s interest’ [67].
Also Germany – the country with voters most stubbornly resisting economic
reforms – is suffering from the lack of strong leadership, which is noted in both
the elections in 2002 and 2005. A leader concludes in 2002 ‘Germany and Europe
need a chancellor who will be bloody, bold and resolute – and willing to take on
vested interests for the greater good’ [68].
The German 2005 elections are interpreted as a sign of a wider problem of
the European political leaders in a news story entitled ‘Spectre of election defeat
stalks Europe’s reformers’. Despite their constant ‘vows’ for economic reform,
the European leaders have difficulties ‘turning the rhetoric [of economic reform]
into vote winning strategies’. The FT story infers that – with the notable exception
of Margaret Thatcher – it has been not possible to promise a programme of radical
economic reform in Europe and win elections. And further on, the same dilemma
applies to the ‘almost every post-communist government in central Europe’ [69].
This emphasis on strong leadership seems to be linked with a rather
anti-democratic understanding of democracy. If the outcomes of democracy are
not what the FT hopes for, the problem lies with its weak leaders, not in weak
ideas loosing in elections. The main task of the political leadership is thus to
implement the economic reforms even when they are contradictory to the election
results. This rather anti-democratic call for strong leadership can thus be
understood as a way of trying to solve the discrepancies between the economic
and democratic discourses by framing the unpopularity of the economic problems
in terms of leadership rather than of democracy.

Political imaginary of financial journalism

The political imaginary of the early twenty-first century FT is founded on
democracy and on market liberalism. However, when the hierarchy between
these two discourses is analyzed, it becomes clear that the central element in the
political imaginary of financial journalism is its priority for liberal market
reforms. When in conflict, democracy, elections, voters, and politics are
subservient to them.
The FT strongly promotes democracy both in western and non-western
countries, but in cases where the proponents of market liberalism are not on the
winning side in elections, the paper gets deeply critical of democracy. When the
liberal economic reformers loose in elections, the FT frames the issues in ways,

207
RECLAIMING THE MEDIA

which belittle the democratic principles and practices. Moreover, the FT often
takes clear political stances and maintains the need for the implementation of
liberal economic reforms notwithstanding their poor performance in elections.
The market reforms are seen as unavoidable, despite contradicting election results.
In order to maintain the reasonability of its own political stance, the paper labels
the voters as emotional or self-interested, national politics as morally questionable
and calls for strong leaders.
The political imaginary of the FT can perhaps be understood as an element
of the political regime of globalization as an attempt to re-imagine and redefine
the national polis at the age of internationalized capital. This global imaginary
questions the reasonability of national democracies and sees them as secondary
to the primary aims of economic liberalism. The mobile capital has a need for a
political language, which reduces the local meanings and co-ordinates them in a
standardized way. David Harvey (1989: 284–307; 2001: 121–7) speaks of the
time–space compression entailed in capitalism. Capital accumulation has always
thrived for the speeding and widening up of action. It thus reduces and brings
down temporal and spatial barriers that flexible capitalism does not need and
only tolerates localized identities and polities. The early twenty-first century FT
seems to be contributing to this globalizing discourse of the liberalized economy
by questioning the premises of the nation state, national politics, and elections.
The FT seems to carry on the interest of the internationalized investor and
finance capital by trying to promote democracy and market economy in order to
open up the national economies for international finance.
The practises and discourses of modern journalism have a role to play here.
Modern journalism, which includes the financial journalism of the FT, has been
characterized by strives for autonomic professionalism, for impartiality, as well as
for independence and freedom from external control. The Anglo-Saxon press
adopted these ideals of the news paradigm first during the nineteenth century,
and their birth has been linked with the historical and economic conditions of
news production as well as with attempts to create professional integrity and to
legitimize journalistic work (Barnhurst, 2005; Pöttker, 2005a; Schudson, 2005).
This tradition of impartial professionalism should however not be understood as
the only constitutive element of journalism. In many cases, its importance might
even be exaggerated. For instance, Michael Schudson argues that the norm of
objectivity was never adopted with such fervour in British journalism as in the
case of North American journalism (Schudson, 2001: 165–7). Thus rather than
being only a fact-finding mission, journalism is a mixture of various elements
(Carpentier, 2005; Deuze, 2005; Pöttker, 2005b), and this indeed also seems to
be the case with FT’s financial journalism. Covered by the language of impartial
journalism, the paper takes strong political stances.
From the point of the democracy, the political imaginary of the FT has a
questionable element in its cynicism towards politics, voters, and democracy. The

208
 ON THE DARK SIDE OF DEMOCRACY

FT’s journalism seems to contribute to the anti-political vein of the trans-national

economy, undermining the principles of democracy (Kantola, 2001). The FT
seems to have a master plan of politics, a pre-ordained ‘black box’ of economic
reform that must be implemented in any case. The political imaginary of the FT
journalism is thus dominated by economism – a strong belief that societal and
political issues are economic issues and can be solved by economic solutions.
This imaginary is based on an antithetical position towards the democratic
polis: the imaginary of the economic machine, which needs to be run according
to clear rules and which needs to be controlled by strong leaders; not by politics,
a diversity of opinions and heteronomy but rather by a unity of opinions. The
paradox is that this system of preordained order is promoted in the name of
liberalism, freedom, and democracy. Thus one could say that the political
imaginary of FT’s financial journalism has a flavour of hypocrisy: democracy
hailed in principle but belittled in practice.
At the same time, the FT seems to construct a globalizing deterritorialized
elite space in the public sphere. What is left is a deterrorialized language not linked
to any specific place. National and local circumstances are transformed into an
‘environment’ or a home base, which needs to be developed from the point of the
view of global capital as sites of production and consumption. Thus democracy,
elections and voters become troublesome when representing logics and ideas that
might harass the advance of the capital. Globalizing capitalism, or as Marc Augé
(1995) says, supermodernity, develops abstract notions, which bypass the local
histories and reformulate local spaces as sites of production. There is less
special meaning attached to a space. A space can be characterized by more general
qualifications, which may be standardized and applicable to other spaces as well.
As this unifying and deterritorialized language is loosing its links with everyday
reality and local circumstances, it is used primarily for governing spaces with a
globalized imaginary of productivism, which belittles the local polities and
democracies as nuisances for the inevitable advance of the global economy.

Notes for Chapter Nine

[1] The selection of the research material on the 2-week period might leave out
some nuances of the election coverage process. However, the majority of the
election reporting is concentrated within the researched period. An explorative
check of the other election stories confirmed that they were similar to the
actual research material. The main advantage of the 2-week selection period is
that the material is more consistent and comparable between countries as the
research material concentrates on the main stories surrounding the elections.
[2] World News – Europe: Red faces in ministry over fiasco at the poll booths:
High turnout reflected the strong popular interest in the election, but caught
the organizers on the hop, Paul Betts, 14 May 2001.

209
RECLAIMING THE MEDIA

[3] Leader: Return to the centre, 24 January 2003.

[4] Leader: Indian vote signals, 3 May 2004.
[5] Comment and analysis: Fox spurs a revolution: The former Coca-Cola
salesman’s victory marks Mexico’s transition from one-party rule to pluralist
democracy, Henry Tricks and Richard Lapper, 4 July 2000.
[6] Postal vote: Koizumi makes Japan choose between paternalism and the free
market, David Pilling, 10 August 2005.
[7] Leader: Japan in transition, 10 September 2005.
[8] Europe: Leaders fall on swords as voters rise in rebellion, Leyla Boulton,
5 November 2002.
[9] Europe: Putin holds political cards after opponents trounced, By Andrew Jack
and Arkady Ostrovsky, 9 December 2003.
[10] Leader: Putin power, 9 December 2003.
[11] Europe: Triumph brings Persson closer to euro, Christopher Brown-Humes
and Nicholas George in Stockholm; 17 September 2002. Comment and
analysis: Germany resists change, but Joschka Fischer looks ahead. Brian
Groom and Haig Simonian; 24 September 2002. German elections: Schröder
promises to ‘push forward with renewal’, Hugh Williamson in Berlin; 24
September 2002.
[12] Europe: Czechs’ modest new premier faces up to huge reform challenge.
Robert Anderson; 19 June 2002.
[13] Comment and analysis: Free trade with the United States and Canada did not
spur wider economic reform, and limited progress towards creating prosperity
is in danger, John Authers and Sara Silver; 1 July, 2003.
[14] Comment and analysis: Hail Berlusconi: The scale of the centre-right’s
victory suggests Italy’s new premier has a mandate for change but he faces
difficulties on at least three fronts, James Blitz, 15 May 2005.
[15] Europe: Portuguese PM faces tough route to ‘Nordic’ prosperity, Peter Wise in
Lisbon; 22 Feb 2005.
[16] Lex column: Enemy of the state, 13 September 2005.
[17] Comment and analysis: A second bite for Gerhard Schröder, Heinrich Von Pierer,
24 September 2002.
[18] Leader: Time for leadership in Germany, 24 September 2002.
[19] Poll deals blow to advocates of EU economic reform, George Parker and James
Blitz, 19 September 2005.

210
 ON THE DARK SIDE OF DEMOCRACY

[20] Companies International: India emerges as the new star of Asia: Democracy –
and growth, Daniel Bogler, 10 May 2004.
[21] Europe: Centre-right poll win boosts Slovakia’s EU chances, Robert Anderson
in Bratislava, 23 September 2002.
[22] Europe and International Economy: European Union hails centre-right victory
in Slovakia, Robert Anderson, 24 September 2002.
[23] Asia-Pacific: Election setback for Indian reformers, Edward Luce in New Delhi,
12 May 2004.
[24] Leader: Indian vote signals, 3 May 2004.
[25] Asia-Pacific: Election setback for Indian reformers, Edward Luce in New Delhi,
12 May 2004. Leader: India’s challenge, 19 April 2004.
[26] Asia-Pacific: Voters take revenge on India’s leading symbol of reform, Edward
Luce, 12 May 2004.
[27] World News: Jubilant Persson increases his vote, Nicholas George and
Christopher Brown-Humes in Stockholm, 16 September 2002.
[28] Leader: Same Swedes, 17 September 2002.
[29] Leader: Czech chance, 17 June 2002.
[30] German elections: Business gloomy on growth prospects, By Bertrand Benoit
in Berlin, 24 September 2002.
[31] Inside track: Colors of coalition, Daniel Bogler, 27 September 2002.
[32] Leader: Czech chance, 17 June 2002.
[33] Political gridlock in Germany reflects a vote against change, Wolfgang
Munchau, 20 September 2005.
[34] Radical reform alarms German voters, 15 September 2005.
[35] Asia-Pacific: Voters take revenge on India’s leading symbol of reform, Edward
Luce, 12 May 2004.
[36] Leader: Poll Shock, 25 September 2001.
[37] World News – Europe: Norwegian electorate set to abandon party loyalties:
There is uncertainty about which will emerge as biggest party, Christopher
Brown-Humes and Valeria Criscione, 6 September 2001.
[38] Radical Reform alarms German voters, 15 September 2005.
[39] Comment and Analysis: France goes on sale, Victor Mallet, 18 June 2002.
[40] Leader: French lessons, 18 June 2002.

211
RECLAIMING THE MEDIA

[41] Centre-left wins majority in Norwegian election, Päivi Munter in Oslo,

12 September 2005.
[42] Leader: Bush gets mandate to be strong abroad, 4 November 2004.
[43] Comment and Analysis: Hail Berlusconi: The scale of the centre-right’s victory
suggests Italy’s new premier has a mandate for change but he faces difficulties
on at least three fronts, James Blitz, 15 May 2001. Leader: Rasmussen twins,
22 November 2001. Leader: Same Swedes, 17 September 2002. Europe:
Leaders fall on swords as voters rise in rebellion, Leyla Boulton, 5 November
2002. Europe: Prospect of Haider comeback looms over coalition politics, Eric
Frey in Vienna, 26 November 2002. Leader: Putin power, 9 December 2003.
Leader: Indian vote signals, 3 May 2004.
[44] Politicians fail to connect as voters look to their wallets, Richard Milne in
Munich and Bertrand Benoit in Berlin, 19 September 2005. The Americas:
Battle for Danforth Avenue could swing Toronto vote, Ken Warn, 25 June 2004.
[45] Comment and analysis: Four more years: but will Putin’s desire for a strong
state hamper economic reform? Top jobs set an assertive tone; Andrew Jack
and Stefan Wagstyl, 17 Mar 2004.
[46] FT Money: The morning after, and a nation beset by debts, Philip Coggan,
6 November 2004.
[47] Radical reform alarms German voters, 15 September 2005.
[48] Radical reform alarms German voters, 15 September 2005.
[49] Europe: Czechs’ modest new premier faces up to huge reform challenge, by
Robert Anderson, 19 June 2002.
[50] German elections: Schröder promises to ‘push forward with renewal’, By Hugh
Williamson in Berlin, 24 September 2002.
[51] Companies International: India emerges as the new star of Asia: Democracy –
and growth, Daniel Bogler, 10 May 2004.
[52] Comment and analysis: Turkey should not abandon Ataturk, Kemal Dervis,
5 November 2002.
[53] Koizumi vindicated: renewal is achieved for his party and is in prospect for
Japan, David Pilling, 13 September 2005.
[54] Comment and analysis: Fox spurs a revolution: The former Coca-Cola
salesman’s victory marks Mexico’s transition from one-party rule to pluralist
democracy, Henry Tricks and Richard Lapper, 4 July 2000.
[55] Comment and Analysis: Free trade with the United States and Canada did not
spur wider economic reform, and limited progress towards creating prosperity
is in danger, John Authers and Sara Silver, 1 July 2003.

212
 ON THE DARK SIDE OF DEMOCRACY

[56] Inside track: Colors of coalition, Daniel Bogler, 27 September 2002.

[57] Koizumi vindicated: renewal is achieved for his party and is in prospect for
Japan, David Pilling, 13 September 2005.
[58] Lex Column: German gridlock, 19 September 2005.
[59] Leader: Germany votes, 20 September 2002.
[60] Political gridlock in Germany reflects a vote against change, Wolfgang Munchau,
20 September 2005.
[61] Lex Column: Enemy of the state, 13 September 2005.
[62] Postal vote: Koizumi makes Japan choose between paternalism and the free
market, David Pilling, 10 August 2005.
[63] Samuel Brittan: Democracy alone is not enough, Samuel Brittan, 12 May
2005.
[64] Election 2005. The third term: United front needed to face down rebels,
James Blitz, 7 May 2005.
[65] Comment and analysis: Free trade with the United States and Canada did not
spur wider economic reform, and limited progress towards creating prosperity
is in danger, John Authers and Sara Silver, 1 July 2003.
[66] Leader: Poll shock, 25 September 2001.
[67] World News: Jubilant Persson increases his vote, Nicholas George and
Christopher Brown-Humes in Stockholm, 16 September 2002.
[68] Leader: Time for leadership in Germany. 24 September 2002.
[69] Leader: Time for leadership in Germany, 24 September 2002. Spectre of
election defeat stalks Europe’s reformers, Robert Anderson, Paivi Munter,
George Parker and John Thornhill, 22 September 2005.

References for Chapter Nine

Anderson, B. (1983), Imagined Communities: Reflections on the Origin and Spread
of Nationalism, New York: Verso.
Augé, M. (1995), Non-Places, Introduction to an Anthropology of Supermodernity,
London: Verso.
Barnhurst, K. (2005), ‘News Ideology in the Twentieth Century’, in S. Høyer and
H. Pöttker (eds.), Diffusion of the News Paradigm, Göterborg: Nordicom,
pp. 239–62.
Bauman, Z. (1999), In Search of Politics, Cambridge: Polity Press.

213
RECLAIMING THE MEDIA

Blumler, J., Gurevitch, M. (1995), The Crisis of Public Communication, London:

Routledge.
Cameron, A., Palan, R. (2004), The Imagined Economies of Globalization, London:
Sage.
Carpentier, N. (2005), ‘Identity, Contingency and Rigidity. The (Counter-)Hegemonic
Constructions of the Identity of the Media Professional’, Journalism, 6: 2,
pp. 199–219.
Cerny, P. (1990), The Changing Architecture of Politics. Structure, Agency and the
Future of the State, London: Sage.
Clarke, J. (2004), Changing Welfare, Changing State. New Directions in Social Policy,
London: Sage.
Dahlgren, P. (2001), ‘The Public Sphere and the Net. Structure, Space and
Communication’, in L. W. Bennett and R. M. Entma (eds.), Mediated Politics.
Communication in the Future of Democracy, Cambridge: Cambridge
University Press, pp. 33–55.
Deuze, M. (2005), ‘What is Journalism? Professional Identity and Ideology of
Journalists Reconsidered’, Journalism, 6: 4, pp. 442–64.
Financial Times (2005a), ‘European Opinion Leaders Survey 2003’. www.ft.com/
mediakit. Downloaded on 19 August 2005.
—— (2005b), ‘The FT audience in the UK. The FT Audience in Europe. The FT
Audience in Asia.’ www.ft.com/toolkit. Downloaded on 19 August 2005.
Franklin, B. (2004), Packaging Politics. Political Communications in Britain’s Media
Democracy, (2nd ed.), London: Arnold.
González-Vélez, M. (2002), ‘Assessing the Conceptual Use of Social Imagination in
Media Research’, Journal of Communication Inquiry, 26: 4, pp. 349–53.
Habermas, J. (1999), ‘The European Nation-State and the Pressures of Globalization’,
New Left Review, 1: 23, pp. 46–59.
Hardt, M., Negri, A. (2000), Empire, Cambridge, Massachusetts: Harvard
University Press.
Harvey, D. (1989), The Condition of Postmodernity, Oxford: Basil Blackwell.
—— (2001), Spaces of Capital. Towards a Critical Geography, Edinburgh: Edinburgh
University Press.
Hay, C. (2004), ‘The Normalising Role of Rationalist Assumptions in the Institutional
Embedding of Neoliberalism’, Economy and Society, 33: 4, pp. 500–27.

214
 ON THE DARK SIDE OF DEMOCRACY

Hirst, P., Thompson, G. (1996), Globalization in Question: the Iinternational Economy

and the Possibilities of Governance, Cambridge: Polity Press.
Kantola, A. (2001), ‘Leaving Public Places: Antipolitical and Antipublic Forces of
the Transnational Economy’, Javnost, 8: 1, pp. 59–74.
Kynaston, D. (1988), The Financial Times. A Centenary History, London: Viking.
Louw, E. (2005), The Media and Political Process, London: Sage.
McNair, B. (2000), Journalism and Democracy: An Evaluation of the Political Public
Sphere, London: Routledge.
Pöttker, H. (2005a), ‘The News Pyramid and its Origin From the American
Journalism in the 19th Century. A Professional Approach and an Empirical
Inquiry’, in S. Høyer and H. Pöttker (eds.), Diffusion of the News Paradigm,
Göterborg: Nordicom, pp. 51–64.
—— (2005b), ‘Epilogue. Perspectives on the Development of the News Paradigm’,
in S. Høyer and H. Pöttker (eds.), Diffusion of the News Paradigm, Göterborg:
Nordicom, pp. 263–72.
Schmidt, V. (1995), ‘The New World Order, Incorporated: The Rise of Business and
the Decline of the Nation State’, Daedalus, 124: 2, pp. 75–106.
Schudson, M. (2001), ‘The Objectivity Norm in American Journalism’, Journalism,
2: 2, pp. 149–70.
Schudson, M. (2005), ‘The Emergence of the Objectivity Norm in American
Journalism’, in S. Høyer and H. Pöttker (eds.), Diffusion of the News Paradigm,
Göterborg: Nordicom, pp. 19–36.
Sklair, L. (2002), ‘The Transnational Capitalist Class and Global Politics:
Deconstructing the Corporate-State Connection’, International Political
Science Review, 23: 2, pp. 159–74.
Strange, S. (1996), The Retreat of the State: The Diffusion of Power in the World
Economy, Cambridge: Cambridge University Press.
Taylor, C. (2004), Modern Social Imaginaries, Durham: Duke University Press.
Touraine, A. (1990), ‘The Idea of Revolution’, Theory, Culture and Society, 7,
pp. 121–41.
Warf, B. (1999), ‘The Hypermobility of Capital and the Collapse of the Keynesian
State’, in R. Martin (ed.), Money and the Space Economy, Chichester: John
Wiley & Sons, pp. 227–39.

215
 Journalism

Copyright © 2006 SAGE Publications

(London, Thousand Oaks, CA and New Delhi)
Vol. 7(4): 433–452 DOI: 10.1177/1464884906068361

ARTICLE

Financial news journalism

A post-Enron analysis of approaches towards
economic and financial news production in the UK

䊏 Gillian Doyle
University of Stirling, UK

ABSTRACT

The collapse of Enron and other corporate scandals have raised concerns about the
efficacy of financial journalism. Based on research on where reporters get their ideas for
stories and how they approach their work, this article explores the particular
circumstances in which production of financial and economic news takes place. The
author argues that, while reporters are generally highly sceptical about ‘spin’ and
strongly inclined towards highlighting instances of corporate underperformance
and mismanagement, the circumstances and constraints they work within nonetheless
make it unlikely that financial irregularities obscured within company accounts will be
detected on a routine or consistent basis. Moreover, the way in which the commercial
sector is organized (with in-depth analysis generally confined to specialist media whose
audiences are already financially literate) means that the task of facilitating a sound
public grasp over the significance of financial and economic news developments is
largely being neglected.
KEY WORDS 䊏 agendas 䊏 corporate influence 䊏 economic journalism 䊏 financial
journalism 䊏 financial press 䊏 news decisions 䊏 sources

Introduction

Why is it that the Enron collapse of 2001 came as a surprise to financial

journalists and the world at large? 1 According to Andrew Gowers, editor of the
Financial Times (FT), the warning signs which ought to have triggered suspi-
cion (i.e. anomalies in the annual report for the previous year) were all present
ahead of the company’s sudden demise. But ‘[t]he press blindly accepted
Enron as the epitome of a new post-deregulation corporate model, when it
should have been much more interested in probing the company’ (Gowers
cited in West, 2005: 9).
The extent to which financial and economic news coverage adequately
informs the public will most obviously flare up as a matter of concern when

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

434 Journalism 7(4)

what is seen as poor journalism is accompanied by widespread and painful

personal losses such as those precipitated by an unexpected collapse in share
prices (Oborne, 2002: 55; Sherman, 2002). The immediate experience of
financial loss or gain is, of course, not the only issue at stake. How well
journalists do in interpreting and describing economic and business news and
the public’s grasp over these issues also has potentially important political
ramifications. This was clearly evident, for instance, in the explicit emphasis
given to the economy as the ‘key to victory’ in New Labour’s 2005 campaign
for re-election (Wintour et al., 2005: 1).
In the wake of Enron and other corporate scandals that have raised
concern about the efficacy of financial journalism, this article sets out to
explore the particular circumstances that surround production of economic
and financial news content. Despite important earlier work that has analysed
the role of specialist correspondents – most notably by Tunstall (1971) –
relatively little discussion has taken place within academic literature about
issues and features that are specific or particular to this area of journalism. Yet
at the same time, it is increasingly recognized that perceptions about the
economy and prevailing business climate occupy central importance within
everyday political debates (Goddard et al., 1998: 33). This exploratory study
opens up economic and financial news production to examination by in-
vestigating where reporters get their ideas for stories from, how they approach
their work, how sources are used and which pressures they face. More gen-
erally, this article aims to consider the nature of the contribution to public
knowledge made by financial journalism.
Desirable though it is that news coverage should facilitate informed public
engagement with important issues of the day, there is relatively little evidence
to suggest that the ways in which economic and financial developments are
reported do, in fact, engender widespread and in-depth comprehension,
particularly for non-specialist audiences. Earlier research that has focused on
the content of news reporting has identified, for example, the ways in which
accounts of economic events and processes within mainstream media may
often be incomplete or excessively vague (Jensen, 1987). Research into audi-
ence reception of economic news on television has also identified numerous
problems related to comprehension (Goddard et al., 1998).
Some research work has been critical of perceived partialities in economic
and business news coverage and of the role played by corporate public
relations (PR) in manipulating public opinion (Dreier, 1982; Glasgow Uni-
versity Media Group, 1976, 1980). Davis has argued that the main purpose of

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 435

deploying corporate PR is not to sway the public at large but rather to

influence ‘other, mostly corporate, elites’ (2000: 283) – corporations vie with
each other for the attention of a target audience primarily composed of
investors. In so doing, they dominate or ‘capture’ business and financial news
agendas to the exclusion of all other interests (Davis, 2002: 70).
The notion that business news coverage is heavily influenced by powerful
and self-interested corporations accords with the radical critique offered by
economist J. K. Galbraith. For Galbraith (2004), economists, politicians and
media are all party to an ‘innocent fraud’ in their interpretation of economic
and financial events and all have colluded in myths (such as that of a benign
‘market’) that obscure rather than illuminate the grip of big business over
public life.
Are economic and financial journalists systematically duped by corporate
spin or do they bring to bear a critical expertise which helps contribute to an
informed citizenry? By examining where financial reporters in the UK get their
ideas for stories from and how they approach their work, this article aims to
explore the sort of intellectual climate and circumstances in which production
of this particular type of news takes place. The research underpinning this
analysis took place in spring 2005 and involved observation of news meetings
and a series of in-depth interviews.2
The findings presented below indicate that many of the pressures and
imperatives faced by financial and economic journalists are, in fact, similar to
those affecting specialists that cover other ‘beats’, for example, constraints
over time and resources and the need to remain close, but not too close, to
relevant sources (Tiffen, 1989; Tunstall, 1971). However, the conditions and
challenges surrounding production of financial and economic news content
are distinctive in some respects at least. Gowers’ assessment that journalists
need to stand up more firmly to ‘corporate bullying’ is acknowledgement of
one particular sort of pressure that bears consistently upon financial news
reportage (cited in West, 2005: 9). Another notable difficulty is that, as argued
below, the domain from which economic and financial news emerges is one of
imperfect knowledge and where the informational needs of the professional
investors routinely predominate over those of journalists.
Nonetheless, the extent to which financial and economic news coverage
facilitates a sound public grasp over unfolding news developments has im-
portant potential implications both in terms of civic empowerment and in
terms of democracy. Thus, in exploring the conditions within which this
particular sort of news is produced, a broader concern that this article seeks to
consider is the extent to which the current organization of financial news
coverage is conducive towards widening and advancing public understanding
about the meaning and significance of events in this arena.

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

436 Journalism 7(4)

Where do ideas for financial news stories come from?

The processes through which financial news stories are identified and selected
for coverage typically involve some degree of interplay between a news editor
and a reporter or reporters. Journalists are expected to bring forward ideas and
more weight is given to those generated by specialists and experienced corres-
pondents. In terms of where financial journalists get the ideas that they bring
to their editors, some are self-generated but most stem from scanning other
media (especially newswires) and sifting through official releases (e.g. com-
pany or government announcements) or semi-official data (industry surveys,
etc.) that routinely flow through to the news desk.
Thus, news selection procedures are not dissimilar from many other areas
of journalism. However, judgements amongst financial reporters about news-
worthiness are very strongly governed by perceptions about utility and levels
of financial literacy amongst target audiences. A reporter working for a
specialist publication such as the FT or the Investors Chronicle (IC) may well
have a quite different sense of what is newsworthy from a financial corres-
pondent working, say, for a mainstream Sunday newspaper or at CNN.
The readership for specialist financial publications is perceived by those
constructing news on its behalf as being educated, informed and relatively
literate on issues related to the economy. According to an FT journalist:
We’re very conscious of who we are writing for. We’re writing for investors such
as city fund managers. Our role is to inform educated, professional investors.

Journalists working within the business sections of more mainstream

media have a different sense of who and what interests they are catering to.
Whereas investors and ‘city people’ may represent a portion of their audience
(a component likely to be highly valued in terms of advertising), the general
purpose of business news coverage within regular newspapers or television is
rarely to speak to this constituency alone. Business news segments within
mainstream media are usually intended to be accessible and appealing for non-
specialist audiences – stories are expected to capture and sustain the attention
of a broad, lay readership. Entertainment is therefore high on the list of
priorities. One Sunday financial reporter explains:
I think our editor is very aware that a lot of our business readers are, let’s say,
people that are running shops in Birmingham for whom the intricacies of hedge
fund management are not going to grab them every week.

Contrasting news values are discernible in the approach towards selection

of, for example, stories about companies. For news outlets primarily concerned
with servicing the informational needs of investors, the key point of interest in
a company story will tend to be analysis of events (particularly unexpected
ones) affecting that company’s financial performance and earnings and, by

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 437

implication, its share price. At the FT, reporters rely heavily on routine
company announcements to the Stock Exchange (e.g. about results) to
generate initial ideas. In addition, self-generated ideas may emerge from
something a journalist picks up in the course of investigating routine or ‘diary’
stories or when a sector specialist spots an emerging pattern affecting com-
panies within their ‘beat’.
Within mainstream daily newspapers, selection of stories for the business
pages also relies to a large extent on ‘diary’ events – ideas drawn from the
routine flow of daily announcements of company results, news of mergers or
acquisitions, etc. Here, however, judgements of newsworthiness reflect a
different understanding of what readers hope to get out of looking at business
news and in which investment information is by no means seen as the main
angle. Typically, one of the main drivers underlying choice of stories is
whether a lay audience (i.e. a mixed readership including many who are not
investors) will recognize the players involved. Another consideration is the
scale of the financial events involved and whether this is likely to captivate a
non-specialist audience. One daily journalist describes the process of sifting
ideas for news stories as follows:

You tend to think about the size of the deal involved – numbers. When you’re
talking about multi-billion pound deals then that is considered very sexy indeed.
The other thing that would be considered of great value is if the companies
involved are household names. And that’s why retail companies get an awful lot
of coverage – because everyone knows them . . .

If there is a personal aspect – directors and pay-offs – then that can be helpful.
People have been interested over recent years in reward for failure and ‘fat cat
pay’ stories.

Responses gathered from a range of UK-based financial journalists suggest

that judgements about newsworthiness vary according to experience, training
and employment history. For some – especially those employed at specialist
publications such as the FT – good financial journalism involves in-depth
analysis intended to inform and perhaps shape investor sentiment and be-
haviour. For others – especially those catering primarily to lay audiences –
news coverage often leans more in the direction of ‘infotainment’ centred
around actors, events and intrigues that happen to be situated in the realm of
business and finance.
Of course, these two sorts of journalistic ambitions are not always mu-
tually exclusive and nor is it possible to neatly categorize all reporters’
inclinations purely on the basis of which publication they are writing for.
Indeed, many financial reporters have moved with relative ease between
specialist and mainstream journalism. Nonetheless, the imperative to avoid

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

438 Journalism 7(4)

alienating non-specialists is generally acknowledged as an important deter-

minant both within story selection and in the choice of points of engagement
offered by business segments at most mainstream media in the UK.
Consequently, company stories that centre around the activities, enuncia-
tions and perceived failings of prominent and well-paid corporate executives
feature with extreme regularity in the business pages of many if not most UK
newspapers. This conforms with Tumber’s suggestion that the news values
inherent within business news coverage are apt to reflect ‘the media’s normal
preoccupation with the lives of the rich and famous’ (1993: 351). One city
editor accounted for the impetus to include a ‘human angle’ within business
stories as follows:
Focusing on people and personalities is a much easier way to bring readers in
than focusing on, say, technological trends or industry structure or gearing
histories.

The need for an ‘accessible’ approach to financial news coverage militates

against the use of technical or specialist forms of financial analysis which,
whilst central to the investment news circulars issued to institutional investors
by brokerage houses and banks, play little or no role in the finance pages of the
mainstream press. The opinions of investment specialists are often cited. but,
typically, in terms that are broad and highly abbreviated rather than as a
means of opening up, say, a company’s revenue and cost structure to close
scrutiny by a lay audience.
The different ways in which financial journalists account for how their
ideas for stories emerge are indicative of how very varied this field is. Whilst
news judgements within specialist financial media reflect the privileges of
addressing a self-selecting and relatively economically literate audience, other
media constantly struggle with the challenge of making financial news acces-
sible and appealing to lay audiences. This latter imperative, however, is not
necessarily compatible with nor conducive to the more analytical and pene-
trating forms of journalism through which public comprehension of events in
the financial world might be strengthened.

Companies as sources

In addition to the differing attitudes reporters take toward what constitutes a

good story, their approaches towards use of sources and towards verification
and corroboration reveal much about how the intellectual climate within
which financial news production takes place can vary. Sunday mid-market
journalism for example, with its emphasis on (sometimes anonymous) tip-offs
to create breaking news, may be contrasted with an insistence on accuracy and
precise attribution at a publication such as the FT where internal guidelines

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 439

require two and ideally three independent sources for each story. Nonetheless,
at least one attribute is widely shared amongst financial journalists whose job
it is to report, explain and comment on corporate performance – that is,
scepticism about corporate ‘spin’.
The relentless drive towards positive self-portrayal by companies is widely
acknowledged by financial reporters as endemic to their field. The growth of
corporate and financial PR over recent decades may be seen as part and parcel
of the wider ascendancy of ‘spin culture’ (discussed by, for example, Davis,
2002; Franklin, 1994; Jones, 2000). A variety of methods are deployed by
journalists in order to maintain an independent and critical stance. According
to one financial correspondent: ‘You start with the assumption that the press
release is not telling you the whole story.’
To arrive at a more fully informed understanding of whatever event has
taken place, a series of discussions or interviews with company and other
‘expert’ sources is needed to gather follow-up information. That the motives
which lie behind any source choosing to speak to the press need to be
considered is widely appreciated. Being well informed, building up good
relationships (though not too good) and retaining one’s cynicism are seen as
important tools for extracting useful and ‘truthful’ information from corporate
contacts. All the reporters interviewed in the course of this study were
emphatic about the need to retain a critical distance in relation to corporate
sources. As one explains:

We know we’re being spun to, but we do bring our own judgement to it . . . You’re
not going to be captivated because of a few freebies or a nice lunch.

[T]he prospect of losing access because you take a critical stance is more of a
threat to analysts than to journalists, at least at the FT. There have been cases of
equities analysts being sacked because of writing unfavourable reports about
companies . . . Companies can write to the editor and complain that I’m an
asshole and that would be embarrassing. But they don’t have the power to make
a journalist lose his or her job.

Many regard cutting through spin and criticizing, where criticism is due,
as precisely the essence of their job. They see themselves as performing a
‘watchdog’ role in relation to corporate performance and conduct and are
therefore innately disposed towards identifying and bringing to light any
problems and instances of poor management or failure within corporations.
Even so, one or two acknowledge that, since hostile coverage of a company
may jeopardize future access, relationships with useful corporate contacts need
to be ‘managed carefully’.
Some companies and individuals try to deter unfavourable press coverage
by, for example, harassing journalists and/or striking up an aggressively
libellous stance:

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

440 Journalism 7(4)

The FT obviously has a huge advantage in that, by and large, they’ve got to speak
to us. So you can be fairly robust really. But [journalist A] who covered the whole
[company X] thing had a terrible time with them because they were always trying
to deny that things were going wrong. She knew things were bad. She would
write things and they would ring up and complain and bully. They really did try
very hard. And of course she was right. And in the end they all had to get the
sack. But that’s the sort of thing that can happen.
Robert Maxwell for example . . . had a complete system of bullying. . . [a]nd for
years got away with it. People were too terrified to write things about him
because he would sue.
And at the moment [company Y] are suing people right, left and centre. They’re
suing us. There is this fear.

As a self-protective measure, news media tend to be very vigilant about the

threat posed by litigious corporate players and newspapers routinely seek legal
advice before publishing stories that are potentially actionable. Journalists’
awareness of this brings with it caution in relation to certain corporate players.
Thus, as exemplified by the Maxwell case, bullying can be a highly effective
deterrent against good journalism.
Even so, most reporters spoken to in the course of this research attach
high importance to their own sense of independence and are clear about the
need to exercise informed and critical judgement when it comes to inter-
preting and commenting on news events in the corporate realm. Speaking and
cross-checking with sources outside the company plays a vital role in this.

Analysts

For many company news items, equities analysts employed by banks or

brokerage houses to carry out investment research can be extremely helpful in
disentangling the facts. Not surprisingly perhaps, they play a far greater
supporting role in some forms of financial news coverage than in others.
Insights that hinge on detailed financial analysis are usually not going to offer
a great deal of interest for journalists whose primary mission is to seek out
exciting and entertaining stories involving ‘big numbers’ or a lively human
interest angle to bring colour to the business pages. In more conventional
forms of financial journalism, however, where the emphasis is on assessing
current and prospective earnings performance and overall investment appeal,
journalists have much to gain from drawing on the specialist know-how that
an experienced analyst can offer.
How useful analysts actually are to a financial reporter depends not only
on the nature of the journalism in question but perhaps also on the reporter’s
own capacity for financial analysis. Whereas numeracy and basic skills in
financial analysis are taken seriously in specialist publications such as the FT,

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 441

surprisingly little commitment to training is available to support journalists

working on the business sections of many mainstream newspapers in the UK
(where the skills of financial reporting have to be learned ‘on the job’). Time
constraints are a more universal problem and another potential impediment
to journalists unravelling the financial complexities of any given corporate
development for themselves.
One business news editor explains that:

Journalists certainly rely on analysts quite a bit to do the interpreting for them of
the performance of companies and of economies . . . [and] for off-the-peg
opinions and quick reactions to the things where we feel they are better briefed
than we are.

Speaking with analysts offers a convenient and rapid means of arriving at

an understanding of the significance of events affecting the fortunes of quoted
companies. However, since analysts are not themselves entirely ‘disinterested’
parties, a degree of scepticism and critical distance (e.g. about the potential for
analysts’ viewpoints to be coloured by clients’ investment positions) is, again,
essential. According to one reporter: ‘[w]ith an analyst, you’ve always got to
think, hang on, is he talking his book?’
The presence of analysts reflects an interesting peculiarity of this field of
journalism, which is that information affecting share prices is exceptionally
valuable (and, for this reason too, the manner in which quoted companies
disclose any news that is material to their share price is subject to regulation).
The insights relating to share valuations that analysts may arrive at are
intended to benefit their clients – primarily institutional investors – rather
than the public at large. Professional investors require access to useful insights
not at the same time as but in advance of others. In servicing these require-
ments, analysts enjoy several material advantages over journalists including,
(usually) a much smaller ‘beat’ or fewer companies to cover, much more time
to analyse each one, better access to key personnel within companies and
greater expertise in techniques of financial and investment analysis. These
inequalities have inevitable implications for the scope journalists have when it
comes to breaking stories that hinge on in-depth financial analysis.

Stumbling across ‘black holes’

Although the Enron episode and other recent financial scandals have given
rise to criticism of journalists (and, even more so, auditors and analysts who
failed to register any irregularities), it is not clear that the prevailing order
encourages or equips reporters to recognize and pursue instances of deliberate
and well-disguised impropriety (Oborne, 2002: 55). As discussed above, what

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

442 Journalism 7(4)

passes for business or financial journalism can vary widely. Those who put
financial news together draw on a wide variety of methods of sourcing and
investigation including, in some but not all cases, elements of financial
analysis.
Serious investor-oriented financial journalism requires corporate reporters
not only to comment on events as they unfold but also to reflect on whether,
on the basis of whatever information is readily accessible about a company’s
finances and operating environment, the market valuation of its shares looks
appropriate. Many reporters who operate successfully in this particular do-
main have both an aptitude for and interest in disentanglement of complex
financial information. The need to subject all business models and espoused
managerial virtues to critical and independent examination is widely acknowl-
edged. Even so, time pressures being a commonly cited problem, it appears
doubtful whether routine analysis by journalists is liable to result in consistent
detection of financial irregularities that have been deliberately obscured
within company accounts.
According to one news editor:

I think financial journalists are generally good at analysing companies and

interpreting and maintaining companies at arms length. Where they are less
good, however, is in pro-actively investigating stories – in stepping back to see
the wider picture and spotting things that deserve a closer look. This is because
they don’t have the time and the opportunity and perhaps the education and
training needed to be more pro-active.

Lack of time for reflection on ‘things that deserve a closer look’ is one
difficulty, but, even when a situation is spotted (say, with the help of a whistle-
blower) where the financial success of a business appears questionable or
unconvincing, journalists may still face many additional hurdles. Most jour-
nalists spoken with take the view that, even when armed with well-informed
suspicions, gaining support for the sustained investigation needed to compile
a credible body of evidence for the story is likely to prove highly challenging.
One business reporter stated that the failure of journalists to detect financial
problems at Enron:

. . . is not surprising and it would not be surprising to see this happen again.
I would always see this as being about resources. It’s not that there is any
disinclination to do stories like this. People at a morning conference are going
to get far more excited about the story of an Enron collapse than Enron new
figures . . .

But if I got a tip-off that [Company X] was massively cooking the books and
asked for a week off to follow it up then it would be very hard – people would be
highly sceptical.

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 443

The huge investment of energy and uncertain outcome associated with

investigative reporting means that, for most financial media in the UK at least,
this is supported only on an occasional basis rather than as a routine activity.
So long as this remains the case, the opportunities for media to play a role in
uncovering frauds such as Enron will be limited.

Economic news stories

Turning to economic as opposed to corporate business coverage in the finan-

cial press, again, some interesting contrasts are discernible on the question of
what constitutes a newsworthy story. Accessibility is a major consideration
although one whose meaning is interpreted differently from one outlet to the
next. At the FT, for example, where readers are assumed to be relatively
economically literate and broadly interested in how the economy may affect
the landscape for investment, economic issues are dealt with regularly and at
a meta-aggregate level. Economic news coverage tends to be wide ranging,
taking in major international as well as domestic developments. Within
sections devoted to business in mainstream media, the range of economic
stories likely to receive coverage is much more limited. For UK newspapers,
selection of economic news items involves a constant effort to reflect and
capture the concerns of as wide a lay audience as possible. Therefore, the
stories most likely to be picked are those with a personal finance dimension
(e.g. house prices, interest rates, pensions) or with a political angle (e.g. the EU
and monetary union, the impact of spending on public services).
The potential presence of ‘spin’ in the interpretation given to economic
events by players in the field is a widely recognized hazard. The risk of
bias most obviously arises where self-interest is at stake, as explained by
one reporter:

. . . you have consultancies or interest groups and lobbyists, trying to push a

certain point and they package their information in the shape of official statistics
or ‘expert opinions’. For example, the association of estate agents saying ‘the buy
to let market is booming!’.

Although such biases are recognizable, the problem remains that self-
interested parties are sometimes the main or sole repositories of relevant data
– it is they who generate and control access to the expert knowledge that
economics reporters rely on.
Some of the sources that economics reporters rely on are prone to extreme
and/or deeply entrenched viewpoints, based not on motives of self-interest but
on genuine professionally informed beliefs about how the economy works.
Economics is, by its nature, a site for differing and disputed impressions of the

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

444 Journalism 7(4)

same reality by ‘experts’ (as evidenced, for example, by the differing pre-
dispositions of individual members of the Monetary Policy Committee who
advise the Bank of England ahead of each monthly decision on interest rates).
So, even where self-interest is not present as a concern, economic news
coverage that aims to be even handed demands of journalists an approach that
is sufficiently well informed and critical to negotiate a panoply of differing
professional interpretations of events past and future.
It is widely acknowledged that there is a strong political dimension to
economic reporting, not least because governments are generally seen as
responsible for the health and ‘stewardship’ of the economy (Goddard et al.,
1998). Susceptibility to political prejudice is an obvious pitfall that economics
journalists need to be aware of, albeit that, in the UK at least, political
partisanship is an accepted aspect of mainstream newspaper journalism and
one that spills over into the business pages. For specialist financial publica-
tions, the general aim is usually to achieve neutral and objective economic
reportage. Whether or not neutrality is an aim, journalists who report critically
about the handling of the domestic economy are liable to experience
a backlash.
According to one UK economics reporter:

. . . we see this, for example, in the way that our relationship with the Treasury
develops. Public finances and public borrowing are a big deal in the UK. We see
that if we report this critically, we get loads of phone calls from the political
people in the Treasury. Not only the political people but also the official press
officers and civil servants who shouldn’t have a political outlook on things but
do. They say why are you reporting us so critically and aren’t we doing well.
There is, immediately, a [sense that] you’re attacking the government. So politics
is always present.

Pressure against negative reportage can take many forms – journalists and
publications whose views are critical may, for example, find they receive less
favourable treatment in terms of access to leaked data about the economy or to
exclusive interviews with ministers. Whilst such pressure may be seen as an
occupational hazard, the consequences of it in terms of an informed citizenry
and democracy are worthy of further research and analysis.
Thus, the specialist knowledge that may be required to succeed as an
economics reporter is not necessarily confined to that concerned with the
technical workings of the economy. Whilst a degree of expertise in this respect
is obviously conducive to effective economic news analysis, it is worth noting
that, within some mainstream media, little or no special distinction is made
between economic and other business news, and financial journalists are
expected to cover both. Relevant knowledge and experience is, however,
highly important in sensitizing reporters to the agendas of relevant economic
players and sources.

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 445

A pro-business agenda?

Some studies that have considered financial news coverage have argued that
journalists are, in a sense, ‘captured’ by corporate and pro-business agendas
(Davis, 2002). The findings presented here confirm that specialist financial
news coverage is primarily investor-driven in emphasis, but whether the
overall agenda is so narrow as to preclude all interests other than corporate
ones from finding expression is questionable.
Company news is, most certainly, a central concern within financial
journalism. Even so, the findings of this study suggest that reporters generally
believe that investors want and need the performance of business entities and
the competencies of their managers to be dissected critically – something
which most pride themselves as being good at, notwithstanding corporate
resistance to critical coverage. As previous research has identified (Tumber,
1993), much financial news coverage is negative, pointing to failures of
management, results that have disappointed, contracts that have been broken,
deals that have not worked out, etc. Thus, the picture painted of the corporate
world by specialist financial media is often far from rosy.
Many financial journalists recognize corporate performance as being a
multi-dimensional concept. Whereas some unquestionably see their own
remit as centred purely around providing investment information, others,
especially those addressing more generalist audiences, interpret their role
more broadly. Those in the latter category are, to some extent at least, trying to
cater to the fundamental shared appetites that audiences have for a more
rounded knowledge of the world around them, including in respect of the
economy and financial markets.
Financial journalism does, therefore, at least sometimes turn a critical gaze
towards aspects and consequences of how business is conducted that extend
beyond the concerns of investors. Entertaining stories about superhero CEOs,
boardroom coups and unwarranted salary increases form part of this fare. So
too do more weighty news items examining corporate governance, employ-
ment practice, regional development, consumer and environmental issues.
One business news editor explains:
There are a lot of business reporters in print and in TV as well who allow
themselves to take the line of least resistance and whose journalism will reflect
being pushed and pulled by different corporate interests. But there are other
interests trying to make their voices heard and that do get heard in the [business]
media. TV manages it sometimes and print manages it a lot of the time very well.
They include academics who we bring in to comment on economic, financial
and political and other news we cover. Interest groups like environmental groups.
Consumer representatives. And a lot of times we are responding to and seeking to
get the input of groups that are speaking against the message that the corporate
world is giving. For example, stories reflecting doubts about how much integrity

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

446 Journalism 7(4)

there is within drug companies resisting revealing the results of their research
when it may prove detrimental to the fortunes of their own drugs being sold. So,
I think a lot of my colleagues are aware that there are alternatives to the lines
being peddled by companies. There are definitely examples where those other
voices get to be heard in the debate about whatever is the business story of
the day.

The claim that financial journalism is captured by business interests is not

necessarily to do with the tenor of individual news items so much as about
how coverage as a whole is framed and the sorts of values it serves to reinforce.
For instance the weight given to ‘City opinion’ may be seen as reinforcing
norms such as ‘the market knows best’. A frequent criticism is that financial
journalism involves little or no ambition to challenge or step outside the
parameters of pro-market and pro-capitalist thinking.
Of course, from an investment point of view, market sentiment is an
important consideration since, irrespective of whether it is correctly informed,
it remains a key determinant of valuations for investment instruments. So,
reportage which accurately discerns, interprets and reports on moods and
movements within financial markets will find prominence because it is of
value and interest to those looking to media for guidance about investment. In
addition, financial journalism must itself be recognized as an active agent
within market systems since it not only describes developments and responses
to events but also, to a greater or lesser extent, reporters play a role in actually
informing, correcting and shaping prevailing currents of market opinion.
According to a financial features writer: ‘You’re reflecting City opinion and
you’re also hoping to influence it.’
Even so, it is possible to draw a distinction between describing or seeking
to inform market behaviour and, on the other hand, being disposed to
advocate markets as the best system for allocating resources. Several reporters
questioned in the course of this research readily acknowledge that passivity in
relation to pro-market ideologies is fairly characteristic of the sector. How this
compares with the approach of journalists elsewhere and in the mainstream of
news reporting is an interesting question that deserves attention in future
research. Certainly, the evidence of this study indicates that many financial
journalists in the UK feel no compulsion to challenge prevailing values and
norms and do not see this as part of their own role. Some, however, are
conscious that the merits of a market economy model may be debatable and,
in addition, are ready to challenge ‘rash assumptions’ about shared values:
Recently I was working on a show and the producer (whose job generally
includes crafting headlines for the show) had written about an East Asian country
where the government was prepared to enact the reforms required to meet WTO3
membership. She’d written in a headline: ‘A step in the right direction for [country
x]’. I pointed out to her that this, in itself, was a politically loaded judgement – to
say that this step towards WTO membership is in the ‘right’ direction – and we

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 447

ought to be aware that in fact there may be people who would disagree that a step
towards the WTO (and towards embracing a market economy system and a sort
of US-based model of economics and, in some sense, politics) was a step in the
right direction for that country. And she agreed that that was not an assumption
that we should embody in the way we write about it.

There is a tendency in our media to cover economic stories as if there is no other

position to take on how economies are run other than the market-economy
system. Whereas, in actual fact, there are countries right around the world that
take a very different view on that, from Venezuela through to North Korea. And
it’s not really our job to make an assumption that one should be trumpeted
over another.

Explicit dissent from pro-market thinking may be rare in financial journal-

ism but an awareness of the need to avoid reproducing and reinforcing
prevailing value systems is not altogether untypical. Many are comfortable
with prevailing news values and accepted parameters for discussion of finan-
cial and economic news but some are not. A degree of pragmatism is common-
place – confinement is an acknowledged by-product of organizational and
commercial pressures governing daily news production. According to one
economics correspondent:

We operate within a system. We are critical of certain things within the system
but we never challenge the parameters of the system as a whole. In terms of
economic development, we write about, say, whether countries have been
successful in reducing their debt level but we don’t ask why we have a system
whereby countries have debts in the first place. We don’t challenge – but I’m
afraid that’s the deal. If I wanted to be a campaigner I wouldn’t be here. . . [and
wouldn’t have this platform]. I’m aware of this and sometimes it is frustrating
but, on the other hand, I still think we do a good job in terms of highlighting
certain things. We are not campaigning but we are working within the con-
straints of reality.

Financial reporters, like those in any other sector, are subject to the
‘constraints of reality’ – the guiding confines embodied by, for example,
assumptions about newsworthiness and what readers want or about appro-
priate presentational formats or standard practices for newsgathering – that
make production of news on a daily basis a more possible task. As previous
research has indicated, shared conventions about newsworthiness, while help-
ing to transform ‘difficult decisions into routine choices’, also serve to mini-
mize the role that the preferences and judgements of individual journalists
might otherwise play (Tiffen, 1989: 66–7). That this is ‘the deal’ may be widely
accepted. But institutionalized routines and shared norms do not altogether
extinguish the ambition and possibility for individuals to ‘highlight certain
things’ and, in so doing, to re-shape accepted contours for public discourse
about finance and the economy.

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

448 Journalism 7(4)

Conclusions

This exploratory study of financial journalism has centred around the ques-
tion of where reporters get their ideas for stories. The answer, in most cases, is
that a few ideas are self-generated thanks to coming across an interesting piece
of information or a trend or discrepancy from a trend but the majority of ideas
considered newsworthy will be drawn from the routine flow of corporate and
economic news releases and through ‘cribbing’ from other media. Not surpris-
ingly, one of the main drivers underlying choice of stories is the perceived
interests of audiences. On this account, a fairly sharp contrast is discernable
within financial news coverage. News selection within outlets that are primar-
ily concerned with servicing the informational needs of investors is governed
by a relatively clear shared understanding of what is newsworthy – i.e. issues
with potential to impact on the landscape for investment. For business
segments within mainstream media, conceptions about newsworthiness are
more fluid.
Financial news selection decisions within mainstream media are strongly
determined by the need not to lose the interest of lay audiences. So, although
news choices tend to reflect a general aim to keep audiences abreast of
significant developments in the realm of business and the economy, the
emphasis of what is judged newsworthy differs from specialist publications
in at least two important respects. First, attention is focused primarily and in
some cases almost exclusively on large corporate names, well recognized
brands and, in economic news, on a handful of topics perceived to be
understood by and of interest to the public at large. Second, in terms of points
of engagement offered to audiences, a somewhat more varied range of con-
cerns and issues may find representation and, in particular, entertainment is
likely to feature far more strongly. Indeed, so-called financial and business
news is, in some cases, so centred around personal dramas (e.g. the struggles
and showdowns of ailing or arrogant CEOs or the anguish of fans in relation to
acquisition of UK sports clubs by foreigners) it is difficult to be sure whether
what is being offered is financial news in the guise of entertainment or
vice versa.
Financial journalism is sometimes stereotyped as involving a pro-
corporate bias, as though choices made about the content and framing of
financial news are governed by a deliberate wish to portray corporations and
their activities in a positive light. This conception is flawed. In covering
corporate news, financial reporters tend to be extremely sceptical in their
approach to how reliably companies account for themselves. Indeed, some
journalists see corporate reportage as prone to favour negative over positive
news – a point which reinforces findings highlighted in earlier research work
(Tumber, 1993). Stories of competent management and stable performance,

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 449

because they are unexceptional, are likely to be underplayed whereas much

attention is focused on instances of corporate crisis or perceived failure.
Financial journalists are generally highly attuned to the requirement
within their profession for a high degree of independence and scepticism.
Most regard it as a primary duty, in the words of one financial news editor, ‘not
to let the people who are trying to pull the wool over our eyes get away with
it’. Of course, the limitations of research which is highly ‘media centric’ in its
approach (Schlesinger, 1990) – in this case, focusing on journalists’ percep-
tions of their own independence – must be acknowledged. Further, more
broad-ranging analysis of source–media relations in the field of financial
journalism, to add to valuable work already carried out by Davis (2002) in
respect of financial PR, offers a useful direction for future research.
A reliance on ‘experts’ to help explain and interpret news developments is
prevalent within financial and economic news coverage. Whilst reliance on
experts is not peculiar to this sector of journalism, the nature of the expertise
being called upon is distinctive in various respects. The opinions of equities
analysts, for example, are frequently drawn on for assistance with evaluation
of corporate investment prospects. The presence of analysts denotes a realm in
which specialist knowledge is highly valued. This factor is not entirely un-
problematic in its implications for financial media.
Driven and supported by the needs of the professional investment com-
munity, it is analysts – not journalists – who predominate as the main
repositories of expert knowledge about the true underlying state of financial
health of listed companies and about the significance of unfolding events in
the realms of economics and finance. Without excusing journalists from their
professional responsibilities to carry out thorough and probing analysis, it is
worth noting that the position that reporters occupy within the wider in-
formational hierarchy does not strengthen the likelihood of media breaking
news stories, such as Enron, that hinge on in-depth financial analysis. Nor, in
this respect, are financial journalists helped by constraints over the time and
resources available to support pro-active investigative reporting – a subject for
complaint by one and all. Further research work that examines and compares
opportunities or incentives to carry out investigative financial journalism not
only in the UK but elsewhere too would be valuable, given the increasing
tendency towards competition at an international level amongst financial and
business news providers.
Nonetheless, the independence, intelligence and high level of critical
expertise that many financial journalists bring to their coverage of events must
be seen as major strengths that reinforce an enduring and, by and large,
deserved reputation for strong standards of professionalism in this sector
(Parsons, 1989). Financial journalism aimed at specialist audiences, while
confined in its overarching purpose, frequently offers coverage of events that

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

450 Journalism 7(4)

when compared with other news media is quite exceptional in the ambition of
its analytical depth and range. Financial news segments within mainstream
media do not share the same ambitions, in deference to the perceived resist-
ance of lay audiences to technical analysis, but nonetheless contribute to an
increasingly rich and varied infrastructure of news provision via which the
public at large now enjoys ready access to commentary about all major
financial and economic developments.
Financial journalists are not oblivious to their own power to shape the
way that news events are accounted for. Notably, however, most spoken to in
the course of this study would not immediately recognize their role as
embodying any broad public responsibilities. Some refer to the ‘watchdog’ role
reporters play in relation to corporate behaviour. Others express a sense of
duty to get at the truth – to avoid being manipulated by corporate or other
sources and, within economic reporting, to try to provide objective reportage
on politically sensitive issues. One or two suggest they might feel differently
on this question if they worked for the BBC.
A burning desire to facilitate an improved grasp on the part of the general
public over business and economic issues does not appear to factor highly in
the conscious understanding that financial journalists in the commercial
sector have of what purposes their professional activities serve. The need for
comprehensible exposition of any given story is, of course, well recognized.
But this is not the same as an active sense of responsibility in relation to
bringing about a citizenry that is widely informed as to the meaning and
significance of business and economic events.
Previous research has emphasized the importance of the audience’s ability
to comprehend economic news. A good grasp of the workings of the economy
and of how it is or ought to be managed is needed by the public in order to
make an ‘informed appraisal of politicians and government actions upon
which the democratic process depends’ (Goddard et al., 1998: 33). The secrets
and implications of how businesses create wealth are of concern to all rather
than a few. Be that as it may, the findings of this initial survey suggest that
financial journalists, at least in the commercial sector (which is where the
activity is predominantly located), are largely unaware of responsibilities they
might perform in relation to civic empowerment and democracy.
Moreover, this research has found that the way that the sector is organized
means that the task of securing a sound public understanding of financial and
economic news issues is overlooked because, in a sense, it falls between two
stools. Financial media that provide comprehensive and in-depth coverage are
aimed at audiences who are already knowledgeable about business and the
economy and whose interests are typically professionally driven. On the other
hand, segments devoted to business news within mainstream media, fearful of
deterring lay audiences, are generally unable to do penetrating and forensic

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

 Doyle Financial news journalism 451

analysis of economic and financial news events. Commercially led financial

news production, as currently orientated, is not really designed for and is
unlikely to succeed in any public educational role.

Acknowledgements
With thanks to all interviewees who participated in this research and especially Dan
Bogler at the Financial Times and Adrian Bowden at CNN. Thanks also to two
anonymous reviewers for helpful comments. The author has previously worked as an
equities analyst and in financial journalism.

Notes

1 Following on from irregularities in accounting which had earlier allowed

operating profits to be artificially inflated, US-based energy trading company
Enron was forced to disclose losses in the order of $1bn in October 2001. The
uncovering of financial malpractice within Enron precipitated the largest bank-
ruptcy in US history with major losses for investors and several legal actions
taken against the company’s senior executives and its auditors, accounting firm
Arthur Andersen.
2 A series of 10 semi-structured and 4 unstructured interviews were carried out with
financial journalists currently or previously employed by the Financial Time (FT),
the Sunday Times, the Telegraph, Investors Chronicle (IC) and CNN in March and
April 2005.
3 World Trade Organization.

References

Davis, A. (2000) ‘PR, Business News and Corporate Elite Power’, Journalism 1(3):
282–304.
Davis, A. (2002) Public Relations Democracy: Public Relations, Politics and the Mass Media
in Britain. Manchester: Manchester University Press.
Dreier, P. (1982) ‘Capitalism V the Media: An Analysis of an Ideological Mobilization
among Business Leaders’, Media Culture & Society 4(2): 111–32.
Galbraith, J. K. (2004) The Economics of Innocent Fraud: Truth for Our Time. London:
Allen Lane.
Franklin, B. (1994) Packaging Politics: Political Communications in Britain’s Media Democ-
racy. London: Arnold.
Glasgow University Media Group (1976) Bad News. London: Routledge.
Glasgow University Media Group (1980) More Bad News. London: Routledge.
Goddard, P., J. Corner, N. T. Gavin and K. Richardson (1998) ‘Economic News and the
Dynamics of Understanding: The Liverpool Project’, in N. T. Gavin (ed.) The
Economy, Media and Public Knowledge, pp. 9–37. Studies in Communication and
Society Series, R. Negrine and A. Hansen (eds). London: Leicester University
Press.

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

452 Journalism 7(4)

Jensen, K. (1987) ‘News as Ideology: Economic Statistics and Political Ritual in

Television Network News’, Journal of Communication 37(1): 8–27.
Jones, N. (2000) Sultans of Spin. London: Orion.
Oborne, P. (2002) ‘Why Does the Press Not Spot Monsters Like This?’, Evening
Standard, 3 July: 55.
Parsons, W. (1989) The Power of the Financial Press: Journalism and Economic Opinion in
Britain and America. Aldershot: Edward Elgar.
Schlesinger, P. (1990) ‘Rethinking the Sociology of Journalism: Source Strategies and
the Limits of Media Centrism’, in M. Ferguson (ed.) Public Communication: The
New Imperatives – Future Directions for Media Research. London: Sage.
Sherman, S. (2002) ‘Enron, Gimme an “E”: Uncovering the Uncovered Story’, Colum-
bia Journalism Review 2(March/April), URL (consulted 20 June 2006): http://
www.cjr.org/issues/2002/2/enron-sherman.asp
Tunstall, J. (ed.) (1971) Journalists at Work. Communication and Society Series.
London: Constable.
Tiffen, R. (1989) News and Power. St Leonards, Australia: Allen & Unwin.
Tumber, H. (1993) ‘Selling Scandal: Business and the Media’, Media Culture & Society
15(3): 345–62.
West S, (2005) ‘Sceptical Attitude Is Vital for Accurate Business Journalism’, UK Press
Gazette, 4 March: 9.
Wintour, P., J. Carvel and T. Branigan (2005) ‘Blair: Economy Is Key to Victory’,
Guardian, 31 March: 1.

Biographical notes

Gillian Doyle is Director of the MSc in Media Management programme at the

Department of Film & Media Studies at Stirling University. Prior to coming to
Stirling in 1993, she worked as an equities analyst and in financial journalism. She
is a member of the Stirling Media Research Institute with publications including
Understanding Media Economics and Media Ownership, both published by Sage
in 2002.
Address: Stirling Media Research Institute (SMRI), Department of Film & Media
Studies, University of Stirling, Stirling FK9 4LA, Scotland, UK. [email:
[email protected]]

Downloaded from http://jou.sagepub.com by Nixon Kariithi on October 20, 2008

How to Succeed in Business Journalism
Chrystia Freeland. New York Times Book Review. New York.
22 August 2010.

Chrystia Freeland offers advice for print journalists working in business journalism in the current market
for print news...and in light of the tightly-controlled media relations of companies facing financial crises.
These are grim days for print journalists: we are the auto workers of the white-collar class, toiling in an
industry in structural decline (see: sale of Newsweek for $1). But this summer's best-seller list offers
some relief for the world's inky-fingered wretches. The hero of our collective imaginations is a middle-aged
print reporter named Mikael Blomkvist, the Swedish muckraker who co-stars in Stieg Larsson's Millennium
trilogy, which is dominating beaches and airport lounges this season.
For business scribes, Blomkvist's celebrity is especially satisfying. Business journalists are the high
school nerds of the newsroom, lacking the dangerous glamour of the war correspondents, the proximity to
fame of the sports and entertainment writers, and the alpha-dog swagger of the political press corps.
Blomkvist offers the business press hipness by association. His investigations take him beyond the
ascetic world of balance sheets and offshore bank accounts to showdowns with former K.G.B. sadists.
Better yet, although he is the divorced father of an adult daughter, and a smoker who runs mostly to keep
his paunch in check, he is catnip to women. If James Bond were reincarnated as a crusading Swedish
feminist, he would be Mikael Blomkvist.
There's just one catch: Blomkvist despises the mainstream business press almost as much as he
loathes the corrupt businessmen who are his chief targets. Blomkvist, who writes for an independent
magazine he helped found, accuses establishment business journalists of getting too close to the
magnates they cover. They have access, he complains, but they fail to do the "real" work of uncovering
corporate malfeasance.
Larsson, himself an investigative journalist, died in 2004, before the financial crisis. But if he were
reviewing the books inspired by the meltdown, he would surely reiterate his protagonist's dyspeptic
critique of business reporting. The best writing on the crisis has been from the inside out, starting with
Andrew Ross Sorkin's "Too Big to Fail" - a vivid, nearly instantaneous account of Wall Street in 2008 that
stands as that pivotal year's first draft of history.
Michael Lewis does something even smarter and more original in "The Big Short," recounting the crash
from the perspective of a small tribe of investors who had the insight and the audacity to foresee the
crisis and profit from it. But while Lewis writes about iconoclastic outsiders, he profiles their lives and
trades very much from the inside. "I've found it impossible to write a decent nonfiction narrative without
unusually deep cooperation from my subjects," Lewis explains in his acknowledgments, thanking his
traders for allowing him "to enter their lives."
Lewis is "eternally grateful" to his subjects for their cooperation. Sorkin, a reporter and columnist for The
New York Times, is "truly grateful" to his. One can imagine Blomkvist sputtering with rage, but you don't
have to be a fictional Scandinavian social democrat to wish that business journalism in the United States
was more about afflicting the comfortable and less about cozying up to them. In the spring, the high
priests of American journalism at the Columbia Journalism Review published a tough critique of Sorkin by
Dean Starkman, who argued that "Too Big to Fail" was on one side - the wrong side - in the "mini-
struggle" between "deal journalism and the work of accountability-oriented reporters."
That article rightly highlighted the important investigative work done by reporters with a "more
confrontational approach," like Gretchen Morgenson and Don Van Natta Jr., both of The Times, and Mark
Pittman of Bloomberg News, who wrote a 2007 series predicting the collapse of the banking sector. But
the bigger, more complicated truth about the financial crisis is that it wasn't caused by evil businessmen.
The overarching story is one of systemic failure, not individual wrongdoing. It wasn't the Bernie Madoffs
who plunged the world into recession. It was low capital requirements, weak limits on leverage, over-the-
counter traded derivatives, soft rules on mortgage lending and global financial imbalances.
If your attention wandered as you read that list of abstract terms, you are not alone. A growing body of
cognitive research is demonstrating something schoolteachers and entertainers have known for a long
time: Most of us respond better to personal stories than to impersonal numbers and ideas. That cognitive
bias is so pronounced that Deborah Small, a professor of marketing at the Wharton School, has found
that charitable giving actually goes down if too many statistics are included in individual tales of need
(and if we get only statistics and don't learn any personal stories, giving is even lower). Forget "just the
facts, ma'am." Actually, forget the facts altogether.

1 
 
 For readers, that same bias means we are drawn to stories about people, not systems. When it comes
to the financial crisis, we want heroes and villains and whathe-had-for-breakfast narratives; we are less
enthralled by analytical accounts of the global financial system and the cycle of boom and bust. The
Columbia Journalism Review - and Blomkvist - juxtapose the approaches of "access" and "investigative"
journalists. But the real divide may be between storytellers and system analysts. (This is one of many
reasons that anyone interested in the financial crisis and its causes should venture farther down the best-
seller list and dip into "This Time Is Different," a lucid and unapologetically dense study of eight centuries
of financial crises by the economists Carmen M. Reinhart and Kenneth S. Rogoff.)
This dichotomy goes beyond writers and newspaper front pages to our legislatures and even the
campaign trail. Financial reform legislation didn't become sexy until the Securities and Exchange
Commission unveiled its case against Goldman Sachs. The "fabulous Fab," as Fabrice Tourre, the
Goldman trader who bet against subprime mortgages, called himself, and his colorful e-mails were a story
right out of Small's research. It packed such a viscerally powerful punch that almost no one, apart from
the great vampire squid's P.R. team, bothered to note that because of the firm's fine culture of risk
management, Goldman was probably less culpable in the 2008 crisis than any other investment bank.
Fabulous Fab's shenanigans (and great name!) not only helped pass the financial reform bill, they cost
Goldman $550 million, the biggest settlement ever paid to the S.E.C. Score one for the storytellers. But
that is likely to be a temporary triumph, and not only because Goldman now prohibits its employees from
using vulgar language in e-mails, presumably to ensure that the next documents the bank is forced to
disgorge aren't quite so vivid.
We are living in the age of number-crunchers, not narrators. On Wall Street, in Silicon Valley, in
Bangalore and in Shanghai, the new technologies and the capital flows that are reshaping our world are
dominated by the people who master data dumps. This split - more than geography, more than gender,
more than what your parents did for a living - may be the real class divide of our time.
Even Larsson, who created Blomkvist at least partly in his own image, knew this. That's why the more
eye-catching partner in his crime-busting duo is the quasiautistic number-cruncher extraordinaire Lisbeth
Salander. Female readers may be dubious of the 20-something Salander's not-totally-requited passion for
Blomkvist, but what really rings false in their relationship is the idea that Blomkvist would be Salander's
boss, and not vice versa. There have been reports that Larsson once told a friend that the fourth novel in
the series, left unfinished at the time of his death, would follow the pair to a remote island town in
Canada's Northwest Territories. But a more plausible plot would involve Salander's move to Palo Alto and
the start-up of her global data mining and security firm.

What Price Journalism?

The news isn't free. That's why the media are brewing up new (and familiar) ways to pay for it
By James Poniewozik
Time, Vol. 174, Issue 3, 27 July 2009

Will ___ save journalism? Lately it seems easier to find ruminations on that subject than to find
journalism itself. With advertising down and the Internet making information seem free and easy, anxious
journos (for whom "save journalism" equals "save my job") have suggested numerous white knights for
their profession, including Amazon's Kindle, philanthropists, micropayments, the government and the new
iPhone. (Is there an app for that?)
Or coffee! Maybe coffee will save journalism! In June, MSNBC signed a deal to make Starbucks the
official caffeinated beverage of its talk show Morning Joe. In 2008 a chain of TV affiliates cut a deal to
place McDonald's iced coffee on anchor desks.
Those who can't sell coffee can try to sell Kaffeeklatsches. The Washington Post was embarrassed this
month by a leak of its plans to charge up to $25,000 for lobbyists and executives to sponsor "salons" with
public officials and the reporters who cover the fields they work in, like health care. "Spirited? Yes," a flyer
said of the promised talks. "Confrontational? No." Journalism? Someday it just might be.
Some of these experiments may seem ethically dubious or just icky, but they're also examples of a
simple truth: whether you read it online or watch it on TV, there's no such thing as free news. Someone,
somewhere, is paying for it, be it in money or in time. And journalists are under pressure to become more
creative in paying that bill.
Once, said payment came from the audience or from advertisers. Now the Internet offers all-you-can-
eat info, yet advertisers are unwilling to pay anywhere near the same rates for online ads as they do for
print or TV ads, and the Web has all but supplanted newspaper classifieds.

2 
 
 The New York Times is reportedly readying plans to start charging for online access, while a group of
newspaper execs has been looking into the legality of banding together to do the same. News outlets are
selling software, merchandise, club memberships--anything that people are more willing to pay for than,
well, news.
It's possible, though, that nothing will save the journalism business--at least as we know it and pay for it
today. That doesn't mean journalism will go away. Reporting won't go away, though foreign bureaus might.
Information won't go away. Opinion certainly won't.
But somebody will have to pay--even, or especially, for the free stuff. Some journalism could become a
kind of volunteer work, performed by eyewitnesses, passionate amateurs or professionals in other fields
who use journalism as a loss leader to sell their books or build their brands. (That's the model of the
legion of unpaid writers at the Huffington Post.) Even if you filter your own news from Twitter, you're
paying in time and effort.
Those seeking to pay the bills through full-time journalism could find different paymasters. The
Associated Press recently started taking investigative reports from four nonprofit journalism groups. And if
newspapers can't afford investigations, advocacy groups and think tanks--which already hire research
pros--could do their own: a kind of piecemeal return to the old partisan press.
Meanwhile, the advertisers who are loath to pay for banner ads at websites have shown interest in, as
they say, more "integrated" forms of product-plugging. Some news sites sell companies "sponsored
content" mentioning their products, while independent blogs collect payoffs for posts--positive ones only,
please--about merchandise. (Where did I learn about that? From the New York Times, which had to report
the story without sponsorship from Healthy Choice.)
The media of the future may be a combination of all this, plus old-school outlets that survive. They
could produce good journalism. (After all, traditional news outlets aren't without potential conflict either; I
review HBO series even though HBO's owner owns TIME.) But they may include funding models far
different from the old church-and-state separation of content-making and money-raising.
Journalists would be foolish, though, to think we can guilt people into buying our work in part to
preserve our uniquely holy calling. (Try arguing that to a laid-off factory worker.) As with any other service,
people will buy it or they won't. Yes, news audiences will have to recognize that "free" information may
mean more sponsorships and piper payers calling the tune. But journalists will have to accept that some
members of our audience are, in fact, willing to make that trade-off, just as they live with product
placement in movies.
We may not like it, but there it is. Producing something that someone is willing to pay for--while not
selling out--may make our work possible. Whereas moralizing, plus a buck or so, will buy you a cup of
robust, piping hot Dunkin' Donuts coffee. That one was free, fellas.

~~~~~~~~

Split investment products

Some stepping stones
By Bruce Cameron
PERSONAL FINANCE, Saturday, May 23, 1998

In this first article in Personal Finance's new Scrapbook series Bruce Cameron deals with split
investment products. There is a wide range of these complex products. This week we set the scene by
describing the various types of split investment products available. In the following weeks we will deal in
more detail with the particular choices you have.

What are they? Split investment products go under many names and come in many forms including
linked products, multi-manager funds, fund of funds unit trusts, and wrap funds.
What happens is: One company will offer you a single investment product in which to place your money;
and with the product you will be offered a variety of investment choices, sometimes only provided by one
company but increasingly provided by other companies. For example you could choose from the full range
of unit trust funds available.
The first of these options was offered by linked product companies about 10 years ago. These
companies offer a range of unit trust investments, often wrapped up in an embracing mother product,
such as a living annuity.

3 
 
Business journalism ethics in Africa:
A comparative study of newsrooms in
South Africa, Kenya and Zimbabwe
By Admire Mare and Robert Brand

Abstract
This article aims to provide an insight into the state of business journalism ethics
in Africa, firstly, through an examination of newsroom ethical policies and secondly
through an exploration of the way in which African business journalists negotiate
ethical decision-making in their day-to-day news processing practices. The
researchers employed document analysis and semi-structured interviews to examine
Business Day in South Africa, Business Daily in Kenya and Financial Gazette in
Zimbabwe. In these African countries, business journalism has been steadily
growing since the late 1960s, fuelled by the presence of robust stock exchanges and
increasing debate on the issue of business journalism ethics. The research found
that while all three newspapers had clear ethical guidelines in place and editors and
journalists recognized the importance of ethical behavior, ethical practice did not
always follow. This is largely due to the precarious economic basis of news
organizations, lack of effective monitoring, and a pervasive culture of unethical
behavior at some sites.

Key words: Business journalism, ethics, Kenya, South Africa, Zimbabwe

Introduction:
Conceptualising business journalism
Economics, business and financial journalism are “closely related
forms of journalistic endeavour and the terms are often used
interchangeably, even though there are distinctions between them”
(Kariithi, 2003). This study uses the term “economics journalism” to
refer to journalism about business, financial markets and economics,
and uses the terms “business journalism”, “economics journalism” and
Author biographical note
Admire Mare ([email protected]) is an MA candidate at the School of Journalism
and Media Studies, Rhodes University, South Africa. This article is based on his thesis research,
funded by the Centre for Economics Journalism at Rhodes University.
Robert Brand ([email protected]) (M.Phil, University of Stellenbosch; PGDHE, Rhodes
University) is a Senior Lecturer in the Pearson Chair of Economics Journalism at the School
of Journalism and Media Studies, Rhodes University, South Africa.
AcknowledgementsThe authors would like to thank Terje S. Skjerdal for his valuable
input, and two anonymous reviewers for their thoughtful comments on this article.

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

407
Admire Mare and Robert Brand

“financial journalism” interchangeably. Economics has been identified

as an important area of knowledge acquisition for effective
participation in modern democracies (Mogweku, 2005). Due to the
importance of economics in modern societies, business news derives
from, and is related to, nearly all aspects of our lives. Not only does
business journalism contribute to public knowledge about the
economy (Gavin, 1998), but the financial media also play a crucial role
in spreading economic ideas and ideologies and setting the parameters
of debate about economic issues (Brand, 2010). Furthermore,
economics journalism serves a crucial informative role in the market
mechanism, with the ability to move the prices of securities such as
stocks and bonds (Brand, 2010). Together, those factors make
economics journalism one of the most important areas of journalism in
many modern media organizations (Parker, 1997).
In most of Africa, the roots of economics journalism can be traced to
the continent’s protracted economic crises of the late 1970s and early
1980s, when the failure of World Bank-sponsored structural
adjustment programs (SAPs) thrust economics into the public
limelight in many African countries (Kareithi & Kariithi, 2005, p. xi). As
African nations embarked on their political transitions, the still fledging
economics media kept pace, constantly advocating through their
coverage the need to open up both the political and economic systems
(Kariithi, 2002). African journalists have become ever more aware of
their pressing responsibility to regularly monitor and scrutinize the
government to ensure that its performance matches its promise
(Kareithi & Kariithi, 2005, p. 120). Nowhere is that scrutiny more
critical than in the management of the nation’s economic and financial
affairs. However, few African media organizations can show a track
record of substantive economics reporting, given that economics
reporting is generally a recent addition to the regular newsroom beats
in much of Africa (Kareithi & Kariithi, 2005). Furthermore, an
examination of African economics journalism cannot be complete
without a discussion of the economics of journalism in Africa
(Nyamnjoh, 2005). Many media organizations operate on shoe-string
budgets, and journalists are poorly remunerated which accounts for
the underdeveloped state of business journalism as a genre in Africa.

Business journalism ethics

The recent crisis in global banking, markets and economies has
reminded us all of the importance of financial and business journalism

408
 Business journalism ethics in Africa

ethics (Tambini, 2009, p. 2). It has brought into sharp focus the
intricate relationship between business journalism and the operations
and behavior of financial and economic markets, and also the need for
ethical journalism within the genre. The notion of business journalism
ethics, like general media ethics, arguably has an Anglo-American
ancestry (Ward, 2006; Schudson, 2001). Underpinning the notion of
journalism ethics is the belief that the media have a role to play in
society. As a result, debates on journalism ethics and self-regulation are
often informed by a normative approach, centred on the social
responsibilities of the media.
Business journalism ethics is located within the broader ambit of
media ethics. Thinking around business journalism ethics therefore
needs to be underpinned by a philosophy of the role of business
journalism in society, including the relationship between business
journalism and the market economy. Tambini (2009) has developed a
conceptual model for understanding the rights and duties of financial
journalists. At the core of this model is the understanding that the
financial media, in addition to their informational and monitoring role,
have the power to influence the prices of individual securities such as
bonds and stocks. Whereas the broader discourse of journalism ethics
focuses on the relationship between society and the media, business
journalism ethics is, in addition, concerned with the relationship
between news and markets.
Business journalism ethics addresses questions such as: What
responsibility do journalists have when their stories can have direct
impacts on market behavior? Should the ethical and professional
standards of business and financial journalists differ from those of
others such as political journalists? Should journalists avoid “panicking
the markets”? What about direct conflicts of interest? How can
journalists deal with conflicting responsibilities in relation to their
various overlapping constituencies – to readers, investors, to
corporations, to governments and to national economies? What
happens when journalists themselves, or those close to them, hold
shares in a company?
There is a large body of research on media accountability and
professionalism globally and in some African countries which argues
that the quality of media content is deteriorating (Chari, 2007;
Nyamnjoh, 2005; Mfumbusa, 2008). A spike in ethical transgressions
comes at a time when regulation of the media by the state has become
a discredited practice (Duncan, 2010), yet many media systems
African Communication Research, Vol 3 , No. 3 (2010) 407-430
409
Admire Mare and Robert Brand

continue to grapple with the question of who media organizations

should be accountable to. In Africa, governments have responded, in
some cases, by tightening media laws and limiting freedom of
expression and speech the in the process. The Zimbabwean and
Kenyan governments are examples of this. It must be noted that
Zimbabwe has since 2000 experienced a crisis which has been
described as resting on the political, economic and social tripod with
symptoms being bad governance, media strangulation, economic
meltdown, disputed land reforms, hyperinflation, exodus of
professionals and outbreak of waterborne diseases (Mlambo, 2006, p.
16).
On the other hand, Kenya hit international headlines in December
2007 following the disputed elections which resulted in the death of
thousands of civilians. Zimbabwe has both a statutory (Zimbabwe
Media Commission, ZMC; formerly Media and Information
Commission, MIC) and self-regulatory (Voluntary Media Council of
Zimbabwe) mechanisms. South Africa, on the other hand, has a
transparent, voluntary system of self-regulation administered by a Press
Council which has a binding code of ethics (Krüger, 2009). In the case
of Kenya, the voluntary regulatory body was replaced by the official
Media Council of Kenya in 2007. Kenya’s statutory regulatory body has
a code of ethics which the media are not bound to follow. In spite of
the existence of the statutory body, concerns have been raised
regarding the conduct of the Kenyan press and their adherence to the
code of ethics (Mudhai, 2007). All three countries have had notable
debates as regards media accountability systems. Most notably in
South Africa, where the ANC government has proposed the
establishment of the Media Appeals Tribunal (MAT) meant to replace
the South African Press Council. Politicians in the three countries have
used more or less similar arguments to justify the necessity of statutory
media regulation, chief among them, the perceived ethical
transgressions by media practitioners and “toothless” penal system. In
Kenya, the referendum on the new constitution held in August 2010
promised a different media regulation system.
Breaches of business journalism ethics are well-documented in
Europe and the United States of America. Examples are the “City
slickers” case in the United Kingdom, where business columnists at the
Daily Mirror were found guilty of “ramping”, or buying shares and
boosting their value through favorable reporting (Tambini, 2010). In
America, a Wall Street Journal business writer, Foster Winans, was

410
 Business journalism ethics in Africa

convicted of securities fraud after using inside information to profit

from share trading (Newman, 1996). It is unlikely that African business
journalists would be immune to these kinds of ethical transgressions.
However, although the literature records numerous cases of breaches of
general journalism ethics (see, for example, Chari, 2007; Kasoma, 1996;
Ndangam, 2006) breaches of business journalism ethics have not been
systematically documented.
One case of “brown envelope” – bribery – has been reported in
South Africa, when a reporter at the Cape Argus newspaper admitted
receiving money from a politician in return for negative coverage of his
political opponents. But other, more sophisticated forms of influencing
journalists also exist, such as the payment of a fee to CNBCA, the
South African-based financial television channel, by the Gauteng
provincial government in return for “preferential and regular
programming and content slots to the Gauteng provincial government”
(Steyn, 2010). As Harber (2010) points out: “The path to brown
envelopes is strewn with gifts and freebies. Hand-outs to journalists are
commonplace, and only a few media institutions keep tight rules and
practices on how to deal with them.” What, then, are those rules, and
how are they institutionalized?
Codes of ethics are at the core of media regulation, as they define the
standards that are expected of the media in their reporting (Duncan,
2010). A code of ethics is a document that sets out guidelines aimed at
proscribing certain types of conduct deemed unethical, and identifying
other types of conduct as being ethical (Retief, 2002). Codes act as a
stock of knowledge of what constitutes common business news
standards. On the one hand, it allows the public to know what
behavior to expect from journalists and further know the standards
against which to measure their performance (Duncan, 2010).
Professional norms of journalists are of two types; technical norms
which deal with news gathering and reporting, and ethical norms
which embrace the newsman’s obligations to the craft and include such
ideals as responsibility, impartiality, accuracy, fair play and objectivity
(Breed, 1955, p. 108). Codes can be either statutory or non-statutory,
depending on the context in which it is used. For instance, in South
Africa, the Broadcasting Code has legal force whereas the Press Code
does not; in countries such as Zimbabwe and Kenya, journalism codes
of ethics are enforced by statutory or professional bodies and voluntary
membership tribunals such as the Voluntary Media Council of
Zimbabwe. The existence of codes of ethics at media organizations,
African Communication Research, Vol 3 , No. 3 (2010) 407 - 430
411
Admire Mare and Robert Brand

however, suggests more about the aspirations of journalists or their

employers or regulators than about the actual practice of journalists.
Research methods
The objective of this research is twofold: to compare the policies – in
the form of ethics codes – governing ethics at the three subject
newspapers; and secondly, to probe how these are operationalized by
editors and journalists. The choice of Business Day, Financial Gazette
and Business Daily was determined by the fact that all the news
organizations engage in specialized business reporting, operate in
countries with vibrant stock exchanges and are market leaders in terms
of readership figures in their respective countries.
A document analysis was carried out to identify and compare salient
policy features, while semi-structured interviews were conducted with
business editors and journalists to examine how journalists negotiate
ethical concerns and guidelines in their everyday practice. The business
news editors of the Business Day in South Africa, the Financial Gazette
in Zimbabwe, and the Business Daily in Kenya were interviewed, as
well as three business journalists from each newsroom based on an
availability sampling technique. A total of nine journalists were asked to
answer a set of related questions about business journalism ethics,
causes of ethical transgressions and monitoring and enforcement of
codes of ethics within newsroom contexts. Interviews in Kenya were
carried out face-to-face, while those in South Africa were conducted by
telephone and in Zimbabwe by a combination of telephone and e-mail.
Interviewees were promised anonymity in the belief that that would
allow them to respond more freely. The interviews enabled the
researchers to complement information obtained from the document
analysis with journalists’ own experiences of and perceptions arising
from putting those ethical guidelines into practice.

Findings and discussion

Only one of the newspapers, Kenya’s Business Daily, has its own
code of ethics, which addresses pertinent business journalistic moral
dilemmas. The Financial Gazette of Zimbabwe does not have its own
code, but relies on the industry-wide code subscribed to by the
Voluntary Media Council of Zimbabwe in conjunction with the
Zimbabwe Union of Journalists. South Africa’s Business Day subscribes
to a group code of ethics – the BDFM code of ethics – which applies to
all the company’s publications, and which focuses on general as well as
business journalism.

412
 Business journalism ethics in Africa

A range of themes recurred in the three codes of ethics, and they

referred to similar journalistic responsibilities and duties, corroborating
Limor ’s (2006, p. 168) observation that journalistic codes the world
over display “remarkable similarities in the ideas, or standards of
conduct and the basic tenets which are advocated”. Common
principles among the three codes include: the importance of accuracy;
the duty to refuse bribes; avoidance of plagiarism; the obligation to
honor confidentiality of sources; respect for people’s right to privacy;
the imperative to avoid conflicts of interest; fairness in news gathering
processes; integrity of the source and the journalist; the primacy of
freedom of expression and comment; and the duty to correct mistakes.
While these principles apply to journalism in general, this article
analyzes and compares the treatment in the codes of those principles
which have a particular relevance for business journalism. They are:
accuracy/truthfulness, the duty to refuse bribes, avoiding conflicts of
interest, and resisting pressure from advertizers or sources of
information. Although at the general level, the three codes are similar,
on the level of individual principles there are qualitative differences. For
example, although both Business Day’s and Business Daily’s codes
contain sections on conflicts of interest, the former focuses on
acceptance of gifts and the latter on share ownership by journalists.

Accuracy
The three codes are remarkably similar in the way they address
business journalists’ fundamental obligation to be truthful and report
the news accurately, and what should be done in the event of
inaccurate reporting. There is a clear recognition of the importance of
accuracy in business journalism, where news can have an immediate
impact on markets by moving the prices of securities. All three codes
also recognize the importance of fairness in reporting, and include the
responsibility to correct mistakes promptly. Business Daily’s code of
conduct and ethics states the following with regard to accuracy: The
fundamental objective of a journalist is to report fairly, accurately and
without bias on matters of public interest. All sides of a story should be
reported. It is important to obtain comments from anyone mentioned
in an unfavorable context. Whenever it is recognized that an
inaccurate, misleading or distorted report has been published, it should
be corrected promptly. Corrections should report the correct
information and not restate the error except when clarity demands.

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

413
Admire Mare and Robert Brand

(Code of conduct, Business Daily, Kenya)The Financial Gazette’s code of

ethics echoes the above sentiments:

Media practitioners and media institutions must report and

interpret the news with scrupulous honesty and must take all
reasonable steps to ensure that they disseminate accurate
information and that they depict events fairly and without
distortions. [...] Before a media institution publishes a report, the
reporter and the editor must ensure that all the steps that a
reasonable, competent media practitioner would take to check its
accuracy have in fact been taken. (Code of ethics, Financial Gazette,
Zimbabwe).

Business Day’s code operationalizes the quest for accuracy and fairness
as follows:
Take every possible step to ensure that both praise and criticism
are backed up by knowledgeable, independent sources, ensure
that anyone who is criticised is given an opportunity to respond,
make an active attempt to seek out and highlight the independent
view, and written editorial policy for each publication that is
distributed to all employees. (Code of ethics, BDFM, South Africa).

It is clear that the codes regard accuracy, honesty and fairness as

foundational journalistic issues, and underscore the need to ensure fair
and balanced reports of events. Distortion of information by
exaggeration, by giving only one side of a story, by placing improper
emphasis on one aspect of a story, by reporting the facts out of the
context in which they occurred or by suppressing relevant available
facts are marked as ethical violations. Business Day’s code further
recognizes the importance of accuracy and truthfulness in the
particular role played by the financial press in the market system, and
the importance of ethical conduct for the credibility of the newspaper:

As journalists working for the financial press in particular, we

have to be unusually conscious of these ethical questions because
our reports can dramatically affect investor sentiment. Journalists
who work for the financial press make decisions daily which can
affect thousands of employees and investors. In short, dishonest
journalism or deceitful journalists can do immense harm to the
publication, undermining its credibility and, ultimately, driving
away readers and advertisers. (Code of ethics, BDFM, South
Africa)

414
 Business journalism ethics in Africa

Bribery
Bribery of journalists has become ubiquitous in some African
countries (Ndangam, 2006; Chari, 2007), and business journalists are
not immune to temptation. It was clear that all three codes consider
bribery as a threat to journalistic integrity which compromises the
credibility of the media organization. The codes also recognize that the
corrupting effect of bribery does not depend on a quid pro quo by the
journalist, but that a gift or “freebie” may also compromise the
independence and integrity of a journalist. The Nation Media Group
code of ethics exemplifies the zero-tolerance approach to bribery:

Gifts, bribes, brown envelopes, favours, free travel, free meals or

drinks, special treatment or privileges can compromise the
integrity of journalists, editors and their employers. Journalists,
editors and their employers should conduct themselves in a
manner that protects them from conflicts of interest, real or
apparent. (Code of ethics, Nation Media Group, Kenya).

This extract reflects that the organization would like its business
journalists not only to avoid conflicts of interest but also the
appearances of such conflicts. All situations capable of creating undue
familiarity are expected to be avoided or handled cautiously. The
BDFM code of ethics calls upon business journalists to desist from
accepting gifts and bribes. It cautions:

BDFM employees should not accept gifts from companies, sources,

suppliers or customers in excess of R200 [USD30]. All gifts of
whatever value should be declared to the editor or his/her
representative and the recipients are encouraged to hand them
over to the editor/representative for the annual Christmas raffle.
(Code of ethics, BDFM, South Africa)

On direct bribery – where a quid pro quo is expected – the BDFM

code states: “Journalists should never undertake to publish or not
publish any material in exchange for favours of any description.” It also
includes a reference to a ubiquitous feature of South African
journalism; corporate-sponsored travel.

Journalists must under no circumstances commit the paper to

publishing a story about a company or other organisation in return for
a trip. Any story based on a sponsored journey must be as balanced
and well-researched as any story written in the newsroom. As with

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

415
Admire Mare and Robert Brand

any other story, anyone taking a trip should make a point of seeking
out opinions other than those of the sponsor, e.g. competitors, analysts,
other governments. Paid accommodation and transport while on
assignment may be accepted on the sole criterion of whether it benefits
the publication. All invitations must be routed in writing through the
editor or whoever the editor delegates. (Code of ethics, BDFM, South
Africa).

Financial Gazette’s code is also explicit about bribery: “Media

practitioners [...] must not publish or suppress a report or omit or alter
vital facts in that report in return for payment of money or for any
other gift or reward.”

Conflicts of interest
Two of the codes – those applying at the Business Daily and the
Business Day – include rules regulating coverage of companies in which
the journalist owns shares. Such rules are a near-universal feature of
business journalism ethics codes in the Anglo-American tradition
(Tambini, 2010), and are instituted in addition to legislative measures
designed to prevent insider trading or market manipulation. However,
while recognizing the need to regulate share ownership by business
journalists, ethics codes deal with the issue differently. Some require
share ownership to be disclosed to editors or to readers, while others
prohibit journalists from owning shares in companies they cover. The
Business Daily code requires business journalists not to write about
shares in whose performance they know that they, their close families
or associates have significant financial interest, without disclosing the
interest to the editor:

Even where the law does not prohibit it, journalists should not
use for their own profit financial information they receive in
advance of its general publication nor should they pass that
information to others. They should not buy or sell, either directly
or through nominees or agents, shares or securities about which
they intend to write in the near future. Utmost care should be
exercised by journalists in giving any interpretation to financial
information. (Code of conduct, Business Daily, Kenya).

Business Day’s code of ethics, on the other hand, does not restrict share
ownership by its journalists, but requires disclosure: “Where a
journalist has an interest and/or is a player in an industry, he/she
should request the newsdesk to disclose this at the bottom of the
article, or to assign the story elsewhere.”

416
 Business journalism ethics in Africa

Another potential conflict of interest occurs where journalists do

paid work outside their news organization, known as ‘moonlighting’.
The Business Daily and Business Day’s codes of ethics address the
potential conflict of interest created by accepting outside work. Business
Day’s code states: “All freelance work conducted must be cleared first
with the editor or his representative.”
Business Day’s code also recognizes the potential of conflicts of
interest arising out of membership of civic, political or lobby
organizations:
Journalists should avoid any activity that could impair their
impartiality. Journalists’ civic duty or political beliefs could very
well entail support for or membership of an organisation or a
movement. But if the organisation forms part of their reporting
responsibility, they should not accept payment from the
organisation concerned or hold an executive post. Where potential
conflict exists journalists have a duty to inform the editor. Failure
to do so will be construed as a breach of this code. (Code of ethics,
BDFM, South Africa)

Pressure or influence
Pressure refers to any force or influence which causes a journalist to
feel strongly compelled to act in a manner desirable to the source of the
force or influence (Oloruntola, 2007). The three codes address this
ethical dilemma in different ways. The Financial Gazette’s code cautions
journalists to be wary of advertizers’ and politicians’ influence on news
reports:
Media practitioners and media institutions must not suppress or
distort information which the public has a right to know because
of pressure or influence from their advertisers or others who have
a corporate, political or advocacy interest in the media institution
concerned. (Code of ethics, Financial Gazette, Zimbabwe)

The Business Daily’s policy guidelines specifically address

advertisements and public relations material use:
All stories based on PR material so used will, however, be re-
written in the news style of the Group, any self indulgence
removed and its inclusions judged solely on its news value.
Special care will be taken, however, not to alter or misrepresent
the essential factual content of the PR communication. The media
will not allow any advertisement or commercial that is contrary
to these ethical principles. (Code of conduct, Business Daily, Kenya)

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

417
Admire Mare and Robert Brand

Despite small differences evident in the three codes, it is clear that

pressure is acknowledged as impairing journalists’ judgement and
compromizing objectivity. Pressure is conceptualized as anything
exerting influence from politicians, to public relations firms and
advertizers. Journalists are called upon to maintain their credibility by
ensuring the “so what” question is addressed in all news articles
involving powerful social actors such as advocacy or political groups.

Negotiating ethical issues in business journalism practice

Financial journalists operate within a framework of rights and duties
which institutionalizes a particular ethical approach defined by their
role in the market system (Tambini, 2010). Business news can have
direct and powerful impacts on markets (Thompson, 2000; Roush,
2006; Tambini, 2010). This raises fundamental questions about the
responsibilities of financial journalists. Business journalists are caught
up in an intercalary position which on the one hand requires them to
play a watchdog role in the system of corporate governance; and on the
other, to be ethical when dealing with the reflexive nature of their
relationship with markets (Tambini, 2010, p. 162). Journalists
interviewed appreciated the centrality of business journalism ethics in
this position. A reporter at the Financial Gazette put it thus: “We as
business journalists have enormous power to influence business
decisions [...]. Hence ethicality is of paramount importance.”
There was consensus among interviewees about the importance of
codes of ethics in relation to the coverage of markets and business
corporations. Business journalists interviewed also tended to agree on
the key challenges they face, although they were less unanimous on
how to respond to them. Some of these will be discussed in turn.

Pressure from advertizers

During interviews with business journalists, pressures from or on
behalf of advertizers were cited as major impediments to ethical news
production. Pressure may come from external sources, but often also
from within the newspaper management. This was evident to a greater
extent at the newspapers in Zimbabwe and Kenya than in South
Africa:
In the case of Nation Media Group, bribery cases have been rare,
but threats to cut advertising if the story is not toned down are
rampant. There are companies which, if they threaten to pull out

418
 Business journalism ethics in Africa

advertisements, even editors are forced to kill stories in order to

protect the lifeline of media companies. (Business reporter, Business
Daily, Kenya).
Advertising is a major artery in the existence of media
organisations hence ‘those who pay the piper call the tune’. At
times, you can get a call from the CEO or editor to kill certain
stories in order to safeguard advertising revenue. The message is:
Don’t endanger the flow of the stream lest we are not able to pay
you at the end of the month. (Business reporter, Business Daily,
Kenya)

I was once faced by a predicament, where I was supposed to kill a

story because it was stepping on the toes of one of our major
advertisers. In fact, the boss phoned me to drop the story and focus
on other newsworthy stories. (Business reporter, Financial Gazette,
Zimbabwe)

Pressure from news sources

News sources exert control through selective granting or denying of
access, the threat or actuality of lawsuits, or by relying on personal
relationships with media executives who have the power to shape the
news agenda. Interviews with business journalists in the three media
organizations confirm that businesses exert enormous pressure on the
business press, partly due to the “embedded” nature of the relationship
between the business press and the market. Pressure from news
sources appeared to be more pronounced in Zimbabwe and Kenya
than in South Africa, although the phenomenon was cited by
journalists at all three sites:

At times you meet cunning CEOs who try by all means to push
their corporate news angles. In this work of ours if you refuse to
budge then he or she will approach the next guy on the line. He
can be strategically located above you, which means if he
manages to influence that one you have no choice but to run the
story. The whole process of news production is infested with
power dynamics which CEOs know how to manipulate to their
advantage. Some CEOs bargain at the top level with your CEO
before you are assigned to cover the story. Most of these
executives have honed these social capital and networks over the
years, hence they can always scratch each other ’s backs without
you understanding the dynamics of source cultivation. They
won’t endanger those social relations for anything”. (Business
reporter, Business Daily, Kenya)

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

419
Admire Mare and Robert Brand

Insider trading
Most codes of ethics on business journalism, especially in America
and Europe, include strict rules to prevent insider trading (Tambini,
2010). Insider trading refers to the practice of using information that is
not in the public domain to invest in securities such as shares for
individual gain. In many countries, including South Africa, this is
against the law and in breach of stock exchange regulations.
Respondents in this study stated that insider trading cannot be ruled
out, even where ethics codes have rules on share ownership and
trading by journalists. An interesting case is that of the Business Daily in
Kenya, which is situated in the same building six floors above the
Nairobi Stock Exchange. Journalists are well aware of the potential for
unethical behaviour created by this close physical proximity with the
market they cover:

We have not received any complaints thus far. However, I can say
there is no concerted programme group-wide to monitor business
journalists. I must hasten to say that not receiving complaints
doesn’t mean it’s not happening and will not happen in future.
(Business Editor, Business Daily). The Nairobi Stock Exchange is
located in the first floor of the Nation Media Centre. We know the
results ahead of everyone because we are strategically located
close to the stock exchange and also due to our journalistic
privileges. (Business reporter, Business Daily, Kenya)

Reporting on companies in which the journalist owns shares was

seen as a conflict of interest, though respondents differed on how
newspapers should deal with the issue:

I know of some business editors who own shares on the local

bourse and they still write editorials and stories on the
performance of those counters. It defeats the whole notion of
conflict of interest, but business journalism is still underdeveloped
in this country and the issue of ethics exists in theory but not in
practice. (Business reporter, Financial Gazette, Zimbabwe).

Market manipulation
Market manipulation, also known as “share ramping”, is one of the
strands of business journalism ethics which is not specifically addressed
in the codes of ethics from the three media organizations. Financial
journalists can have impact on share prices through recommendation
and thereby profit by selling shares on in the short term. During
interviews with business journalists, it was clear that most of them are

420
 Business journalism ethics in Africa

aware about the influence financial media can have on the prices of
stocks and bonds:

Business information is very sensitive and valuable hence we as

business reporters are at an advantage to influence the market.
(Business reporter, Business Day, South Africa). We cannot run
away from the fact that business journalism is a very sensitive
genre, where the impacts of news reports are far too great. One
story can turn the whole business organisation up-side-down in a
split of hours. It requires rigorous balance, more caution and
higher level of ethical judgment and integrity”. (Business editor,
Business Daily, Kenya).

Conflicts of interest
While all genres of journalism face issues of conflict of interest,
research has shown that such issues are more pronounced in relation to
financial journalism (see Banda, 2010; Rumney, 2009; Tambini, 2010).
The intercalary position of a business journalist in relation to the
interest of the reader, investor or market makes such conflicts
unavoidable. On the one hand, business journalists see themselves as
information providers for market participants; and on the other hand
they have a watchdog role over those very market participants
(Tambini, 2010). One such conflict, already mentioned, concerns
ownership of shares of companies which a journalist covers, a situation
which may nurture the temptation to withhold information that could
hurt the company or publish information that favors it, or engage in
profit-driven market manipulation (Tambini, 2010).
While respondents were aware of the potential conflict of interest
created by owning shares, some thought it did not constitute a serious
problem. The economic condition of journalists in Africa was cited as a
justification for investing in shares and profiting from inside
information: “The paradox which business journalists are faced with
everyday is whether to give market intelligence to others to benefit
while I remain mired in poverty?” (business reporter, Business Daily,
Kenya).Other respondents, however, believed that the poor salaries of
journalists eliminated the possibility of market manipulation and
insider trading: “Most of us have access to market intelligence in terms
of the local stock exchange, but lack the capital base to use that
information to our advantage” (business reporter, Financial Gazette,
Zimbabwe).

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

421
Admire Mare and Robert Brand

Moonlighting, which is another ethical dilemma which falls under

conflict of interest, was also identified as rampant in Zimbabwe and
Kenya. Some respondents justified moonlighting, or outside work, by
referring to their poor salaries, even though they recognized the
potential for conflicts of interest. In Zimbabwe, a respondent said,
taking two jobs was now the norm among journalists. He imparts:
“Freelancing is more lucrative than real work. In fact, freelancing pays
per story while full-time work pays a low flat salary which means the
more stories one files the better the returns” (business reporter,
Financial Gazette, Zimbabwe).

Disclosure
A related question is whether journalists should disclose their
financial interests, for example ownership of shares in a company they
cover. Most business journalism ethics codes, if not banning share
ownership outright, require that journalists disclose their interests
either to editors or, in some cases, to their audience (Tambini, 2010). In
the case of codes of ethics analyzed for this study, journalists are
expected to declare only gifts received at corporate functions. Most
codes are silent on the issue of share ownership except the Business
Daily, which bans share ownership. Business Day requires journalists to
disclose share ownership to readers at the bottom of an article.
Respondents felt, however, that disclosure rules would be ineffective
because they are difficult to police:

How do we ensure business journalists are not trading in shares

via their spouses or families? Share ownership is a private issue
which is difficult to police. Investment decisions are private issues
where disclosure is difficult to inculcate. (Business reporter,
Business Daily, Kenya)

At the Financial Gazette, a respondent stated that disclosure rules

were not policed because executives simply assumed journalists’
relative poverty precluded share ownership: “Disclosure of share
ownership is not an issue at all. No one bothers you because they
assume you cannot afford shares in the first place” (business reporter,
Financial Gazette, Zimbabwe).

‘Brown envelopes’ and other gifts

The causes for corruption in the newsrooms are varied and multiple.
In most cases where it occurs, corruption is fuelled by poor working

422
 Business journalism ethics in Africa

conditions, greed, materialism and hunger for media coverage by

business enterprises (Ndangam, 2006). In Zimbabwe and Kenya, some
respondents in this study claimed personal knowledge of corrupt
practices:

Most Zimbabwean journalists make a living through getting

kickbacks from news sources whom they interact with on a day-
to-day basis. (Business reporter, Financial Gazette, Zimbabwe). In
Kenya, inducements take place in times where information is
being hidden and malpractices are being concealed. In cases,
where a business organisation is trying to hide something, then
you expect brown envelope journalism to be the last resort.
(Business reporter, Business Daily, Kenya)

In South Africa, one respondent, while not having personal

knowledge of bribery, did not rule it out: “Not hearing about
complaints related to ethical violations does not mean nothing is
happening. [...] It may be happening behind our backs.”
Involvement in bribery appears to be driven by economic
circumstances and supported by a pervasive culture of unethical
behavior, even amongst senior executives:

I cannot afford to be ethical, when everyone including our bosses

are accepting sponsored trips abroad and kick-backs in order to
accommodate certain stories in the newspaper. At the end of the
day, someone would say who would I harm if I accept a bribe for a
story that is truthful? (Business reporter, Financial Gazette,
Zimbabwe).

To tell you the truth, journalism in Zimbabwe does not pay

adequately to live comfortably despite the status associated with
journalism. We are seen as celebrities by our readers but the truth is
that we still have bills to pay like anyone else, we have families to take
care of and needs to meet. Yet we earn peanuts. (Business reporter,
Financial Gazette, Zimbabwe)
At the end of the day, low income condemns you to accepting
sponsored trips for stories and other gift exchanges. In most cases,
inducements take place at times where information is being hidden
and malpractices are being concealed. In cases, where a business
organization is trying to hide something, then you expect brown
envelope journalism to be the last resort. (Business reporter, Business
Daily, Kenya)

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

423
Admire Mare and Robert Brand

It is clear from the foregoing that brown envelope journalism

manifests itself in different shades in different contexts. For instance,
sponsored tours, corporate gifts such as t-shirts, diaries and cash
inducements are all part of the “media gift exchange”. Hydén (2006, p.
73) refers to this as “the economy of affection”, that is, “investing in
reciprocal relations with other individual as a means of achieving
seemingly impossible goals”. There is a very thin line separating
sponsored visits from cash inducements because both strategies are
meant to elicit positive media coverage. The above extracts corroborate
Ndangam ’s conclusions (2006): journalists in Africa pay lip-service to
objectivity and autonomy while remaining committed to corrupt
practices. Although editors mentioned that they take the issue of
bribery seriously, it seems that gifts and bribes exchange hands in
newsrooms in Kenya and Zimbabwe. Interviews confirmed that some
business journalists have relationships with politicians and business
people which violate their institutional codes of ethics and foundational
principles of journalism.

Enforcement and monitoring of code of ethics

Concerns about monitoring and enforcement of codes of ethics were
raised by all interviewed editors. They revealed that there are many
challenges associated with enforcing and monitoring individual busi-
ness reporters’ conduct in the field. Business editors mentioned that it is
difficult to keep a hard line stance against ethical transgressions due to
peculiar challenges facing African newsrooms such as lack of transport,
low advertizing revenue and massive labor turnover. Editors sometimes
allow journalists to indulge in unethical behavior – such as accepting
sponsored travel opportunities – because their publications do not have
the resources to pay for travel. In other cases, editors simply rely on the
integrity of journalists, with no active monitoring of behavior or polic-
ing of the ethics codes:

We operate on shoe-string budgets which makes it difficult for us

to provide transport to our reporters for fieldwork. At times, we
allow journalists to go for sponsored trips because without such
support, news gathering may grind to a halt. In the end,
monitoring journalists in the field is difficult. (Business editor,
Business Day, South Africa).

We tell our journalists that the integrity of an individual is as good as

the integrity of the organization. In fact, you cannot build an

424
 Business journalism ethics in Africa

organization of integrity with unethical individuals. It’s a two-way

process. It is difficult anyway to monitor reporters because as an
organization we don’t have such intelligence gathering mechanisms.
We have no capacity hence we rely on goodwill. (Business editor,
Business Daily, Kenya)
Although it may be difficult to generalize it seems apparent from the
above extracts that business editors acknowledge that monitoring and
enforcement of codes is an impossible task which transcends human
resource policies to embrace what White (2010) calls “ethics of system
awareness” and respect for the “ethos of professionalism”. It has
emerged from the interviews that the mere existence of a code of ethics
is no guarantee for ethical conduct, as the following extract confirms:

Ethics is a living entity, which, like constitutions and laws, require

constant refinement with changing times in order to cope with
peculiarities of business news gathering. Ethical challenges keep
on becoming more complex and sophisticated as economies
evolve. Having a code of ethics is not an end in itself but a start of
a journey towards promoting professional behaviour in the
newsroom. (Business editor, Business Daily, Kenya)

Neither can a code provide a comprehensive ‘road map’ for ethical

behaviour in any circumstance:

There is no document that can address all the eventualities in the

field. At the end of the day, ethical guidelines continuously evolve
on a day-to-day basis, as business journalists interact with
editors. It’s about instantaneous reactions to moral dilemmas in
the field. (Business editor, Business Day, South Africa)

At one newspaper, a system was implemented that relies on readers

to alert the newspaper regarding ethical lapses. Although this resulted
in a number of complaints from readers, the system wasn’t wholly
effective:

When we began, we received a lot of complaints from readers.

However upon investigation, we realised that most complaints
were personal fights between the accused reporters and
complaints. Most complainants when called upon to come and
substantiate their claims, they chickened out. (Business editor,
Business Daily, Kenya)

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

425
Admire Mare and Robert Brand

Conclusion
While each of the financial newspapers in this study had ethical
policies in place, and journalists and editors recognized the importance
of ethical behavior in the field of business journalism, there was, in
some respects, a disconnect between policy and practice. Ethics codes
reflect the aspirations of newspaper publishers and journalists, rather
than actual practices. While journalists were aware of the existence of
ethical policies, they were not always familiar with the details of those
policies, and in some cases, such as restrictions on share ownership, not
always in agreement with them. All three ethics codes included
measures to prevent bribe-taking, but in two of the countries –
Zimbabwe and Kenya – it seemed that brown envelope journalism is
an accepted practice, and in South Africa, related practices such as
freebies and sponsored travel are ubiquitous. This is due to the
precarious economic basis of the news organizations, which do not
have the resources to pay journalists competitive salaries or to fund
travel for journalistic purposes. The link between economic
circumstances and ethical behavior is illustrated by the fact that
journalists in Zimbabwe and Kenya seemed more tolerant of brown
envelope journalism and related practices than their counterparts in
South Africa, where media organizations are far more profitable and
journalists, as a consequence, better remunerated. Unethical journalism
cannot be justified by economic circumstances, but neither can it be
addressed without addressing the economic basis and status of news
organizations and journalists.
A second aspect that needs to be addressed in order to improve
ethical behavior in the business media is monitoring and policing of
ethics rules. At all three newspapers in this study, respondents admitted
that monitoring was not taking place and that editors relied on the
integrity and honesty of journalists. Experience has shown, however,
that unethical practices thrive when ethics rules are not monitored and
enforced (Chari, 2009; Ndangam, 2006). Lack of resources was again
cited as the main reason for the absence of effective monitoring.
Lack of enforcement of ethical rules, together with the economic
circumstances of journalists, result in a pervasive and tolerated culture
of unethical behavior, even among senior editorial executives. This was
evident to some extent from responses of journalists in Kenya and
Zimbabwe, and, to a lesser extent, in South Africa. Incidents were
cited, for example, of pressure being brought to bear by senior editorial
executives on behalf of advertisers; share ownership rules being

426
 Business journalism ethics in Africa

disregarded; and freebies and sponsored travel being tolerated. While

such a culture persists, improvements in ethical behavior will obviously
be difficult to effect.

References
Banda, F. (2010). When journalism is a blunt knife. Rhodes Journalism
Review, 29, 10–12.
Brand, R. (2010). The business of business news: South Africa’s
financial press and the political press. Ecquid Novi: African Journalism
Studies, 31(1), 24–41.
Breed, W. (1955). Social control in the newsroom: A functional analysis.
In D. Berkowitz (Ed.) (1997), Social meaning of news (pp. 107–22).
Thousand Oaks, CA: Sage.
Chari, T. (2007). Rethinking ethical issues in African media. African
Identities, 5(1), 39–60.
Chari, T. (2009). Ethical challenges facing Zimbabwean media in the
context of the Internet. Global Media Journal: African Edition, 3(1).
Retrieved on 22 November 2010, from http://sun025.sun.ac.za/
portal/page/portal/Arts/Departemente1/Joernalistiek/
Global%20Media%20Journal/Global%20Media%20Journal%20-
%20Files/8C985F826DA95119E04400144F47F004.
Duncan, J. (2010). Media accountability systems in Africa.
Unpublished report, UNESCO/Highway Africa Website
Development Project.
Gavin, N.T. (Ed.) (1998). The economy, media and public knowledge.
London: Leicester University Press.
Harber, A. (2010, July 7). It’s up to the ANC and the media to stop the
rot, Business Day. Retrieved on 22 November 2010, from http://
www.businessday.co.za/articles/Content.aspx?id=114003.
Hydén, G. (2006). African politics in comparative perspective. Cambridge:
Cambridge University Press.
Kareithi, P., and Kariithi, N. (Eds.). (2005). Untold stories: Economics and
business journalism in African media. Johannesburg: Witwatersrand
University Press.
Kariithi, N. (2002, summer). Economics and business journalism in
Africa. Nieman Reports, pp. 26–27.
Kariithi, N. (2003). Business and economics journalism. In
Encyclopaedia of International Media and Communications (pp. 153–
61). San Francisco: Academic Press.

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

427
Admire Mare and Robert Brand

Kasoma, F. (Ed.) (1996). Journalism ethics in Africa. Nairobi: African

Council for Communication Education.
Krüger, F. (2009, November). Media courts of honour self-regulatory
councils in Southern Africa and elsewhere. Report, Friedrich-Ebert-
Stiftung/Fesmedia Series, Windhoek.
Limor, Y.H. (2006). Journalism and moonlighting: An international
comparison of 242 codes of ethics. In final report, international
symposium on media and ethics, Ankara, Turkey, 3–4 Nov 2006
(pp. 161–74).
Mfumbusa, B.N. (2008). Newsroom ethics in Africa: Quest for a
normative framework. African Communication Research, 1(2), 139–
58.
Mlambo, A. (2006). The Zimbabwean crisis and international
response. Journal of Contemporary History, 31(2), 54–77.
Mogweku, M. (2005). Economics journalism in emerging democracies
in Africa: Dealing with a difficult terrain. pp.62-76. In P. Kareithi
and N. Kariithi (Eds.), Untold stories: Economics and business
journalism in African media. Johannesburg: Witwatersrand
University Press.
Mudhai, F.O. (2007). Time to harvest? Media, corruption and elections
in Kenya. Paper presented to the Global Integrity Conference,
London.
Ndangam, L.N. (2006). “Gombo”: Bribery and the corruption of
journalism ethics in Cameroon. Ecquid Novi: African Journalism
Studies, 27, 179–99.
Newman, K. (1996, October). Walking a tightrope. American
Journalism Review. Retrieved on 22 November 2010, from http://
www.ajr.org/article.asp?id=3472.
Nyamnjoh, F.B. (2005). Africa’s media: Democracy and the politics of
belonging. Pretoria: Unisa Press.
Oloruntola, S. (2007). Mass media ethics in Nigeria: The problems
facing the Nigerian journalists. Lagos Papers in English Studies,
1(1), 58–68.
Parker, R. (1997). Journalism and economics: The tangled webs of
profession, narratives and responsibility in a modern democracy.
Discussion paper, The Joan Shorenstein Center, Harvard University,
Cambridge, MA.
Retief, J. (2002). Media ethics: An introduction to responsible
journalism. New York: Oxford University Press.

428
 Business journalism ethics in Africa

Roush, C. (2006). Profit and losses: Business journalism and its role in
society. Illinois: Marion Street Press.
Rumney, R. (2009, September). Caught in a blamestorm. Rhodes
Journalism Review 29. Grahamstown: Rhodes University.
Schudson, M. (2001). The objectivity norm in American journalism.
Journalism, 2(2), 149–70.
Steyn, L. (2010). TV channel gets R50 million from Gauteng. News
article, Mail & Guardian Online. Retrieved on 24 August 2010, from
http://www.mg.co.za/article/2010-04-01-tv-channel-gets-r50m-from-
gauteng.
Tambini, D. (2009). What is financial journalism for? Ethics and
responsibilities in a time of crisis and change. London: Polis.
Tambini, D. (2010). What are financial journalists for? Journalism
Studies, 11(2), 158–74.
Thompson, T. (Ed). (2000). Writing about business: The new Columbia
Knight-Bagehot guide to economics and business journalism. New York:
Columbia University Press.
Ward, S.J.A. (2006). The invention of journalism ethics: The path to
objectivity and beyond. New York: McGill Queens’s University
Press.
White, R.A. (2010). The moral foundations of media ethics in Africa.
Ecquid Novi: African Journalism Studies, 31(1), 42–67.

African Communication Research, Vol 3 , No. 3 (2010) 407 - 430

429
International Journal of Business and Social Science Vol. 5 No. 3; March 2014

Professional Socialisation and Training of Business Reporters in Malawi: A Case

Study of the Daily Times and the Nation Newspapers

Ellard Spencer Manjawira

Lecturer
Department of Journalism and Media Studies
The Polytechnic, constituent college of the University of Malawi

Abstract
In the past few decades, the proportion of business news compared to general news has increased tremendously
across all media platforms in Africa. While the critical role played by business journalism is recognised, little is
known about the people who write and report such news. Most studies on business journalism have tended to
focus on analysing the content of business news, rather than the specific processes through which business
journalists are socialised and trained. The findings of this study are drawn mainly from in-depth interviews with
business reporters and editors at two leading newspapers in Malawi, The Daily Times and The Nation. Two
major findings emerge from the study data. First, business journalists vary in their educational and professional
backgrounds, as well as the reasons for working on this beat. Second, the majority of them have no prerequisite
formal education and training in business journalism. The study recommends that business reporting should
become an integral component of journalism education and training programmes in order to adequately prepare
journalists for effective coverage of business issues.
Key words: business journalism, education, mentoring, training, socialisation, specialisation,
Introduction
The professional socialisation and training of business journalists remains an underdeveloped area of research in
Africa. A lot of studies conducted so far have tended to devote more effort to content analysis, examining how
the business press report specific issues and events. For example, Kariithi and Kareithi (2007) did a critical
discourse analysis of media coverage of the anti-privatisation strike of 2002 in South Africa, Kula (2004)
investigated the coverage of inflation news by the South African print media while Manda and Chirwa (2007)
examined budget reporting trends in Malawian media. Considering the increased growth and importance of
business reporting across media platforms in Africa in the last decade and the contributions business journalists
make to the debate surrounding the political economy of host nations, research on the professional socialisation
and training of such group of specialised reporters remains a worthwhile area of inquiry.
The present study explores the professional socialisation and training of business reporters in Malawi. The
objective is to understand the process by which people become specialised business news reporters. The study
addressed the following key questions:
1. What motivates journalists in Malawi to venture into business reporting?
2. What processes do the journalists follow to become specialised reporters?
3. What mentoring process do they undergo?
4. What education and training do the journalists possess?
5. What education and training do the reporters believe is needed to effectively report about business?
Business journalism as a sub-field of news reporting
Business journalism refers to all reporting that is written not only about businesses but also on the economy
(Roush 2006: 8). According to Kariithi (2003), three closely related forms of journalistic endeavour; business,
economics and financial journalism are often used interchangeably even though there are distinctions between
them.

181
© Center for Promoting Ideas, USA www.ijbssnet.com

Economics journalism refers to the coverage of national and international economic events and issues, business
journalism comprises the coverage of local economic issues in an in-depth fashion while financial journalism
provides a micro level perspective into financial markets (Kariithi, 2003:153). In this study the term business
journalism is used to refer to all the three.
Roush (2004:2) observes that there is no more important work in today’s media than that of a business journalist
and as such vibrant business reporting is being encouraged in emerging democracies and emerging economies.
Welles (2001:18) contend that this genre of journalism has acquired special status, as manifested in special
newspaper sections, television and radio programmes as well as specialised publications and special editorial
teams tailored to business. Business journalism has thus emerged as a distinct and legitimate news reporting sub-
field with a number of specific practices and norms of its own (Kjaer and Slaata, 2007:38).
Business journalism in Malawi
Although business news has been a main offering of Malawian news media for many years, the institutionalisation
of business reporting as a specialised area of journalism practice is a relatively new development. It dates back to
just about twenty years ago. As Chimombo and Chimombo (1996) put it, the defunct The Malawi Financial Post
and The Malawi Financial Observer emerged in the early 1990s as potential business news outlets, but they
contained more political than financial news. Thus, to date Malawi does not have a free-standing business
newspaper. Instead, business news is carried as a section in a general newspaper or as a supplement or pull out
The prominence of business reporting in Malawi emerged following the adoption of liberal politics in 1994. Since
the end of one-party rule, issues of the economy and people’s welfare have dominated political and civic debate.
People have become more conscious of the performance of the economy and how it affects their livelihood and
survival. In national elections, for example, sound economic management and improvement in living standards
have become dominant campaign themes of various political parties and candidates. Manda and Chirwa (2007:2)
argue that business reporting creates space for public debate on the national economy through the involvement of
citizens in matters of formulating, implementing and monitoring of the national budget. Besides focusing on the
national budget, business reporting in Malawi has been equally concerned with public accounting, corporate
governance and economic performance of the private sector among other issues.
Nevertheless, Malawi, like many other African countries, lacks a well developed business journalism practice.
This could be attributed to two major factors. Firstly, the one-party rule which prevailed for 30 years after
independence did not allow any journalism schools to operate (Chimombo and Chimombo, 1996:6). Formal
journalism education and training was only introduced after the adoption of multi-party politics in 1994.
Secondly, the existing journalism education models emphasise training for general reporting (Jamieson, 2005:
29). Since there had been no formal training and education for business reporting, general reporters routinely
transform into business journalists. This situation called for an investigation into the socialisation and training of
business reporters considering that business journalism poses its own unique and complex challenges.
Business reporting at The Daily Times and the Nation newspapers
The Daily Times and The Nation are the only two daily newspapers in Malawi. The Daily Times is the oldest
newspaper in Malawi. It was established in the early 1960’s by the family of the country’s first post-
independence president, the late Dr. Hastings Kamuzu Banda. The Nation, owned by late veteran politician, Aleke
Banda, was established in 1993 during the transition from single party to multi party political dispensation. The
Daily Times and The Nation define and dominate business reporting in Malawi. The two newspapers were
appropriate for the study because they covered more business issues and in greater detail than other media
organisations in Malawi. Furthermore, they were significant as they had set up business desks alongside other
regular news beats such as politics, entertainment and sports.
The papers had deployed full time staff for the business desks both at their main offices in the commercial city of
Blantyre and at regional bureaus in Lilongwe and Mzuzu. They also enjoyed the highest circulation and
readership in Malawi. At the time of the study, The Daily Times and The Nation had a circulation of 12,000 and
15,000 respectively (MISA 2012:47). The business desk at The Nation was set up in 1995 and in 1996 for The
Daily Times. The Daily Times has a four page section of business news daily with a sixteen page The business
Times pull out on Wednesday. The Nation on its part carries four pages of business news daily except on Sunday
and publishes its eight-page supplement on Thursday.

182
International Journal of Business and Social Science Vol. 5 No. 3; March 2014

Research Design and Methodology

To answer the stated research questions, this study adopted a case study approach. As Stake (1995: 112) notes,
cases are chosen and studied because they are considered “instrumentally useful in furthering understanding of a
particular problem, issue, or concept.” The study targeted business journalists of two leading daily newspapers in
Malawi namely The Daily Times and The Nation. Data was mainly collected through face-to-face, semi-structured
in-depth interviews with selected business reporters. The in-depth interviews were used to obtain detailed
information about specific aspects of the respondents ‘work as business journalists. Where appropriate, follow-up
questions were asked to gain more depth to answers provided to the study question. This allowed a substantial
room for respondents to express themselves more openly and for the researcher to probe explanations (Wimmer
and Dominic 2004). Additional information was gathered through in-depth interviews with editors of the two
newspapers. This was used not only to complement data from business reporters, but also to get an alternative
perspective. At the time of the research, the business desk at The Daily Times and The Nation had 4 and 5
reporters respectively. In total 11 people participated in the study (nine reporters and two editors).
All interviews conducted with reporters and editors were recorded and later transcribed. Given that the interviews
produced data in form of verbatim transcripts, the researcher interpreted the meaning of the data and presented it
in a critical and coherent manner. The researcher reported those sections of the interviews that shed most light on
the research question in narrative form with pertinent quotations used to illustrate major findings of the study.
Study Findings
Motivation for becoming a business journalist
Analysis of the interview transcripts indicated that the majority of the interviewees came upon business reporting
as a career serendipitously. Their transition from general assignment to business reporting did not have a single
catalyst. They gave various motivations for choosing business journalism as a career path. Nevertheless, three
basic patterns emerged from the interviews; those who became business journalists out of passion for the beat,
those who joined the business desk just for the sake of reporting something different, and those who were forced
by circumstances.
A reporter of The Daily Times belonged to the few that had the initial passion to report business. As he put it:
“The field was uncharted and so [I] wanted to do something unique in Malawi journalism, to take up the
challenge to help bring awareness among people on various business policies being introduced and implemented
and how they affected the country’s development agenda. Also it was the idea to associate with the cream of the
world. Economists, business and financial experts are regarded as the top ranks of decision making on issues of
the economy. Issues of the economy are regarded as tough and difficult. For belonging to the business desk, one is
seen as belonging to unique and special class of journalist. Many reporters would refuse to be on the business
desk because they think it is difficult. To be a business reporter is special, one interacts and associates with top
notch intelligentsia, people with knowledge about business and the economy.” (Interview, September, 2012)
For three reporters at The Nation and one at The Daily Times , the motivation to enter business journalism was
the desire to report on something different (to break away) from the usual routine, mainly the emphasis on
political reporting. And for two reporters at The Daily Times, circumstances forced their entry into business
journalism; they were ordered to move to the beat due to shortage of staff on the business desk.
Based on these findings, it can be said that many of the reporters had no initial motivation to venture into business
reporting. Only a few had considered it in the first place. The rest were, to say the least, dragged into the field for
various reasons cited above. These findings support Marchette (2005) assertion that journalistic specialisation was
not compatible to academic disciplines, because there were no formal entry requirements. For the journalists at the
two newspapers under study there was no specific academic qualification or any other conditions attached for
them to become business reporters.
Recruitment for business reporting
The newspaper editors were asked, “What was the pre-requisite education and training for business reporting? In
other words, what criterion was used by the editors for recruiting and re-deploying staff on the business desk?”
Their responses revealed that experience in journalism rather than background knowledge in business or
economics was the most important factor considered when media institutions hire business reporters. Editor of
The Daily Times explained that:

183
© Center for Promoting Ideas, USA www.ijbssnet.com

“Recruiting staff for the business desk is a challenge because most of the media training institutions do not offer
specialised training for business reporting. So usually most of the people that we have hired are those that got
basic training in journalism then probably had chances later on for further studies specifically in business and
economics news coverage. Most of the time we target those who have had training outside their normal or basic
journalism training, and also had opportunities to do short courses in business and economics reporting. In
addition we usually also look for some work experience, those who have been on the business desk before.”
(Interview, October, 2012)
On the other hand, editor of The Nation said for business reporting the paper usually targeted people with a
relevant first degree and at least with some knowledge of economics or business. The editor observed that it was
ideal to target those with an economics degree in economics because this knowledge was vital, citing an example
of one of the paper’s business reporters who was an economics graduate from Chancellor College, a constituent
college of the University of Malawi. Editor of The Daily Times said his organisation had tried the approach of
recruiting economics or business studies graduates since it would have been the best option. But he pointed out
that such graduates were usually not settled because they could get more competitive salaries elsewhere. He said
economics and business studies graduates found lucrative jobs elsewhere rather than in the media. He said, when
they came to the media, it was because they had nowhere to go at that particular time. This editor observed that
unless remuneration and work conditions in the media improved to become competitive as those offered by the
corporate and financial sector, the chances of maintaining economics and business studies graduates were
minimal. Editor of The Nation agreed with his Daily Times counterpart that it was not achievable to get
economics and business graduates as they were mostly unwilling to work in the newsroom but instead preferred
the corporate world where salaries and conditions were attractive. He added that it had to be understood that these
economics and business graduates were not in principal professional journalists by training but just happened to
be suited to journalism, hence their primary target was the financial, business and corporate sectors.The editor’s
advocating for economics or business graduates as the most ideal for business reporting was contradicted by a
very experienced business reporter at The Daily Times who argued that he would give priority to an experienced
reporter to learn on the job over an economics graduate turned business reporter. To him, the economics or
business graduate would fail to communicate information to the masses. He added that the experienced journalist
would look at issues with the eye of an ordinary person. Another reporter at The Nation supported this position
that economists or business studies graduates were not best suited for business reporting noting:
“It is true that some people who are economists have ended up being good business journalists. But you also have
got cases around where you find people who have never been trained as economists ending up being good
business journalists. I think we should first understand who a journalist is; a journalist is a communicator whether
it be in science or politics. So in the case of business reporting, it is anybody else who is interested in reporting
business news, what is important is to equip them to understand the issues. To me, it is better to have an
experienced journalist rather than a graduate economist to report on business. Even if one does not have a
background in economics or business studies but if you have an interest in that particular sector then you can turn
into a good communicator of those issues. What is important is to be good communicators and interpreters of the
issues.”(Interview, October, 2012)
From the sentiments of the two reporters, it can be argued that the position of editors on recruiting business and
economics graduates for business reporting seems idealistic. What was more practical and manifested on the
ground was that journalism experience surpassed all other considerations. Of the nine business reporters
interviewed during the study only one had a degree in economics. This indicated that while economics or business
qualification was preferred, it was not attainable and that journalism experience was the most used criterion for
recruiting staff for business reporting. The situation at the two Malawian newspapers seemed to agree with Reed
and Lewin (2005: 14), who noted that it helped if the reporters had experience covering other types of stories
before moving over to business, as experienced reporters needed less direction while greener reporters required
more mentoring. Nearly four decades ago, Turnstall (1971:24) also made similar observation that in specialist
reporting preference had always been on general experience and competence rather than specialised knowledge.
Induction and mentoring newly recruited business reporters
Editors of the two newspapers under study agreed that mentoring for newly deployed reporters on the business
desk was an important requirement to have the people orientated to the expectations and mode of operations on
that particular desk.
184
International Journal of Business and Social Science Vol. 5 No. 3; March 2014

Editor of The Daily Times however observed that sometimes formal mentoring was not always possible,
especially if the new person came to the desk when more experienced reporters were busy. In that situation, he
confessed, de-briefing and mentoring was sometimes overlooked and the new person was left to swim on their
own. He said what would be done instead was to constantly give feedback to the concerned person. He noted for
example that if there was something which could be improved on, they would be advised accordingly. The editor
said the responsibility of mentoring would be left to the business editor because he possessed specialised
knowledge in that field. Editor of The Nation said the process of mentoring on the business beat was the same for
reporters on other desks The only difference was that as part of the mentoring process they were encouraged to
read widely literature on business and economics to keep themselves abreast with latest developments. The two
editors admitted that induction and mentoring of new recruits was compromised because they were not governed
by any written rules but carried out as routine practices when necessary.
However, most reporters expressed concern over lack of mentoring and socialisation at the time they joined the
business desk. One reporter of The Nation explained that he was not mentored or inducted in any way on business
reporting as the experienced reporters were then not available to do so. A reporter of The Daily Times said in the
absence of formal mentoring in the early days, he familiarised himself through reading articles in international
business newspapers and magazines. Two reporters of The Daily Times who had the privilege of being inducted
and mentored admitted it was a useful process that nurtured and sharpened their skills.
These findings revealed that while mentoring was an essential process in the professional socialisation of business
reporters, it had not been carried out to the expected levels or in some cases not at all. Most reporters interviewed
lamented how they had struggled to cope with demands of the business desk and ended up making mistakes in
their writing which could have been avoided if they were formally and properly inducted and mentored. Most
newly recruited reporters on the business desk said they had been left to find ways of doing things on their own.
Education and training of business reporters
In this study, education was used to refer to academic qualification that emphasise theoretical aspects while
training denoted qualification that focussed on practical elements of a profession. Within training, a distinction
was also made between short term courses pursued at workshops and seminars, and long-term courses leading to
award of a certificate, diploma or degree. In terms of their formal education, findings revealed that the highest
academic qualification for two reporters of The Nation and three of The Daily Times was The Malawi School
Certificate of Education (an equivalent of British GSCE O-level certificate). One reporter of The Daily Times had
a diploma in journalism, one reporter of The Nation possessed a bachelors degree in economics while two
reporters (one for each paper) possessed bachelors degree in journalism.( Refer to Table 1)
Table 1: Academic Qualifications
Qualification Number of people
(a)M.S.C.E. (British GSCE O- level equivalent) 5
(b) Diploma 1
(c) Bachelors degree in journalism 2
(d) Bachelors degree in economics 1
The academic qualifications as shown by table above indicate that most business editors ventured into business
reporting unprepared without any pre-requisite knowledge and expertise.
Professional Qualifications
All the journalists interviewed indicated having no initial exposure or background knowledge in business or
economics except one who had a bachelors degree in economics. The rest only possessed qualifications in general
journalism ranging from certificate to a bachelors degree (Refer to Table 2).
Table 2: Professional qualifications in business/economics
Qualification Number of people
(a) Certificate in business /economics 0
(b) Diploma in business /economics 0
(c) Bachelors degree in business /economics 1
(d) Masters degree in business/economics 0

185
© Center for Promoting Ideas, USA www.ijbssnet.com

It was because of knowledge gap in business and economics as depicted by the table above that most reporters
indicated that short term business reporting courses were critical for them to meet the demands of the beat.
Professional short courses
All reporters interviewed indicated that they had attended short-term professional training at either a workshop or
seminar. Topics covered during such training included the following: reporting corruption, corporate governance,
budget reporting and analysis, reporting business news, globalisation, understanding the global financial crisis,
and reporting the national economy. Most of the workshops and seminars, it was observed took place locally and
organised by institutions such as the University of Malawi, the Reserve Bank of Malawi, National Bank of
Malawi, Standard Bank, Malawi Revenue Authority, Office of the Director of Public Procurement, Economics
Association of Malawi, Malawi Confederation of Chambers of Commerce and Industry, Malawi Stock Exchange,
Malawi Economic Justice Network and Institute of Internal Auditors, and the local offices of international
institutions such as the World Bank, Canadian International Development Agency and the United States Agency
for International Development ( USAID). Some reporters indicated to have attended such short term courses
outside the country organised by international institutions such as the Reuters Foundation, European Union,
African Development Bank, Reserve Bank of South Africa, and Johannesburg Stock Exchange among others.
The two editors admitted that due to cash flow problems it became difficult for the media institutions to sponsor
reporters for professional training in Malawi or outside the country. They instead encouraged reporters to seize
opportunities of fully-funded training. They said in some cases their organisations would meet part of the costs
such as transportation expenses when the tuition and other costs were paid for. But they emphasised that the
initiative had to be with the reporter to identify and apply for a course and only inform management should they
needed support.
In-house training
Editor of The Daily Times added that apart from training offered by other institutions within and outside the
country, in-house training is sometimes organised. This usually involved inviting officials of business and
economics institutions who would make presentations to the business reporters. He said such presentations
supplemented the mentoring and socialisation that took place on the desk and had proved very useful. He
explained how it was done:
“We have in the past tried to call people and organisations to come and make presentations on particular areas of
business and economics as one way of improving the performance of our business reporters. For example the
Economics Association of Malawi would do some training for journalists on specifically how they want people to
cover economics issues, the Bankers Association of Malawi would give a briefing on how to handle issues
concerning banks, the Malawi Stock Exchange would also hold a training session specifically on how best they
could be covered. So business reporters benefit from such presentations” (Interview, October 2012)
The above explanation showed that the media organisations complemented efforts of external organisations in
providing training to business reporters. All reporters were unanimous in acknowledging the significance of long
and short term professional courses to their business reporting careers. One reporter of The Nation put it that:
“When I was going into business reporting I did not have the much needed knowledge and experience, therefore
such training have been like eye openers because they helped me understand issues in business and I think they
have helped to shape me to where I am now” ( Interview, October 2012)
Most reporters said the courses exposed them to new business knowledge, and provided new insight and helped
them gain confidence. In one unique case, as part of professional training, one reporter of The Daily Times said he
had benefited from a six month internship at the business desk of The Chicago Tribune in the United States of
America
Membership to professional organisations
Socialisation and training through membership to professional association was also mentioned by the business
reporters as another useful intervention. One such body was the Association of Business Journalists (ABJ). In the
words of a reporter of The Nation who claimed was a founding member of ABJ had contributed tremendously to
the quality of business reporting:

186
International Journal of Business and Social Science Vol. 5 No. 3; March 2014

“The association has done an incredible job to enhance the professionalisation of business journalists through
exchange of ideas and public talks where professionals in economics, business and financial sectors present
working papers and discuss issues. In addition members have benefited from the association as a forum for
networking, interaction, knowledge sharing and discussion of issues to develop business journalism profession,
lobbying and negotiating with organisations for training.” (Interview, October, 2012)
In addition to the local organisation, other reporters said they were members of international professional bodies
such as the African Economics Editors Network through which they had benefited in form of training, networking
and sharing of knowledge and skills with other reporters across the African continent.
Education and training the reporters needed
Despite benefiting from short and long term professional training, the reporters explained that they wished they
could undergo more training to enhance their skills especially in aspects they faced challenges. The areas
identified included: monetary policy, international financial market systems, globalisation, interpreting national
budget, bond and commodity markets, interpreting statistics, and analysing company financial statements. This
showed that while the business reporters had undergone some professional training, there existed knowledge gap
that required more exposure and training. In a study of 18 west coast newspaper editors and reporters in the
United States of America carried out over a decade ago, nearly all agreed that business journalists needed classes
or training in business and economics to do their jobs well (Ludwig 2002:129). Going by the study findings, the
scenario in the United States appear to hold true to the Malawi situation. As articulated by reporters of the two
newspapers under study, their exposure to different forms of professional training had significantly improved their
capacity to cover business. They indicated that they needed to take classes in business and economics to provide
them with tools necessary to do their work properly, although they were mixed responses on what form the
courses should take and the specific areas or topics.
Discussion of Findings
Findings of the study established that for most business journalists at the two daily newspapers, there was no
initial motivation to venture into business reporting. Most of them began their careers as general reporters and few
had considered the choice of business journalism as a career option as there was no initial passion and inspiration.
For some it was a matter of moving away from their usual routines especially political reporting while others were
forced by circumstances, for example shortage of personnel on the desk. This showed that most of them were to
say the least dragged into it for various reasons. The study also revealed that the business reporters had different
educational and professional backgrounds and experiences. Although the editors of the two daily newspapers
under study said they preferred business or economics graduates, most of their business journalists at that time did
not possess those qualifications. The majority of them had no formal training in business or economics and had to
be exposed to the field through short and long term on the job training.
An essential outcome of the study was the recognition that training was one of the central pillars of the
professional socialisation of business reporters. Kariithi (1995:376) puts it that studies of how African journalists
cope with demands of business journalism have found that even without considering the impact of other factors,
the writers lacked technical skills for comprehensive reporting and analysis of business issues. The way the
business reporters were socialised was reflected on the kind of content they produced. Since an understanding of
business and economics issues is a pre-requisite for effective dissemination and interpretation of information to
the public, business journalists required to be trained. The study revealed that there were a handful of trained
business reporters, hence the added need for more training. However, specialisation in business reporting had not
fully taken root among Malawian journalists. It was noted that lack of adequate specialised training was
particularly cardinal. Local institutions that offer journalism education and training did not have specialised
programmes targeting business reporting and therefore most of them became business reporters by need other
than ability.
To this effect, the Department of Journalism and Media Studies at the Polytechnic, a constituent college of the
University of Malawi, as a key journalism education and training institution, needed to strengthen its curriculum
to accommodate the training of business reporters. The department’s revised curriculum of 2010 which
incorporated some business journalism modules was a move in the right direction. As Pardue (2004) observed,
until specialised training in business reporting was integrated into journalism programs, a gap would remain
between what editors needed and what poorly prepared graduates would deliver.
187
© Center for Promoting Ideas, USA www.ijbssnet.com

But more could be done by the University of Malawi and other private journalism and media training institutions
by either introducing a speciality programme in business reporting or by allowing specialising from third year of
the current general degree programme. Meanwhile, the two daily newspapers in Malawi should continue to
provide professional training opportunities through which their business reporters could hone their skills. Also not
to be underestimated would be the value of what journalists could learn on the job. As the study showed, most of
the business journalists joined the beat without any previous knowledge. Therefore induction and mentoring
needed to be given special priority. Interviews with reporters and editors attested that on the job training remained
a neglected aspect. Therefore induction and mentoring needed to be strengthened and encouraged. Further, the
media organisations should hire economists or business studies graduates and train them as business journalists.
In the process, their in-depth knowledge of economics and business coupled with an understanding of news
reporting would combine to making business news more interesting to the public.
Areas for Further Research
This study was an exploratory enquiry into the socialisation and training of business reporters in Malawi. The
findings and interpretations presented in this paper are only the beginning of an important area of study worth
pursuing. A lot of questions still exist about business journalism in Malawi and these could be answered by
embarking on further studies within the sub-field. While this study provided a good snapshot to understanding
socialisation and training of a group of specialist reporters at the two daily newspapers, it was narrow in scope. A
broader enquiry could be undertaken nationwide targeting business journalists in other newspapers, radio and
television stations, as well as magazines. Also an audience reception study could be conducted to investigate
public engagement with business news. Such an enquiry would seek answers to the following questions: how does
the Malawi public understand and use business news? How is business news evaluated by the audience? How
much does it contribute to the formation and development of public opinion on the economy? How does it
influence civic discussion on other issues affecting society?
Conclusion
A lot of studies have been conducted on business journalism but mainly analysing the content of business
reporting. There is however dearth of research targeting people responsible for writing and producing business
news. This study is but a small contribution in that regard as it examined the professional socialisation and
training of business reporters at two leading newspapers in Malawi. It has provided a rich picture of how such
reporters became what they are. Findings of this study would be useful to editors in needs assessment process for
hiring and training business reporters, and for journalism schools in the training of such reporters. It is also hoped
that this study would contribute to a knowledge base journalism scholars can draw from when understanding and
interrogating the socialisation and training of business journalists in an African context in general and Malawi in
particular.

188
International Journal of Business and Social Science Vol. 5 No. 3; March 2014

References
Chimombo, S. and Chimombo, M. (1996) The Culture of Democracy: Language, Literature, the Arts and Politics
in Malawi, 1992-1994. Zomba: WASI Publications.
Jamieson, R. (2005) ‘Business Reporting in Malawi Media’, in Kareithi, P. and Kariithi, N (eds) Untold Stories:
Economics and Business Journalism in African Media, pp 29-31. Johannesburg: Wits University Press.
Kareithi, P. (2005). ‘Rethinking the African Press: Journalism and the Democratic Process’, in Kareithi, P. and
Kariithi, N (eds.) Untold Stories: Economics and Business Journalism in African Media. pp 2-15.
Johannesburg: Wits University Press.
Kariithi, N. 1995. “Questioning the Policy maker: The Role of Mass Media in Shaping Africa’s Economic
Future”, in Okigbo, C. (ed.) Media and Sustainable Development in Africa.pp 140-166. Nairobi: African
Council for Communication Education.
Kariithi, N. (2003) ‘Business and Economics Journalism’, Encyclopaedia of International Media and
Communications. Vol.1. pp 153-161. San Francisco: Academic Press.
Kjaer, P. and Slaata, T. (2007) Mediating Business: The Expansion of Business Journalism. Copenhagen:
Copenhagen Business School Press.
Kula, M. (2004) How the South African Print Media Cover Economics News: A Study of Inflation News in Four
Newspapers, 1999-2001. MA Thesis, Rhodes University, South Africa.
Ludwig, M. (2002) ‘Business Journalists Need Specialised Finance Training’, Newspaper Research Journal, Vol.
23 (2): 129-141.
Marchette, D. (2005) ‘Sub-fields of Specialised Journalism’, in Benson, R and Neveu, E (eds.) Bourdieu and the
Journalistic Field, pp 64-79. Cambridge: Polity Press.
Manda, L. and Chirwa, W. (2007) Whose Voice Matters: Trends in Budget Reporting in Malawi. Lilongwe:
Canadian International Development Agency-CIDA
Media Institute of Southern Africa, (2012) So This is Democracy: State of Media Freedom in Southern Africa.
Windhoek: MISA
Pardue, M. (2004) ‘Most Business Editors Find News Reporters Unprepared’, in Newspaper Research Journal,
Vol. 25(3): 66-76.
Reed, R. and Lewin, G. (2005) Covering Business: A Guide to Aggressively Reporting on Commerce and
Developing a Powerful Business Beat. Illinois: Marion Street Press.
Roush, C. (2004) Show Me the Money: Writing Business and Economics News for Mass Communication.
London: Lawrence Erlbaum Associates
Roush, C. (2006) Profit and Losses: Business Journalism and its Role in Society. Illinois: Marion Street Press
Stake. R. (1995). The Art of Case Study Research. Thousand Oaks: Sage
Sparks, C. and Splichal, S. (1989) “Journalistic education and professional socialisation”. Gazette( 43): 31-52
Turnstall, T. (1971) Journalists at Work: Special Correspondents; Their News Organisations, News Sources and
Competitor Colleagues, London: Constable and Company
Welles, C. (2001) ‘Writing about Business and the Economy’, in Thompson, T (ed) Writing about Business . pp
1-12. New York: Columbia University Press.
Wimmer, R and Dominick J, (2003) Mass Media Research: An Introduction. Belmont: Wadsworth Publishing
Company.

Author’s Bibliographical Note

Ellard Spencer Manjawira is a lecturer in the department of Journalism and Media Studies at The Polytechnic,
constituent college of the University of Malawi. He holds a Bachelor of Education degree from Chancellor
College, University of Malawi and a Master of Arts Degree in Journalism and Media studies from Rhodes
University, South Africa. He previously worked as a News producer for the Malawi Broadcasting Corporation.
His teaching and research interests are in Broadcast Journalism, Business Reporting, and Media Management.

189
554167
research-article2014
JOU0010.1177/1464884914554167Journalism

Article

Journalism

Are watchdogs doing their

1­–17
© The Author(s) 2014
Reprints and permissions:
business? Media coverage sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/1464884914554167
of economic news jou.sagepub.com

Antonis Kalogeropoulos
University of Southern Denmark, Denmark

Helle Mølgaard Svensson

University of Southern Denmark, Denmark

Arjen van Dalen

University of Southern Denmark, Denmark

Claes de Vreese
University of Amsterdam, The Netherlands

Erik Albæk
University of Southern Denmark, Denmark

Abstract
In the wake of the financial crisis, journalists were criticized for failing in their coverage
of the economy: The claim was that they had failed in their duty as watchdogs. The aim
of this article is to examine to what extent journalists fulfill their role as watchdogs
when covering business news, in light of this criticism. Given the prevalence of the
watchdog ideal in journalism and the lessons learned during the financial crisis, we
expect journalists to act equally critically toward business and political news. Based on
a systematic content analysis of business and political news in the five largest Danish
newspapers, we find that politicians and business actors are covered with a similar
tone. We conclude that journalists do fulfill their watchdog role when it comes to both
business and politics. The differences in coverage and the implications of this adherence
to the watchdog ideal are also discussed.

Corresponding author:
Antonis Kalogeropoulos, Center for Journalism, University of Southern Denmark, Campusvej 55, 5230
Odense M, Denmark.
Email: [email protected]

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
2 Journalism 

Keywords
Business coverage, business news, content analysis, economic news, financial crisis,
watchdog journalism

Introduction
Ever since the dawn of the international crisis in 2008,1 the media worldwide have been
criticized for failing to exercise skepticism about what was done by those in political and
financial power and therefore failing, as the fourth estate, in their duty to the public
(Marron et al., 2010). For example, Manning (2013) claims that financial journalism
failed to alert for the sings of the crisis by practicing a simplistic model of monitoring.
He also argues that public relations (PR) consultants made financial institutions more
competitive in exercising control in information flows. Empirical studies that analyzed
media content before the 2008 crisis have shown that the media were paying attention
only to some sectors of the economy (which did not include debt and derivative markets)
and that their evaluation was not very critical (Starkman, 2009; Tett, 2009). Other schol-
ars have criticized financial journalists for being unaware of the institutional framework
in which they operate (Tambini, 2010b) for not being trained and knowledgeable enough
(Davis, 2007; Doyle, 2006) or paying too little attention to economic details (Schiffrin
and Fagan, 2013). Starkman (2009), in his study on American newspapers, found that
although financial journalists did give some warnings about investment and banking
issues between 2000 and 2003, after 2004 such warnings and investigative stories were
missing. In Denmark, it was argued that the media did not function as watchdogs during
the financial crisis because there was no political conflict between the government and
the opposition (Andersen, 2011).
The aim of this article is to determine to what extent journalists lived up to their role
as watchdogs when they covered economic news in 2012. In this way, we will be able to
assess if this ‘failure of the watchdog-critique’ that was expressed toward journalists at
the onset of the crisis is legitimate in times of a full blown crisis. We do not expect this
to be the case – in fact, we expect journalists to act as watchdogs within the field of busi-
ness news to the same extent they do when they cover political news. Lessons taught by
the financial crisis clearly amplified the need for journalists to be alert and cautious of
the acts of not only politicians but also business actors – the major Icelandic banking
collapse and the Lehman Brothers bankruptcy are only two examples where journalists
could have exerted more critique vis-à-vis power holders. These lessons, combined with
all the criticism journalists have been exposed to and the importance that they attach to
the watchdog ideal, make us believe that journalists of today operate as watchdogs when
they cover both economic news and political news.

What is a watchdog?
The watchdog metaphor implies that the journalists act as guards toward those groups in
society who have power. At all times, watchdogs should represent the citizens, be suspi-
cious of potential threats and hold the powerful elites such as government and public offi-
cials accountable (Berry, 2009; Donohue et al., 1995; Franklin et al., 2005; Wahl-Jorgensen,

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 3

2007). Franklin et al. (2005) specifies the watchdog role more clearly by referring to three
assumptions:

First, the media are essentially autonomous; second journalism acts in the public interest
looking after the welfare of the general public rather than that of society’s dominant groups; and
third, that the power of the news media is such that they are able to influence dominant social
groups to the benefit of the public. (p. 274)

According to these assumptions, the watchdog is autonomous, represents the public and
has the power to challenge those in power (Patterson, 1998). Watchdogs are also critical
and adversarial in their coverage, critical in a context of political competitiveness where
actors are open to evaluation (Norris, 2000: 29). Additionally, watchdogs are per defini-
tion objective; they do not represent any specific interests, but instead, they present dif-
ferent interests and opposing views in a news story in order to be as unbiased as possible
(Skovsgaard et al., 2012). The importance of fulfilling the objective watchdog role is
underlined by the dedication journalists express toward it. In a research conducted by
Skovsgaard et al. (2012), 45 percent of Danish journalists agree that it is ‘very important’
for journalists to be as objective as possible and not to take a stand on who is right in a
conflict. They also believe that they should be equally critical toward both sides in a
dispute (Skovsgaard et al., 2012).
But how does the watchdog operate in economic news – are watchdogs as fierce when
it comes to chasing business actors as they are when chasing politicians? We believe it is
crucial that journalists sound the alarm when some potential dangers toward society are
rising in the world of business – in exactly the same way they do when politicians jeop-
ardize the well-being of society. That is also why we adhere to the watchdog ideal as a
standard that should belong in business too. It has been argued that political journalists
face less pressure for PR, thus are more critical toward their actors (Reich, 2011). That is
why the coverage of politicians can serve as a standard to which the coverage of business
actors can be compared. This question seems more important than ever, since the power
of business actors has become very clear in the wake of the financial crisis. For such a
comparison to be made, it is desirable to distinguish between economic news focusing on
either ‘political news’ or ‘business news’,2 in order to see how the journalists fulfill their
role as watchdogs when it comes to, for instance, actors and issues covered.
Prior research on how business news is covered is ambiguous. It has been claimed that
the American news media have a pro-market bias (Herman, 2002). Likewise, in a case
study of how business crime is framed in the British media, Allen and Savigny (2012)
demonstrate that the media favor business interests over the public interest – business
actors had the voice in 45 percent of the articles analyzed, whereas government politicians
only had the voice in 7 percent of the cases. Furthermore, they argue that the media envi-
ronment is generally supportive of business interests and that those responsible for finan-
cial wrongdoings are able to get away with it (Allen and Savigny, 2012). Miller (2006)
also found that the American press preceded a public admission or an investigation in
exposing ‘accounting irregularities’ of companies in only less than a third of the cases.
Contradictorily, and based on observation and in-depth interviews, Doyle (2006) claims
that financial journalism is sometimes falsely stereotyped into using a pro-corporate bias
with the aim of portraying corporations and their activities positively. He also found that

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
4 Journalism 

the journalists perceive themselves to be watchdogs as far as corporation performance and

conduct are concerned. These journalists claim to be ready to cover any malfunctions or
consequences within corporations’ performance and conduct. Journalists in the same study
also acknowledge that PR and corporate spin is ‘endemic’ to their field, and they are trying
to find ways and techniques to keep their reports independent from the releases (Doyle,
2006: 14). As it was found in other empirical studies (Tumber, 1993), some, mostly tabloid,
financial journalists put emphasis on negativity since it is more newsworthy.
The empirical findings of Reich (2011) suggest that, in comparison to their political
counterparts, financial journalists use fewer sources per item, are more reliant on PR and
they take less initiatives in contacts with sources. On the other hand though, not many
differences were found as far as diversity of sources and cross-checking are concerned.

The impact of the financial crisis on watchdog journalism

We further believe that the financial crisis, combined with all the criticisms that financial
journalists have been exposed to, has potentially made journalists even more alert to their
role as watchdogs of not only politicians but also business actors. Scholars have indeed
argued that critical incidents and events like the Vietnam War, the Watergate scandal, the
Gulf War or the assassination of JFK have reshaped the rules and conventions of journal-
istic practice which are relatively stable (Arlen, 1969; Schudson, 1993; Zelizer, 1990,
1992). In this light, the current financial crisis can theoretically be seen as a critical
juncture influencing the pattern of financial journalism (Kier, 2012). A critical juncture
is a specific event that opens up the opportunity for change in the path followed (Thelen,
1999), and in this case, it could be the opportunity for financial journalism to become
more alert and critical toward business. Especially since financial journalists might have
incentives for rebuilding their trustworthiness due to their failure in predicting the crisis
and in a reply to all the criticism they have been exposed to in the wake of the crisis
(Kier, 2012). A way of rebuilding this trustworthiness could be through a more aggres-
sive coverage (Roush, 2006). Extrapolating from this, we believe that journalists would
adhere to a cautious and equally critical stance toward business news as is the case for
political news.

Hypotheses
Our first set of hypotheses is based on the expectation that journalists learned the lessons
from the early phases of the financial crisis, which demonstrated that both political deci-
sions on the economy and the behavior of business actors can have a great impact on citi-
zens’ lives. In addition, since journalists consider their watchdog function as very
important and are aware of their responsibility to keep a close eye on the power holders
in society, we find no reason why journalists should differentiate in their watchdog duty
when covering business actors or politicians. We believe that the basis of watchdog jour-
nalism is the similarity and balance in the coverage of different power holders in news
articles. A very positive and optimistic coverage of important business actors before and
during the first signs of the ongoing financial crisis has been claimed to be one of the
reasons behind it (Dickinson, 2010; Tambini, 2010b). The role of financial journalists

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 5

should contain not only ‘unearthing cases of fraud, but providing the balanced and skep-
tical news and comment that deflates bubbles and helps avoid market irrationality’
(Tambini, 2010b: 28). This would influence the way the economic climate is evaluated
in economic news, both political and business.
Thus, following our expectations and past research suggesting that the visibility of an
issue, the visibility of actors and its tone influence perceptions (De Vreese et al., 2006),
we focus on these aspects of the coverage and we build the following hypotheses:

H1a. The economic climate is evaluated similarly in economic news articles where
the main issue is a political issue as in articles where the main issue is a business
issue.
H1b. The economic climate is evaluated similarly in economic news articles where
the main actor is a politician as in articles where the main actor is a business actor.
H2. Politicians and business actors are evaluated in a similar manner in economic
news articles.

Our second set of hypotheses concerns the frames of the news stories in political and
business news. We base these two hypotheses on the assumption that a focus on conse-
quences implies a more interpretative and proactive view on news (De Vreese et al.,
2001; De Vreese, 2005). This is in accordance with the theory on the watchdog function
of journalism, since the whole point of alerting the public is to make the public aware of
the possible consequences of the actions of the political or financial power holders.
Moreover, we believe that the importance of the news criteria conflict (Galtung and
Ruge, 1965) is tied closely to watchdog journalism because the objectivity norm enhances
a focus on all sides in disputes. Again, since both political and business actors are power-
ful groups that work in very competitive environments, we expect similarity in the pres-
ence of both consequence frame and conflict frame:

H3. The presence and the evaluation of economic consequence frame is similar in
economic news articles where politicians and business actors are the main actors.
H4. The presence of conflict frame is similar in economic news articles where politi-
cians and business actors are the main actors.

The Danish case

We test our four hypotheses in the Danish context. In Denmark, the journalistic ideal of
watchdog journalism is very strong; in fact, the notion that journalists cannot fulfill their
duties as responsible servants due to political pressure has very minimal support (Van
Dalen et al., 2012). The objectivity norm and the public service norm are also highly
emphasized by Danish journalists, something that started with the decline of party press
in the late 19th century or early 20th century (Skovsgaard et al., 2012). A case like the
Danish where there is a strong ideal of watchdog journalism is interesting to investigate
so as to draw conclusions on the possible developments of this ideal due to recent events.
We think that the trends will be the same in most Western countries where journalists
share the same professional values and have been hit by the crisis in the same extent as

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
6 Journalism 

Denmark. Thus, we expect this to be the case in the countries belonging to the Democratic
Corporatist model and not necessarily in countries which, for example, belong to the
polarized pluralist model where the professionalization is weaker between journalists
(Hallin and Mancini, 2004).

Methods and data

The analysis is based on a quantitative content analysis of news articles covering the
economy. These articles were published by the five Danish newspapers with the largest
circulation: Berlingske, Jyllands-Posten, Politiken (broadsheets), B.T. and Ekstrabladet
(tabloids) in a three month period from 1 March to 30 May 2012. This time period was
chosen because it minimized the risk that one breaking news story on the economy
(favorable as well as unfavorable) would make a bias in either way because it could be
heavily covered for many days in a row. By keeping the data collection period as long
as possible, the risk of such bias is lowered. Acknowledging that the Internet is an
increasingly important source of news supply, we decided to include news articles
published on both the printed platform and the online platform of each newspaper. The
population of articles was obtained by a computer-assisted content analysis using two
different electronic databases, Infomedia3 and BERTA.4 Infomedia was used for col-
lecting the news articles that were published in the printed newspapers, whereas
BERTA was used for collecting the news articles published online on the homepage of
the newspapers.
The relevant articles from each newspaper were found using specific search words.5
The search words used are specifically related to the economy, but words that are often
used to describe the economy such as ‘upturn’ or ‘downturn’, ‘improvements’ or ‘decline’
are left out, since they may also appear in all other contexts. A search including these
words would result in a higher number of hit articles that are not related to the economy
at all.6 A search in Infomedia generated a population of 3,006 articles from Politiken, for
example, and an equivalent search was done for each media outlet. Likewise, using
BERTA the population of online articles was obtained. By using this sampling procedure
throughout the research, the entire population of articles consisted of 17,321 articles
divided almost equally on the five different media outlets.
In order to draw a representative sample of the news articles, we sampled on two
levels. First, we sampled randomly7 which days to choose for the content analysis and,
second, within these specific dates we selected the specific articles by sampling ran-
domly from all the articles published on this specific date. This procedure was carried out
until the sample was complete, and we repeated the procedure for each newspaper. We
sampled 50 articles from each newspaper from the same 50 days. The final number of
articles included in the content analysis was 492.8
The articles were analyzed by three trained coders using a codebook with explicit
coding rules. The coders are political science students with Danish as their mother
tongue. Coders received training in several sessions, and meetings were held in order to
resolve conflicts in definitions of variables. An inter-coder reliability test was undertaken
in a subsample of 25 articles.9

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 7

Measures
First, the main issue of each article was coded. If a story had more than one main issue,
then coders were asked to code first the one which was mentioned first. The issue catego-
ries were as follows: employment/unemployment, inflation, state debt and deficit, busi-
ness news and imports/exports, taxation, housing market, investment issues, interest
rates, individual economic stories, growth/recession (in a country), and others. These
categories were inspired by a similar study by Sanders et al. (1993).
Second, articles were classified as having ‘no evaluation’, ‘positive evaluation’, ‘neg-
ative evaluation’, and ‘mixed evaluation’ toward the economic climate. By mixed evalu-
ation we mean balanced exposure of favorable and unfavorable evaluations of the
economy. The coders were asked to measure the tone of the headline and the subheading
of the article when in doubt.10
Third, for each article, we coded the appearing actor. These could be specific persons,
institutions, a government, an organization, or a country. Up to five actors per article
were coded. By definition, actors needed to appear twice in the article in order to be
coded (verbally mentioned twice, verbally mentioned once and quoted once, verbally
mentioned once and depicted once). The actors in each article were coded by order of
appearance. Actors with several roles like ‘President of the euro group/Prime minister of
Luxembourg’ were coded according to how the journalists or the sources named them.
Broad categories of actors were ‘Business actors’, which included companies, business
people, and CEOs, ‘Political Actors’, which included Danish and international politi-
cians as well as governments and the European Union (EU) used as actors, ordinary citi-
zens, experts and credit-rating agencies, and interest organizations.
Fourth, coders were asked to code whether the actors were evaluated by anyone in the
story, a journalist or a source. Possible responses were ‘there is no evaluation of the
actor’, ‘there is a dominantly favourable evaluation of the actor’, ‘there is a mixed evalu-
ation of the actors’, and ‘there is a dominantly unfavourable evaluation of the actor’.
Fifth, coders were asked to evaluate whether a news article reports an event, a prob-
lem, or an issue in terms of the consequences it will have economically on an individual,
group institution, region, or country. Sixth and finally, coders evaluated whether a news
article put emphasis on disagreement between arguments, people, or institutions. These
framing items stem from De Vreese et al. (2001).

Results
The first part of this section covers the descriptive analysis of this study. During the ana-
lyzed period, we coded the issues discussed in economic news. Figure 1 shows that
corporate news was the most prevalent issue (21.5%) followed by unemployment and
employment (11.2%), and taxation (11.2%).
We merged (un)employment, debt/deficit, taxation, and growth/recession stories into
political issues. For business stories, we used housing market, investment issues, interest
rates, and corporate news. Others include Energy, Personal Economy, and other items not
counted in the first analysis. When combining the issues into two general categories,

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
8 Journalism 

25

20

15

10

Figure 1.  Main issue of the news articles.

political issues and business issues, the presence of political issues and business issues in
the articles is similar (31.3%–34.8%), as seen in Figure 2.
Figure 3 shows the actors mentioned in the articles. In sum, business actors and com-
panies are the most present actors (27.2%), followed by international actors such as for-
eign politicians, EU or leaders of financial institutions like the International Monetary
Fund (IMF) and the World Bank (20.3%), and Danish politicians (13.6%).
As far as the evaluation of the economic climate in the articles is concerned (Figure
4), 37.6 percent of the articles covered the economy negatively, as opposed to 20.7 per-
cent who were positive towards it. Of the articles, 29.7 percent did not contain any evalu-
ation of the climate.
In order to compare to what extent journalists act as watchdogs in both politics and
business news, we turn to the hypotheses. The first hypothesis (H1a) concerns the evalu-
ation of the economic climate in articles with different issues and expects that the eco-
nomic climate is evaluated similarly in articles where the main topic is either about
political issues or business issues (Table 1). This hypothesis is supported because no
significant differences are found in the presence or in the direction of the evaluation of
the economic climate across the two issue categories: χ2 (1, N = 325) = 1.109, p > .05 and
χ2 (2, N = 241) = 5.443 p > .05, respectively. In both political issues and business issues,
unfavorable coverage of the general economic climate is most prevalent.
The next hypothesis (H1b) concerns the evaluation of the economic climate when the
first actor is either a politician or business actor (Table 2) and expects that the evaluation
of the economic climate is evaluated similarly across these actors. This hypothesis is
supported because no significant differences are found in the presence or the direction of
the evaluation of the economic climate: χ2 (1, N = 301) = 0.340, p > .05, and χ2 (1,
N = 238) = 0.399, p > .05.
The second hypothesis (H2) predicts similarities in the way politicians and business
actors are evaluated by other actors or journalists in the article (Table 3). This hypothesis

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 9

50
45
40
35
30
25
20
15
10
5
0
Business News Polical News Others

Figure 2.  Main issue of the news articles divided into broader categories.

30

25

20

15

10

Figure 3.  Main actors of the news articles.

is partly supported because significant differences are found in the presence of evalua-
tions of different actors: χ2 (1, N = 301) = 3.957, p < .05, and no significant differences
appear when measuring the direction of the evaluations of actors: χ2 (2, N = 188) = 2.853,
p > .05.
The third hypothesis (H3) predicts similarities in the presence and the evaluation of
economic consequences frames when different actors appear in the articles. According to

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
10 Journalism 

40

35

30

25

20

15

10

0
No Evaluaon Unfavourable Mixed Evaluaon Favourable
Evaluaon Evaluaon

Figure 4.  Evaluation of the economic climate.

Table 1.  Presence and direction of the evaluation of the economic climate according to
different issues.

Issues Presence of evaluation Direction of evaluation

No Yes Total (%) Unfavorable Mixed Favorable Total (%)

(%) (%) (%) (%) (%)
Political 26 74 100 (n = 171) 53 24 23 100 (n = 127)
Business 21 79 100 (n = 154) 50 15 35 100 (n =122)
Chi square p-value: .292 p-value: .066
N = 325 N = 249

Articles including issues that did not fit into these categories were excluded from this analysis and this
explains the lower number of articles.

Table 2.  Presence and direction of the evaluation of the economic climate according to
different actors.

Actors Presence of evaluation Direction of evaluation

No (%) Yes (%) Total (%) Unfavorable Mixed Favorable Total (%)
(%) (%) (%)
Political 22 78 100 (n = 167) 55 15 30 100 (n = 130)
Business 19 81 100 (n = 134) 52 17 31 100 (n = 108)
Chi square p-value: 0.56 p-value: 0.84
N = 301 N = 238

This analysis is based on 301 articles, because actors not belonging in either of these two categories are left
out.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 11

Table 3.  Presence and direction of actors’ evaluations in political and business actors.

Actors Presence of evaluation Direction of evaluation

No (%) Yes (%) Total (%) Unfavorable Mixed (%) Favorable Total (%)
(%) (%)
Political 43 57 100 (n = 167) 53 22 25 100 (n = 96)
Business 31 69 100 (n = 134) 48 16 36 100 (n = 92)
Chi square p-value: 0.047 p-value: 0.24
N = 301 N = 188

This analysis is based on 301 articles, because actors not belonging in either of these two categories are left
out.

Table 4.  Presence and direction of evaluations in economic consequence frame in articles with
different main actors.

Actors Presence of economic Direction of evaluations in economic

consequences frame consequences frame

No (%) Yes (%) Total (%) Unfavorable Mixed Favorable Total (%)
(%) (%) (%)
Political 37 63 100 (n = 167) 44 15 41 100 (n = 105)
Business 54 46 100 (n = 134) 38 19 43 100 (n = 62)
Chi square p-value: .004 p-value: 0.64
N = 301 N = 167

This analysis is based on 301 articles, because actors not belonging in either of these two categories are left
out.

Table 4, this hypothesis is partly supported. There were significant differences in the
presence of the economic consequences frame when politicians and business actors are
compared : χ2 (1, N = 301) = 8.300, p < .05. The economic consequence frame was present
in 46 percent of the articles with business actors as actors, while it was significantly more
present in articles with politicians as actors (63%). On the other hand, no significant dif-
ferences appeared in the evaluation of the economic consequences: χ2 (2, N = 167) = 0.882,
p > .05.
The last hypothesis examines the presence of conflict frames in articles with different
actors. According to Table 5, the hypothesis is not supported because significant differ-
ences are found: χ2 (1, N = 301) = 28.207, p < .05. A conflict frame was present in 53
percent of the articles with politicians as main actors, while it was present in 23 percent
of the articles with business actors as main actors.

Discussion
What do these results tell us about the watchdogs barking equally loud within the eco-
nomic and business news coverage? The descriptive analysis showed that corporate

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
12 Journalism 

Table 5.  Presence of conflict frame in articles with different main actors.

Actors Presence of conflict frame

No (%) Yes (%) Total (%)

Political 47 53 100 (167)
Business 77 23 100 (134)
Chi square p-value: 0.00  
N = 301

This analysis is based on 301 articles, because actors not belonging in either of these two categories are left
out.

news was the most covered issue followed by political issues such as (un)employment
and taxation. When looking at political news and business news, the difference between
the issues was more balanced and showed that journalists cover political and business
issues almost equally as far as the amount of the stories is concerned. This is a first indi-
cator that the media portray political and business issues in a similar manner. Likewise,
when it comes to actors present in the coverage, business actors are actually more visible
than politicians. What happens in the business world is by no means left unnoticed –
journalists do in fact pay a lot of attention to and give a lot of space in their columns to
what is at stake in the business world. These results are in line with Kjær’s et al. (2007:
146) findings which demonstrated that during the past decades, business and industry-
themed news and actors are gaining prevalence over economic news on governmental
policy in Nordic countries.
In terms of content, we find more similarities than differences in the coverage of
political news and business news. The economic climate was evaluated similarly across
articles about political and business issues, although the more favorable evaluations of
the economic climate were found for business issues (Table 1). This similarity might not
be surprising since the poor state of the economy favors a poor coverage of the economy
(Tumber, 1993). In terms of actors, we also found that the evaluations of the economy are
similar in the articles where business actors and politicians are main actors. In addition,
when we tested for potential differences between tabloids and broadsheets, we did not
find any significant differences in the direction of the coverage.
Differences were also found in the frames used. The ‘economic consequences’ and the
‘conflict’ frame were more present in politicians than in business actors. The differences
in the economic consequences frame are surprising, considering that both politicians and
business actors are powerful actors whose actions are potential threats to citizens and
need to be watched and scrutinized carefully by journalists. On the other hand, the fact
that journalists use the conflict frame more when it comes to politicians could be
explained with the obviousness of the other side in the dispute – it is easy for the journal-
ists to identify different views because clearly defined oppositions appear within politics
in terms of opposition parties, especially in a country with a multiparty coalition govern-
ment (Semetko and Valkenburg, 2000). This is more blurred within business.
But together, all the results suggest that journalists do keep a watching eye on the busi-
ness and evaluate them in a critical way which is a first indicator of a change of patterns.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 13

According to Tambini’s (2010a) findings, during the crisis financial journalists were not
dedicated to the watchdog role as much as their political counterparts. This was because
they were responding to what the audience or investors wanted to hear or because of con-
flicts of interest (Stein and Baines, 2012). We believe that this change is due to the finan-
cial crisis which served as a ‘critical juncture’ for media coverage. According to historical
institutionalists, a critical juncture or a crisis serves as an abrupt institutional change
(Hogan and Doyle, 2007). This can be a change in policies or patterns.
Since the financial crisis has led governments and corporations to reform, these
changes will be evident in the patterns of the media as an institution which played a
major role in the crisis too. The public discussion and demand for reform that followed
the financial crisis involved the role of the media in the society as a major player in this
crisis (Marron et al., 2010; Starkman, 2009; Tambini, 2010a, 2010b), and this has
alerted the field about its own responsibilities. We cannot be certain on whether this is
a temporary or a lasting change. On the one hand, other critical events such as the
Vietnam War or the Watergate scandal set a journalistic example as mentioned earlier
(Zelizer, 1992). On the other hand, the pressure of the companies’ public relations will
persist to push the journalists. Possible consequences of this change, if it is a lasting
one, could include changes in the audience and in the market. A more critical eye
toward business and the whole financial system may increase cynicism and distrust
(Cappella and Jamieson, 1997), but it would also protect the society from irregularities
(Tambini, 2010a). Finally, the Danish journalists did live up to our expectations accord-
ing to the Democratic corporatist model and showed professional standards of looking
at both sides of the story with a similar manner. These results may apply to Denmark
and to other countries belonging in the same media system model, but this may not be
the case for other countries. In countries of the Liberal model, such as the United
Kingdom, where the system is very competitive (Strömbäck and Shehata, 2007), more
commercial pressures apply. In countries of the polarized pluralist model, such as
Spain, it is common for media owners to use the media for their interests (Hallin and
Papathanassopoulos, 2002).
Last but not least, limitations may include the small time period of research or the sole
use of press (online and offline) and the large number of unidentified items in the issue
and actor identification questions. Future research needs to include a broader time period
so that a connection with the real world indicators will provide deeper insights between
businesses. In addition, TV and radio economic news should be included as well in order
to examine a more comprehensive image of the media coverage of the economy.

Funding
The study was funded by the independent research foundation of VELUX.

Notes
  1. By crisis, we mean the financial crisis 2007–2008 which led to the collapse of financial insti-
tutions and of stock markets around the world. We believe that this crisis has consequences
until today through the European sovereign debt crisis.
  2. For the purpose of this study, we understand political news as economic news which is focus-
ing on politically regulated issues such as taxation and employment, whereas business news is

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
14 Journalism 

news focusing on issues that concern business actors like companies and business representa-
tives such as investment issues.
  3. Infomedia is a database that archives all news articles from printed newspapers published by
different media outlets. The specific search in Infomedia is conducted by using search criteria
such as search words, date, and media outlet.
  4. BERTA is a new archive of all news articles published online by different media outlets.
When using different search criteria such as search words, date, and media outlet, BERTA
will, like Infomedia, show the population of articles fulfilling these criteria.
 5. The search words used were as follows: economy, balance of payments, gross domestic
product (GDP), inflation, housing market, taxation, debt, investment, interest rate, stock,
bank, consumption, savings, salary, loan, export, import, state of the market, employment,
unemployment, growth, recession. These words were chosen because an elaborative pretest
revealed that these words often appear in financial journalism.
  6. This was tested through BERTA: An identical search was made with the following words
added: surplus, improvements, balance, upturn, hire, progress, deficit, decline, worsening,
imbalance, sack, downturn. This search resulted in 19,807 news articles.
  7. We sampled randomly by using the software system http://www.random.org.
  8. Eight articles were deleted from the sample because after the coding they appeared not to be
about economic news.
  9. For the variable issue, percentage agreement is 78.2. For the variable actor, percentage agree-
ment is 61. For the evaluations (actor and climate) percentage agreement is 55.4. For the
variable economic consequence frame, percentage agreement is 71. For the variable conflict
frame percentage, agreement is 82.6.
10. If the tone of an article was absent or unclear from the heading or subheading or if the article
has an opposite tone than the header and subheading, the coders needed to count and compare
the number of different evaluations in the article.

References
Allen H and Savigny H (2012) Selling scandal or ideology? The politics of business crime cover-
age. European Journal of Communication 27(3): 278–290.
Andersen JG (2011) From the edge of the Abyss to Bonanza – And beyond. Danish Economy and
Economic Policies 1980–2011. Comparative Social Research 28: 89–165.
Arlen MJ (1969) Living-Room War. Peabody, MA: The Viking Press.
Berry SJ (2009) Watchdog Journalism. Oxford: Oxford University Press.
Cappella JN and Jamieson KH (1997) Spiral of cynicism. The Press and the Public Good. New
York: Oxford University Press.
Davis A (2007) The economic inefficiencies of market liberalization. Global Media and
Communication 3(2): 157–178.
De Vreese C (2005) News Framing and typology. Information Design Journal + Document
Design 13(I): 51–62.
De Vreese C, Banducci SA, Semetko HA, et al. (2006) The news coverage of the 2004 European
Parliamentary election campaign in 25 countries. European Union Politics 7(4): 477–504.
De Vreese C, Jochen P and Semetko H (2001) Framing politics at the launch of the Euro: A cross-
national comparative study of frames in the news. Political Communication 18(2): 107–122.
Dickinson M (2010) Where were the media in the financial crisis of 2008, and have we seen this
trend before? Honors Projects in Communication 7. Available at: http://digitalcommons.bry-
ant.edu/honors_communication/7
Donohue G, Tichenor PJ and Olien CN (1995) A guard dog perspective on the role of the media.
Journal of Communication 45(2): 115–132.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 15

Doyle G (2006) Financial news journalism: A post-Enron analysis of approaches towards eco-
nomic and financial news production in the UK. Journalism 7(4): 433–452.
Franklin B, Hamer M, Hanna M, et al. (2005) Key Concepts in Journalism. London: SAGE.
Galtung J and Ruge MH (1965) The structure of foreign news: The presentation of the Congo,
Cuba and Cyprus crises in four Norwegian newspapers. Journal of Peace Research 2(1):
64–90.
Hallin DC and Mancini P (2004) Comparing Media Systems: Three Models of Media and Politics.
Cambridge: Cambridge University Press.
Hallin DC and Papathanassopoulos S (2002) Political clientelism and the media: Southern Europe
and Latin America in comparative perspective. Media, Culture & Society 24(2): 175–195.
Herman E (2002) The media and markets in the United States. In: Alisa Clapp-Itnyre, Roumeen
Islam and Caralee McLiesh (eds) The Right to Tell: The Role of Mass Media in Economic
Development. Washington, DC: The World Bank, pp. 61–82.
Hogan J and Doyle D (2007) The importance of ideas: An a priori critical juncture framework.
Canadian Journal of Political Science 40(4): 883–910.
Kier C (2012) Har finanskrisen sparket liv i kritisk erhvervsjournalistik. Master’s Thesis,
University of Southern Denmark, Denmark.
Kjær P, Erkama N and Grafström M (2007) Transforming business news content. In: Kjær P
and Slaata T (eds) Mediating Business: The Expansion of Business Journalism. Copenhagen:
Copenhagen Business School Press, pp. 131–158.
Manning P (2013) Financial journalism, news sources and the banking crisis. Journalism 14(2):
173–189.
Marron MB, Sarabia-Panol Z, Sison MD, et al. (2010) The scorecard on reporting of the global
financial crisis. Journalism Studies 11(2): 270–283.
Miller G (2006) The press as a watchdog for accounting fraud. Journal of Accounting Research
44: 1001–1033.
Norris P (2000) A Virtuous Circle: Political Communications in Postindustrial Societies.
Cambridge: Cambridge University Press.
Patterson TE (1998) Political roles of the journalist. In: Graber D, McQuail D and Norris P (eds)
The Politics of News: The News of Politics. Washington, DC: CQ Press, pp. 17–32.
Reich Z (2011) Different practices, similar logic: Comparing news reporting across political,
financial, and territorial beats. The International Journal of Press/Politics 17(1): 76–99.
Roush C (2006) Profits and Losses: Business Journalism and Its Role in Society. Oak Park, IL:
Marion Street Press.
Sanders D, Marsh D and Ward H (1993) The electoral impact of press coverage of the British
Economy 1979-87. British Journal of Political Science 23(2): 175–210.
Schiffrin A and Fagan R (2013) Are we all Keynesians now? The US press and the American
Recovery Act of 2009. Journalism 14(2): 151–172.
Schudson M (1993) Watergate in American Memory: How We Remember, Forget, and Reconstruct
the Past. New York: Basic Books.
Semetko HA and Valkenburg PM (2000) Framing European politics: A content analysis of press
and television news. Journal of Communication 50(2): 93–109.
Skovsgaard M, Albæk E, Bro P, et al. (2013) A reality check: How journalists’ role perceptions
impact their implementation of the objectivity norm. Journalism 14(1): 22–42.
Starkman D (2009) Power problem: The business press did everything but take on the institutions
that brought down the financial system. Columbia Journalism Review 48(1): 24–30.
Stein J and Baines D (2012) Myth making on the business-pages: Local press and global crisis.
Ethical Space: The international Journal of Communication Ethics 9(1): 52–59.
Strömbäck J and Shehata A (2007) Structural biases in British and Swedish election news cover-
age. Journalism Studies 8(5): 798–812.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
16 Journalism 

Tambini D (2010a) Beyond the great crash of 2008: Questioning journalists’ legal and ethi-
cal frameworks. Ethical Space: The International Journal of Communication Ethics 7(3):
1–14.
Tambini D (2010b) What are financial journalists for? Journalism Studies 11(2): 158–174.
Tett G (2009) Icebergs and Ideologies: How Information Flows Fuelled the Financial Crisis.
Anthropology News 50(7): 6–7.
Thelen K (1999) Historical institutionalism in comparative politics. Annual Review of Political
Science 2: 369–404.
Tumber H (1993) Selling scandal: Business and the media. Media, Culture & Society 15(3): 345–
362.
Van Dalen A, De Vreese C and Albaek E (2012) Different roles, different content? A four-country
comparison of the role conceptions and reporting style of political journalists. Journalism
13(7): 903–922.
Wahl-Jorgensen K (2007) Journalists and the Public: Newsroom Culture, Letters to the Editor,
and Democracy. Cresskill, NJ: Hampton Press.
Zelizer B (1990) Achieving journalistic authority through narrative. Critical Studies in Media
Communication 7(4): 366–376.
Zelizer B (1992) CNN, the Gulf War, and journalistic practice. Journal of Communication 42(1):
66–81.

Author biographies
Antonis Kalogeropoulos is a PhD student of Political Communication in the University of Southern
Denmark. His main interests include political communication, framing effects, and far right wing
coverage.
Helle Mølgaard Svensson is a PhD student at the Center for Journalism at the Department of
Political Science at University of Southern Denmark. Her main interests are news coverage, news
bias, public opinion, and attitude formation. The purpose of her project is to examine how the
Danish news media cover the economy and how this news coverage influences people’s perception
of the economy.
Arjen van Dalen (PhD) is Associate Professor at the Centre for Journalism at the University of
Southern Denmark. He wrote his PhD dissertation on Political Journalism in Comparative
Perspective. His research interests are in comparative communication research, particularly jour-
nalistic cultures and the relations between journalists and politicians. He has published about these
topics in The Global Journalists in the 21st Century (edited by David Weaver and Lars Willnat,
2012) and journals such as the European Journal of Communication, Political Communication,
The International Journal of Press/politics, and Journalism Studies.
Claes de Vreese is Professor and Chair of Political Communication and Scientific Director of The
Amsterdam School of Communications Research ASCoR in the Department of Communication
Science at the University of Amsterdam. He is also Adjunct Professor of Political Science and
Journalism at the University of Southern Denmark. He has published more than 60 articles in
international peer-reviewed journals, including Communication Research, Journalism Studies,
Political Communication, Journal of Communication, International Journal of Public Opinion
Research, Public Opinion Quarterly, Scandinavian Political Studies, European Journal of
Communication, West European Politics, EU Politics, Journalism & Mass Communication
Quarterly, Mass Communication & Society, and European Journal of Political Research.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Kalogeropoulos et al. 17

Erik Albæk is Professor in the Centre for Journalism at the University of Southern Denmark.
Professor Albæk has been visiting professor at MIT, Harvard University, Vilnius University
(Lithuania), Potsdam University (Germany), and the University of Amsterdam. He has been chair-
man of the Danish Social Science Research Council and the Nordic Political Science Association.
He has published articles in journals such as Journalism & Mass Communication Quarterly,
Journalism, Political Communication, Journal of Communication, and Party Politics.

Downloaded from jou.sagepub.com at Bobst Library, New York University on July 27, 2015
Trade Facilitation
Capacity Needs
Policy Directions for
National and Regional
Development in West Africa

Edited by
Gbadebo Odularu
Philip Alege
 CHAPTER 1

Introduction: The Changing Landscape

of Trade Facilitation and Regional
Development Issues in West Africa

Gbadebo Odularu

Abstract  The advent of technological advancement, digital commerce, and

increased trade integration has continued to strengthen South-South
regional trade institutions, partnerships, and capacities. With Brazil, Russia,
India, China, and South Africa (BRICS) now accounting for a substantive
share of the global gross domestic product (GDP) and the robust economic
growth and trade expansion being experienced in Africa, collaboration
between governments, regulators, and organized private sectors is crucial
for enhancing trade facilitation capacities in Africa. However, the continent
and its sub-regions are continually being confronted by increasing trade
costs arising from non-tariff sources, such as inefficient transportation, weak

G. Odularu (*)
Department of Accounting, Economics and Finance, School of Business and
Technology, Marymount University, Arlington, VA, USA
Cross-Border Education Research Division, American Heritage University of
Southern California (AHUSC), Ontario, CA, USA
Centre for the Research on Political Economy (CREPOL), Dakar, Senegal
e-mail: [email protected]; [email protected]; [email protected]

© The Author(s) 2019 1

G. Odularu, P. Alege (eds.), Trade Facilitation Capacity Needs,
https://doi.org/10.1007/978-3-030-05946-0_1
2  G. ODULARU

logistics infrastructure, cumbersome regulatory procedures, lengthy cus-

toms processes, and incoherent business documentation, thereby placing
Africa at a competitively disadvantaged position. While discussing selected
regional integration and development initiatives in West Africa, the article
expatiates on the strategic importance of advancing trade facilitation agenda
in the face of increasing non-tariff measures (NTMs) and the ongoing
African Continental Free Trade Area (AfCFTA) negotiations.

Keywords  Trade facilitation • Non-tariff measures • AfCFTA

• West Africa • ECOWAS • WTO

When goods and services cross borders in international trade, information

needs to be passed between relevant parties, whether private companies or public
bodies, including suppliers, logistics providers, customs, regulatory agencies,
sellers and buyers. Paperless trade refers to the digitization of these information
flows, including making available and enabling the exchange of trade-related
data and documents electronically. Less formally, one can think of this as cross-­
border trade transactions using electronic data in lieu of paper-based docu-
ments. (World Economic Forum (WEF) 2017)

1.1   Introduction: Economic Context

and Rationale

In this twenty-first century, increasing economic growth, improved gover-

nance, and enhanced trade are gradually becoming parts of the ‘Africa
rising’ narrative. Given the nature of these countries, the two inseparable
and most important sectors—Agriculture and Trade or Commerce—
remain the backbone of the West African economy. However, there is an
increasing gap between trade facilitation (TF) commitments and imple-
mentation, which has a direct impact on West Africa’s capacity to export
its commodities—agriculture, manufacturing, and services. For West
Africa to achieve its Sustainable Development Goals (SDGs) (specifically
on reducing poverty, hunger, decent work, and sustained economic
growth, etc.) and meet the expectations of Vision 2020,1 the Economic

 In June 2007, the ECOWAS Authority adopted ECOWAS Vision 2020, which is aimed
1

at setting a clear direction and goal to significantly raise the standard of living of the people
through conscious and inclusive programs that will guarantee a bright future for West Africa,
and shape the destiny of the region for many years to come  – http://www.ecowas.int/
about-ecowas/vision-2020/.
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  3

Community of West African States (ECOWAS) has been promoting trade

facilitation as a tool for the accelerated development of the West African
economy. Trade facilitation remains one of the most viable and appropri-
ate tools for achieving and accelerating sustainable development in West
Africa. Its trade facilitation tool is designed to increase intra-regional com-
merce, sustainable boost trade volume, foster integration into the global
economy, and contribute towards its realization of the United Nations
Sustainable Development Goals (UN SDGs).
The commercially gigantic countries in West Africa are Nigeria, which
accounts for approximately 76 per cent of the total regional trade, fol-
lowed by Ghana with about 9.2 per cent, and lastly by Côte d’Ivoire,
which is estimated at about 8.64 per cent. Regional trade in West Africa is
dominated by mining commodities (oil resources, iron, bauxite, manga-
nese, gold, etc.) and agriculture (cotton, coffee, cocoa, roots and tubers,
cereals, fruits, vegetables, and livestock products). However, the value
chain of these commodities is highly inefficient, partly due to deficient
access to accurate and timely data for enhanced national and regional trade
facilitation and sustainable development (KGH Border Services 2016;
Petersen 2017).
The core of the economic relations of the US with West Africa has been
the African Growth and Opportunity Act (AGOA) of the year 2000.
AGOA offers more than three dozen countries easy access to US markets
by eliminating import tariffs. Experts and policymakers believe that, as the
main trade policy of the US for Africa, it will bring about the economic
and political development of Africa. But the outsized role of oil and
apparel in African export growth has raised questions about whether
AGOA can diversify the region’s economies and increase its competitive-
ness in global markets. Unfortunately, the US engagement in terms of
trade with AGOA’s participants has declined since 2008 while Africa has
found a new trade partner—China and expanded trade relations with
China and other countries. The AGOA is a trade preferential programme
for Africa that was established in the year 2000 to strengthen US trade
relations with Africa and the Caribbean, enacted during the regime of
President Bill Clinton as the US President. Further, it remains a potent
and innovative trade strategy which allows AGOA-qualified African coun-
tries to overcome selected non-tariff barriers within the US marketplace.
The American government saw the policy as an avenue to drive growth
and sustain democratic dividends in Africa. It was also expected that
AGOA would make the US-Africa relations stronger when the US markets
are opened to millions of consumers from Africa.
4  G. ODULARU

It is correct to understand that non-tariff measure (NTM) can be linked

to sustainable development directly or indirectly. When it is direct, it
means there are policies that have an immediate impact on sustainable
development, like those directed at protecting health and the environ-
ment. If it is indirectly linked, this could be as a result of trade policies that
are geared towards fostering economic development with a spill-over
effect on sustainability. The indirect linkage to sustainable development
makes the cost of trade to slow down the impact of trade as an engine of
growth. NTMs may also be seen as trade costs or non-tariff barriers
(NTBs). NTMs that are legal but with non-trade motives can greatly
restrict and distort international trade flows. Even as NTMs are increas-
ingly becoming popular in most countries, there is still a serious transpar-
ency gap. The United Nations Conference on Trade and Development,
with support from partners, is at the forefront of an international effort to
collect comprehensive data on currently imposed mandatory regulations.
It is a fact that each NTM has implementation processes, and it becomes
more difficult when the procedures are not very clear. This increases costs
and causes delays. However, the World Trade Organization (WTO) Trade
Facilitation Agreement has the powers to reduce drastically procedural
obstacles and delays at the border.
The benefits of international trade and trade facilitation rely basically
on the absence of trade restrictions among trading nations. The global and
gradual reduction in tariffs is increasingly being replaced by NTMs. The
effect of NTMs is not exactly clear, as it seems to be a bit confusing.
NTMs limit import flows to other countries, and measuring the accuracy
and effect can be difficult. In addition to the growing institutional weak-
ness and rising compliance cost, overcoming these trade barriers requires
an enhanced capacity to efficiently facilitate trade at regional and interna-
tional levels. As discussed in the fourth chapter of this book, it is impor-
tant to reduce the number of days for the clearing of goods, reduce the
amount of documentation required for trade, and reduce the cost per
container both for export and for import. It is believed that overcoming
such NTBs will increase the volume of intra-regional trade in the ECOWAS
and, consequently, raise the level of trade flows between partners in the
region. Based on this background, the purpose of this article is to discuss
the strategic importance of advancing West Africa’s trade facilitation
agenda in the face of increasing NTMs and the ongoing African Continental
Free Trade Area (AfCFTA) negotiations.
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  5

1.2   Regional Integration and Development

Initiatives in West Africa: A Glimpse2
Over the past decades, regional development platforms have proliferated
in West Africa. However, economic development in the region has not
met the required expectations. Though West African countries are making
frantic efforts to foster regional development initiatives, the progress indi-
cators are not very impressive, partly because of the slow implementation
of regional development programmes designed to eliminate barriers to
growth. These hindrances are largely in the form of inadequate national
policies and the limited implementation of national and sub-regional
agreements; inadequate human and institutional capacities, poorly devel-
oped economic growth information systems; porous infrastructure (road,
marine port, waterway, and rail) network connectivity and the relatively
poor state of these networks; conflicts and security issues; and limited
financial resources.
Further, West Africa faces two major phenomena, given the current
demographic trends and assumptions about life expectancy and mortality.
First, an average annual population increase of 2.6 per cent, which means
doubling the population in 25 years, with major consequences for con-
sumption levels. And, second, accelerated rates of urbanization such that
by 2030, the urban population shall account for 60 per cent of the total
population (UNECA/AUC/AfDB’s ARIA IV 2011). As mortality rates
diminish, these trends may reach a critical stage in which the question
needs to be addressed: ‘What economic transformation strategy does West
Africa need, and on what basis shall development policies stand, in order
to meet most of the demand for food for a population of 455 million
inhabitants, 261 to 273 million of whom will live in cities, a population for
the most part living in poverty by the year 2030?’3
Most West African countries have not succeeded in achieving rapid
and sustainable economic growth and development over the past four
decades. In view of this, it is reasonable to suspect that poor agricultural
performance may be a significant contributory factor to the unsatisfactory

2
 Odularu 2013, as part of the dissertation submitted to the School of Law and Business,
University of Sunderland, United Kingdom.
3
 UNECA/AUC/AfDB’s Assessing Regional Integration in Africa (ARIA) IV – Enhancing
Intra-African Trade, 2011. Available online at http://www.uneca.org/aria4/ARIA4Full.pdf.
6  G. ODULARU

performance in the region. One of the challenges facing West Africa is

how to utilize agriculture more effectively for economic development
than it has been done over the last four decades. How can this be achieved?
It is within this context that this thesis seeks to explore the drivers and
dynamics of economic development in West Africa.
In spite of the diversity of development issues that confronts West
Africa, bright prospects exist for economic transformation through the
optimization of its regionally coordinated policy space. In addition to
accruing gains from being integrated into the global economy, regional
development strategies in West Africa would generate economies of scale,
exploit differences in natural resource endowments, and help facilitate and
expand opportunities for trade by removing physical, political, and eco-
nomic boundaries. However, these benefits are not without hurdles. For
instance, the prospects of across-the-border collaboration in West Africa
are especially challenging, considering that the region contains the most
heterogeneous concentration of states in terms of language and colonial
history. As a result, the major regional organizations—the Sahel and West
Africa Club (SWAC),4 the Economic Community of West African States
(ECOWAS) (Gowon 1984),5 the Union Economique et Monetaire Quest
Africaine (UEMOA),6 and the Permanent Inter-State Committee on
Drought Control (CILSS)7—face the significant challenges of coordinat-
ing development policies and projects and identifying appropriate forms of
stakeholder participation in regional decision-making. In addition to these
is the challenge of coordinating the activities of the numerous inter-­
governmental, inter-sectoral, and regional development initiatives that
exist in the sub-region.

4
 The Sahel and West Africa Club (SWAC) comprises a group of West African regional
organizations, countries, and international organizations that work together towards the
development and integration of the West African region.
5
 ECOWAS covers all the 15 West African countries. However, Mauritania withdrew in
2000. For an extensively detailed account of the efforts targeted at regional integration in
West Africa, see Yakubu, Gowon. 1984. ‘The Economic Community of West African States:
A Study in Political and Economic Integration’. 3 Volumes, 793 pp., University of Warwick,
United Kingdom. The electronic version of the doctoral thesis is available at http://wrap.
warwick.ac.uk/4397/1/WRAP_THESIS_Gowon_1984.pdf.
6
 UEMOA covers the eight French-speaking West African countries, which include Benin,
Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Togo, and Senegal.
7
 CILSS covers the Sahelian countries in West Africa.
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  7

West African countries have a long-standing tradition of gathering into

groupings whose institutional objective is fostering cooperation and eco-
nomic integration.8 Consequently, ECOWAS9 was established to promote
a regional-based scheme of development in West Africa, through the cre-
ation of a common trade market and the adoption of enabling macroeco-
nomic policies for sustainable development. In particular, its mission is to
promote economic integration in all fields of economic activity—industry,
transport, telecommunications, energy, agriculture, natural resources,
commerce, and financial sectors.10
ECOWAS comprises 15 West African countries, which can be sub-­
divided into two groups: the 8 Union Economique et Monetaire Quest
Africaine (UEMOA) members (Benin, Burkina Faso, Côte d’Ivoire,
Guinea-Bissau, Mali, Niger, Senegal, and Togo), which adopted the CFA
franc as a common currency,11 and 7 non-UEMOA members—Cape Verde,
Ghana, Guinea, The Gambia, Nigeria, Liberia, and Sierra Leone. ECOWAS
was established in 1975 as a free trade area. In 2000, UEMOA also became
a custom union, which was eventually extended to cover all of ECOWAS.
However, the actual implementation of both internal liberalization and a
common external tariff has been very slow and many member countries in
practice still do not fully comply with their obligations. A striking challenge

8
 The quest for regional integration stems from a desire to minimize the cost of trade
between nations and facilitate market access and growth for the region’s industries, as well as
to strengthen the economic power of the combined member states vis-à-vis third parties.
Further, it is a developmental necessity in relation to trade, economic performance, and
strengthening of policy credibility and effectiveness. In other words, strong organizational
and institutional initiatives, which are targeted at regional integration will expand the scope
of increased intra-regional trade, improved regional infrastructure, more efficient administra-
tive systems, higher levels of investment and industrialization, and reduced political contami-
nation of macroeconomic policies and programmes.
9
 ECOWAS was founded on May 28, 1975, when the geopolitically related Anglophone,
Lusophone, and Francophone countries signed the Treaty of Lagos. It comprises 16 member
countries. These member countries are Cape Verde, The Gambia, Ghana, Guinea, Liberia,
Nigeria, and Sierra Leone (Non-CFA countries) and Benin, Burkina Faso, Côte d’Ivoire,
Guinea-Bissau, Mali, Niger, Senegal, and Togo (CFA countries) as well as Mauritania.
10
 The achievement of these goals will be driven through the implementation of a free trade
area and a custom union (elimination of custom duties, quantitative and administrative
restrictions to trade, establishment of a common external tariff), the creation of a common
market (elimination of all obstacles to the free movement of persons, capital, and services),
and the creation of an economic union (harmonization of economic, agricultural, industrial,
and monetary policies, and the establishment of a fund for cooperation and development).
11
 The CFA franc is the name of two currencies used in parts of West and Central African
countries which are guaranteed by the French treasury.
8  G. ODULARU

is the integration of Nigeria, which maintains a very complex tariff struc-

ture with high tariff peaks and a complete import ban on a number of
products.
West African countries are characterized by a rather heterogeneous
group of countries. Nigeria is, by far, the largest member both in terms of
its population and in its economic weight. The heterogeneity is more evi-
dent in the government sizes, ranging from values around 8 per cent
(Guinea) to almost 25 per cent (Mauritania and Nigeria). These data obvi-
ously suggest a great heterogeneity in the basic structure of the national
economic systems. In addition, this is not unrelated to the strong ethnic
fractionalization, which is typically an index of polarization and potentially
unresolved and endemic conflict. The greater fractionalization docu-
mented for some countries maps into higher values for an index that mea-
sures socio-political instability.
In terms of economic structure, only a few member countries have
developed sizeable manufacturing industries while most others depend
primarily on agriculture, services, and—in some cases—oil and mineral
extraction. Mali, Niger, and Burkina Faso are landlocked while all other
member countries have access to the sea, although port infrastructure is
not well developed in some of them.

1.2.1  Regional Integration Arrangements (RIAs)

in West Africa
West African countries are represented on a number of regional integra-
tion and development platforms. Some of these include the ECOWAS,
Communaute des Etats de l’Afrique de l’Quest (CEAO), Mano River
Union (MRU), and UEMOA. The primary objective of ECOWAS is to
promote regional cooperation and integration and to create a unified
economic space in order to facilitate economic growth and develop-
ment in West Africa. According to the 1975 ECOWAS Treaty Preamble,
the Community was created because of the ‘overriding need to acceler-
ate, foster and encourage the economic and social development of
member states in order to improve the living standards of their peoples’
(Aryeetey 2001).
ECOWAS aims to use regional integration as a potent tool for a cus-
tom union and, ultimately, for the establishment of an economic and
monetary union that would raise the living standards of its people and
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  9

enhance economic stability in the region. The key elements of its policy
include eliminating all tariffs and other trade barriers between the mem-
ber states and establishing a customs union, a unified fiscal policy, a com-
mon currency, and coordinated as well as harmonized regional policies in
transport, technology, communications, energy, and other infrastructure
facilities (CDD 2002).
In terms of population size, it represents the biggest organization for
regional integration on the African continent.12 ECOWAS exists alongside
other distinct sub-regional integration arrangements and inter-­
governmental organizations (Table 1.1). The CEAO was created in 1973
with the establishment of a joint central bank, the Central Bank of West
African States (BCEAO). The Mano River Union was also established in
1973. Further, another community in the West African region is a group
of the distinct eight countries of the UEMOA, the eight constitute a mon-
etary and customs union. The other seven non-UEMOA countries may be
considered as a second group, each with its own national currency.

Table 1.1  Countries membership of regional integration arrangements in West

Africa
ECOWAS—1975 CEAO—1973 MRU—1973 UEMOA—1994

Benin Benin Guinea Benin

Burkina Faso Burkina Faso Liberia Burkina Faso
Cape Verde Côte d’Ivoire Sierra Leone Côte d’Ivoire
Gambia Mali Guinea-Bissau
Ghana Mauritania Mali
Guinea Niger Niger
Guinea-Bissau Senegal Senegal
Liberia Togo
Mali
Niger
Nigeria
Senegal
Sierra Leone
Togo

Sources: African Development Report (various issues)

12
 However, this may change with the current Tripartite Agreement between EAC,
COMESA, and SADC.
10  G. ODULARU

UEMOA was created in 1994 by the Francophone States of West

Africa, including all members of the CFA zone. The UEMOA countries
share a single currency and monetary policy. UEMOA regionally coordi-
nates the economic, monetary, and trade policies of the member states
such that integration performance among these members seems to be at a
more respectable level compared to the rest of the West African countries
(Asenso-Okyere 2005).
Further, within the ECOWAS region, the Gambia, Ghana, Guinea,
Nigeria, and Sierra Leone formed another sub-community, which is called
the West Africa Monetary Zone (WAMZ). These countries aim at forming
a monetary union, using the ECO as their common currency. The launch-
ing of the union was postponed from 2005 to 2009 due to the inabilities of
member states to meet the primary convergence criteria. The launch is yet
to take off, partly due to macroeconomic inefficiencies in a few of the mem-
ber states. It is relevant to note that the multiple membership of Regional
Integration Arrangements (RIA) by West African countries has undermined
the regional growth progress among these countries. Since ECOWAS was
created, few of its agreements have been fully implemented, especially as
they relate to the free movement of goods and labour, transport facilitation,
monetary integration, and transportation (road, air, and waterways).
A quick look at the profiles of these organizations reveals an uncomfort-
able relationship between colonial inheritances and the spirit of pan-­
Africanism. The philosophy underlying ECOWAS was that colonial rule
had arbitrarily divided markets and fragmented peoples, thereby placing the
continent in general and West Africa in particular in a disadvantageous posi-
tion for achieving development (Odularu 2013). Thus, at the signing of the
Lagos Treaty in 1975, when ECOWAS was established, it aimed at over-
coming neo-colonial patterns of trade by focusing on four key areas:
expanding intra-community trade, improving physical infrastructure, reduc-
ing excessive external dependence, and creating a single ECOWAS cur-
rency. Article 59 of the Treaty states that member states could belong to
other sub-regional organizations as long as their membership did not
detract from the ECOWAS provisions (Odularu 2013). This resulted in the
creation of the francophone member countries to simultaneously belong to
UEMOA,13 which has experienced various transformations in the past few

13
 Regarding its procedures for accepting and implementing decisions, UEMOA responds
to requests from states who want greater regional coherence on particular policy issues. If the
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  11

decades. One of these includes all UEMOA members belong to the CFA
franc monetary zone, which is pegged to the Euro, and convertibility is
assured by the French Treasury. It is generally perceived that UEMOA
operates more successfully than ECOWAS. According to a former
ECOWAS Executive Secretary, only 45 per cent of ECOWAS programmes
has ever been implemented by its member states while the corresponding
figure for UEMOA is about 68 per cent. For instance, the UEMOA’s trade
liberalization scheme became effective in January 2000, resulting in the
abolishment of all tariffs on goods produced within the member states, the
adoption of a common external tariff (CET), and the standardization of
business laws.

1.2.2  Regional Trade and Institutional Issues in West Africa

Despite the increasingly intensified political efforts in recent times, the
share of regional trade in West Africa has remained more or less constant,
at a rather low level, over the past two decades (between 10 per cent and
15 per cent of total exports go to regional markets, with some fluctua-
tions). However, these aggregate figures are dominated by Nigeria’s heavy
weight in the region’s total exports. These consist mainly of oil and are, to
a large extent, directed to the global market (United Nations Commodity
Trade Statistics Database).

request is accepted, UEMOA engages in a series of workshops at the national and regional
levels to ensure the harmonization of texts specific to the policy area. The executing organ—
UEMOA Commission—then passes the finalized text to the Council of Ministers, which
examines how to finance the activity in a manner that does not jeopardize the region’s mac-
roeconomic stability. This Council consists of two ministers from each member state, one of
whom is always the Minister of Finance, and meets at least twice a year. The decisions of this
Council are determined according to the principle of unanimity and are subsequently
imposed on the member states. If, however, a unanimous decision is not possible at this level,
the issue is presented to the Conference of Heads of States, which consists of the presidents
of the eight member states. This organ meets at least once a year and needs to abide by the
principle of unanimity before a decision can be taken. Once a decision is made, it is binding
on all member states. By contrast, the ECOWAS Executive Secretariat, which is the equiva-
lent to the UEMOA Commission, must submit all decisions, acts, and protocols to a highly
involved ratification process that ultimately decreases the number of programmes that are
actually implemented (Odularu 2013).
12  G. ODULARU

Trade openness is a common feature in the sub-region.14 However,

substantial differences still persist. The openness index ranges from about
30 per cent (Burkina Faso) to almost 100 per cent (Mauritania, Ghana,
Cape Verde). It must be noted that even if the share of intra-sub-regional
trade increases consistently from the date of creation, the level of intra-­
sub-­regional trade is still relatively low. It increased from 3 per cent in
1970 to almost 11 per cent in 2008. Trade integration is more pronounced
among West African Economic and Monetary Union (WAEMU) coun-
tries following the creation of a common union in the late 1990s.
For some countries, the share of manufactured goods is substantially
higher among sub-regional exports than among exports to global markets:

• Benin exports manufactured food, beverages, tobacco (including a

substantial amount of cigarettes), and some construction materials
(mainly steel and cement) to ECOWAS while exports to BRIC and
Rest of the World (RoW) consist mainly of agricultural products
(cotton, cashew nuts).
• Côte d’Ivoire exports mainly refined petroleum products15 to the
sub-region. Exports to high-income OECD countries (hiOECD)
comprise agricultural (cocoa), mining (crude oil), and food products
(cocoa butter).
• Ghana exports manufactured wood, plastic, and textile products to
the sub-region. Exports to other SSA are dominated by semi-­
processed gold to South Africa. Exports to other regions comprise a
large percentage of traditional agricultural commodities, mainly
cocoa.
• Senegal exports refined petroleum products, construction materials,
as well as some food products (margarine, flour, and mineral water)
to the sub-region. Export to BRICs is dominated by refined petro-
leum products while exports to hiOECD comprise mainly fish and
other seafood.

14
 During the last four decades, ECOWAS has made quite considerable strides towards the
achievement of its goals – tariffs on intra-regional trade have been consistently reduced; free
movement of designated goods; and reduction of customs duties and adoption of ECOWAS
passport/travel documents.
15
 The classification used for these statistics follows the ISIC Rev. 2 industrial classification,
which categorizes refined oil as a manufactured product while crude oil is classified as a min-
ing product.
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  13

• Togo, the country with the highest share of intra-ECOWAS exports

(59 per cent) exports construction (steel and cement) and packaging
materials as well as some food products (margarine, flour, and min-
eral water) to the sub-region. Export to other regions comprises
mainly agricultural (cotton and cocoa) and mining (phosphates)
products.

On the other hand, a number of West African countries have higher

shares of agricultural and fishery products among their regional exports
than among their global exports:

• For Burkina Faso, exports to all regions are dominated by one agri-
cultural product, cotton. Export to West Africa also comprises a few
food and tobacco products (Cigarettes, sugar, and vegetable oil)
while hiOECD also contain some semi-processed gold.
• Guinea has very low regional exports, about half of which are of fish.
Exports to other regions are dominated by aluminum and gold in
different degrees of processing.
• For Mali, agricultural products (live animals) are the main export
items to West Africa. Agricultural products (in this case, mainly
­cotton) also play an important role in its export portfolio to BRIC,
hiOECD, and RoW.  The main export item, however, is semi-­
processed gold, which is exported to South Africa and hiOECD.

Since the signing of the Cotonou agreement in 2000, ECOWAS coun-

tries are also engaged in the negotiations for an Economic Partnership
Agreement (EPA) with the EU. The 2006 formal review of the negotiation
process already found a lack of progress and persistent disagreement, espe-
cially with respect to the agreement’s development provisions and the
number of resources for financial assistance. Given the delays and difficul-
ties in the negotiation process, the European Commission adopted a two-­
stage approach, asking non-LDCs to sign ‘interim EPAs’ limited to trade in
goods in order not to lose their privileged market access to the EU (LDCs
enjoy duty-free market access under the ‘Everything But Arms’ (EBA) ini-
tiative). Of the four non-LDC members, Ghana and Côte d’Ivoire signed
an interim EPA while Nigeria fell back to less favourable EU market access
under the Generalized System of Preferences (GSP). Cape Verde, after its
graduation from LDC status in 2008, obtained an extension of EBA until
the end of 2011. It has now been approved for EU market access under
14  G. ODULARU

GSP+, a special market access status granted by the EU to developing

countries that commit to international standards on human and labour
rights, as well as environmental protection and good governance.
Critics argue that the EPA process can have an adverse impact on
regional integration by further complicating the negotiations, imposing
deadlines and procedures that are not appropriate for the regions’ charac-
teristics (Odularu 2013). Arguably, the introduction of reciprocal free
trade with the EU before the consolidation of the regional market also
carries the risk of ‘diverting’ trade from regional markets to EU markets.
ECOWAS member countries have, therefore, declared that they see prog-
ress with regional integration as a prerequisite for the implementation of
an EPA with the EU.
A striking point is the existence of gross inconsistencies in the regional
trade policies in West Africa. These trade policy inconsistencies occur at
two levels: the community level, between public and trade policies in the
region, and the international level. Thus, the prompt policy response to
ensuring coherence in these West African trade strategies is essential, both
for the region’s economic development and for its growing role in conti-
nental and regional trade (Rolland and Alpha 2012).
Strong institutions are prerequisites for economic development, as also
stated in the Saemaul Undong Movement (SUM). Considering polity
scores (an index of the quality of government action) in selected West
African countries, it should be noted that there are substantial differences,
with some countries ranking relatively well (Senegal, Mali, Ghana, and
Benin) while a few countries like Mauritius, The Gambia, Togo, and
Guinea are rather poor. Corruption is also endemic and pervasive in West
Africa, and it is strongly associated with poor civil liberties, worse political
rights, and a high level of ethnic fractionalization.

1.3   The Global Perspective to Promoting Trade

Facilitation
One of the driving forces behind the Trade Facilitation Agreement (TFA) is
the reduction in cross-border trade costs through the removal of ‘border red
tape’ (AITTIDF 2018)16 Based on this background, the World Trade

16
 The full implementation of the TFA is estimated to reduce global trade costs by an aver-
age of 14.3 per cent, with African countries and least developed countries (LDCs) forecast
to enjoy the biggest average reduction in trade costs. Full implementation has also been
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  15

Table 1.2  WTO TFA: aims and characteristics

Objectives Characteristics

Speedy release and clearance of goods • Transparency in

Expedited movement of export, import, and transit cargo regulations
Lower costs of international trade by reducing procedural • Predictability in
barriers decision-making
Co-operation and co-ordination among border agencies • Rational, transparent fees
within the government and between governments and charges
Provision of technical assistance in building capacities • Customs co-operation
• Border agency
co-operation
• Simplifying
documentation
• Freedom of transit
• Advance rulings
• Appeal procedures
• Transparent penalties.

Source: WCO, 2017. ‘Building a Single Window Environment’. Available online at: http://www.
wcoomd.org/-/media/wco/public/global/pdf/topics/facilitation/instruments-and-tools/tools/sin-
gle-window/compendium/swcompendiumvol1all-parts.pdf

Organization (WTO) Trade Facilitation Agreement (TFA)17 commits coun-

tries to the development and implementation of single window, thereby
explicitly mentioning single window in paragraph 4 of Article 1018 (See
Table  1.2). Thus, developing automated systems which are targeted at
improving trade facilitation and aiming at revenue collection, social protec-
tion, and data/intelligence provision to the government all result in the sim-
plification of trade processes and more effective and modernized customs
and border management (WCO 2017). The digitization of commercial
transactions, electronic certification, mutual exchange of information, coop-
eration, and collaboration mechanisms, joint recognition, paperless cross-
border trade, and other innovative regional arrangements are effective

found to potentially reduce the average time needed to import by 47 per cent. Cuts in export
time will be even more dramatic with estimates predicting a 91 per cent reduction of the
current average.
17
 The WTO Trade Facilitation Agreement (TFA) was adopted in December 2013 at the
WTO’s Ninth Ministerial Conference, held in Bali, Indonesia, under the Doha Development
Agenda (DDA). The TFA entered into force on February 22, 2017.
18
 Formalities connected with Importation, Exportation, and Transit.
16  G. ODULARU

pathways to trade facilitation (AITTIDF 2018; Adekunle 2018a, b; World

Bank 2017; Odularu and Adekunle 2017). Cross-border paperless19 trade
and (electronic) single-window20 implementation or the ­readiness of West
African economies to engage in the paperless exchange of trade-related data
and documents among customs and relevant regulatory agencies, as well as
the trading community (traders and service providers) through a national
single window. Thus, the ECOWAS member states are at varying degrees of
paperless trade and national single window based on the bilateral/regional/
initiatives for cross-border trade and exchange of data. By identifying the
common elements and challenges, it creates greater awareness towards
enhancing the capacity of relevant West African trade facilitation-related min-
istries and agencies. In order to fast-track the implementation of the tool, it
is important that all the at-the-borders and behind-the-borders sectoral min-
istries and agencies21 adopt a well-­coordinated approach in the implementa-
tion of its capacity-strengthening strategies. Some of the instruments and
tools being used by the World Customs Organization towards the inclusive
facilitation of trade and the effective management of borders in the twenty-
first century include inter alia the Single Window Interactive Map, the
Coordinated Border Management (CBM), Integrated Risk Management
and Data Harmonization, and so on (WCO 2017; WTO 2015).

1.3.1  Enhancing Trade Facilitation and Fostering Commerce

Through the AfCFTA
West Africa’s performance in terms of exports has been inconsistent over
the last decades. The reasons for this have been political instability as
well as macroeconomic challenges. The influence of foreign countries in

19
 Paperless trade allows for the coherent flow of trade activities on the basis of electronic
rather than paper documents. In other words, it provides the ecosystem where regulatory,
legal, and technical tools enhance paperless trade transactions via an electronic single window
facility, electronic port management systems, electronic certificate of origin, electronic cus-
toms declaration, document simplification and data harmonization, and so on.
20
 A facility that allows parties involved in trade and transport to lodge (once) all the stan-
dardized information and documents with a single-entry point to fulfil all import, export,
and transit-related regulatory requirements. From the traders’ viewpoint, it results in
increased integrity and transparency, reduced costs and delays, efficient allocation of
resources, predictable rules, and faster clearances.
21
 Cross-Border Regulatory Agencies (CBRA) includes inter alia ministries focusing on
trade, industry, tourism, agriculture, finance, mines, parks and wildlife, pharmacy, roads,
immigration, border police,
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  17

determining Africa’s market forces has also led to fluctuations in the

prices of commodities coupled with general economic crises experienced
across the globe. The issues of NTMs22 are policy measures that have the
potential to have an economic effect on international trade. They shape
trade and influence which country trades what and at what price. It has
become a big challenge for policymakers, importers, and exporters.
Though the main objective of NTM is to protect public health and the
environment, they have a significant effect on trade through informa-
tion, compliance, and procedural costs. In meeting the Sustainable
Development Goals (SDGs), a proper understanding of the uses and
implications of NTMs are essential for the formulation of effective devel-
opment strategies. Using the NTM hub, this can be a gateway to infor-
mation classification, data, research and analysis, and policy support.
Improved transparency and a better understanding of NTMs can develop
the capacity of policymakers, negotiators on trade, and researchers to
strike a balance between the reduction of trade costs and the taking care
of public objectives.
African leaders and their representatives from 55 nations met in Kigali,
Rwanda, on March 21, 2018, to officially sign and launch the African
Continental Free Trade Agreement (AfCFTA),23 during the Tenth
Extraordinary Meeting of the Heads of State and Government of the
African Union (AU). This signed agreement has made Africa the biggest
free trade zone created since the WTO was established. About 44 of the
55 AU member states put pen to paper to sign the agreement to kick-start
the AfCFTA. Forty-seven nations signed the Kigali declaration and thirty
countries signed the Protocol agreement on free movement of persons,

22
 Non-tariff measures (NTMs) capture all government measures, other than tariffs or cus-
toms taxes, which restrict international commerce between domestic and imported goods
and services. NTMs can be described as policy measures that are outside the usual Customs
tariffs but still have an economic impact on trade internationally. There are the traditional
trade instruments, like quotas or trade defence measures. These measures can be said to be
non-tariff barriers (NTBs) because of their discriminatory and protective nature. Very impor-
tantly, NTMs are made up of policies that arise from non-trade objectives and are applied to
both foreign and domestic producers in an effort to protect against health or environmental
risks. Since such measures may affect trade, their application is regulated in WTO
agreements.
23
 With Phase One almost concluded, Phase Two negotiations are expected to begin in late
2018 and focusing on provisions for investment, competition policy, and intellectually prop-
erty rights.
18  G. ODULARU

right to residence, and rights to establishment. The NTBs are some of the
most prominent barriers to intra-Africa trade. A significant progress will
be achieved by the AfCFTA in increasing intra-Africa trade, the facilitation
of trade through limiting the number of barrier traders are faced with
before their goods (as well as services) are allowed to go across the bor-
ders. Though the AfCFTA prioritizes five services sectors—communica-
tion, financial, tourism, transport, and business services, the barriers
hindering intra-Africa trade continuously and basically remain issues
around regulation, customs, and documentation at the border posts, pre-­
shipment inspection, sanitary and phytosanitary measures (SPS), and the
technical barriers to trade (TBTS). The negative effect of these measures
on intra-regional trade is crucial but regional economic communities have
failed to address the challenges.
According to UNECA (2018), the establishment of the AfCFTA would
provide a strong basis for the industrialization and transformation of the
African continent towards deepening regional integration and boosting
intra-African trade.
A good number of the countries whose economies are doing well in the
past decades have been driven by trade-led growth. For most developing
countries, economic growth has been based on revenues from commodi-
ties. The SDGs post 2015 have, as part of their objectives, the transforma-
tion of mineral resources that can drive the economy, thereby reducing
poverty. Employment opportunities are created through trade, women are
empowered, entrepreneurs make more money, and there are massive
investments in infrastructural development. The development of trade
relies on an enabling environment, the ease of doing business, and other
policy and non-policy factors. If trade must have a significant effect on
poverty reduction, the underlying conditions must support favourable
sectorial growth patterns and inclusive employment and social policies. It
is crucial to combating increased inequalities from trade. Since there is a
drop in traditional tariffs, NTMs have become an important topic of dis-
cussion on sustainable global trade patterns.
There are positive indicators of a gradual but steady growth of econo-
mies in West Africa in the first half of 2018. As the global  trade talks
continue in many parts of the world on how to reduce tariffs, NTBs
among trading countries may enhance the expansion of regional trade and
development networks. For instance,  the current agreements in South
America and Africa, as well as talks by the EU and Mexico in April, 2018
show the seriousness of the NTMs.
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  19

Some of the challenges that West African RECs face in their efforts to
facilitate trade, as well as address NTBs, include inter alia:

• Overlapping membership: Member States (MS) often belong to

more than one Regional Economic Community (REC) with differ-
ent regulatory requirements. MS are often unable to reconcile the
different requirements, leaving traders with regulatory uncertainty.
• The slow implementation of existing commitments related to trade
facilitation measures, including the harmonization and coordination
of SPS measures, health certification, border operating times,
customs documentation requirements, and transit traffic.
­
Implementation is hampered to a certain extent by overlapping
membership.
• Lack of transparency and knowledge asymmetry: Due to the inef-
ficient dissemination of information, the commercial ecosystem is
fraught with unnecessary hindrances to trade and investment
among economic actors, which stems from the incomplete under-
standing about markets. Regulatory transparency and access to
information are significant barriers to intra-Africa trade. Regulations
and import requirements are often changed without advanced
notice. Trade rules and requirements and subsequent changes are
often not readily accessible, making it difficult and costly to trade
across borders.
• Lack of trust, especially related to the quality of imported goods, has
increased with more stringent SPS requirements and standards,
including additional testing requirements and pre-shipment inspec-
tions. This makes intra-Africa trade more time-consuming and costly.
The lack of trust often relates to the lack of implementation of exist-
ing REC commitments as well as delays in harmonizing standards
and easing regulations towards lowering transaction costs of doing
business in West Africa (like the harmonization of health certification
and requirements) due to infrastructure deficiencies and human and
financial constraints.

Though most African countries suffer from limited productive capaci-

ties and a high infrastructure deficit, addressing these challenges is crucial
in order to realize the true potential of AfCFTA within West African eco-
nomic bloc member states. One of the effective approaches in this regard
is for governments, regulators, and organized private sectors (OPSs) to
20  G. ODULARU

implement targeted, sector-specific policy options aimed at identifying and

resolving intra- and inter-regional trade constraints. Further, the adoption
of the trade facilitation agreement at the WTO is very important in reduc-
ing transaction costs and also enhancing uniformity of standards.

1.4   Looking Forward

With the increasing tension and confusion being created due to the lack of
progress on urgent WTO issues, as well as the trade war between the US
and China,24 more countries are more inward-looking and risk-averse in
the global trading ecosystem. Thus, it used to be easier to make most West
African and other African countries be signatories to all sorts of regional
and global trade facilitation and development agreements. It was in the
past that West Africans used to think that multiple representations in
regional and global trade agreements are desirable to its macroeconomic
trajectory. However, due to a gradual exposure to knowledge and educa-
tion, an increasing number of West African countries now understand the
art of trade negotiations, and they know the implications of being signa-
tories to certain trade rules and regulations. In fact, today, such trade
proposals do not readily and expressly attract African trade negotiators and
stakeholders. Further, more trade experts continue to challenge the very
possibility of signing trade protocols without thorough engagement of the
grassroots. This is because Africans are now more aware of the challenges
that they have to grapple with due to the implementation gaps and capac-
ity challenges that are carried over from the previous trade epochs. This
distressingly wide gap between TF commitment and implementation is
also glaring evidence of the capacity needs and challenges being faced by
West African countries.
As a matter of fact, regional integration and trade facilitation issues have
taken front-burner position in intellectual discourse across African coun-
tries. Since the launch of the Continental Free Trade Area (CFTA) in
March 2018, there have been academic and political processes
geared  towards regional integration—the trade facilitation nexus. For

24
 Though the US-China trade war has been looming since March 2018, the trade dispute
effectively started on July 6, 2018. The cause of the dispute is due to ‘Made in China 2025’,
which aims to greatly improve the competitiveness of the Chinese manufacturing industry
and enable China to become the world’s manufacturing powerhouse (Lui 2018).
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  21

example, the establishment of Nigerian Trade Negotiations Office (see

Chaps. 2 and 3), as well as the African Economic Research Consortium’s
(AERC) project on ‘Re-thinking Regional Integration in Africa for
Inclusive and Sustainable Development - Case Studies’. Thus, the content
of the proposed book will be useful for similar national and regional
programmes.
In order for West African Member States to be able to effectively nego-
tiate the AfCFTA commitments as well as formulate informed trade facili-
tation policies, there is more need for evidence-based sector studies on
market access and national treatment limitations, thereby providing the
basis for national consultations with respective regulatory and private sec-
tor stakeholders.
The structure of this book may be read as a narrative itself. After the
introduction, the second chapter discusses the implementation challenges
that Nigeria faces in attaining the TF commitments while the third chapter
focuses on the empirical basis for advancing the trade facilitation agenda in
West Africa, with a special focus on Nigeria, being the biggest country in
the region. The concluding chapter provides some economic development
and trade facilitation strategies and policy recommendations for attaining
sustained development in West Africa. In its entirety, this book offers
workable recommendations which are aimed at enhancing West Africa’s
trade facilitation and regional integration agenda among the government,
private sector, and global development community.

References
Adekunle, B. (2018a). Digital Payment, Ethnocultural Food and Alternative
Agriculture [Blog]. Available at: http://evcontario2011.blogspot.com/2018/
06/digital-payment-ethnocultural-food-and.html. Accessed 4 Oct 2018.
Adekunle, B. (2018b). Asymmetric Information in the Halal Food Market  – A
Research Project Understanding Halal Food: A Glimpse ... [Blog]. Available at:
http://evcontario2011.blogspot.com/2018/09/asymmetric-information-in-
halal-food.html. Accessed 5 Oct 2018.
Aryeetey, E. (2001). Regional Integration in West Africa (Working Paper No.
170). OECD Development Centre.
Asenso-Okyere, K. (2005). Reflections on Economic Development Policy in West
Africa. Paper Presented at a Seminar at the International Food Policy Research
Institute (IFPRI), Washington, DC.
22  G. ODULARU

Australian International Trade and Transport Industry Development Fund

(AITTIDF), Centre for Customs and Excise Duties, Charles Stuart University.
(2018). Review of Australia’s Progress Towards Implementation of the Single
Window Concept. Available online at: http://www.aittidf.org.au/wp-content/
uploads/2018/05/Single-Window-Final-Report.pdf
Centre for Democracy and Development (CDD). (2002). From Regional Security
to Regional Integration in West Africa: Lessons from ASEAN Experience.
London: Centre for Democracy and Development.
KGH. (2016). International Single Window Study: Australia Department of
Immigration and Border Protection. Final report, available online at: https://
www.sbr.gov.au/sites/g/files/net5641/f/KGH-DIBP-SW-International-
Study-Final-Report-v1.0_FINAL.pdf
Liu, K. (2018). Chinese Manufacturing in the Shadow of the China-US Trade
Ware. Economic Affairs, 38, 307–324.
Odularu G. O. (2013). An Economic Development Strategy for West Africa: Lessons
and Policy Direction. Faculty of Business and Law, University of Sunderland,
North East England, United Kingdom. Available online: http://ethos.bl.uk/
OrderDetails.do?uin=uk.bl.ethos.640872
Odularu, G. & Adekunle, B. (Eds.). (2017). Negotiating South-South Regional
Trade Agreements: Economic Opportunities and Policy Directions for Africa.
Springer. https://link.springer.com/book/10.1007/978-3-319-45569-3#toc
Peterson, J. (2017). An Overview of Customs Reforms to Facilitate Trade. Journal
of International Commerce and Economics, August, 2017. https://www.usitc.
gov/journals
Rolland, J.  & Alpha, A. (2012). Reinforcing the Consistency of Commercial
Policies in West Africa. ICTSD Bridges Africa, 1(1) – May 2012.
UNECA/AUC/AfDB’s. (2011). Assessing Regional Integration in Africa
(ARIA) IV  – ‘Enhancing Intra-African Trade.’ Addis Ababa, Ethiopia.
Available online at: http://www.uneca.org/aria4/ARIA4Full.pdf
United Nations Economic Commission for Africa (UNECA) and Confederation
of Indian Industry. (2018). Deepening Africa-India Trade and Investment
Partnership. A joint report by the African Trade Policy Centre and Confederation
of Indian Industry.
WCO. (2017). Building a Single Window Environment. Available online at:
http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/facilita-
tion/instruments-and-tools/tools/single-window/compendium/swcompen-
diumvol1all-parts.pdf
World Bank. (2017). Trading Across Borders: Technology Gains in Trade Facilitation.
In Doing Business 2017, October 25, 2016. http://www.doingbusiness.
org/~/media/WBG/DoingBusiness/Documents/AnnualReports/English/
DB17-Chapters/DB17-CS-Trading-across-borders.pdf
   INTRODUCTION: THE CHANGING LANDSCAPE OF TRADE FACILITATION…  23

World Economic Forum (WEF). (2017). Paperless Trading: How Does it Impact
the Trade System. Available online at: http://www3.weforum.org/docs/
WEF_36073_Paperless_Trading_How_Does_It_Impact_the_Trade_System.
pdf
World Trade Organization (WTO). (2015). Agreement on Trade Facilitation.
Preparatory Committee on Trade Facilitation, W/L/931, July 15, 2015.
https://www.wto.org/english/thewto_e/20y_e/wto_tradefacilitation_e.pdf
Yakubu, G. (1984). The Economic Community of West African States: A Study in
Political and Economic Integration. 3 Volumes, 793pp, University of Warwick,
United Kingdom. The electronic version of the doctoral thesis is available at:
http://wrap.warwick.ac.uk/4397/1/WRAP_THESIS_Gowon_1984.pdf
Introduction
Paul Collier

This is a timely book. Although for Africa the past decade has been economi-
cally benign, attention in the international business media has been narrowly
focused. International investors have concentrated on the natural resource
sector, due to high prices for its exports, and international consumer busi-
nesses have been attracted by the consequential scope for expanding imports
of consumer goods. Yet Africa’s economies have huge potential for growth
that is more widely diffused across many sectors. Despite softer commodity
prices, during the coming decade Africa will continue to catch up with the
world economy.
Even in the natural resource sector, lower prices will be more than offset
by the expansion in the volume of resources extracted, reflecting a decade
of investment in prospecting. But the process of attracting further invest-
ment into the sector has become much more challenging now that the
sector is on the wrong side of the super-cycle. Africa now has its own signifi-
cant companies and these will more naturally continue to be focused on
the region. Especially for these companies, as Chapter 12 discusses, govern-
ments will need policies that make investment secure and attractive, while
ensuring that resource rents accrue as revenue.
From now on much of Africa’s growth will come from harnessing the
opportunities for investment and productivity across the economy. Sector
by sector, this book discusses those opportunities and the constraints that
will need to be overcome. To begin with a seemingly mundane example,
as the income of more Africans rises above subsistence levels, discretionary
consumption will increase disproportionately. This creates opportunities to
revolutionize retail distribution, which in much of the region remains domi-
nated by small scale and informality. The productivity gain from reaping the
economies of scale and specialisation that come with malls, supermarkets
and retail chains is enormous. This transformation is now happening across
Africa, but, as Chapter 9 makes clear, it faces significant policy impedi-
ments. The successful management of scale and specialisation in retailing
depends on professional expertise, and this is currently concentrated in

1
2 Paul Collier

relatively few African organisations. Yet as they bring their capabilities to new
markets, they often meet resistance from politicians and bureaucrats who are
suspicious of non-national companies. They also face logistical problems of
moving products across borders: barriers, costs and delays can eliminate the
potential productivity gains from organising supply chains regionally.
Further, with discretionary expenditures comes consumer concern for
product quality and variety. Firstly, consider the need to respond to the
demand for quality. Not only are informal modes of production and distri-
bution unable to harness the gains of scale and specialisation, they are
unable to build reputation with consumers. Informal products are not suffi-
ciently standardised for consumers to be able to trust a product based on a
past purchase, nor are good informal products legally protected from imita-
tion by look-alike inferior ones. As discussed in Chapter 5, branding offers
the solution to these problems, providing the scope for retailers and produ-
cers to build reputation with consumers free of the threat of imitation. But
African firms are latecomers: international firms can offer African consumers
established reputable brands and have the legal capacity to protect them
through patents and copyrights. Establishing equivalent African brands
urgently requires a phase of investment in advertising and legal expertise:
without it, African business will miss the boat as new consumers, in their
quest for quality, bond with international brands.
Probably the most important product whose quality urban African
households want to upgrade is their housing: except in South Africa, years
of neglect in housing investment have left most people living in shacks.
People are often physically capable of improving their housing with their
own labour, but the key input they need is cement. For decades, little
cement was produced locally, and tapping into international supply was
stymied by inadequate transport logistics, which are evidently particu-
larly important for cement due to its low value-to-weight ratio. In the
past decade, there has been a major expansion in African supply, but
demand, driven by the desire for better housing, is also rocketing. As
discussed in Chapter 8, it is important that the supply of cement is turned
from a bottleneck to a driver of growth.
Now consider the quest for variety. People in poverty make their own
entertainment, but one important use of discretionary spending is to widen
horizons. The media provide the window onto the limitless emporium of
modernity. But far more than in respect of products, the interface between
people and information is mediated by culture, and cultures are specific
to societies. A Chinese bicycle can be marketed to an African household
more readily than a Chinese soap opera, let alone a Chinese newspaper. The
expanding demand for information, discussed in Chapter 11, is a huge oppor-
tunity for an indigenous African media. On the base of meeting domestic
demand, the industry can also meet the previously latent demand in the
large African diaspora.
 Introduction 3

Scale and specialisation, the cornerstones of productivity, can take place

only in large markets. Most African countries constitute small markets, and
so trade with other countries is critical to rising prosperity. As the opening
chapter makes clear, international trade is in Africa’s blood: even in the twelfth
century, African traders were exchanging goods over huge distances. Yet many
countries are currently economically isolated due to a combination of inad-
equate transport infrastructure and bureaucratic impediments to the free flow
of commerce. Being small and isolated is, in economic terms, a death sentence:
people are trapped into the inevitable poverty of low productivity activities.
While Chapter 1 demonstrates that the relationships that support long-
distance trade are part of African tradition, Chapters 4 and 15 take up the
associated themes of investment in transport infrastructure and transport
logistics.
Africa has never had an infrastructure appropriate for its needs. During the
colonial era, transport routes were overwhelmingly extractive: designed to
move primary commodities to ports. During the half-century since, govern-
ments have seldom prioritised new investment in transport infrastructure.
The lack of new investment was compounded by the systematic neglect of
maintenance expenditures in budgeting. In consequence, in some respects,
Africa’s transnational transport infrastructure is even less adequate now
than it was in the 1960s. There is, however, a new economic opportunity
to finance transport infrastructure arising from the recent natural resource
discoveries around the continent. Not only do governments have new
revenues, they can be geared up by borrowing on sovereign bond markets:
in conjunction with debt relief, credit ratings have improved dramatically.
Rather than let new revenues and borrowings be allocated to infrastructure
through the budget process, some governments have preferred to exchange
the rights to resource extraction directly for the provision of new infrastruc-
ture, which typifies the Chinese resource deals. At their best, they provide a
mechanism for political commitment of revenues to this important priority,
and are much faster than negotiating a sequence of distinct transactions. At
their worst, however, they result in opaque and disadvantageous deals.
The scope for big transport infrastructure projects has understandably
gained political and media attention. However, while far less dramatic, the
removal of bureaucratic barriers to trans-border trade, both at the border
itself, through the harmonisation of ‘behind-the-border’ regulations, would
yield even larger benefits to practical transport logistics at radically lesser
cost. The two approaches are not alternatives: evidently, if transport infra-
structure would lie unused because of bureaucratic impediments, it is not
worth building.
The low priority that governments have given to transport infrastruc-
ture is a symptom of a wider problem: governments have taken exclusive
responsibility for providing a wider range of infrastructure than they have
been willing to finance. As Chapter 14 discusses, water is a stark instance of
4 Paul Collier

government insistence on a monopoly commitment for provision on which

it has then defaulted. Politicians find it expedient to whip up popular resent-
ment at commercial charges for water supplies by arguing that water is a
‘basic right’. Yet other than in a few high-income districts, this is a ‘right’ that
political leaders have repeatedly breached. The same phenomenon used to
apply to telecommunications. African governments insisted on a monopoly
on landlines for telephones and then failed to provide and maintain them.
The transformation of telecommunications was not due to political enlight-
enment but to the happenstance of technological change. Fortuitously,
mobile phones were classified as a sufficiently distinct product that they
could be provided without infringing the public landline monopoly. For
water, the nearest equivalent is water sold in bottles, which is not judged to
breach the public monopoly on water provision. But unfortunately, bottled
water is a less adequate substitute for a tap than is a mobile phone for a land-
line. However, the astounding take-up of mobile phones in Africa, discussed
in Chapter 10, has the potential for a broader narrative to be accepted by
ordinary citizens: where services can be well-provided privately, it is a breach
of rights to insist on the retention of failing public monopolies.
The provision of security is an example of a public service which is techno-
logically distinct from piped water and landline phones. It is invariably
provided publicly, through police, because it enforces the rule of law, which
is a basic duty of all government. However, while there is a duty of public
provision, there is absolutely no technological need for such provision to
have a monopoly. The private provision of security services did not need
to await technological change analogous to the mobile phone, or labour
under the disadvantage that delivering water in bottles is far more costly
than delivering it through pipes: private security guards and police use a
common technology. Nevertheless, as discussed in Chapter 13, without any
technological impetus, private security services have expanded enormously
across the region. Good security has repercussions beyond the obvious. As
discussed in Chapter 16, one of Africa’s best opportunities for diversifying
exports beyond primary products is through the sale of tourist services. The
continent clearly has huge advantages of natural endowments and prox-
imity to major high-income markets. But an important deterrent to tourism
to Africa is exaggerated fear: Ebola, though contained to three countries of
West Africa, hit tourism across the continent. Similarly, security incidents
anywhere on the continent hit tourism everywhere.
The underlying impetus for the expansion of private security provision is
the same as that driving the exceptionally rapid expansion of mobile phones
in Africa, namely, the poor quality of public provision. States have simply
not got to grips with managing public services. The underlying reason
derives from the nature of African politics, which has too often been about
patronage rather than performance. In addressing African private invest-
ment, African politics is finally inescapable.
 Introduction 5

The economic implications of African politics appeared even during the

liberation process: Africa’s polities fragmented. One important economic
consequence is that national markets are mostly very small. The only way
to reconcile the need for economic scale with political fragmentation would
have been to create strong supra-national political authorities, but whereas
Europe succeeded in this endeavour, to date Africa has not. As Chapter 3
discusses, trans-national economic integration has lacked powerful cham-
pions. The most evident costs have been missed opportunities for shared
infrastructure, such as transport routes and power generation, and the prolif-
eration of beggar-thy-neighbour impediments to the flow of trade. But the
lack of political energy behind integration has also had consequences for the
flow of labour and capital.
Scale and specialisation, the engines of productivity growth, depend not
only on cross-border flows of goods, but on the cross-border flow of skills.
In politically fragmented markets, the same skill can become unwanted
in one small market and yet be in high demand elsewhere. More subtly,
people will be less inclined to acquire the specialist skills for which they
have an aptitude, if they are restricted to a national market with only a few
potential employers. The European Commission has long enforced the prin-
ciple of the free movement of labour around all member countries, and for
most of them movement across borders does not even require a passport. In
contrast, as discussed in Chapter 6, movement across many African borders
requires a visa with restrictions even more severe for fellow-Africans than
for non-Africans. Employment of non-nationals is not only restricted, but in
some countries restrictions are being tightened to the extent that even those
long resident are being expelled. Even the possibility of such a tightening of
policy discourages cross-border movement, and this in turn makes it more
difficult for firms to find well-qualified workers. The upshot is that firms are
discouraged from investments that would require such workers, and people
are discouraged from acquiring specialist skills.
During the 1990s, most African countries liberalised their financial sectors
and encouraged international banks to establish local businesses. The theory
behind the welcome given to international banks was that their strong
reputations would ensure that they remained financially robust, and that
their global spread would enable them to diversify the risks inherent in local
banks that were purely dependent on a small, volatile national economy.
The global financial crisis disabused central bankers of these beliefs. Not only
were international banks revealed as risk-prone, but finding that they needed
to increase capital relative to liabilities in their core markets, they repatriated
capital from their African businesses. This led to a credit squeeze in African
markets that was entirely unrelated to African conditions. A lesson from this
crisis is that a good way to reconcile diversification with a proper commit-
ment to the local market is to encourage African banks to operate in several
national markets. Such a strategy, discussed in Chapter 7, is not without
6 Paul Collier

challenges, because it requires prior agreement among African central banks

as to how to manage the failure of either a branch in one country, or an
entire banking group. But since the underlying structure of African banking
operations is not complex, the task of policy coordination and cooperation
is far less daunting than that faced by regulators in the OECD.
In combination, the pay-off to shared infrastructure, easier trade and
unimpeded factor movements, is so large that the more purposeful sharing
of sovereignty required for genuine regional integration is imperative. Africa
has plenty of institutional structures for regionalism: the African Union,
NEPAD, the African Development Bank and the RECs. Indeed, arguably, it
has too many of them: some countries are simultaneously in several RECs
which involve what might become incompatible commitments. To date, too
much of this has been driven by the appetite for political theatre: prestigious
meetings followed by portentous pronouncements on symbolic steps such as
common currencies, but little action on issues that actually matter. What is
needed in its place is a business-driven, practical agenda. African businesses
need to become more vocal and themselves learn how to cooperate across
borders in lobbying for change.
Yet African business has the potential to change African politics more
fundamentally than through its lobbying. As Chapter 2 argues, until recently,
the only feasible route by which indigenous Africans could become wealthy
was through acquiring political power and then abusing it for personal gain.
Now, while the political route to wealth has been discredited, Africa abounds
in role models of business success. Gradually, this is changing the character
of those who seek a political career. Those who aspire to wealth can seek it
more productively, and with better chance of success, in business. This opens
political opportunity for those who want to serve Africa rather than them-
selves. This is doubly important because African politics is set to change.
Currently, the age gap between citizens and rulers is dramatically wider in
Africa than anywhere else in the world. It will not remain so, and a younger
generation of African leaders will have fresh priorities.
2
Why Governance Matters for
Investment
John Endres

After decades of decline, per capita incomes in Sub-Saharan Africa

started rising from 1995 onwards. By 2008, they finally passed their
previous peak of $941, seen 34 years previously, in 1974. Since then,
they have continued rising, reaching a level of $1,016 in 2013, the latest
data available.1
These changes in the averages are encouraging and have played a large
part in sparking the ‘Africa rising’ story, but they represent only a tiny
sliver of how Africa has changed over the past two decades. There have
also been dramatic changes at the very top end of the scale, namely, in
the wealth and identity of Africa’s most prosperous citizens.
In the past, the principal path to fabulous wealth, and often the only
one, was through political power or strong connections to people in
political power. Being the president meant that you could build up a
tidy nest egg by controlling the treasury and by charging for access to
state and natural resources. In this way, leaders such as Mobutu Sese
Seko of Zaire, Teodoro Obiang of Equatorial Guinea and Eduardo dos
Santos (not forgetting his daughter Isabel, one of Africa’s wealthiest
women) of Angola managed to become not just dictators, but dollar
millionaires and in some cases even billionaires, according to Forbes
magazine.2
Not only did this represent illicit self-enrichment on a staggering scale,
it usually also resulted in large amounts of money leaving the country,
spirited away to be deposited in secret bank accounts and tax havens.
According to Global Financial Integrity (GFI), a research organisation
based in Washington, DC, an estimated $854 billion to $1.8 trillion were
taken out of Africa in the form of unrecorded, illicit financial outflows
between 1970 and 2008.3
This figure is comparable to the entire continent’s annual GDP at
the end of that period ($1.6 trillion in 2008),4 and dwarfs the annual

28
 Why Governance Matters for Investment 29

1,200

1,000

800

600

400

200

-
1960

1970

1980

1990

2000

2010
2013
Figure 2.1 Per capita incomes in Sub-Saharan Africa (in US$)
Source: World Bank, World Development Indicators, http://databank.worldbank.org.

financial inflows. In fact, the total amount of money thought to have

been removed from the continent implies that the continent is a net
creditor to the rest of the world5 – and the figures do not include most
proceeds from drug trafficking, human smuggling and other criminal
activities, which are often settled in cash. For a capital-deficient conti-
nent with a capital spending backlog, dependent on the charity of stran-
gers in the form of foreign aid, this diverted money spells decades of
missed opportunities for development. The funding gap came about
as a direct result of fraud, theft and trade mispricing enabled by bad
governance.
Now contrast the wealth of Africa’s dictators with that of the developed
world’s most successful businessmen. Few Africans managed to become
the Bill Gates or Warren Buffet of their countries after decolonisation,
and no wonder: success would immediately have attracted the covetous
attention of the political elite. Therefore, the choice was between
giving up one’s grand ambitions or being co-opted into the system. The
prospects for making a fortune without controlling the state’s lever of
powers, or having privileged access to those who controlled them, were
slim. Many businessmen concluded that it was safer to pretend to stay
small and hide whatever successes they could achieve.
This has changed over the past decade. Since 2011, it has become worth
Forbes’s while to compile a list of the wealthiest Africans, who, although
often politically well connected, managed to build their fortunes
through trade and business rather than by exercising power.6 Notably,
some extremely successful African businessmen have built their fortunes
not in the usual sectors such as oil or mining, but in communication,
30 John Endres

financial services or building materials. In other words, fortunes are now

being made based on offering value to customers, rather than on skim-
ming rents from resources.
This is an important and welcome change. The emergence of extremely
wealthy entrepreneurs indicates that space is beginning to open up for
ordinary citizens to generate wealth. It means that more people are
deciding to keep some of the fruits of their labour within Africa, re-
investing to reap the benefits of fast-growing economies.
Rising GDPs and the bulging net worth of wealthy individuals reflect
a change in the economy. But what about politics and governance?
Have improvements in one area been accompanied by improvements
in the other?
Here, the picture is mixed. The World Bank’s key measure of govern-
ance, the Worldwide Governance Indicators, for instance, shows that
just three mainland African countries, Botswana, Namibia and South
Africa, as well as three island nations, Mauritius, Seychelles and São
Tomé and Príncipe, managed to achieve positive governance scores in
1996, the first year that these statistics were collected. By 2012, the latest
year for which figures are available, only a single mainland country,
namely, Ghana, had joined the group. Apart from some islands (Cape
Verde, Mauritius, Réunion and Seychelles), all other countries remain
stuck in negative territory.7
However, it is also worth taking a look at which countries showed
improvements over the same period. The result inspires slightly more
hope: 25 countries, almost half of the total, improved their scores. If
they manage to stay on this path, there will soon be many more coun-
tries with positive governance scores. And this may be the more signif-
icant observation: although most countries have not yet managed to
break into positive territory, the fact that they are getting better may
be enough to give African investors enough confidence to keep their
money on the continent.
A further factor inspiring confidence is that most African countries
have abandoned their earlier dalliances with socialism and its deriva-
tives. The experiences of the former East Bloc countries have thoroughly
discredited this political philosophy. A belief in democracy and free
enterprise has supplanted it – conditions much more favourable for
nurturing successful entrepreneurs and growing economies.
The end of the Cold War, and with it the ending of the proxy wars and
ideological battles, has also given a different character to African busi-
ness identity. African business and political leaders seek to speak to their
peers from other continents at eye level, rather than being seen as the
permanent underdog or supplicant, as in the past. The wealth of Mobutu
 Why Governance Matters for Investment 31

Sese Seko and the glittering trappings of Emperor Jean-Bédel Bokassa’s

power, for instance, may have impressed onlookers and inspired fear
and deference, but not respect. The next generation of Africans wants to
bask in earned respect, not deference.
But this process of economic improvement is still at its very begin-
ning, and fragile. Africa now finds itself at a fork in the road: the low
road beckons with corruption and indifferent (at best) governance. The
political elites continue to enrich themselves, while ordinary citizens
start becoming poorer again, as in the past. What’s more, it is by no
means certain that demand for Africa’s commodities, as well as the prices
of those commodities, will remain as high as they have been over the
past decade and a half. Instead, scenarios like a slow-down in China’s
economic growth and increasing reliance on alternative energy sources
like renewables and shale gas may cause demand for African resources to
flag.8 Combined with a rapidly growing population unable to produce
the goods and services that consumers throughout the world want, the
result is frustration, impoverishment and instability, leading to further
declines in governance quality, greater poverty and a widening gap
between Africa and the rest of the world.
By contrast, there is a high road that leads to a virtuous cycle. In this
scenario, better governance enables stronger business growth. Higher
economic growth lifts millions out of poverty and allows an increasingly
assertive middle class to emerge, which clamours for further improve-
ments in governance, such as more transparency, more accountability,
more political freedoms and better service delivery. If such a cycle is set
in motion, the countries participating in it may find themselves trans-
formed within a generation, much as Asia’s tiger economies did.
Although it may be true that better governance leads to higher growth,
better governance is not cheap – which may explain why wealthier
countries often have better governance, as Mushtaq Khan, an economist
at the School of Oriental and African Studies in London, pointed out in
a 2007 paper.9 Developed economies have the resources needed to create
and enforce property rights, uphold the rule of law, reduce corruption
and provide public goods and services transparently, accountably and
in response to democratically expressed preferences. For African coun-
tries that have benefitted and continue to benefit from demand for their
resources, the implication is that they should make an effort to employ
the windfall revenues to improve governance.
There is a further noteworthy aspect to the link between governance
and growth: better governance also means formalising the economy by
registering, regulating and taxing companies operating in the informal
sector. The benefits for the state are obvious: apart from additional
32 John Endres

income for the state coffers, formalisation also allows statistical offices to
gain a more accurate understanding of economic activity in the country.
Although empirical evidence suggests that formalisation correlates with
higher per capita incomes, there is a risk in poorly governed countries
that tax revenues go straight to corrupt officials rather than to the state
coffers, as well as opening up more scope for kickbacks or extortion.10
For informal enterprises, getting caught in the net of state surveillance
and taxation may seem like a bad deal, but it has its upside: informal
businesses are often destined to remain small because they have to
remain inconspicuous to avoid the state’s attentions and because they
find it harder to access funding for expansion from banks and investors.
Becoming formally registered removes these impediments, allowing
enterprises to grow to much larger sizes. Larger enterprises are able to
benefit from economies of scale and greater division of labour, making
them more efficient and able to offer better products and services to
consumers.11
Although most people detest being coerced into making involuntary
contributions to the state coffers, taxes have an important role to play
in governance. The more a state depends on taxes from individuals and
companies, the more accountable it has to be to both. Those paying the
bill are more likely to question what is being done with the money when
they are citizens than when they are foreign governments (in the case of
development aid) or large concerns exploiting natural resources, eager
to maintain friendly relationships with the host country government.12
Africa still faces enormous challenges. Corruption is pervasive, phys-
ical infrastructure lacking or insufficient and states appear incapable
of delivering the services that many citizens need or desire.13 Poverty
remains shockingly high and the high population growth rates raise the
spectre of enormous masses of young, frustrated people finding ways to
express their outrage destructively. Violent extremism is on the rise in
east and west Africa, and some regions, like South Sudan and the Central
African Republic, are descending into violent anarchy.
Yet many of these problems have existed, in one form or another, for
decades. It is only in the past 10–15 years that the prospect has emerged,
however slim its chances, of a change in this situation. It is not just
because there has been some economic growth where previously there
was very little. It is also because all African countries now conduct elec-
tions, most allow multiple parties to participate (or at least pretend to)
and several have experienced a change of leadership by means of elec-
tions. Governance, though far from perfect, is beginning to improve.
International relations do not need to focus inexorably on the former
colonisers in the Western world, but can be built with countries such as
Brazil, China and India in the global south.
 Why Governance Matters for Investment 33

In other words, in the political realm as much as in the economic,

the idea is beginning to take hold that things can get better. Instead of
stagnation and decline being inevitable, growth and rising prosperity
are seen to be possible. From seeing that these things are possible, it is
a small step to demanding that they be made true. And this is essential:
Africa cannot be improved from the outside. It has to be done from the
inside, by Africans who want it to be done and are ready to make sure
that it is done. Africans investing in Africa is both an expression of this
increasing assertiveness and a driver of ongoing improvements.

Notes
1. World Bank, World Development Indicators, http://databank.worldbank.org
(accessed 27 August 2014). Figures are constant 2005 US dollars, corrected for
the effects of inflation.
2. Forbes, How Dictators Manage Their Billions, http://www.forbes.com/2000/06/
22/feat.html; Who Were Africa’s Richest Dictators?, http://www.forbes.com/
sites/mfonobongnsehe/2011/11/08/who-were-africas-richest-dictators/;
Daddy‘s Girl: How an African ‘Princess’ Banked $3 Billion in a Country Living
on $2 a Day, http://www.forbes.com/sites/kerryadolan/2013/08/14/how-
isabel-dos-santos-took-the-short-route-to-become-africas-richest-woman/ (all
accessed 27 August 2014).
3. Global Financial Integrity, Illicit Financial Flows from Africa: Hidden Resource
for Development (March 2010), http://www.gfintegrity.org/storage/gfip/
documents/reports/gfI_africareport_web.pdf, p. 5.
4. World Bank, World Development Indicators, http://databank.worldbank.org
(accessed 27 August 2014). The figure given is in current US dollars. Africa’s
GDP was given as $2.3 trillion in 2013.
5. Global Financial Integrity and African Development Bank, Illicit Financial
Flows and the Problem of Net Resource Transfers from Africa: 1980–2009
(March 2013), http://www.gfintegrity.org/storage/gfip/documents/reports/
AfricaNetResources/gfi_afdb_iffs_and_the_problem_of_net_resource_transfers_
from_africa_1980-2009-web.pdf, p. 1. Quote: ‘Results indicate that Africa was a
net creditor to the world, as measured by the net resource transfers, to the tune
of up to US$1.4 trillion over the period 1980–2009, adjusted for inflation’.
6. Forbes, Number of African Billionaires Surges to 27, http://www.forbes.com/
sites/kerryadolan/2013/11/13/number-of-african-billionaires-surges-to-27-up-
two-thirds-from-2012/ (accessed 27 August 2014).
7. World Bank, Worldwide Governance Indicators, http://info.worldbank.org/
governance/wgi/index.aspx#home (accessed 27 August 2014).
8. Deloitte University Press, The Boom and Beyond: Managing Commodity Price
Cycles, http://dupress.com/articles/global-economic-outlook-q1-2014-the-
boom-and-beyond-managing-commodity-price-cycles/ (accessed 27 August
2014).
9. Mushtaq H. Khan, Governance, Economic Growth and Development since the 1960s,
http://eprints.soas.ac.uk/9921/1/DESA_Governance_Economic_Growth_
and_Development_since_1960s.pdf.
34 John Endres

10. Christopher Woodruff, Registering for Growth: Tax and the Informal Sector
in Developing Countries (July 2013), http://www2.warwick.ac.uk/fac/soc/
economics/research/centres/cage/onlinepublications/briefing/chj854_cage_
woodruff_bp_09_07_13_web.pdf. ‘Increasing the formalization rates of small
firms is unlikely to offer governments a substantial new source of revenue in
the short run’ (p. 10).
11. On the benefits of business formalisation, see USAID, Removing Barriers to
Formalization: The Case for Reform and Emerging Best Practice (March 2005),
http://www.oecd.org/dac/povertyreduction/38452590.pdf.
12. OECD, Citizen-State Relations: Improving Governance through Tax Reform (2010),
http://www.oecd.org/dac/governance-development/46008596.pdf.
13. Afrobarometer, Governments Falter in Fight to Curb Corruption: The People Give
Most a Failing Grade (November 2013), http://www.afrobarometer.org/files/
documents/policy_brief/ab_r5_policybriefno4.pdf; What People Want from
Government: Basic Services Performance Ratings, 34 Countries (December 2013),
http://www.afrobarometer.org/files/documents/policy_brief/ab_r5_policy-
briefno5.pdf.
3
Regional Economic Communities
Jacqueline Chimhanzi

There is, arguably, no greater topical issue in Africa than that of regional inte-
gration – a concept whose time has definitely come but whose operation-
alisation is still in the making and upon which Africa’s massive unrealised
potential lies. Central to the importance of Regional Economic Communities
(RECs) is their cross-cutting nature that transcends virtually all economic
activity and sectors – from manufacturing, energy, infrastructure and finan-
cial services to tourism – underpinned by a very simple rationale – that
there is strength in numbers. Given the transformative potential of regional
integration, the integration discourse is actually best located in the broader
context of development and economic transformation – beyond merely
‘fixing borders’ as an end in itself. Marcelo Giugale, the World Bank’s Africa
Director for Poverty Reduction and Economic Management, aptly expressed it
as follows: ‘The final prize is clear: ... Africans trad[ing] goods and services with
each other. Few contributions carry more development power than that’.1
Despite this recognition of the salience of regional integration, it is
not happening fast enough and undermines Africa’s continued ‘rising’
and competitiveness. The African market is highly fragmented. With
a similar population size to China and India, Africa is, in comparison,
54 markets, China 1 and India 1, and therein lies the challenge for compa-
nies – both international and African – wanting to access African opportuni-
ties and do business on the continent. Africa’s intra-trade levels remain low
compared to other regions in the world.
The chapter opens with the rationale and context for the need for RECs
on the African continent followed by an overview of the state of play in the
development of African RECs. There will then be a focus on attempting to
understand the underlying issues accounting for low intra-regional trade.
This is followed by a specific focus on the East African Community (EAC),
deemed one of the better performing and most dynamic RECs. Justification,
along different performance metrics and indicators, is provided for with
the selection of the EAC as a focal case study. The experience of the MeTL
Group based in Tanzania and recognised as a leading East African industrial
35
36 Jacqueline Chimhanzi

conglomerate is used to illustrate the realities of operating within the realm

of the EAC legislative framework. In a departure from Africa, the case of
Airbus, touted as a ‘pragmatic’ approach and presenting a different architec-
ture to regional integration, is examined. Insights and learnings are drawn
from both the East African and Airbus experiences, and the chapter closes
with policy recommendations for African RECs.

The need for Regional Economic Communities

It is observed that 27 of Africa’s 54 countries are small, with national popula-

tions of fewer than 20 million and economies of less than US$10 billion.2
Infrastructure systems, like borders, are reflections of the continent’s colo-
nial past, with roads, ports and railroads built to facilitate the export of raw
materials, rather than to bind territories together economically or socially.3
The Economist,4 in a seminal piece titled ‘Aspiring Africa’, boldly challenged
African leaders: ‘Why not rekindle pan-Africanism by opening borders
drawn in London and Paris?’ In short, decades after the end of colonialism,
African countries continue to be doubly challenged by size and connec-
tivity5 and are unable to compete on favourable terms on the scale that is
required for competitiveness. According to Mohammed,6 this is more so the
case where exports are specialised, making them yet more vulnerable from
a scale perspective. Against this backdrop, is increasing globalisation with
cost-efficient producing countries, such as China, presenting a new form of
competition for Africa?7 The net impact has been Africa’s deindustrialisa-
tion, as evidenced by the share of manufacturing in African GDP falling from
15 per cent in 1990 to 10 per cent in 2008.8 The implications of this trend for
intra-African trade and how African countries can rebuild their productive
capacities and attain competitiveness should strongly form part of the new
regional agenda to boost intra-African trade.9
The World Economic Forum’s (WEF) Global Competitiveness Report
2014–2015 defines competitiveness as “the set of institutions, policies
and factors that determine the level of productivity of a country.” (WEF,
2014:4). The index is based on a composite score that ranks countries on
12 pillars of competitiveness. According to this ranking, seven of the ten
least competitive countries are African. Strikingly, on the contrary, seven
African countries feature on the list of the ten fastest growing economies in
the world, in the period between 2011 and 2015: Ghana, Ethiopia, Tanzania,
Zambia, DRC, Nigeria and Mozambique (The IMF/Economist 2010 in The
Economist, 2011). In juxtapositioning these two sets of statistics and reali-
ties – pertaining to a continent whose countries occupy the lowest posi-
tions on competitiveness rankings whilst also simultaneously occupying the
highest rankings on the world’s fastest growth index – a powerful message
emerges: that Africa has significant growth potential which, however, can
only be further unlocked and sustained through regional trade and the
 Regional Economic Communities 37

resultant competitiveness. Indeed, whilst the African narrative has shifted

from ‘The Hopeless Continent’10 to ‘The Hopeful Continent: Africa Rising’,11
the case for regional integration has never been more compelling even as the
new face of Africa is celebrated. A lack of integration represents the biggest
threat to Africa’s continued rising.12
It against the backdrop of this recognition for the need for integration that
the notion of an African Economic Community (AEC), comprising eight
regional economic communities, was conceived. The ultimate aim of the
AEC is continentally uniform economic, fiscal, social and sectoral policies
and the creation of a ‘single competitive market’ that increases the intercon-
nectedness of African economies.13 The Sirte Declaration, signed in 1999,
called for the formation of the African Union and the speeding up of the
provisions of the Abuja Treaty to create an African Economic Community.
The Abuja Treaty signed in 1991 had defined the migration path for how the
AEC would be achieved via a six-stage process over a 34-year period14 ending
in 2028 (see Table 3.1).15
There are a total of 14 RECs on the continent though only 8 are recognised
by the African Union (see Table 3.2). Six African countries are members of only
one REC, 26 are members of two RECs and 20 are members of three RECs,
while only 1 country belongs to four RECs. The main reason provided for
membership of more than one REC is that countries believe this enhances their
political and strategic positioning.16 However, practically, it is challenging as it
has led to ‘duplication and overlapping protocols, structures and mandates’.17

Table 3.1 Six stages of the establishment of the African economic community

Stage Goal Time Frame

1 Creation of regional blocs in regions Was to be completed in 1999

where such do not yet exist
2 Strengthening of intra-REC integration Was to be completed in 2007
and inter-REC harmonisation
3 Establishing of a free trade area and To be completed in 2017
customs union in each regional bloc
4 Establishing of a continent-wide customs To be completed in 2019
union (and thus also a free trade area)
5 Establishing of a continent-wide African To be completed in 2023
Common Market (ACM)
6 Establishing of a continent-wide To be completed in 2028
economic and monetary union (and thus
also a currency union) and Parliament
End of all transition periods 2034 at the latest

Source: Abuja Treaty, Article 6.

Table 3.2 African states’ REC memberships

Regional Economic Community Member States Formation Year Headquarters

CEN-SAD Benin, Burkina Faso, Cape Verde, Central African 1994 Tripoli, Libya
(Community of Sahel-Saharan Republic, Comoros, Côte d’Ivoire, Chad, Djibouti, Egypt,
States) Eritrea, Gambia, Ghana, Guinea-Bissau, Guinea, Kenya,
Liberia, Libya, Mali, Mauritania, Morocco, Niger, Nigeria,
São Tomé and Príncipe, Senegal, Sierra Leone, Somalia,
Sudan, Togo, Tunisia.
COMESA Burundi, Comoros, Democratic Republics of Congo, 1994 Lusaka, Zambia
(Common Market for Eastern and Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya,
Southern Africa) Madagascar, Malawi, Mauritius, Rwanda, Seychelles,
Sudan, Swaziland, Uganda, Zambia, Zimbabwe
EAC (East African Community) Burundi, Kenya, Rwanda, Tanzania, Uganda 1966–1977 then Arusha, Tanzania
2000–present
ECCAS (Economic Community of Angola, Burundi, Cameroon, Central African Republic, 1983 Libreville, Gabon
Central African States) Chad, Democratic Republic of Congo, Equatorial Guinea,
Gabon, Republic of Congo, São Tomé and Príncipe
ECOWAS (Economic Community Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, 1975 Abuja, Nigeria
of West African States) Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger,
Nigeria, Senegal, Sierra Leone, Togo
IGAD (Intergovernmental Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, 1996 Djibouti, Djibouti
Authority on Development) Uganda
SADC (Southern African Angola, Botswana, Democratic Republic of Congo, 1980 Gaborone,
Development Community) Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Botswana
Namibia, Seychelles, South Africa, Swaziland, Tanzania,
Zambia, Zimbabwe
UMA Algeria, Libya, Mauritania, Morocco, Tunisia 1989 Rabat, Morocco

Source: UNECA (http://www.uneca.org/oria/pages/history-background-africas-regional-integration-efforts).

 Regional Economic Communities 39

Consequently, countries are stretched with resources being inefficiently used18

and RECs grappling with ‘existential and credibility issues’.19
The streamlining and consolidation of RECs in different regions remains a
key challenge for the realisation of both regional and pan-African economic
integration. In the interim, in the process of migrating towards the AEC,
there is a ‘milestone’ – Stage III – to form free trade areas and customs
unions. The Tripartite Free Trade Area (TFTA), for example, comprising
the Common Market for Eastern and Southern Africa (COMESA), the
East African Community (EAC) and the Southern African Development
Community (SADC) regional bodies, will encompass 26 African countries,
representing more than half of the AU membership, with a combined popu-
lation of 530 million (57 per cent of Africa’s population) and a total GDP of
$630 billion or 53 per cent of Africa’s total GDP.

Assessment of the performance of RECs

against their mandate

In light of the aforementioned strategic context outlining the mandate

and scope of RECs, what is the state of play of African integration? There
would appear to be consensus that, overall, the implementation of the
Abuja Treaty has not been satisfactory. The progress attained, thus far,
by the RECs has been described as ‘mixed’,20 ‘slow and partial’21 and as
being ‘punctuated by periods of stagnation or blighted by reversals, with
modest achievements, at best, in a few instances’.22 The net impact of
these varying levels of maturity in the development of RECs is that Africa
has integrated with the rest of the world faster than with itself. Levels of
intra-Africa trade remain extremely low at 11 per cent, whilst 40 per cent
of North American trade is with other North American countries, and
63 per cent of trade by countries in Western Europe is with other Western
European countries as depicted in Table 3.3.
Specifically regarding free trade and customs unions, limited progress is
recorded in four of the eight RECs, namely, UMA, ECCAS, CEN-SAD and
IGAD, whilst important progress has been achieved in COMESA, EAC, SADC
and ECOWAS (see Table 3.4). Given the uneven progress, the overall present
state of African economic integration is insufficient to support achievement
of the African Common Market.

Explanations for low levels of regional integration

The large disparity among regional groupings in terms of intra-regional

trade is clearly attributable to their differentiated levels of progress in imple-
menting the structured set of modalities designed to eliminate trade barriers
and non-tariff barriers (NTBs). Tariff barriers emanate from taxes and duties
40 Jacqueline Chimhanzi

Table 3.3 Comparisons of different continents’ intra-regional trade levels

Region 2000 (in per cent) 2009 (in per cent)

Africa 9.2 11.7

Asia 49.1 51.6
CIS 20.1 19.2
Europe 73.2 72.2
Middle East 8.7 15.5
North America 55.7 48.0
South and Central America 25.6 26.1

Source: WTO Secretariat.

Table 3.4 Estimated value and share of intra-REC trade, 2009

Value of Intra-REC Share of Intra-REC

REC Exports (US$ Billions) Exports (in per cent)

AMU 3.9 4.6

CEMAC 0.1 0.5
COMESA 6.4 6.8
EAC 2.4 23.0
CEEAC 0.2 0.3
ECOWAS 7.7 9.7
SACU 2.9 4.2
SADC 16.0 12.2
UEMOA 2.7 14.5

Source: WTO Secretariat and UN Comtrade.

that undermine trade while non-tariff barriers refer to non-tariff related trade
restrictions resulting from prohibitions, conditions or specific requirements
that render the importation and exportation of goods difficult or expensive.23
These include red tape and bureaucracy, inefficient customs and border posts
and poor infrastructure for the movement of goods between countries. Also,
licensing rules, import permits and standards, including their implementa-
tion, fall within this category.
A key challenge militating against effective regional trade relates to the
delays in moving goods across borders within and between regions. Delays
in terms of crossing borders are, on average, longer than in the rest of the
world: 12 days in Sub-Saharan countries compared with 7 days in Latin
America, less than 6 days in Central and East Asia, and slightly more than
4 days in Central and East Europe.24 These delays add a tremendous cost to
importers and exporters and increase the transaction costs of trading among
African countries. For food and other perishable goods, such delays can be
devastating.
 Regional Economic Communities 41

According to Brenton and Gözde,25 ‘thickness of borders’ (2012:8) is a

proxy for ease of access; thus, the denser the border, the more the country
limits trade, travel and the flow of factors of production. A World Bank
survey found that African borders are very ‘thick’ relative to other parts of
the world. This was highlighted by President Mahama of Ghana, on a World
Economic Forum panel in Davos in 2014, who noted that goods being trans-
ported from Nigeria to Ghana need to go through six border posts paying
both ‘official and non-official’ fees. In yet another example, the Chirundu
One Stop Border Post, between Zambia and Zimbabwe located on either side
of the Zambezi River, often touted as an example of progressive border post
management on the continent, is beset by a number of challenges. Anecdotal
experiences of using this border post suggest that whilst processing times
have been reduced, the border post is not fully realising what it was set up
to achieve.
Another key constraint relates to the high volume of paper-work to be
processed owing to rules of origin. By determining the origin of goods,
rules of origin is the instrument used to prevent trade deflection, to ensure
that only the member states of a preferential trade arrangement benefit
from the negotiated tariff preferences. It is, however, deemed that SADC
rules of origin are particularly stringent as they are based on sector or prod-
uct-specific requirements. The experience of Shoprite, the largest retailer
on the African continent, is illustrative of this form of trade barrier. In a
report examining the barriers that stifle cross-border trade within Africa,
the World Bank revealed that the retailer spends US$20,000 a week in
import permits to transport meat, milk and other goods to its stores in
Zambia alone. Approximately 100 single entry import permits are applied
for every week, and this figure could rise up to 300 per week in peak periods.
On average, according to the World Bank, there can be up to 1,600 docu-
ments accompanying each truck the retailer sends with a load that crosses
a border in the region.26
For garments, the rule is even stricter and requires that two stages of trans-
formation take place in a SADC member state for the garment to qualify for
SADC preferences. This means that either the fabric, the yarn or the garment
has to be manufactured in a SADC member state. With very little textile
manufacturing in this region, the rules effectively limit the trade of garments
in this region.27 The administrative requirements for certificates of origin
can account for nearly half the value of the duty preference. Shoprite, there-
fore, opts not to claim SADC preferences in sending regionally produced
consignments of food and clothing to its franchise stores in non-SACU SADC
markets. Instead, it pays full tariffs.
While rules of origin can be used, just as import tariffs, to protect domestic
industry from import competition, a balance needs to be struck so that
companies are not over-burdened by being obliged to use inputs from specific
sources and having to adapt production processes to meet the rules of origin
42 Jacqueline Chimhanzi

requirements to qualify for preferential market access. As stated by the World

Bank in their seminal annual Doing Business reports and with great relevance
here: It is ‘about smart business regulations, not necessarily fewer regula-
tions’.28 Reforms to minimise costs could come from two sources: reforms
in the rules of origin itself in the form of simplification and easing of stand-
ards, and reforms in the administrative procedures, particularly the certifica-
tion process. A complex ROO regime accompanying a free trade agreement
can further complicate rather than facilitate trade in the region. There is
the need for the streamlining of customs procedures and simplification of
customs clearances, including the introduction of paperless trading with the
objective of minimising documentation costs.29
Underlying these barriers are issues of leadership and political will. In super-
imposing various states’ memberships, a complex and convoluted picture
emerges (see Figure 3.1) which provides explanations for the slow progress
towards integration. While the REC is the unit of analysis and the explicit
focus of this chapter, there is recognition of the tensions that are inherent
in how individual countries interact with their REC(s) as well as how the
different RECs themselves align in evolving to become a single monolithic

UMA
UMA Libya
Algeria Libya
Algeria Morocco
Morocco
IGAD
IGAD
Mauritania
Mauritania Tunisia
Tunisia Somalia
Somalia
Kenya
Kenya
Djibouti
Djibouti Uganda
Uganda
Eritrea
Eritrea EAC
EAC
Sudan
Ethiopia
Ethiopia
CEN-SAD
CEN-SAD Sudan
Egypt Tanzania
Tanzania

Malawi
Malawi Zambia
Zambia SADC
SADC
Zimbabwe
Zimbabwe
Burundi
Burundi Mozambique
Mozambique
CEMAC Central
CameroonCentral DRC
DRC
African
Congo Rep.
African
Republic
Equtorial
Republic
epublic Botswana
Botswana
Guinea Chad
had CEPGL Lesotho
Chad
Gabon Lesotho
Rwanda
Rwanda Swaziland Namibia
Namibia
South Africa
ECCAS
ECCAS South Africa
Angola SACU
o Tom and Principle
São
Mautitius
SACU
Seyehelles

Comoros
Madagascar
Burkina Faso
Benin, Gambia
Gambia
Mali Nigeria
Niger Nigeria COMESA
COMESA IOC
IOC
Senegal
Togo
Côte d’lvoire
UEMOA
UEMOA Guinea Bissau union
Réunion
MRU
MRU
Liberia
Liberia
Guinea
Guinea
ECOWAS
ECOWAS Sierra Leone
Sierra Leone
Cape Verde
Cape Verde
Ghana
Ghana

Figure 3.1 Overview of overlapping African countries’ REC memberships

Source: Economic Commission for Africa, 2006, in ECA, AUC and AfDB (2010). Assessing Regional
Integration in Africa IV. Enhancing Intra-African Trade. United Nations publication. Sales
No. E.10.II.K.2. Addis Ababa.
 Regional Economic Communities 43

free trade area. The African REC, therefore, straddles both national and
supranational contexts and therein lies the complexity in operationalising
the regional trade mandate.
At the opening session of the 2013 African Development Bank’s Africa
Economic Conference, South Africa’s then finance minister, Pravin
Gordhan, acknowledged this collaboration/competition tension stating
that treading this fine balance requires a ‘special kind of leadership’
that appreciates sovereignty yet relinquishes aspects of it for the greater
regional good. A particularly fitting illustration of this is how African states
continue to negotiate as individual countries and not as RECs, thus losing
the opportunity to leverage scale. By mid-2010, for example, African coun-
tries had signed 748 bilateral investment treaties, 140 of which were with
other African countries.30 Whilst, for instance, a singular negotiator, the
European Commission, carries out negotiations on behalf of the European
Union, no REC Commission or Secretariat negotiates on behalf of their
member countries.
Integration continues to be viewed as threatening whereas it should be
viewed as a win-win policy and not as a zero-sum game. In similar vein,
UNCTAD31 finds it difficult to understand why countries are reluctant to
adopt common standards and regulations from which they are all likely to
gain. This points to the need to actively manage the soft side of integration.
Fears of sovereignty being undermined need to be mitigated against as they
are unfounded. Empirical evidence points to the potential benefits of inte-
gration. In a study by TradeMark Southern African, the potential benefits of
a successful TFTA were outlined in the impact study, ‘General Equilibrium
Analysis of the COMESA-EAC-SADC Tripartite FTA’. The report considered eight
TFTA simulator scenarios and found that net real income gains would accrue
to members of the TFTA generating annual welfare gains of $518 million.32 It
is perhaps due to this perceived loss of sovereignty that African governments
have not successfully managed to mainstream and integrate regional trade
mandates into national policies. It would appear that countries have not
‘internalised’ regional trade imperatives as planning for the state and for
the region continue to happen in parallel, not concurrently nor in an inte-
grated manner. On this, Rwanda’s experience is instructive. The country
is embarking on socio-economic transformation that is to be attained via
regional integration. This aspiration has, subsequently, been enshrined in
the country’s Vision 2020.
While the AU has set up the Conference of Ministers in Charge of
Regional Integration to holistically look into the implementation
of protocols, harmonisation of policies and programmes and co-
ordination between RECs, there is a ‘hearts and minds’ aspect that cannot
be addressed by policy instruments. Winning hearts and minds could be the
basis for building the necessary political will.
44 Jacqueline Chimhanzi

Regional Economic Communities and private sector

development: towards a new paradigm

There is a compelling case for the reinvigoration of the African integration

agenda. There is a need to locate the issue of intra-Africa trade in the broader
context of private sector development (PSD) and the development discourse,
which transcends ‘fixing borders’.33 This is corroborated by UNCTAD34 in
stating that although inefficient customs and regulatory procedures certainly
hamper trade in the region, experience has demonstrated that the main
barriers to increasing intra-African trade are often not found at the border.
Trade facilitation needs to be an integrated part of development strategies
in most African countries because it is a catalyst for further progress in areas
beyond trade and export expansion.35 It is only in this broader context that
the import of regional integration can be effectively conveyed. Rippel36 illus-
trates how trade facilitation across borders can contribute to reaching devel-
opment goals (Figure 3.2).
UNCTAD37 proposes a shift in paradigm from a linear and process-based
approach to integration. They view the current paradigm as having an
undue focus on the elimination of trade barriers and subscribe to a more
development-based approach to integration, which pays as much attention
to the building of productive capacities and private sector development as
to the elimination of trade barriers. It is contended that the current inte-
gration paradigm does not address adequately the fundamental supply side
constraints – a weak private sector, poor labour productivity, lack of access to
finance, inadequate infrastructure, low institutional capacity and low access
to technology and innovation. These collectively constitute an ecosystem
and in its absence, companies cannot achieve manufacturing and productive
capacities to ensure that there are goods and services to be had for regional
trade, in the first instance. African countries will struggle to compete favour-
ably against growing global competition without an outward reorientation
of their trade policies.
On labour productivity specifically, Rankin, Söderbom and Teal (2006)
conducted a study comprising 1,012 firms spanning the period from
1992 to 2003 in five countries: Ghana, Kenya, Nigeria, South Africa and
Tanzania. The key conclusion drawn from the findings is that firms with
higher labour productivity are more likely to export than those with lower
labour productivity. Moreover, African manufacturing firms generally have
lower labour productivity than firms on other continents. Thus, if African
governments want to boost intra-African trade, they will have to enhance
the export competitiveness of African manufacturing firms by addressing
these obstacles to productivity growth.38
UNCTAD39 attributes poor regional integration outcomes, in part, to
the limited role of the private sector in regional integration initiatives and
efforts. In a telling 2012 UNECA survey,40 31 per cent of respondents stated
 Regional Economic Communities 45

Poverty
Economic reduction
growth

More trade can

create jobs and
Improved income
export opportunities
performance
Increase
competitiveness
of firms
Reduction of
trade costs

Examples of Trade Facilitation Measures:

• Better border and customs management
• Improving infrastructure
• Open and competitive markets in
logistics and service sectors
• Harmonised regional standard

Figure 3.2 How trade facilitation can contribute to reaching development goals
Source: Rippel, B., “Why Trade Facilitation Is Important for Africa,” in World Bank 2012:
“De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services”.

political motivations for joining a REC, 39 per cent cited economic reasons,
16 per cent cited geographic reasons, 6 per cent historical and 8 per cent
cultural. This further supports the assertion that even for those RECs with a
trade agenda, trade is not always their overarching priority despite all their
pronouncements. While trade agreements are signed by governments, it is
the private sector that understands the constraints facing enterprises and is
in a position to take advantage of the opportunities created by regional trade
initiatives. While there are business councils, governments remain the only
active drivers of regional integration in Africa and the private sector remains
a passive participant in the process. If African governments want to achieve
their objective of boosting intra-African trade, they have to create more
space for the private sector to play an active role in the integration process.
But more importantly, the African private sector must be able to occupy that
space. Evidence, however, points to a weak African private sector with limited
capacity. For instance, most African private sector jobs are in the informal
sector with only 2–10 per cent of African workers occupying permanent/
formal wage employment. Permanent formal employment in the private
46 Jacqueline Chimhanzi

sector is highest in South Africa, Botswana and Egypt at 46 per cent, 23 per
cent and 18 per cent, respectively.41 The African scenario, as depicted, is said
to contrast sharply with that in Asia, where the private sector is strong and
plays a crucial role in shaping the integration agenda.42

Rationale for the focus on the East African Community

Given the aforementioned context of African RECs continuing to experi-

ence constraints in terms of boosting trade and investments, a key objective
of this chapter is to identify best practice that offers learnings and insights
for African RECs. To that end, there will be a focus on the East African
Community. While the EAC case study will highlight best practice, this is
not to imply that it is without its challenges. According to Paul Collier, ‘[T]
oo much attention may have been given to the symbolism of monetary
union and common currency, and too little to opportunities for coopera-
tion in creating a shared infrastructure for the community’. Moreover, an
assessment of the EAC in its inaugural EAC Common Market Scorecard of
2014 identified at least 63 non-conforming measures in the trade of serv-
ices and 51 non-tariff barriers affecting trade in goods, while in capital,
only two of the 20 operations covered by the Common Market Protocol are
free of restrictions in all of the EAC partner states.43 The Scorecard assesses
progress toward the development of a common market in capital, services
and goods across the Partner States of the EAC and in terms of commit-
ments made by the Partner States, outlines progress in removing legislative
and regulatory restrictions to the Protocol, and recommends reform meas-
ures. Member states are assessed for compliance with 683 laws and regula-
tions relevant to the common market – 124 in Capital, 545 in Services and
14 in Goods. Notwithstanding the indictment according to the Scorecard
findings, the EAC is still lauded as the top performing African REC on a
number of indices and metrics (see Figure 3.3). Table 3.4 depicts the EAC as
having had the highest levels of trade with intra-REC exports accounting
for 23 per cent of all exports in 2009. This is in stark contrast to CEMAC’s
0.5 per cent and SADC’s 12.2 per cent. Implementation of the Customs
Union Protocol in 2005 has had a positive impact on intra-EAC trade which
has grown from $US2 billion in 2005 to $US5.5 billion in 2013, a growth of
36 per cent.44
Regarding, specifically, the export of services, Africa has experienced
growth at an average annual rate of 14.2 per cent in the period 2000–2008
with significant variations in services export growth among African RECs.45
Again, on the basis of this metric, the EAC recorded the fastest average annual
growth at 17 per cent, while COMESA and SADC services exports grew at
14 per cent, and ECCAS and ECOWAS services exports grew at 10–11 per
cent, lower than the average for Africa.
 Regional Economic Communities 47

EAC* Quick Facts

2nd fastest growing economic bloc in the world.
Fastest growing economic bloc in Sub-Saharan
Africa.

5,8% Average GDP growth of 5,8%

during the last decade.
2004 2014

Combined GDP of partner states

currently stands at USD 99,8 billion.

Total population – 145 million

(projected to reach 150 million by 2015).

Total FDI inflow in the region has tripled from

USD 1,3 billion in 2005 to USD 3,8 billion in 2012

Figure 3.3 EAC quick facts

Note: *The East African Community (EAC) is the regional intergovernmental organisation of
the Republic of Burundi, Kenya, Rwanda, the United Republic of Tanzania, and the Republic of
Uganda, with its headquarters in Arusha, Tanzania.
Source: Africa Practice (2014), “East Africa Integration: State of Play,” Africa Practice InDepth.

The very establishment of the Scorecard itself, in the first place, and less
so the outcomes of the scoring exercise, is indicative of the EAC’s commit-
ment to a functioning REC. The Scorecard has established a starting point for
continuous improvement based on a quantifiable basis.

Background to and context of the East African Community

There has been a long history of cooperation under successive regional

integration arrangements in the region. Kenya, Tanzania and Uganda have
participated in regional integration arrangements dating back to 1917,
starting with a Customs Union between Kenya and Uganda in 1917, which
the then Tanganyika (Tanzania) joined in 1927; the East African High
Commission (1948–1961); the East African Common Services Organization
(1961–1967); the East African Community (1967–1977); and the East African
Co-operation (1993–2000). The relative success of the EAC is often attributed
to the community having transitioned through many phases and, as a result
of the failures and collapses, for example, in 1977, it is stronger.
The second iteration of the EAC was established in 2000 by Kenya, Tanzania
and Uganda while Burundi and Rwanda joined in 2007. Its objectives are to
48 Jacqueline Chimhanzi

deepen cooperation among member states in political, economic and social

fields – including the establishment of a customs union (2005), common
market (July 2010), monetary union and, ultimately, a political federation of
East African States (see Figure 3.4). Burundi and Rwanda joined the customs
union in 2009. The EAC has a population of about 133 million, a land area
of 1.8 million square kilometres and a GDP of $99 billion as of 2014, with
Kenya, the largest economy, accounting for approximately 40 per cent
of that.
The EAC is, currently, in the fourth Development Strategy phase (2011–
2016) with a focus on the deepening of the integration process. The imme-
diate and key objective of the new phase is the establishment of the East
African Monetary Union (EAMU). The common market protocol, which
entered into force in July 2010, is intended to be fully implemented by
December 2015. By that time the EAC is expected to have achieved the
‘4 freedoms’ – free movement of people, goods, services and capital within
the common market.
It is also important to note that the EAC is evolving in and of itself in
terms of intra-REC integration but also, in pursuance of a parallel mandate,
in adapting to meet the inter-REC integration necessitated by the Tripartite
Free Trade Area integration of SADC, COMESA and EAC.

Learnings from EAC: how is the EAC facilitating

cross-border trade and investment?

As mentioned earlier, the EAC is the better performing of the African RECs.
However, closer examination reveals that integration is neither consistent
nor wholesale. Rather, integration in the EAC manifests in three of the
following ways:

● at an EAC level with all members;

● at an EAC level with only some members, known as the ‘Coalition of the
Willing’;
● individual country efforts that, however, augur well for the EAC and are
often misconstrued to be efforts at an EAC level.

The EAC is characterised by a fissure in its membership with a feet-dragging

element and a fast-tracking one commonly referred to as the ‘Coalition of the
Willing’ but officially known as the ‘Tripartite Initiative for Fast Tracking the
East African Integration’.46 Accordingly, EAC progress regarding a number of
regional initiatives to promote regional trade and investment can be drawn
along the lines of these two groupings.
January 2005 – launched July 2010 – launched Once Customs Union and Common Market Launch date TBD
Protocols are fully implemented

Customs Union Common Market Monetary Union Political Federation

Its main aim is to increase The common market protocol Monetary Union Protocol signed on 30 Novem- A political federation is the ultimate objective of the EAC integra-
trade within the region, spe- was adopted in July 2010. ber 2013 tion process
cifically by harmonising the Its main objective is the free Member states first have to fully implement Most likely to be the most contentious and drawn out. All five
administration of customs. movement of goods and the Customs Union and the Common Market partner states have expressed the desire to see some form of a
This includes the removal of services, persons and labour, Protocol political federation established even though consensus on the
internal tariffs and the adop- and capital Harmonisation and co-ordination of fiscal, mon- form is yet to be achieved
tion of a Common External One of the protocol’s main etary, and exchange control policies required Consultations underway to design the format of the federation
Tariff (CET) goals is the elimination of beforehand and draw up an implementation plan
Current applied CET on non-tariff barriers (NTBs) Standards that must be attained and main- Proposed plan set to be presented for approval at the EAC Heads
imports is 25% for finished tained for 3 years before union is established: of States Summit in November 2014
goods, 10% for semi-fin- public debt ceiling of 50% of GDP; Forex reserve
ished goods and 0% for raw cover of 4½ months; fiscal deficit ceiling of 6%
materials of GDP; core inflation ceiling of 5%; and tax to
GDP ratio of 25%

5 years 5 years 10 years TBC

Achievements Achievements
Increased intra-EAC trade 55 non-tariff barriers (NTBs) resolved in 2013 compared to 36 in 2012. 10 NTBs resolved in the first five months of 2014
(according to the EAC Secre- East Africa Payment System (EAPS) launched by EAC central banks in 2013. It will enable real time money transfers without currency conversion costs
tariat, intra-EAC trade more Real time gross settlement (RTGS) systems linked by regional commercial banks in 2012. As a result, cheque clearance times have reduced from
than doubled from US$1 22 days to just one day
617,1 million in 2006 to US$3 In 2013 the East African Securities Regulatory Authorities group (the EAC’s capital markets regulators) launched a four year strategic plan aimed
800.7 million in 2010) at harmonising a capital markets regulatory and legal framework within the EAC

Challenges Challenges
Agreement on country spe- Several NTBs still remain unresolved to date
cific lists of exclusions to the Member states still retain different classification for work permits: Tanzania has 13 sub-classes; Uganda and Kenya have 9; while Rwanda and Burundi have 2
Common External Tariff (CET) Remains unlikely that all the goals of the protocol will be achieved by 2015, the initial target for full implementation
Membership of Partner States
in other regional economic
communities (RECs) that have
different CET rates

Figure 3.4 Overview of the EAC integration process: key phases and milestones
Source: Africa Practice (2014), “East Africa Integration: State of Play,” Africa Practice InDepth.
50 Jacqueline Chimhanzi

Integration efforts at an EAC level with all members

The EAC’s approach to integration can be said to be consistent with the
tenets of the new developmental regionalism approach that lays emphasis
on addressing supply side constraints and not just ‘fixing borders’. For
example, the current EAC development strategy, covering the period
2011/12 to 2015/16, has an explicit focus on deepening and accelerating
integration and particularly prioritises the expansion of productive capaci-
ties to facilitate product/service diversification and infrastructure network
development for enhanced connectivity within the region. Examples of
these ongoing efforts include an East African transport strategy and regional
road sector development programme; an East African railways master plan;
and the ongoing development of a regional power master plan and inter-
connection code, in collaboration with the Eastern Africa Power Pool. The
EAC has also been successful in securing funding from investors such as the
African Development Bank for the operationalisation of these cross-border
infrastructural programmes.
Regarding capital markets, the region does not have a common stock
exchange although plans are under way for the integration of the stock
markets in Kenya, Uganda, Tanzania and Rwanda. Burundi does not have a
stock exchange. The East African Securities Exchange Association (EASEA) is
working with the Securities Exchanges of each member country to achieve
integration. In 2012, the combined capitalisation of the four exchanges was
estimated at US$31 billion, making it the continent’s third largest bourse
if the EAC stock exchanges were combined, after Western African Regional
Stock Market (BRVM) and the Central African Stock Exchange (BVMAC).
Integration efforts commenced in 2010 with the East African Community
Monetary Policy Committee, which includes the EAC Central Banks
commencing work on the interlinking of the EAC payment systems in
order to facilitate trading, clearing and settlement infrastructures. The East
African Common Market Protocol (EACMP) was signed and ratified on
1 July 2010. Furthermore, the East African Securities Regulatory Authorities
(EASRA), which is the regional umbrella body for capital markets regulators,
is drafting legislation that will allow companies in the four countries to float
bonds within the region. Harmonisation of legal frameworks will mean that
a single information memorandum will be required to comply with the laws
in each market. Also, an initial public offer of securities will also use a single
set of disclosure standards. It is anticipated that these changes will consider-
ably ease and raise levels of cross-border trading by investors.
While the number of African stock markets has increased from 5 in 1960
to 29 in 2014,47 they remain highly fragmented, small, illiquid and tech-
nologically weak, this severely affecting their informational efficiency. The
total value of African stocks outside of South Africa was only 0.94 per cent of
world stock market capitalisation, and 2.14 per cent of all emerging markets
stocks at the end of 2011.48
 Regional Economic Communities 51

It is further contended that African stock markets are also small

compared with the size of their own economies.49 For example, market
capitalisation of the Mozambique stock exchange is only 4.7 per cent
of nominal GDP, whilst Nigeria, Uganda and Tunisia’s capitalisations
are between 31 and 63 per cent.50 This compares unfavourably to the
UK’s 145.6 per cent and the USA’s 122.8 per cent and even to emerging
economies with Malaysia at 183.7 per cent and India at 172.5 per cent.
The case for the integration of African stock markets is, therefore, self-
evident with a number of benefits cited which include increased visibility
due to scale;51 increased liquidity and cheaper cost of capital resulting in the
expansion for trading volumes;52 and finally, greater financial deepening.53
The East Africa Exchange (EAX), established by Heirs Holdings in 2013,
heralds progress towards a common market. Launched in 2013, the commodity
exchange ‘has the capacity to facilitate cross-border trading of commodities
within the EAC, providing a central marketplace, connecting buyers and
sellers throughout the region’, according to Dr. Frazer, the Chairman of the
Board.54 It will link smallholder farmers to agricultural and financial markets,
to secure competitive prices for their products, and to facilitate access to finan-
cial opportunities. EAX’s goal is to facilitate trade across all five East African
Community member states.55
Also, the establishment of the East African Cross-Border Payment
System (EAPS) in late 2013 represents yet another concrete move towards
the integration of money and capital markets.56 The EAPS is an on-
the-spot payment system that links the Real Time Gross Settlement System
(RTGS) in the three central banks – Kenya, Uganda and Tanzania – and
allows for the movement of cash between different banks and branches in
the region in place of cheques. Rwanda and Burundi are expected to join
over time. The EAPS is a multi-currency system in which payments are
effected using any of the currencies of the EAC partner states vastly reducing
costs of transactions in the form of commissions. It is worthy and important
to note that beneficiaries are diverse and include large investors but also
SMEs and citizens who are typically on the periphery and excluded in the
design of large cross-border systems. Citizens who have been using informal
methods – with high transaction costs – are now able to make payments,
including school and medical fees for relatives, across national borders using
the EAPS. It can, therefore, be said that integration is being driven at a level
that impacts on communities in a manner that is relevant to its people.

Integration efforts by the Coalition of the Willing

Members of the Coalition of the Willing are driving infrastructure projects,
accelerating movement of peoples and reducing costs of ICT. Regarding
infrastructure, the three countries (Kenya, Rwanda and Uganda) signed a
tripartite agreement for the development and operation of standard gauge
railway (SGR) that is to run from Mombasa through Nairobi to Kampala and
52 Jacqueline Chimhanzi

Kigali, and construction commenced in October 2014. The standard gauge

signifies progress towards common specification in cross-border infrastruc-
ture. Non-alignment in terms of standards and specifications is a typical
non-tariff barrier on the continent. Regarding labour mobility, Rwanda
abolished work permit fees for all EAC citizens with Kenya following suit
and Uganda abolishing work permit fees for Kenyans and Rwandans.57
For multinationals – whether foreign of African – with offices in the three
countries, this development is a welcome relief. In terms of movement
of people, citizens of Kenya, Rwanda and Uganda, as of February 2014,
have been able to travel anywhere in the three countries using only their
national identity cards instead of passports. Moreover, the three countries
launched an East Africa six-month visa in June 2014 allowing foreign resi-
dents and expatriates residing in the three countries to travel freely within
the three countries. Finally, the establishment of a single tourist visa for
the three countries set a clear and positive tone for movement within the
region. Finally, in terms of connectivity, the Coalition of the Willing estab-
lished a single area mobile network that was launched in October 2014.
This eliminates roaming charges on cross-border calls for mobile phone
users in Kenya, Uganda and Rwanda.58 The net impact is expected to be
greater connectivity and a reduction in the cost of doing business.

Individual country efforts that have benefitted EAC

Evidence shows that ‘economies that have efficient business registration also
tend to have a higher entry rate by new firms and greater business density’.
In terms of the continual improvement of the business environment, the
EAC performs well. However, it is important to note here that the EAC has
been the beneficiary of progressive individual country efforts rather than a
concerted effort at the EAC level. To start a business in the EAC requires only
8 procedures and 20 days on average. The EAC’s average ranking on the ease
of starting a business is 84, higher than that of other regional blocs in Africa –
104 for the SADC, 110 for the COMESA and 127 for the ECOWAS. Of the
74 institutional or regulatory reforms implemented by EAC economies in
the past 8 years, the largest numbers were in the areas of starting a busi-
ness, registering property and dealing with construction permits. These
efforts have led to clear results. In 2005, starting a business in the EAC took
29 days on average; today it takes 20. But the time needed to register prop-
erty had the biggest reduction, dropping from an average of 140 days in
2005 to 56 days as of today. As average figures, they mask the accomplish-
ment of high performers such as Rwanda. For example, Uganda ranked
120, Kenya 121, Tanzania 134 and Burundi, 159 while Rwanda, ranked
52 globally among 181 countries in 2013, was named a top reformer by the
World Bank and second best reformer globally. It earned the distinction
by enacting sound business policies and removing bottlenecks to estab-
lish small to medium-sized firms. In terms of doing business, Rwanda has
 Regional Economic Communities 53

reduced the number of procedures from 8 to 2, and the length of time it

takes to register a business from 14 days to 24 hours. It could be said that
Rwanda has compensated for its small market size by making itself attrac-
tive as a destination to do business in with leadership compensating the
lack of inherent comparative advantages.
The EAC economies have leveraged technology to underpin business
reforms. Rwanda has an integrated system for company registration while
Kenya offers online procedures for tax and value added tax (VAT) registra-
tion. Kenya also introduced online name search, reducing the time and cost
to start a business. Uganda has an online system allowing entrepreneurs
to apply for corporate tax and value added tax identification numbers at
the same time. Tanzania has consolidated and digitised registered company
names, allowing the company name search to be done online and speeding
up name clearances.

The MeTL Group: an industrial conglomerate

operating in the EAC

Mohammed Enterprises Tanzania (MeTL Group) employs 24,000 people and

is Tanzania’s largest private sector employer. Its revenues are US$1.3 billion,
contributing 3.5 per cent to Tanzania’s GDP, with a 5-year plan to grow to
US$5 billion. MeTL is diversified and is into a diverse range of activities,
including grain-milling, rice, the refining of edible oils, sisal farms, tea estates,
cashew fields, logistics and warehousing, financial services, distribution, real
estate, transport and logistics, energy and petroleum. From an initial capacity
of 60 tons, which then grew to 600 tons, MeTL now refines 2,250 tons of
edible oils per year following an acquisition that expanded its capacity in
2013. Regarding textiles, MeTL is Sub-Saharan Africa’s largest entity operating
along the entire value chain from ginning to spinning, weaving, knitting,
processing and printing. Of the 24,000 jobs created by the group, 8,000 are
in textiles. The group also exports 50 of its brands taking advantage of the
fact that Tanzania borders with eight countries, thus leveraging the country’s
‘land-linked’ position.59 MeTL is now present in 11 African countries and is,
arguably, the largest private company in East and Central Africa.
While the group – as a diversified conglomerate – appears to be involved
in seemingly disparate activities, there is a common thread. Speaking to Mr
Mohammed Dewji, the CEO of MeTL Group, it is clear that the common thread
across the businesses is the enabling EAC policy frameworks and specifically:

● harmonisation of external tariffs across EAC countries;

● harmonisation of internal tariff systems within EAC country states, them-
selves; and
● rules of origin.
54 Jacqueline Chimhanzi

The EAC trading bloc, under the Common External Tariff system, is designed
to keep out foreign competition whilst at the same time promoting trade
within the EAC countries. To put it otherwise, it is protectionist vis-à-vis
outsiders but protective of insiders within the community. This has helped
ensure that the countries gain their competitive strength and are strong as
the building blocks of the EAC. According to Mohammed Dewji, at a time
when Africa is particularly vulnerable to cheap imports from China, certain
industries in East Africa are cushioned given the tariff regime. He confi-
dently asserts, ‘They (the Chinese) cannot compete with me in my market’.
He explains it thus: in a bid to promote local value-addition and beneficia-
tion, the Tanzanian government has recognised the job creation potential of
the textiles sector and has accorded the industry a tax relief status for local
producers whilst imposing 25 per cent import tariffs on finished goods and
18 per cent VAT for those importing into the country. Moreover, Tanzania
grows cotton and is the third largest grower on the continent whereas China
has cotton but insufficient to meet demand and has to import to address
the supply gap. Textiles accounts for 5 per cent of Tanzania manufacturing
value-add (MVP) with it being a significant exporter of textiles to other EAC
countries.60
The MeTL Group has leveraged the rules of origin to its advantage – a
regional integration policy instrument that is normally fraught with
complications. Shoprite, the South African retailer that is now Africa’s
largest retailer, prefers not to exercise its rules of origin entitlement within
the SADC region opting to pay full tariffs because it deems the process of
administering rules of origin documentation to be too cumbersome.61
The determination of the eligibility of products to EAC origin and the
granting of Community Tariffs to goods originating in the Partner States
are important processes in the implementation of the EAC trade regime.62
The MeTL Group has a different experience of rules of origin and the busi-
ness model has been structured to leverage the benefits of rules of origin.
Thus, MeTL imports wheat, not flour, and crude palm oil is imported from
Malaysia and Indonesia which is then processed in Tanzania. But to then
export the refined oil to Uganda, for example, would mean Uganda would
have to pay tariffs. However, for sunflower oil which is grown in Tanzania,
the group can process and export it to Uganda at 0 per cent tariff. Over the
years, the EAC member states have aligned their tariffs in accordance with
and support of the rules of origin regime. Tanzania, for example, migrated
towards it over a period of five years, going from 20 per cent to 15 per cent to
10 per cent, 5 per cent and then 0 per cent. Mohammed Dewji explains that
different countries have different comparative advantages and this allows
the different EAC countries to beneficiate locally while benefitting the EAC
intra-trading of goods in a complementary manner. The EAC’s approach
is consistent with a key tenet of regional integration: that ‘a continental
customs union requires that all Africa countries have a single commercial
 Regional Economic Communities 55

Table 3.5 Progress towards elimination of tariffs and equivalent measures by EAC
partner states (Based on 2008–2013 Data; all values in per cent)

Per cent Rwanda Burundi Kenya Uganda Tanzania

Compliance with 20 20 20 20 20 20
tariff schedule
Adoption of rules of 20 20 20 20 20 20
origin requirements
Use of charges of 30 30 27 24 21 18
equivalent effect to
tariffs
Recognition of 16 14.4 16 14.4 11.2 8
certificates of origin
Compliance with 7 7 7 7 0 0
EAC Council
Recommendation
about issuance of
certificate of origin by
customs authorities
Compliance with 7 0 0 0 0 0
Custom Union
Protocol Annex
III about false
documentation for
certificates of origin
100 91.4 90 85.4 72.2 66

Source: K’Ombudo, A.O., East Africa Common Market Scorecard 2014: Tracking EAC Compliance in
the Movement of Capital, Services and Goods. The World Bank, International Finance Corporation
and East African Secretariat.

(tariff) policy vis-à-vis the rest of the world while trade within Africa is totally
free, respecting the continental rules of origin’. The EAC has made formi-
dable progress on this, at least, relative to other African RECs with regards to
the implementation of a customs union.

Airbus: a case of practical regional integration

Moyo63 is a proponent of a different ‘architecture’ for economic integration –

a more pragmatic approach to regional integration.64 Airbus’s dispersed and
integrative manufacturing of aircrafts is illustrative of this approach. In the
mid-1960s, tentative negotiations commenced regarding a European collab-
orative approach in response to European manufacturers’ dwindling market
share and competitiveness in the aircraft sector on the global stage. France,
Germany and the United Kingdom entered into an agreement covering both
56 Jacqueline Chimhanzi

component production and aircraft assembly. Spain is part of this agreement

and in the specific context of the production of the Airbus 380. Under this
partnership, the UK specialises in wing manufacturing; Spain focuses on tail,
fin and pitch elevator; France and Germany share fuselage construction while
final assembly takes place in Toulouse, France. This multi-territory produc-
tion template distributes the benefits across various countries and eventually
leads to the emergence of captive markets.
There are important lessons to be extracted from the Airbus example for
African regional integration. Firstly, ‘[African] countries with more capacity
need to be prepared to lead from behind and to lead by giving away certain
benefits in order to create the cohesion that is necessary. Thus, there is a
‘disproportionate responsibility on large economies such as Nigeria and South
Africa to drive integration’.65 Secondly, the Airbus’s distributed-benefits model
is seen as the outcome of a political, rather than an economic, decision-making
process. By accepting this political dimension, it is also easier to build in the
‘self-interest’ that is necessary for politicians and civil servants to embrace inte-
gration by stating ‘right up-front, how the benefits flowing from such coopera-
tion are going to be distributed and how they could justify such participation to
the electorate’. The Airbus architecture tends to understand that each country
would need to account to its citizens in terms of why it should be part of the
club. Finally, to operationalise such a model, political will, on its own, is not
sufficient. There is also a need for a secure environment and the harmonisation
of business legislation and regulations. The question of visas to facilitate skills
movement must be resolved in a pragmatic manner, in both the short and long
terms and should be issued online as a matter of course.66
To summarise, the key lessons from the Airbus case study of relevance for
African regional integration are as follows:67

● It is easier to commit to economic integration if the dividends to each

participant are clear right up front.
● Even with global products, take a commanding position on the expanded
domestic front first.
● Create mutual vulnerability and win-win in which the success of one is
the success of all in the club.
● Go global on the back of technical and strategic partners’ networks.
● Be clear about the ‘political economy’ nature of integration.
● The ‘bigger’ participants must be prepared to be champions to the cause.

Conclusions and recommendations

Based on the aforementioned strategic context and state of play of regional

integration on the African continent, a number of conclusions are drawn
and recommendations framed.
 Regional Economic Communities 57

Conclusions
● In the context of globalisation, Africa’s rising and the competitiveness of
countries such as China, there is greater urgency to expedite the regional
integration agenda. These dynamics render the issue of integration
inherently more complex and Africa finds itself in a somewhat discon-
certing and unique position where it, at once, needs to raise intra-REC
trade whilst simultaneously confronting external competition that is cost
competitive.
● In light of evidence suggesting slow progress towards the attainment of the
African Economic Community, it would appear there is a lack of urgency
or political will on the part of regional bodies in addressing regional trade
issues. This was similarly observed by Peters-Berries,68 who noted that ‘the
political will for regional integration has not been adequately translated
into action’. Despite all the pronouncements, there still appears to be a
lack of appreciation of how regional trade can truly lead to the economic
transformation of African countries. Consequently, effective integration
needs to be repositioned as a win-win for both the private sector and
governments, themselves, in helping the latter deliver on their mandates
to their people.
● The African private sector is conspicuous by its absence in the regional
integration discourse. In attempting to raise intra-REC trade levels,
regional bodies need to work with the private sector in understanding
their concerns and in co-crafting the solutions. According to the African
Development Bank,69 ‘government and the national/regional Chambers
of Commerce and Business Councils are already interacting in the region,
but the contact has to extend beyond information sharing to involve-
ment in policy making and program implementation process’ and infra-
structure building via public-private-partnership arrangements (PPPs).
The East African Exchange (EAX), a private sector initiative, is a fitting
example of how the private sector can play a lead and pivotal role in
driving the aspirations of a common market, in a manner that is mutually
beneficial to the private and public sectors.

Recommendations
● Removal of trade and non-trade barriers is a necessary but not sufficient
condition for effective regional integration. A broader integration para-
digm that addresses supply-side constraints is needed. To that end, RECs
need to identify the infrastructure gaps that hinder effective trade across
borders and attract investors, as regional bodies, to fill those gaps.
● Soft issues need to be actively managed alongside policy issues. Citizenry
awareness and education are vital to ensure buy-in into the regional trade
58 Jacqueline Chimhanzi

vision and to minimise the tensions between ceding sovereignty and

raising the greater regional common good.
● There needs to be a mainstreaming of regional trade mandates into
national policies. The supra-national and national realms and agendas
will have to be managed jointly and in parallel and should be mutually
reinforcing. While regional communities can provide the framework
for reform, responsibility for implementation lies with each member
country.
● Leadership, leadership, leadership! Leadership compensates for natural
disadvantages, be they locational or a lack of resources. Rwanda has
defied its relatively small market size within the EAC by making itself
attractive as a destination to do business in. It is the largest attractor of
intra-EAC investments having positioned itself proactively to seize the
regional trading opportunity.
● The adage ‘what cannot be measured, cannot be managed’ is particularly
apt in the context of the EAC. The EAC case highlighted the importance
of assessing progress, as illustrated by two initiatives. The first is the EAC
Time-Bound Programme for Elimination of Identified Non-Tariff Barriers
(NTBs), where the heads of delegation of each country report detected
NTBs either in its own country or imposed by another member state to
the EAC Secretariat, and then all five EAC member states agree on char-
acterising such measures as NTBs. The programme was formally adopted
in 2009 and since then has been regularly implemented on a yearly and
quarterly basis since August 2011.70 The second initiative is the East Africa
Scorecard launched in 2014 to define a baseline regarding the status of
integration vis-à-vis capital goods and services and to measure progress,
going forward. Paradoxically, while the EAC is lauded as a model REC,
vis-à-vis other African RECs, an assessment of the EAC’s progress against
its own ambitions found the it wanting in a number of respects. But
the identification of these gaps is entirely in keeping with the spirit in
which the Scorecard was established. According to Dr. Sezibera, the EAC
Secretary-General, the EAC plans to use the scorecard to provide bench-
marks to guide faster implementation of the common market and to
‘foster peer learning and facilitate the adoption of best practices in the
region. This will strengthen the regional market, grow the private sector
and deliver benefits to consumers’.71 Stemming out of this, a key recom-
mendation to African RECs is the need for measurement of progress
towards integration and even more importantly, the responsiveness to
the outcomes of the measurement system.
● Both the EAC and Airbus experiences have highlighted that the ‘bigger’
participants’72 must be prepared to be champions to the cause. ‘Those
54 countries are not going to be in phase with each other every step of
the way – it’s not possible. So those countries that “get it” need to be
prepared to move on ahead of the laggards, while creating a framework
 Regional Economic Communities 59

that says: “When you are ready, you can join. But we are not going to
wait for you”’.73 The EAC’s Coalition of the Willing has demonstrated
this by demonstrating urgency and setting the cadence and tone for
economic integration but perhaps – controversially – at the expense of
the broader political alignment of the EAC.

Notes
1. World Bank, ‘Harnessing Regional Integration for Trade and Growth in Southern
Africa’ (2011), http://siteresources.worldbank.org/INTAFRREGTOPTRADE/
Resources/Harnessing_Regional_Integration_Trade_Growth_SouthernAfrica.pdf,
p. xvi.
2. J. Chimhanzi, ‘Mitigating Business Risk through Regional Integration’, Deloitte on
Africa Series (2012a).
3. L. Lapadre and F. Luchetti, Trade Regionalisation and Openness in Africa. European
Report on Development. EUI Working Paper RSCAS 2010/54. European University
Institute, Florence (2010).
4. ‘The World’s Fastest-Growing Continent: Aspiring Africa’, The Economist
(2 March 2013).
5. Chimhanzi, ‘Mitigating Business Risk through Regional Integration’.
6. D. A. Mohammed, ‘Size and Competitiveness: An Examination of the CARICOM
Single Market and Economy (CSME)’, The Round Table (Vol. 97, No. 395, 2008),
pp. 287–303.
7. R. Kaplinsky and M. Morris, ‘Do the Asian Drivers Undermine Export-Oriented
Industrialization in SSA?’ World Development (Vol. 36, No. 2, 2008), pp. 254–273.
K. Ighobor, ‘China in the Heart of Africa: Opportunities and Pitfalls in a Rapidly
Expanding Relationship’, Africa Renewal (Vol. 26, No. 3, 2013), pp. 6–8.
8. UNCTAD and UNIDO, Economic Development in Africa Report 2011. Fostering
Industrial Development in Africa in the New Global Environment. United Nations
Publication. Sales No. E.11.II.D.14. New York and Geneva (2011).
9. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African
Trade: Unlocking Private Sector Dynamism’ (July 2013), http://unctad.org/en/
PublicationsLibrary/aldcafrica2013_en.pdf (retrieved 21 January 2014).
10. ‘A More Hopeful Continent: The Lion Kings’, The Economist (6 January 2011). ‘The
Hopeless Continent’, The Economist (11 May 2000).
11. ‘The Hopeful Continent: Africa Rising’, The Economist (3 December 2011).
12. Chimhanzi, ‘Mitigating Business Risk through Regional Integration’.
13. Jessica Pugliese, ‘Will There Be an African Economic Community?’ Brookings
Institute (9 January 2014).
14. M. Ndulo, ‘Harmonisation of Trade Laws in the African Economic Community’,
International and Comparative Law Quarterly (Vol. 42, 1993), pp. 101–118.
15. V. Ihekweazu, ‘A Proposed Framework for an Effective Africa Free Trade Area’,
Unpublished thesis, University of Pretoria, The Gordan Institute of Business
(2014).
16. EAC Secretariat, Manual on the Application of East Africa Community Rules of Origin,
Directorate of Customs and Trade, Arusha, Tanzania (2006).
17. B. Omilola, ‘To What Extent Are Regional Trade Arrangements in Africa Fulfilling
the Conditions for Successful RTAs?’, Journal of African Studies and Development
(Vol. 3, No. 6, 2011), pp. 105–113.
60 Jacqueline Chimhanzi

18. Ihekweazu, ‘A Proposed Framework for an Effective Africa Free Trade Area’.
19. African Union Commission, ‘Boosting Intra-Africa Trade: Issues Affecting
Intra-African Trade, Proposed Action Plan for Boosting Intra-African Trade and
Framework for the Fast Tracking of a Continental Free Trade Area’ (2012).
20. African Union Conference of Ministers of Trade, 6th Ordinary Session,
29 October–November 2010.
21. UNECA, ‘Assessing Regional Integration in Africa (ARIA V): Towards an African
Continental Free Trade Area’ (2012a).
22. H. Ben Barka, ‘Border Posts, Checkpoints, and Intra-African Trade: Challenges and
Solutions’, The African Development Bank (2012).
23. TradeMark Southern Africa, EAC Customs Union – Uniform Laws to Enhance
both Regional and External Trade (2012).
24. World Bank, ‘Harnessing Regional Integration for Trade and Growth in Southern
Africa’ (2011), http://siteresources.worldbank.org/INTAFRREGTOPTRADE/
Resources/Harnessing_Regional_Integration_Trade_Growth_SouthernAfrica.pdf.
25. P. Brenton and I. Gözde, ‘Linking African Markets: Removing Barriers to Intra-
Africa Trade’ in Brenton, P and Gözde, I (eds.), De-Fragmenting Africa: Deepening
Regional Trade Integration in Goods and Services, World Bank Report, (Washington,
DC, 2012).
26. World Bank, ‘Harnessing Regional Integration for Trade and Growth in Southern
Africa’.
27. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African
Trade: Unlocking Private Sector Dynamism’ (July 2013), http://unctad.org/en/
PublicationsLibrary/aldcafrica2013_en.pdf (retrieved 21 January 2014).
28. World Bank and IFC, ‘Doing Business in the East African Community 2013.
Smarter Regulations for Small and Medium-Size Enterprises’ (2013).
29. E.M. Medalla and J. Balboa, ‘ASEAN Rules of Origin: Lessons and Recommendations
for Best Practice’, Philippine Institute for Development Studies (PIDS), Philippines
(2009).
30. African Union Conference of Ministers of Trade, 6th Ordinary Session,
29 October–November 2010.
31. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African Trade:
Unlocking Private Sector Dynamism’.
32. TradeMark Southern Africa, EAC Customs Union – Uniform Laws to Enhance both
Regional and External Trade; Ihekweazu, ‘A Proposed Framework for an Effective
Africa Free Trade Area’.
33. B. Rippel, ‘Why Trade Facilitation is Important for Africa’, in World Bank 2012:
‘De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and
Services.
34. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African Trade:
Unlocking Private Sector Dynamism’.
35. Rippel, ‘Why Trade Facilitation is Important for Africa’.
36. Ibid.
37. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African Trade:
Unlocking Private Sector Dynamism’.
38. Ibid.
39. Ibid.
40. UNECA, Study Report on Mainstreaming Regional Integration into National
Development Strategies and Plans. Economic Commission for Africa, Addis Ababa
(2012b).
 Regional Economic Communities 61

41. M. Stampini, R. Leung, S.M. Diarra and L. Pla, How Large Is the Private Sector in
Africa? Evidence from National Accounts and Labour Markets, Institute for the
Study of Labour, IZA Discussion Paper No. 6267 (2011).
42. UNCTAD, ‘Economic Development in Africa Report 2013 – Intra African trade:
unlocking private sector dynamism’.
43. A.O. K’Ombudo, East Africa Common Market Scorecard 2014: Tracking EAC
Compliance in the Movement of Capital, Services and Goods. The World Bank,
International Finance Corporation and East African Secretariat.
44. E. Iruobe, ‘EAC Trade Climbed To $5.5bn In Last Decade’ Ventures Africa maga-
zine (2014).
45. UNCTAD, ‘Trade Liberalisation, Investment and Economic Integration in African
Regional Economic Communities towards the Africa Common Market’ (2012).
46. Africa Practice, ‘East Africa Integration: State of Play’, Africa Practice InDepth
(August 2014).
47. C.G. Ntim, ‘Why African Stock Markets Should Formally Harmonise and Integrate
Their Operations’, African Review of Economics and Finance (Vol. 4, No. 1, December
2012).
48. Ntim, ‘Why African Stock Markets Should Formally Harmonise and Integrate
Their Operations’.
49. Ibid.
50. Ibid.
51. Ibid.
52. Ibid.
53. Ibid.
54. ‘East Africa Exchange Launched in Kigali’, The New Times (4 July 2014).
55. Ibid.
56. M.L. Oketch, ‘Boos to Trade as Cross-Border Payment System Comes Live’, The
East African (7, December 2013).
57. Africa Practice, ‘East Africa Integration: State of Play’, Africa Practice InDepth,
August 2014.
58. Africa Practice, ‘East Africa Integration’.
59. M. Campioni and P. Noack, eds., Rwanda Fast Forward: Social, Economic, Military
and Reconciliation Prospects (Palgrave Macmillan, 2012).
60. UNIDO, Tanzanian Industrial Competitiveness Report (2012).
61. World Bank Report, ‘De-Fragmenting Africa: Deepening Regional Trade Integration
in Goods and Services’ (2012).
62. EAC Secretariat, 2006.
63. N. Moyo and A. Leke, ‘Lessons Learned from the Airbus Success Story: A Template
for Regional Integration’, Unpublished (2014).
64. T. Creamer, ‘Could Airbus Revive Africa’s Stalled Economic Integration?’ Engineering
News (August 2014).
65. Moyo and Leke, ‘Lessons Learned from the Airbus Success Story’.
66. African Development Bank, ‘Regional Integration: The Importance of the Economy
and Political Will’, May 2014, AfDB Annual Meetings, Kigali, Rwanda.
67. Moyo and Leke, ‘Lessons Learned from the Airbus Success Story’.
68. C. Peters-Berries, ‘Regional Integration in Southern Africa – A Guidebook’,
Capacity Building, Germany (2010).
69. African Development Bank, Eastern African, Regional Integration Strategy Paper,
2011–2015 (September 2011).
70. K’Ombudo, East Africa Common Market Scorecard 2014.
62 Jacqueline Chimhanzi

71. Ibid.
72. Moyo and Leke, ‘Lessons Learned from the Airbus Success Story’.
73. Creamer, ‘Could Airbus Revive Africa’s Stalled Economic Integration?.

Other Works Consulted

Chimhanzi, J. (2012). ‘Whither Africa?’ Development, Vol. 55, No. 4, pp. 503–508.
Palgrave Macmillan.
Curtis, B. (2009). ‘The Chirundu Border Post, Detailed Monitoring of Transit Times’.
Sub-Saharan Africa Transport Policy Program (SSATP) Discussion Paper No. 10,
World Bank.
ECA, AUC and AfDB (2010). Assessing Regional Integration in Africa IV. Enhancing
Intra-African Trade. United Nations publication. Sales No. E.10.II.K.2. Addis Ababa.
Ihucha, A. (2 November 2013). ‘Intra-EAC trade Rises 22pc, Defies Barriers and Politics’.
The East African.
Ligami, C. (7 December 2013). ‘Cost of Doing Business in EA Could Come Down as
Non-Tariff Barriers Reduce’. The East African.
Oluoch-Ojiwah, F. (8 February 2013). Rwanda’s Full Participation in EAC Provides
Limitless Opportunities to its Economy, Trademark East Africa, http://www.
hope-mag.com/news.php?option=lnews&ca=6&a=1227. Accessed 24 July 2014.
Rankin, N., Söderbom M. and Teal, F. (2006). ‘Exporting from Manufacturing Firms in
Sub-Saharan Africa.’ Journal of African Economies, 15(4), 671–687.
Schwab, K. (ed.) (2014). The Global Competitiveness Report 2014–2015, World
Economic Forum, Geneva.
TradeMark Southern Africa. (2011). ‘Improving Service Delivery and Reducing Clearing
Times at Chirundu Border Post’. TMSA Case Study Series, Pretoria.
——. (September 2013) General Equilibrium Analysis of the COMESA-EAC-SADC
Tripartite FTA. Retrieved 25 November 2013 from http://trademarksa.org/sites/
default/files/publications/2013–11–06 per cent20TFTA per cent20CGE per cent20-
Impact per cent20Analysis per cent20IDS per cent20Final per cent20Report.pdf.
World Economic Forum. (2013). African Development Bank and The World Bank, The
Africa Competitiveness Report 2013, World Economic Forum, Geneva.
WTO and OECD – AID-for-Trade Case Story. (2011). ‘Improving Service Delivery and
Reducing Clearing Times at Chirundu Border Post’.
4
Transport Infrastructure
Mark Pearson

Much has been written about Africa’s lack of transport infrastructure and
the detrimental effect poor transport infrastructure has on economic devel-
opment. The Programme for Infrastructure Development in Africa (PIDA)
Study Synthesis1 shows that infrastructure plays a key role in economic
growth and poverty reduction and that, conversely, the lack of infrastructure
adversely affects productivity and raises production and transaction costs.
This, in turn, hinders growth by reducing the competitiveness of businesses
and the ability of governments to pursue economic and social development
policies. According to the PIDA Study Synthesis, ‘Deficient infrastructure in
today’s Africa has been found to sap growth by as much as 2 per cent a year
(Calderón 2008)’.
The Africa Infrastructure Country Diagnostic (AICD)2 estimated in 2009
that it would cost US$93 billion a year to raise Africa’s infrastructure endow-
ment to a reasonable level over the following decade, with the split in
expenditure being two to one between investment and maintenance. The
AICD report calculated that African countries already spend US$45 billion
a year on infrastructure and that efficiency gains could raise an additional
US$17 billion from within the existing envelope, leaving an annual funding
gap of US$31 billion.
These headline figures highlight the daunting task African countries
face if they are to take infrastructure to levels that will allow African-
based firms and businesses to become competitive both within Africa
and globally. In a lecture3 in September 2014 at the London School of
Economics, Donald Kaberuka, the President of the African Development
Bank, said that African countries are now able to spend only about
5 per cent of their GDP on infrastructure, a figure which must rise to
nearer 15 per cent. Even this figure of 15 per cent will not be enough for
some countries. For example, the AICD report estimates that the so-called
Fragile States would need to spend the equivalent of about 70 per cent of
their GDP on infrastructure to close the perceived infrastructure gap and,
without external support, this is obviously not a feasible proposition.

63
64 Mark Pearson

African countries do receive a considerable amount of external support

in terms of infrastructure development so the continent is not facing this
challenge totally alone. In 2010 total external commitments for African
infrastructure were US$50.7 billion, but this represented a significant
increase from the previous year of US$38.4 billion.4 Investments in African
infrastructure slowed down during the economic crisis of 2008, especially
investments from the private sector, but since 2008 investments from
the Infrastructure Consortium for Africa countries and from China have
increased significantly.5
In addition, in recent years, a number of emerging economies have begun
to play a more prominent role in the finance of infrastructure in Sub-Saharan
Africa. Their combined resource flows are now comparable in scale to tradi-
tional official development assistance (ODA) from OECD countries or to
capital from private investors. These non-OECD financiers include China,
India and the Gulf states, with China being by far the largest player.
The AICD report also estimated, in 2009, that Africa’s transport infrastruc-
ture required an average capital expenditure of US$10.7 billion per year for
the following 10 years, which, at that time, was equivalent to 1.7 per cent
of continental GDP, and an average of US$9.6 billion per year for the next
10 years in operating costs.
African countries are among the least competitive in the world, and
infrastructure, combined with poor logistics and poorly implemented
trade facilitation tools, is one of the main reasons for this lack of competi-
tiveness. Short-term fixes can be made in other sectors where Africa faces
economic and social challenges, such as importing skills and expertise,
where these are lacking, and until African countries can build up their
own skills bases, but the infrastructure deficit can only be addressed in the
long term. Of equal importance in the infrastructure sector is the absolute
need for infrastructural upgrading to be accompanied by a set of policy
reforms and implementation modalities that will allow a more efficient
service delivery using the improved infrastructure.

Efforts made to address Africa’s infrastructure deficit

The shift in focus by the Organisation of African Unity (OAU) from polit-
ical liberation to economic development in the last quarter of the twentieth
century led to the design of a number of pan-African development approaches,
such as the Lagos Plan of Action (1980), the Abuja Treaty (1991), and, of
particular relevance to transport infrastructure, the adoption of the Trans-
African Highway (TAH) concept by the OAU, with the TAH first proposed by
the United Nations Economic Commission for Africa (UNECA) in 1971.
The TAH consists of nine main road corridors with a total length
59,100 km. As originally formulated, the proposal was to construct a network
of all-weather roads of good quality connecting Africa’s capital cities as
 Transport Infrastructure 65

directly as possible. This was to contribute to the political, economic and

social integration and cohesion of Africa and to ensure road transport facili-
ties between important areas of production and consumption.6
The nine highways7 that made up the TAH programme were: Cairo-Dakar,
Algiers-Lagos, Tripoli-Windhoek-Cape Town, Cairo-Gaborone-Cape Town,
Dakar-Ndjamena, Ndjamena-Djibouti, Dakar-Lagos, Lagos-Mombasa, and Beira-
Lobito.
Implementation of the Trans-African Highway project has not gone
to plan. According to UNECA’s most recent assessment in 2011,8
21 per cent of the TAH is still unconstructed, and in Central Africa only 3,891
km of a planned 11,246 km of roads have been paved, meaning that, after
more than four decades, 65 per cent of the planned roads remain uncon-
structed in that region. Only one of the nine original roads, a 4,400-km
stretch across the Sahel, connecting Dakar in Senegal to Ndjamena in Chad,
is completed. All eight of the other routes are missing significant links.
The African Development Bank’s (AfDB) ‘Review of the Implementation
Status of the Trans-African Highways and the Missing Links: Volume 1:
Main Report,’ published in 2003, reported that the completion and develop-
ment of the TAH concept would depend on the following factors, amongst
other things:

● determination of a minimum standard for TAH and the gradual harmo-

nising of the axle load and total weight regulations;
● the very high cost of completing the TAH network makes the application
of a least cost approach and a careful priority setting (through feasibility
studies) a must in the planning for the improvement of existing links in
the system, including the completion of missing links; and
● the role of the private sector in the funding of the TAH network needs to
be given more attention.

All three of these recommendations are key to the successful development

of the road transport sector in Africa. However, none of them have actu-
ally been implemented. Standards for construction are not harmonised,
meaning that road quality, even at construction, varies widely. As axle
loads and vehicle dimensions have also not been harmonised, it means that
cross-border traffic is disrupted and causes time delays, which pushes up
transport costs. For example, most countries in Eastern and Southern Africa
have a gross vehicle mass (GVM) limit of 56 tonnes9 applied to trucks using
the road networks, which allows the use of truck and semi-trailer seven-
axle combinations (referred to as interlinks in some parts of Africa) with an
overall length of 22 metres. The tare weight of an interlink is 24 tonnes so
the allowed cargo weight, before a vehicle is considered to be carrying an
abnormal load, is 32 tonnes. If an interlink crosses a border into a country
with a different set of vehicle specifications (such as a GVM of 48 tonnes or
66 Mark Pearson

a vehicle length restriction of less than 22 metres or a maximum allowable

number of six axles on a vehicle before an abnormal load license is required),
then the logistics of the whole journey are affected. If one country or one
bridge, or river crossing by pontoon, has a GVM of 48 tonnes on a transport
corridor that is otherwise regulated with a GVM of 56 tonnes, then the entire
journey would need to be completed with a load and vehicle with a GVM of
48 tonnes and a payload of 24 tonnes instead of 32 tonnes. This represents
a payload reduction of 25 per cent which obviously means higher transport
costs per kilometre for the importer or exporter, which may make the import
or export sub-economic.
The TAH has at least been a major push to develop Africa’s continental
roads. There have not been similar initiatives in other modes of transport
in Africa. The railway sector, in particular, has seen a catastrophic decline in
quality of service delivery. Railway infrastructure and public-sector owned
and managed railway companies were allowed to deteriorate almost, in some
instances, to a point of no return. The reliability of most of Africa’s national
railway networks, with the exception of South Africa, is now extremely poor;
accident and failure rates are high, operating costs are also high, and, in
general, the volumes of goods transported by rail are so low as to be uneco-
nomical and most, if not all, national railways are financially loss-making.
However, recently, some countries have started to make concerted efforts
to improve their national railway systems. This return to recognising the
potential of railways in an African context owes much to the fact that the
road sector can no longer cope with the volumes of cargo that are being
transported. Putting so much cargo onto Africa’s roads has resulted in high
wear and tear on the road network, associated high costs of road rehabilita-
tion and maintenance and congestion at border crossings. All of these factors
contribute to delays in freight movement and escalating costs of imports and
exports. In addition, there are environmental, safety and economic benefits
to moving certain goods, such as fuel, acid, coal, minerals, cement and grain,
in bulk by rail rather than by road.
In revitalising their railway systems, some African countries are laying
new standard-gauge rail track, sometimes as dual track and electrified, and
procuring new rolling stock and locomotives. However, if railways are to
become viable once again, much more than revamping infrastructure needs
to happen. The reasons for the decline of Africa’s railways are many and
include a lack of investment in the railways and poor management, coupled
with the rise in importance of the road sector which has received high levels
of public sector investment and subsidies.10 Of equal importance has been
the deregulation of the road sector compared to the rail sector, and this,
coupled with advances in technology, has allowed trucks to carry higher
payloads at lower costs. Therefore, if railways are to be a major component
in an improved transport and logistics system for Africa, then improved
infrastructure will need to be accompanied with policy reforms, revised
 Transport Infrastructure 67

regulations, and, most importantly, improved management. It is not enough

to construct a standard-gauge, electrified, high-speed rail track and not put
in regulations and processes to allow service providers to make efficient and
effective use of this state-of-the-art infrastructure.
African ports and harbours have been modernised, developed and deepened
and capacities have been expanded by national governments and through
concessioning, but this has not been done in any continentally sequenced or
coordinated manner, and these infrastructure upgrades have not been inte-
grated with other modes of surface transport or by taking into account the
continent’s other ports and their capabilities. In addition, the introduction of
larger and larger cargo vessels have transformed the economics of maritime
transport. The Maersk Triple-E class of container ship are 400 m long and
59 m wide and have a draft of 14.5 m, making them too large to use the
Panama Canal but not too large for the Suez Canal. More important, however,
is the fuel efficiency of this class of ship, which is the lowest per TEU of any
ship.11 The ship is powered by two 32 MW (43,000 hp), ultra-long, two-
stroke, diesel engines driving two propellers at a design speed of 19 knots
(35 km/h; 22 mph) for ‘slow-steaming’ which lowers fuel consumption
by about 37 per cent and carbon dioxide emissions per TEU by about
50 per cent.12 The Maersk Triple-E class of ships, when fully introduced, will
predominantly be used to service routes between Asia and Europe. Owing
to the size and draft of the Triple-E class of ships (and because of the size,
special ship-to-shore cranes are required for loading and off-loading), the
number of ports capable of being able to accept fully laden Triple-E class
ships, carrying 18,000 TEUs, is very limited. There are, currently, no African
ports that can accommodate a fully laden Triple-E class of ship, with the
largest ports in Africa, these being in South Africa, Morocco and Egypt, being
limited to handling, at most, post-Panamax ships that have a capacity of
between 5,000 and 10,000 TEUs.13 If, in future, African traders are to benefit
from the efficiencies of a Triple-E class ship, then cargo from and to Europe
and Asia will need to be landed at a port that can accommodate a Triple-E
class ship that is on, or close to, the main Europe-Asia shipping lanes. This
means that the continent’s policy makers should agree on one or two ‘hub’
ports for Africa that could be developed to take the largest container vessels
(or agree to use a port outside of Africa) and a system of feeder ports that will
deliver containers to the hub port(s) so that cargo can be loaded onto larger
ships for delivery to Asia and Europe and the reverse for imports.
Airports on the continent have been developed at a fast pace and many
of Africa’s international airports have improved their facilities so that they
are able to take the world’s largest passenger aeroplanes, such as the Airbus
A380. However, the fact remains that air transport would have been consid-
erably more efficient and competitive if these improvements in infrastruc-
ture had been accompanied with the full implementation of the 1999
Yamoussoukro Declaration by all African governments. The Yamoussoukro
68 Mark Pearson

Declaration, concerning the liberalisation of access to air transport markets

in Africa, remains the single most important African air transport reform
policy initiative.
Enter the New Partnership for Africa’s Development (NEPAD), a coming
together of two initiatives, South Africa’s Thabo Mbeki’s Millennium Africa
Recovery Plan (MAP) and Senegal’s Abdoulaye Wade’s Omega Plan, which
were merged to create the New African Initiative (NAI). The need for further
compromises saw the morphing of the NAI into NEPAD in 2001.
Since its ratification by the African Union in 2002, NEPAD has been
promoted widely both within Africa and by Africa’s Cooperating Partners and
is seen as the mechanism by which support to Africa’s development efforts
can be best delivered. Thus, the NEPAD process has come to be accepted as
the way forward and as the framework for their development efforts not only
by African countries and Regional Economic Communities (RECs) but also
by Africa’s Development Partners.
The component of NEPAD that addresses infrastructure is the Programme
for Infrastructure Development in Africa, a continent-wide programme to
develop a vision and strategic framework for the development of regional
and continental infrastructure. The PIDA initiative is being led by the
African Union Commission (AUC), the NEPAD Secretariat and the African
Development Bank. One of the strengths of PIDA is that it builds on the
past efforts of the Organisation of African Union and the African Union
to promote the development of Africa’s infrastructure. PIDA is not, there-
fore, a re-invention of the wheel and merges various existing continental
infrastructure initiatives, such as the NEPAD Short Term Action Plan, the
NEPAD Medium to Long Term Strategic Framework (MLTSF), and the AU
Infrastructure Master Plans initiatives, into one coherent programme for
the entire continent. It aims to put in place an adequate, cost-effective and
sustainable regional infrastructure base to promote Africa’s socio-economic
development and integration into the global economy, and this is instantly
recognisable as being consistent with the overall aims and objectives of the
African Union.
The sectoral focus of PIDA is Energy, Transport, Information and
Communication Technologies (ICT) and Trans-boundary Water Resources.
Simplistically put, PIDA is a collection of infrastructure projects the AU
member states and the regional organisations consider to be priority infra-
structure projects and vital for the development of Africa with an investment
cost of US$68 billion up to the year 2020. It provides the strategic framework
for African stakeholders to build the infrastructure necessary for more inte-
grated networks to boost trade, promote economic growth and create jobs
through deeper regional integration and linkages into the global economy.
Successful implementation of PIDA is, therefore, intended to enhance Africa’s
competitiveness within itself and in the global economy, while acting as a
catalyst to Africa’s economic transformation.
 Transport Infrastructure 69

A sub-set of the full list of PIDA projects is the Priority Action Programme
(PAP) list of projects which, as the name suggests, are the projects in the
PIDA full list that should be developed and implemented as a priority and
before the other projects in PIDA.
A database (AID – African Infrastructure Database) for PIDA is being devel-
oped to assist in the coordination and implementation of the programme.
The Virtual PIDA Information Centre (VPIC) is the central technology mech-
anism to support monitoring and reporting of regional projects in all RECs.
Stakeholders will access the project data and related reports through the
front-end interface of VPIC, which then becomes the central information
management system for all information related to PIDA projects. With VPIC,
the NEPAD Planning and Coordination Agency (NPCA) is able to facilitate
sharing of PIDA-PAP information, promote participation in PIDA implemen-
tation, enable tracking of progress in PIDA implementation, and promote
investment opportunities in PIDA-PAP projects.
VPIC can be accessed via www.au-pida.org. The VIPC software enables the
AID database to be interfaced with the COMESA-EAC-SADC regional infra-
structure database developed by TradeMark Southern Africa.14 The VPIC
also allows users to browse through, search, filter and view the decomposed
projects of the PIDA Priority Action Programme in so-called project fiches,
thus giving the users the needed information on each project and its imple-
mentation status. VPIC allows the RECs to collect information on PIDA-PAP
projects at national and regional levels and to populate AID accordingly,
thus making up-to-date PIDA project information accessible in VPIC. At the
time of writing, project information in the African Infrastructure database is
far from complete but there are a number of programmes supporting the AU
member states, the RECs and NEPAD to collect information on priority infra-
structure projects so that these projects can be prepared and hence moved
towards a stage where they can be financed and implemented.
In 2013–2014, the 51 original PIDA priority infrastructure programmes
were decomposed into 433 discrete projects. Detailed project fiches were
generated for 83 of these projects and documented in reports. In parallel,
the COMESA-EAC-SADC Tripartite has entered just over 600 priority
projects into the Tripartite Regional Infrastructure Projects Database
(TRIPDA; see www.tripartitegis.org). Since TRIPDA offered a consolidated
dataset for four (including IGAD) of the eight RECs, with a combined
membership of 26 countries, but not yet including South Sudan or
Somalia, it made sense to build AID on the back of TRIPDA.
Recently, efforts have been made to review the pipeline of the
433 projects and the list of 83 for which project fiches were generated. These
have been rationalised and cleaned up and the process of mapping the PIDA
and TRIPDA projects has started and is well under way.
Not only have there been great strides made in the technical aspects
of the Programme for Infrastructure Development for Africa, but there
70 Mark Pearson

remains significant political support as well. At their 22nd Ordinary Session

of the Assembly of the Union on 31 January 2014, the Heads of State and
Government of the African Union agreed on a Common African Position on
the post-2015 Development Agenda and, in terms of infrastructure develop-
ment, also that accelerating Africa’s infrastructural development is pivotal
to connect African people, countries and economies as well as to help drive
social, cultural and economic development. In this regard, the AUC Heads of
State and Government stated that they were determined to:

1. develop and maintain reliable, sustainable, environmentally friendly and

affordable infrastructure in both rural and urban areas with a focus on
land, water and air transport and storage facilities, clean water and sanita-
tion, energy, waste management and information and communication
technologies (ICTs);
2. implement infrastructure projects that facilitate intra-African trade and
regional and continental integration including, with the assistance of the
international community, enhancing research and technological devel-
opment and the provision of adequate financial resources; and
3. promote the delivery of infrastructure programmes to generate local jobs,
strengthen domestic skills and enterprise development, as well as enhance
technological capability.

Challenges faced in developing Africa’s Infrastructure

From the previous section, it becomes clear that Africa is on the right track in
terms of developing the infrastructure it requires for its social and economic
development, with the continued global support of NEPAD and PIDA.
However, the challenges still faced by Africa in its quest to develop its infra-
structure should not be under-estimated. Going back to the aforementioned
lecture by Donald Kaberuka given at the London School of Economics,15 the
President of the African Development Bank highlighted three major chal-
lenges to be overcome in Africa to ensure sustainability, these being integra-
tion, institutions and infrastructure – what he termed as ‘the three I’s’. As
regards infrastructure, President Kaberuka outlined the main ways to close
Africa’s infrastructure financing gap as being: de-risking (such as broadening
and deepening risk mitigation instruments); building a pipeline of bankable
projects; developing template standard contracts; and addressing the present
apprehensions of non-African Sovereign Wealth Funds, Pension Funds, and
so on in investing in Africa’s infrastructure.
Financing of infrastructure projects involves considerable risks, which
diminish as the project moves from concept stage, to pre-feasibility, to feasi-
bility, to design and finally to implementation stages. The most risk faced
by financiers in funding a project is in the early stages of the project. If an
infrastructure project has access to even a small amount of grant funds, or
 Transport Infrastructure 71

a soft loan, then these funds could be most usefully applied to reduce risk,
such as using these grant funds or soft loan to reduce debt repayments or as
an equity investment that would give comfort to other investors who are
either providing loans or who are also equity investors. De-risking a project
in this way can make all the difference as to whether or not the project is
‘bankable’ or not.
Building a pipeline of bankable projects is currently being addressed
through PIDA. However, in a paper entitled ‘Unlocking Private Finance
for African Infrastructure,’16 Paul Collier and Colin Meyer make the point
that ‘the combination of political complexity and the lack of African public
sector specialist teams able to prepare projects mean that there is no pipe-
line of projects ready for funding’. The authors suggest a range of strategic
uses of public money in infrastructure financing and conclude that to
generate a pipeline of bankable projects there is a need for catalytic finance
for specialist teams equipped not just with technicians but with political
entrepreneurs who can overcome veto players. There have been attempts
to establish these specialist teams as suggested by Collier and Meyer, such
as the COMESA-EAC-SADC Tripartite Task Force’s Project Preparation and
Implementation Unit (PPIU), but these attempts have been half-hearted at
best and lack strong political support from the RECs and the REC member
countries themselves.
The development banks have been developing templates for standard
contracts so, in addressing president Kaberuka’s list of ways to close Africa’s
infrastructure financing gap, this leaves the issue of the present apprehen-
sions of non-African Sovereign Wealth Funds, Pension Funds, and so on to
investing in Africa’s infrastructure. There are a number of recent initiatives
involving the use of public funds to encourage private financiers to invest in
African infrastructure projects such as the Africa50 initiative and the Private
Infrastructure Development Group (PIDG), a multi-donor organisation led
by DFID, the aim of which is to encourage private infrastructure investment
in developing countries using a range of facilities and investment vehicles
which provide varying types of financial, practical and strategic support in
order to realise this objective. Support for infrastructure under the European
Union’s Eleventh European Development Fund will also use blending and
leveraging mechanisms and instruments which should reduce risk and act as
a facility which should encourage inclusion of investments from Sovereign
Wealth Funds, pension funds and other private sector investment funds into
Africa’s infrastructure. However, as Collier and Mayer also note, the inability
of Africa to finance its infrastructure requirements is not a capacity constraint
but an institutional and organisational one and, as such, needs an imagina-
tive approach which goes beyond what has been attempted to date.
There are also other practical constraints that need to be addressed if Africa
is to develop its transport infrastructure to the levels required to support
sustainable economic development. One major issue is how African policy
72 Mark Pearson

makers prioritise infrastructure projects, and here it is suggested that a para-

digm shift in thinking about how projects are designed and prioritised is
required.
There are a number of ways in which infrastructure projects can be priori-
tised, including using political, geographical, financial, economic and social
criteria. The reality is that infrastructure projects, at least in Africa, are
selected on the basis of some or all of these criteria in combination but, if the
project is to stand any chance of being financed (meaning that it has to be
considered by financiers to be bankable17), then it must at least be seen to be
economically, if not financially, viable. The main concerns about the systems
used in prioritising infrastructure projects in Africa are that they are back-
ward-looking (as opposed to forward-looking) and the projects themselves
are usually evaluated in isolation to other projects and other factors that will
affect the projects viability. For example, it is possible to evaluate the feasi-
bility of a bridge across a river independently from the railway the bridge is
a part of or the port the railway services, but this evaluation of a project out
of context will lead to an unrealistic prioritisation of regional projects. In the
transport sector it is probably sensible to prioritise transport/transit corridors
and then the individual projects on the corridors that are needed to get the
corridor to an efficient corridor which, if managed efficiently, will reduce
transport costs and make African producers more competitive. But this is not
how transport infrastructure in Africa is prioritised.
The PIDA-Priority Action Programme was compiled through a consulta-
tive process where NEPAD asked the RECs to obtain priority projects from
their member states that were considered to be at least economically (if not
financially) viable and which could be considered to be regional18 (rather
than purely national) in nature. There are a number of constraints in using
this project selection methodology.
The first constraint is derived from the fact that transport infrastructure
project planning is done on the basis of what was economically relevant in
the past and not planning transport infrastructure for the future.
According to various World Bank and African Development Bank
publications, and as quoted in the Agence Française de Développement
(AFD) and World Bank joint publication entitled ‘Youth Employment
in Sub-Saharan Africa,’ published in January 2014, Sub-Saharan Africa
has just experienced a decade of unprecedented economic growth, with
the GDP growing at a rate of 4.5 per cent a year on average between
2000 and 2012, compared to around 2 per cent for the previous 20 years.
In 2012, the region’s GDP growth was estimated at 4.7 per cent and at
5.8 per cent if South Africa was excluded. About one-quarter of countries
in the region grew at 7 per cent or more, and several African countries are
among the fastest growing in the world and medium-term growth prospects
remain strong. In just over a decade, Africa has graduated from being the
Economist magazine’s ‘Hopeless Continent’ (May 2000) to a continent with
 Transport Infrastructure 73

a bright future (‘Africa Rising’; December 2011). These impressive economic

growth figures are based on a strongly performing global economy but a
global economy in which Africa is largely not participating. Economic
growth which is reliant on a demand for commodities is neither sustain-
able nor inclusive. It is not sustainable as it is dependent on demand and
relatively high prices in markets that are not controlled by the supplier, and
it is not inclusive because exports of largely unprocessed commodities are
not job-creating and so a small elite (which is not necessarily based in the
African country that is the supplier) benefits.
Already, Africa is the second-largest and second most populous continent
on earth with an estimated population in 2013 of 1.1 billion people. The
Population Reference Bureau (www.prb.org) estimates that Africa’s popula-
tion doubled between 1982 and 2009 and is expected to almost double again
to a total of about 2.4 billion people by 2050 and to quadruple in 90 years,
by the turn of the twenty-first century. The boom in Africa’s population will
be in Sub-Sahara. Nigeria, a country the size of Texas, is projected to have
a population of about 1 billion by the turn of the century and, as China’s
population shrinks and India’s population plateaus, Nigeria is projected to
be the most populous country on earth. Tanzania, 13 years ago, had a popu-
lation of 34 million, which has now grown to 45 million but is projected to
reach 276 million by 2100, which is close to the current population of the
United States.
The implication of combining increases in wealth with population increases
is that Africa will have a sizable middle class, with significant amounts of
disposable income, by 2050. This constitutes a sizable African production
base and consumer market. Yet, although 2050 is only 35 years away, there
appears to be little effort being made to plan what infrastructure will be
required to service the demands and expectations of this African production
and consumer base. Instead, policy makers are using the rear-view mirror as
their main planning tool and are still assuming that Africa needs large and
efficient transport corridors to African sea ports to export largely raw mate-
rials and import consumer and manufactured items. More realistically, the
actual case could be that Africa needs to start to construct transport networks
to join up African centres that will become production and consumption
centres where greater value addition of Africa’s raw materials and food crops
is done within Africa and consumed within Africa and with less export of
raw materials and basic commodities.
A further constraint could be that many of the projects listed in PIDA may
not be economically or financially viable. There are a number of projects
in PIDA, which are, by definition, classified as priority projects necessary
for Africa’s economic development and which have been priority regional
projects for decades but which have not been implemented. For example, the
first detailed survey of a railway route between Zambia and Zimbabwe across
the Zambezi rift valley, crossing the Zambezi River at or near Chirundu, was
74 Mark Pearson

done in 1916. The purpose was to reduce the haul distance of copper from
the Copperbelt as the existing railway line followed the watershed through
present-day Zambia and crossed into present-day Zimbabwe at Victoria Falls.
A line from the railhead at Kafue to the railhead at Lions Den would cut
hundreds of kilometres off the journey and hence save money in transport.
Another survey of the ‘short-cut’ route was done in 1932 to shorten the
proposed 1916 route even more, and yet another survey was done in 1953
(because construction of the Kariba Dam necessitated another ‘short-cut’
track realignment) and more studies and surveys have been done since
then.
This infrastructure project was first proposed almost a century ago and
yet construction has not started. The inclusion of this project into PIDA is
presumably on the assumption that there have never been sufficient funds
to construct this railway line, ignoring the fact that this line may no longer
be financially or economically viable or that this proposed route may no
longer be important for DR Congo or Zambia as alternative routes to regional
coastal ports that now exist. The Kafue–Loins Den railway project may, on
the other hand, be financially or economically viable, but there is insuffi-
cient information for this to be determined. This is the case for many PIDA
projects, and if there is insufficient information to do an economic or finan-
cial evaluation it is difficult to prioritise a project. If the project is justified
purely on political or social criteria, then it is unlikely to be bankable; and if
it is not bankable, it is unlikely to be implemented.
Most projects in PIDA are at the concept stage; hence, until there is a
feasibility study done, there is no way of determining whether these
projects are viable. Despite the finances that are being made available for
infrastructure projects, it remains the case that it is difficult to get funding
to do pre-feasibility and feasibility studies. Thus, and to avoid a situation
where NEPAD would have to carry out a multitude of feasibility studies,
NEPAD adopted the PIDA-PAP, which is a sub-set of all PIDA projects that
have been developed beyond the concept stage. Using the parlance of
PIDA, PIDA-PAP projects should be classified as being at the S2 or S3 project
preparation stage (where S1 = early concept proposal; S2 = feasibility/needs
assessment; S3 = programme/project structuring and promotion to obtain
financing; S3/S4 = financing and roll out; and S4 = implementation and
operation). If a project is classified as being in the S1 stage, it is unlikely
that it will be ready for implementation within the next five–seven years,
and if a project is in the S4 stage, it will, most likely, already have secured
financing. Therefore, by definition, projects in the PIDA-PAP have had
a feasibility study done and so have been a priority project possibly for
quite some time. However, given the rapid changes taking place in Africa,
and advances being made in engineering techniques, unless the feasibility
study has been done in the recent past, it may no longer be valid and may
need to be redone.
 Transport Infrastructure 75

Project feasibility also needs to be appropriately interpreted. For example, in

engineering terms, it may be feasible to build a bridge across a river. But, unless
the bridge is evaluated as part of a transport or trade corridor, the project, in
isolation, will not be viable. The purpose of building trade and transport infra-
structure is, primarily, to reduce the cost of doing business and, for a regional
project, to reduce the cost of cross-border business. It is, therefore, important
that an infrastructure project be synchronised with other infrastructure and
with the existing regulatory and administrative environment. Transport infra-
structure projects need to be synchronised with other infrastructure projects
along a transport corridor so that each infrastructure project re-enforces the
impact of the next project and the cumulative result is a more efficient trans-
port and logistics system. The same is the case for synchronising infrastructure
with regulatory, legal and administrative regimes – such as ensuring a road
rehabilitation project is done together with an axle-load control regime and a
periodic and regular maintenance regime so that the investment in the road is
sustainable and meets value-for-money criteria.
An example of measuring the viability of an infrastructure project as part
of a transport corridor can be found on the North-South Corridor (NSC) road
network. In this case, the University of Birmingham,19 England, did a road-
condition analysis, using a regional HDM-4 approach to assess the condition
of the entire NSC road network of about 8,000 km. HDM-4 is a software
package and tool used by all Roads Departments/Agencies in countries
the North-South Corridor traverses to analyse, plan, manage and appraise
road maintenance, improvements and investment decisions. From the NSC
regional (total corridor) HDM-4 analysis, roads were categorised into those
that were in good condition, fair condition and poor condition, based on
the International Roughness Index (IRI). A maintenance schedule, which
was costed, was devised; this, when implemented, would bring the entire
road corridor to a fair-to-good condition. The benefit of bringing the entire
road corridor to a fair-to-good condition, combined with a saving of time at
border crossings (50 per cent saving of time on average), was then calculated
as a net present value (NPV). In this way individual sections of the corridor,
be these roads, border posts, or bridges, could be prioritised in terms of the
impact the upgrading of that particular piece of infrastructure would have
on the service delivery performance of the transport corridor as a totality.
This holistic approach to project selection and prioritisation is missing
in PIDA, at least in the transport sector, meaning that scarce resources may
not be allocated, primarily, to projects and programmes where there is the
highest return on investment in terms of improved service delivery and
logistics efficiencies. In addition, PIDA projects are derived from a ‘back-
ward-looking’ (rear-view mirror) approach to planning. The PIDA project
planning process does not start from where Africa wants to be in 2050 and
work back from there – instead it starts from where Africa was in the last
century and assumes that the economic growth trajectory will be the same
76 Mark Pearson

as it was in the past century in terms of infrastructure. This scenario, where

Africa will need ‘more of the same’ going into the twenty-first century, is
highly unlikely owing to Africa’s rapid population and economic growth
contributing to a rising middle class with disposable income, constituting
a market for consumer goods, combined with exponential technological
advances, especially in communications.

Conclusion

In conclusion, steady progress is being made in addressing Africa’s perceived

infrastructure deficit by African governments, international cooperating
partners, private sector investors and development banks, and within the
framework of a continental plan, this being the Programme for Infrastructure
Development in Africa. Considerable effort, and good progress, has also been
made in addressing Africa’s infrastructure financing gap. This has been done
by bringing new financial instruments to the market, such as the African
Development Bank’s Africa50 facility, by African countries benefitting from
flexible financing mainly from China, through more effective and efficient
use of public-private partnerships, and through the blending and leveraging
of grants and soft loans to mitigate against risk, especially in the early stages
of project development.
However, despite these very promising and positive developments, it is not
certain that the transport infrastructure being planned and developed under
PIDA will meet the needs of Africa in the future. The Africa of the future will
be considerably more populous and affluent than it is today and will need a
transport network that will link production centres in Africa with markets in
Africa. Currently, there is no mechanism in Africa’s infrastructure planning
methods, including PIDA, to ensure that the infrastructure to be built is going
to link these new internal markets with new internal industrial centres and
agricultural production. Infrastructure planning in Africa is not referenced
to the future economic development strategies of the African continent. The
Trans-African Highway network conceived in the early 1970s, and reflecting
a political regional integration ambition of joining up Africa’s major capital
cities, is still a PIDA priority; standard-gauge railways are being planned
mainly on a national, and not regional, basis and where there are regional
railway plans, such as in EAC, the projects are not financially viable and need
to be financed from treasury; there is no continental ‘hub and spoke’ plan for
maritime transport to take account of the global reality of using bigger and
bigger ships for inter-continental maritime transport; and airports are planned
primarily to serve national interests, with greater air transport freedoms given
to non-African carriers than African carriers, reflecting poor implementation
of the Yamoussoukro Declaration concerning the liberalisation of access to air
transport markets in Africa.
 Transport Infrastructure 77

In essence, Africa’s infrastructure development plans are still heavily

biased towards political, rather than economic, continental and regional
integration considerations. This is clearly seen in the list of PIDA projects
that reflect a geo-political balancing act rather than the outcome of a hard-
nosed financial and economic analysis. Given that the primary goal of most
decision-makers in the world of high-finance is to make as much money
as possible in as short a time as possible and with the least amount of risk
possible, it is not surprising that finance for most of Africa’s priority trans-
port infrastructure projects is hard to secure.
If Africa’s infrastructure gap is to be closed and done so in a way that reflects
Africa’s future infrastructure needs, a more balanced approach to infrastruc-
ture planning will be required, with less emphasis placed on political factors
and more on economic and financial factors. In essence, the continental
infrastructure plan will need to start with where Africa wants to be in, say
2050, and what production systems should be prioritised. This could best be
done using a value-chain analysis where, for instance, a region would priori-
tise value addition in certain sectors where there is a perceived comparative or
competitive advantage, such as in agro-processing and mineral beneficiation
(upstream and downstream). The transport infrastructure that is required to
achieve this value addition can then be planned and, once planned, checked
for feasibility and bankability, although this also assumes the availability of
funds to carry out feasibility and pre-feasibility which, for large infrastruc-
ture projects, run into the millions of dollars in costs. The end result would
be a greatly strengthened and more credible PIDA and a plan for transport
infrastructure that stands a chance of meeting Africa’s future needs.

Notes
1. Study on Programme for Infrastructure Development in Africa (PIDA) Phase III
PIDA Study Synthesis. Prepared in September 2011 for the African Development
Bank, NEPAD, and the African Union Commission by a consortium headed by
SOFRECO.
2. Vivien Foster and Cecilia Briceño-Garmendia, Africa Infrastructure Country
Diagnostic Report. World Bank.
3. http://www.lse.ac.uk/publicEvents/pdf/2014-MT/20140923-Kaberuka-Transcript.
pdf.
4. R. Schiere and A. Rugamba, ‘Chinese Infrastructure Investments and African
Integration’, AfDB Working Paper 127, May 2011.
5. For a detailed analysis of the trends in external support to the African infrastruc-
ture sector, see ibid.
6. Review of the Implementation Status of the Trans-African Highways and the
Missing Links: Volume 1: Main Report. Africa Development Bank (SWECO
INTERNATIONAL/NCG/UNICONSULT/BNEDT), 2003.
7. For a map of the proposed Trans-African Highways, see: http://mapsof.net/map/
map-of-trans-african-highways.
78 Mark Pearson

8. Quoted in an article entitled ‘Trans-African Highway Remains a Road to Nowhere’,

http://www.howwemadeitinafrica.com/trans-african-highway-remains-a-road-to-
nowhere/39863/.
9. According to the Truck Drivers’ Guide for Ghana, http://www.borderlesswa.com/
sites/default/files/ resources/aug10/Drivers%20Guide%20to%20Ghana%20small.
pdf, UMEOA and ECOWAS implemented a new GVM regime in January 2011,
but it should be mentioned that ECOWAS has made several attempts over the
years to achieve intra-regional harmonisation of axle loads as specified in the
ECOWAS Land Transport Programme but, as yet, regional harmonisation has not
been achieved.
10. In most Sub-Saharan African countries roads are regarded as a public good and the
construction, maintenance, and rehabilitation of roads have been covered using
public funds from donors and the government budget. Although recently there
have been moves to introduce taxes, such as fuel tax, to finance the upkeep of the
road network, and the introduction of road tolls, it is still the case that road users
are subsidised from public funds. Conversely, railways operate on a user-pays-all
basis with no, or very small, public sector subsidies.
11. The name ‘Triple-E’ is, apparently, derived from the class’s three design principles:
‘Economy of scale, Energy efficient and Environmentally improved’.
12. http://en.wikipedia.org/wiki/Maersk_Triple_E_class.
13. Ports in Djibouti, Sudan, Nigeria, and Namibia can now accommodate vessels
with a capacity of around 4,000 TEUs.
14. TradeMark Southern Africa (www.trademarksa.org) was a DFID-funded programme
that supported COMESA, EAC, and SADC in trade policy, including the design
and negotiations of the COMESA-EAC-SADC Tripartite Free Trade Agreement,
trade facilitation, and infrastructure planning and development but which closed
in March 2014.
15. http://www.lse.ac.uk/publicEvents/pdf/2014-MT/20140923-Kaberuka-
Transcript.pdf.
16. http://novafrica.org/papers%20financial%20conference/Paul%20Collier.pdf.
17. There are some situations where a project may not be proved to be economically
or financially viable by an independent source, but the project still goes ahead.
This is particularly the case where a country requests financing (usually on the
basis of a turn-key project where the financer, in effect, selects the constructor)
and repayments are made by the national treasury rather than from user fees
from the project itself. This is the model commonly used by the Chinese where
funding for an infrastructure project comes from, usually, China Exim Bank, and
the contractor is a Chinese company which is paid directly by, in this case, China
Exim Bank.
18. For a project to be regional in nature, it is either located in two or more countries
(such as a dam on a river bordering two countries or a road, railway, or power
transmission line that traverses two or more countries) or it is located in one
country but the infrastructure services more than one country (such as a port or a
section of a regional transport corridor – road or rail or power transmission line –
located in one country).
19. The University of Birmingham is part of HDMGlobal, an international consor-
tium of academic and consultancy companies that have formed a partnership for
the future management of HDM-4.
5
The Growth of Continental
African Brands
Nicholas J.W. Kühne

To gain a better understanding of the drivers behind the recent growth of

consumer brands across Africa, two very important demographic groups
need to be highlighted.
The first is the ‘basic needs consumer’ a distinct group of around
220 million people. This group is the bread and butter for packaged food
companies such as Tiger Brands, Dangote, Golden Penny, Wilmar and
similar commodity suppliers across the continent. The second, and more
interesting, group is the African ‘middle class’ believed to represent around
340 million individuals.
Africa’s middle class has tripled over the past 30 years, with one in three
people now considered to be living above the poverty line. The current
trajectory suggests the African middle class will grow to 1.1 billion (42 per
cent) in 2060.1
Although this is a massive number of people, the African middle class
is in no way similar to the North American or European understanding of
the term ‘middle class’. The African Development Bank defines the African
middle class as individuals who spend between $2 and $20 a day.
The Chinese middle class (which is currently of comparable size) is defined
as individuals spending between $25 and $94 a day. A much better prospect
for business! Nevertheless, there is an increasing interest in doing business in
Africa by companies from countries as diverse as Brazil and Thailand.
Branded consumer goods play an important role particularly in the basic
needs consumer set. If a consumer spends $2 a day, he or she cannot (and will
not) continue to buy a product that doesn’t meet his or her (albeit modest)
expectations. Essentially, a brand’s message is a promise of quality; the
producers of the item guarantee a certain level of quality and the consumer
has recourse if the product doesn’t fulfil its promises.
This is one set of reasons why international brands are generally regarded
as more trustworthy than local brands. It is well known, for instance, that
the detergent branded OMO is not going to burn the users’ hands or destroy
clothing, and therefore the manufacturer is able to charge a premium and

79
80 Nicholas J.W. Kühne

the consumer doesn’t pay grudgingly. But this attitude is slowly changing,
and increasingly, local brands are now beginning to offer a similar degree of
confidence to consumers, thereby creating a genuine threat to established
multi-national brands.
Wunderbrand, a company dealing with branding in Africa, refers to 1950s
American style advertising campaigns when considering up and coming
consumers. A major insight discerned by Wunderbrand is the phenomenon
of ‘firsts’ in many African countries with emerging economies – the first trip
to a cinema, first microwave oven, first credit card or first restaurant experi-
ence; many of the middle class and basic needs consumers are beginning to
experience activities, products and services for the very first time.
Because new consumers require educating, education is the first and most
important element when marketing a product. A brand which understands
this clearly is Nando’s. Many years ago, Nando’s subtly promoted their
offering as a ‘first restaurant experience’ for the new up and coming middle
class in South Africa – migrating up from takeaway chicken meals like KFC
(international brand) and Chicken Licken (local).

Continental African brands making their mark

The impact of international brands in Africa during the past hundred years
or so is clear. Unilever, Nestlé and others have cornered the lion’s share in
many consumer markets in Africa and continue to grow their footprint as
they seek new markets.
However, there are many local brands with strong positions in local
markets and more of them are beginning to expand in their local territories
while also branching out into neighbouring countries. This is resulting in a
tougher time for multi-nationals, as strong indigenous brands begin to make
their mark.
There are many positive spin-offs from this growth in African brands.

African brands that have made a mark – legacy brands

Throughout Africa there are legacy brands that form part of the day-to-day
purchases by local consumers. These include the obvious international brands
such as Coca-Cola, PZ Cussons and Unilever. In the past few decades, local
fast moving consumer goods (FMCG) brands have been actively competing
with international brands. The monopolies colonial and other foreign
interests were able to establish in the continent for most of the previous
century meant that most if not all branded products were imported or set
up by British, American, French or Portuguese companies. An example is
Lever Brothers (now Unilever) who started operations in Nigeria in 1923 and
now owns large swathes of market share in all of the sectors it operates in.
 The Growth of Continental African Brands 81

Similarly, PZ Cussons was founded in 1879 as a trading post in Sierra Leone

and now has a big footprint across West Africa.
Probably the sole early and best-known African luxury brand was a dessert
wine from Groot Constantia in South Africa. The wine became unavailable
for decades until 2003 when the estate began production of a dessert wine,
called Grand Constance, for the first time since the 1880s. In the nineteenth
century, the wine was acknowledged as Napoleon’s, Sir Walter Scott’s and the
French king Louis Philippe’s favourite tipple.

African brands that are starting to make a

mark – new entrants (b-brands)

Sanctions, liberalisation, indigenisation, nationalism, industrialisation,

population growth and a variety of other factors have powered the growth
of home grown brands, typically in protected industries such as cement
(Dangote) and sugar and flour, but also in areas where getting a product to
market is based on local understanding and empathy. A product such as the
Gala sausage roll produced by UAC foods/Tiger Brands is synonymous with
rush hour traffic in Lagos.
‘Globacom’ is one of the largest indigenous mobile networks in West
Africa, which unfortunately has come under pressure due to the nature
of its ownership structure and lack of growth outside its primary Nigerian
market. It is nevertheless well placed to make a mark in the region, but will
need to compete in a category that is fast becoming commoditised.
‘Kasapreko’, an alcoholic beverage company started in 1989 in Ghana, has
been progressively building its brand presence across the continent. Its flag-
ship brand Alomo Bitters, an aromatic herb-based liquor, is enjoyed in bars
and taverns from Accra to Cape Town. They are also attempting to expand
further afield in order to take advantage of the growing demand for alcoholic
beverages on the continent.
A prolific advertiser at airports, GT Bank prides itself as being ‘the African
bank’. Although not nearly the size of its South African counterparts, the
bank has made large strides in creating a respected Nigerian bank brand
that can be found in neighbouring Ghana and also in Kenya. Access Bank
is another Nigerian bank that has been taking advantage of the continued
growth in the banking sector, with over six million customers and branches
in eight countries.
UAC, mostly unknown outside Nigeria, has come into prominence and
will probably be swallowed up completely by future deals – such as selling off
a portion of its fast food business (Mr Bigg’s) to South Africa’s Famous Brands
restaurant chain. Famous Brands is the largest African fast food company,
and by including Mr Bigg’s in its already enormous South African portfolio
of brands, it is more than likely to signal the start of their expansion into
82 Nicholas J.W. Kühne

Nigeria. Zimbabwe also features INNSCOR, represented by fast food holding

company, which owns around 210 stores in six countries. INNSCOR also has
a variety of other regionally respected brands in its portfolio.
African brands have also been part of driving technological advance-
ment in Africa. MTN, for example, leapfrogged local and international
telecoms companies by taking the huge gamble to start operations in
Nigeria when all the signals probably pointed to disaster. They managed
to do this through seeing the opportunity, giving the market what it
desperately wanted (access to communications) and quality service.

What have been the main constraints in building

‘African’ brands?

Because of such a long history of international brands owning the market,

the respect for local brands has tended to be limited. It also means that
growth in local brands typically has been in the commodity space such as
water, beer, snacks and energy. Brands that rely on prestige and exclusivity
have only recently been making an entrance on the local front (Yswara) as
Africans are quietly developing a stronger sense of confidence in their own
style. This is often helped by African brands doing well or being picked up in
the international market, Oswald Boateng, the Ghanaian fashion star, being
an example.

What impact have these brands had on the

local economies?

Fashion brands are one example of an industry creating jobs by penetrating

the formal market for low-skilled workers, women in particular. The growth
in popularity of African fashion week, fashion tourism and interest from
the US and Europe are examples that show that this sector is steadily
increasing in size. The Ethiopian shoe brand SoleRebels, owed by Bethlehem
Tilahun Alemu, has expanded internationally. As mentioned previously,
respect for African brands is still low, so the majority of SoleRebels’s sales
and press coverage has been in international markets. What is exciting about
this industry is that it is a creative industry versus one that is easily repli-
cated. The best way to create strong brands is through creative leadership –
something that is hard to replicate.
The size of the growing banking sector in most African countries has
also resulted in the growth in the number of African graduates being head
hunted for a limited number of positions. Coupled with the training and
business exposure many young, educated individuals receive, many of them
are leaving the banking sector to work on start-ups in the burgeoning mobile
and digital finance sector.
 The Growth of Continental African Brands 83

What impact have these brands had on the perception

of Africa internationally and locally?

An exciting aspect of this is that ‘Made in Africa’ has very limited connota-
tions. Unlike the Chinese experience of changing the perception of ‘Made in
China’ to ‘Created in China’, Africa is in the enviable position of being able
to create its own story around its products.
However, it should not be forgotten that Africa is not a homogenous conti-
nent. Kenya is known for producing splendid teas, and Ethiopia as the origi-
nator of coffee; for gold and diamonds, think South Africa, and for exotic
spices and textiles, Morocco.

What are the most entrepreneurial and marketing

savvy countries?

This often is based on geographic location and government assistance, or

the lack of it. Mauritius, for example, has made tourism and finance its two
major focus areas. Rwanda is trying its level best to become the technology
hub for Africa. When there is a vision from the government and business
leadership in a country, one finds that there is a growth in the supported
sectors as they try to build a competitive advantage.

Countries and what are they doing? (prolific brand

creating regions)

The 2013 Brand Africa 100 Most Admired and Valuable Brands in Africa
report delivered some interesting results showing that African brands are
making headway at 34 per cent of all the brands nominated in the survey,
with international brands steady at 66 per cent. A further breakdown of the
African results indicate that South African brands represent 24 per cent of
the share, Nigerian brands represent 9 per cent with Kenyan brands repre-
senting the remaining 1 per cent.

Conclusion

The continent is in an enviable position of being courted by companies

from all around the world. However, in order for Africa to grow strong
local industry and weather economic storms, it needs to build strong local
brands to compete with the many other international competitors vying
for emerging consumers. African continental brands are emerging, meaning
that smaller African brands are being overtaken not only by multi-nationals,
but by other African brands. Brands focusing on only single markets could
find that they are going to struggle in the near future as economic blocs start
84 Nicholas J.W. Kühne

to open up borders and ease trade restrictions. There are many advantages of
being a home-grown brand, but it does not guarantee success. There is only
a short window for smaller African companies to make the move from being
products to becoming brands. International companies who are desperate for
new markets and revenue have the skills and drive to overtake local brands,
so before this happens, a BRAND new Africa is needed.

Note
1. Deloitte, March 2013, http://www.deloitte.com/assets/Dcom-India/Local%20
Assets/Documents/Africa/Deloitte_on_Africa-(1)_rise_and_rise.pdf.
6
Is It Time for Open Borders in
Southern Africa? The Case for Free
Labour Movement in SADC
Adrian Kitimbo

Southern Africa is facing significant skills shortages. This is evident in coun-

tries such as South Africa, where the scarcity of particularly high-skilled
workers in sectors including engineering, medicine and senior manage-
ment has the potential to limit the country’s long-term economic growth.1
A recent report2 by Adcorp, a labour market specialist, estimates that there
are 470,000 vacancies in South Africa’s private sector which are currently not
filled because of unavailable skills. These shortages are attributed to ‘brain
drain’ from South Africa, immigration restrictions on high-skilled foreigners
and failings in the education system.3 South Africa is not alone – regional
neighbours such as Namibia also report that their economic growth targets
are stymied by shortages of workers in industries that are critical to their
economies.4
Migration experts largely agree that one way to address skills shortages
is through increased labour mobility among countries.5 It is argued that
mismatches in the labour market occur when companies’ demand for workers
are not met with people that have the right skills and competencies. These
gaps, as is the case in a number of Southern African countries, hurt workers
who cannot find employment suited to their skills. They also decrease the
productivity of companies, which in turn damages the economic growth of
countries. Yet the benefits of labour mobility go beyond providing workers
to sectors where there are shortages. The movement of labour also has the
potential to enhance trade and spur entrepreneurship. Evidence6 from
the European Union (EU), home to the most progressive migration system in
the world, attests to these benefits.
Despite clear gains that emanate from labour movement, Southern African
Development Community (SADC) members are reluctant to embrace the
idea of free movement of persons, including labour. Even as other African
Regional Economic Communities (RECs), including the East African
Community (EAC) and the Economic Community of West African States
(ECOWAS), have made significant progress toward opening up borders for
their labour migrants, SADC seems a long way off in achieving this goal.

85
86 Adrian Kitimbo

The debate over free movement in SADC is often hijacked by populist senti-
ments. Inter-regional labour movement tends to evoke security concerns, as
well as the fear of a ‘flood’ of migrants to major receiving countries such as
Botswana. The eruption of xenophobic attacks against Zimbabweans and
other foreign African nationals in South Africa in 2008 highlights the diffi-
culties in promoting a balanced discussion on free labour movement.
Against this backdrop, this Discussion Paper draws from interviews with
migration experts to explore some of the potential economic benefits of free
labour mobility for both sending and receiving countries in SADC. Mindful
of the possible drawbacks of increased labour movement such as brain drain
and the dampening of wages for particularly low-skilled workers, migra-
tion experts such as Lorenzo Fioramonti7 nevertheless argue that a ‘regional
governance framework’ that allows for a multilateral approach to develop-
ment can limit some of these problems. The paper also draws on the EU
experience as well as the migration policies of two other African RECs –
ECOWAS and the EAC – in an effort to draw lessons for SADC.

A snapshot of global and regional migration trends

According to the United Nations (UN), the number of international migrants

has increased by 53 million in the global North and 24 million in the global
South since the 1990s.8 As of 2013, there were 232 million international
migrants.9 There is also significant intra-African migration. In 2010, close to
30 million migrants were African and most of them moved within African
borders.10 In Southern Africa, a region which is the focus of this paper, there
were 1.4 million migrants in 1990, and by 2010 that number had increased
to 2.2 million.11
Botswana and South Africa stand out as the most sought after destina-
tions for migrants from within SADC. In 1990, for example, South Africa
and Botswana hosted 510,000 and 10,000 migrants, respectively, but by
2010 those numbers had risen to 1.2 million and 76,000 respectively.12 Most
migrants to major host states, including South Africa, are from Zimbabwe.
Largely driven by economic circumstances, many Zimbabweans clandes-
tinely cross into South Africa and Botswana for a chance at a ‘better life’.
While the media in South Africa often exaggerates the number of ‘undocu-
mented’ Zimbabweans living in the country, the volume has undoubtedly
increased in the past ten years. The rise in numbers explains, in part, why
some SADC members are hesitant to embrace free movement of labour, as
they fear that they will see the number of migrants who enter their territo-
ries increase to unprecedented levels.
The reality, however, that migration numbers continue to rise, even within
Southern Africa, underscores the need to deal with migration at a broader
level (a regional level in this case). Present national approaches to migration,
combined with bilateral agreements and informality within SADC, are not
 Open Borders in Southern Africa? 87

just unsustainable in the face of growing numbers, but also hinder economic
opportunities that are associated with free movement of persons, including
labour.

Labour movement is not new to Southern Africa

Labour mobility in Southern Africa stretches back to the pre-colonial era,

when people traversed the region to work in various employment sectors. In
the late 1800s, Mozambicans, for example, worked in the Western Cape as
seasonal farmers.13 Pedi and Sotho males also often moved across the Cape
Colony to work on public works and farms as a way to earn wages to buy
weapons such as guns, as well as purchase agricultural products and pay for
a bride.14 Like the Pedi and Sotho, the Tsonga travelled across modern-day
South Africa for work, mainly engaging in seasonal labour on farms in the
Western Cape.15
A major form of migration that dominated Southern Africa in the twen-
tieth century was the movement of contract labourers throughout region.16
In countries such as South Africa, contract labourers largely worked in the
mining sector, an industry which attracted workers from countries including
Botswana, Mozambique and Lesotho to work on gold mines on the
Witwatersrand and on diamond fields in Kimberly. Mining companies hired
foreigners partly because they were cheap, but also because many locals at
the time did not want to engage in this kind of manual labour.17 Other coun-
tries, including what is now Zimbabwe and Namibia, also received thou-
sands of unskilled migrants to work on their mines. In Zimbabwe, coal and
asbestos mines were a big pull for workers from Zambia and Malawi in the
early 1900s. It is estimated that in 1935, up to 150,000 migrants left Malawi
to work in mines in Zimbabwe, South Africa and Zambia.18 Another impor-
tant sector that attracted labour migrants in Southern Africa was commercial
farming. Thousands of workers (mostly women) were hired to work on farms
in several countries, including Zimbabwe and Mozambique.19 Yet mining and
commercial farms were not the only sectors that attracted labour migrants;
to a smaller extent, particularly in South Africa, factories and domestic serv-
ices also hired foreigners.20
The history of labour migration in Southern Africa illustrates that migra-
tion for work does not only have a long past in the region, but also, notwith-
standing the serious social issues that attended it, formed an economic
backbone for especially host countries, such as South Africa, that relied on
low-skilled foreign workers for many decades. Furthermore, this history
shows that systems of migration in Southern Africa are deeply rooted even
though governments have tried to do away with them in recent years. The
unintended consequence of restrictions on free movement of labour between
countries has been an increase in problems such as irregular migration, a
phenomenon which has created enormous social, political and economic
88 Adrian Kitimbo

problems for SADC members. The regional SADC economy would be better
served by a coherent and implemented regional policy on labour migration
than it is with the current practice of trying to continually limit it.

Management of labour movement within SADC

Only recently, SADC members adopted a Regional Labour Migration Policy

Framework that ‘seeks to promote sound management of intra-regional
labour migration for the benefit of both the sending and receiving coun-
tries as well as the migrant workers’.21 But it is yet to be seen if the objec-
tives in the Framework, including the ‘harmonisation and standardisation
of national labour migration policies’, will be implemented by member
countries. According to Joe Rispoli of the International Organization for
Migration (IOM), labour mobility is currently dominated by policies at
national level and by bilateral agreements between countries.22 This is
despite the Declaration and Treaty establishing SADC whose stated goal,
among others, is to ‘gradually eliminate obstacles to movement throughout
the region’.23 National interests, as opposed to those of the region, seem to
be at the forefront of migration management within SADC. In regions such
as the EU, integration has moved forward to such an extent that member
states have given up some of their sovereignty to supranational institutions.
Indeed EU law is superimposed and sometimes replaces national laws. As a
result, EU members find it easier to domesticate EU law. Also, there is more
pressure and urgency in domesticating EU laws, as enforceable penalties do
kick in for those countries that do not implement them. In SADC, however,
domestic laws determine migration policies of respective states.
In order to work within SADC, most foreigners, including those from
within the region, are required to obtain work permits or visas before they can
engage in employment. In the Republic of South Africa, for example, there
are various permits that have to be obtained before foreigners can commence
work. These include general work permits, intra-company visas, critical skills
visas and business permits.24 These permits and visas are obtained through
the Ministry of Home Affairs. But in South Africa and other SADC countries,
acquiring authorisation to work is not always easy. In fact, South Africa’s
recently adopted immigration law has been sharply criticised by business
leaders, non-profit organisations and migration experts within the country
and the region. It is argued that the new stringent rules that affect labour
migrants threaten South Africa’s long-term economic growth, as they could
turn away tourists, potential investors and skilled migrants.
Bilateral agreements are also a centrepiece of current labour migration
governance in Southern Africa. Of all SADC states, South Africa is perhaps
the country with most bilateral agreements with countries in the region.25
South Africa’s dominance when it comes to these agreements is much attrib-
uted to its old labour migrant system, which recruited foreign workers from
 Open Borders in Southern Africa? 89

neighbouring countries to work on mines, farms and factories.26 Some of

the countries with which South Africa has previously signed bilateral agree-
ments include Malawi, Swaziland, Lesotho and Mozambique.27
SADC needs to re-think its management of labour mobility. Current national
and bilateral policies, which largely favour restriction on movement, have
had debatable outcomes. For example, Zaheera Jinnah, a migration expert
at University of Witwatersrand,28 points out that these agreements, which
are meant to help tackle skills shortages, have not been able to achieve their
goal, as a number of high-skilled sectors in SADC member states continue
to struggle to fill positions. But more importantly, the present lack of free
labour movement, for particularly high-skilled workers, is a big hindrance to
potential economic benefits that could result from such mobility.

Evaluating some of the potential economic benefits and

costs of free labour movement in SADC

Economic arguments alone do not influence migration policies. Other

considerations, including those that are social and political, also play a role.
However, the cost benefit analysis of increased mobility can have an even
stronger influence in shaping policies that impact labour migrants. There
is an array of literature and migration models on the economic impact of
free labour movement. Classical and neo-classical theories of migration have
long emphasised its benefits.29
The EU, which has the most progressive policies on free movement in the
world, provides the best ‘experiment’ on open borders. Even as the recent
economic crises in some member states have aroused fierce, inward-looking
migration debates, labour mobility remains integral to the EU project.
European labour migration dates back to post–World War II Europe, a period
that was characterised by colonial immigration regimes and temporary guest
worker policies.30 During the former period, European countries took advan-
tage of the large supply of unskilled workers in their colonies to meet their
labour needs. The guest worker system was largely used during the economic
recovery of countries such as Germany who looked South to Turkey and North
Africa to meet their demand for workers.31 The signing of the Treaty of Rome
in 1957 made the free movement of labour among one of its central goals.
The Maastricht Treaty of 1991, establishing a single market, reinforced the
free movement of persons among EU member states.32 The idea of European
citizenship also emanated from the Maastricht Treaty and further strength-
ened the notion of free movement of persons, which resulted in giving EU
citizens the right to move freely and live in other member countries.
Inter-regional labour mobility in the EU has enabled economic gains to
both receiving and sending countries. One of such positive effects has been
to help fix mismatches in the labour market. This is most evident in coun-
tries with high-skilled workers but lacking enough labour in the low-skilled
90 Adrian Kitimbo

sectors. Even more, societies with an ageing workforce have been able to
expand their shrinking labour force by drawing from a larger labour market.
A recent study of inter-regional migrants in EU cities shows how places such
as Turin, Italy, have capitalised on Romanian immigrants to fill gaps in sectors
that some locals consider undesirable. These include agriculture, construc-
tion and domestic work.33 Similar trends are seen in Hamburg, Germany,
where foreigners are increasingly taking up jobs in sectors including the port
industry.34 Yet the supply of labour across the EU also extends to skilled
sectors such as engineering and medicine. Germany, for example, has in
recent years hired thousands to Spaniards and Portuguese to make up its
shortfall of engineers and other professionals.35 As the examples illustrate,
because of free labour movement in the EU, countries experience less
economically stinging skills shortages. Increased intra-regional mobility in
SADC for specifically high-skilled workers can have similar resultant effects.
Companies in countries such as South Africa would struggle less to fill avail-
able vacancies as there would be a larger pool of candidates with the right
skills to select from.
Beyond tackling skills shortages, free labour movement has the poten-
tial to boost trade. In regions such as SADC, where intra-SADC trade as a
percentage of the community’s total trade has stagnated at around 15 per
cent over the past decade,36 an increase in mobile labour could enhance
trade. Migration studies suggest two ways by which the movement of
persons can improve trade. It is argued that migrants can reduce bilateral
business costs between the host and sending countries. This is achieved
through personal business connections with people from home coun-
tries.37 Secondly, the specific knowledge that migrants bring about foreign
markets can also lessen the cost of trade between countries. In cases where
the political and social institutions of a foreign state are very different
from that of the host state, the knowledge that migrants bring can prove
especially useful.38 Indeed, if a country possesses a significant number of
ethnicities, the information on markets provided by these communities
can spur trade between countries.
Another issue that is worth mentioning as part of the potential economic
gains is the ability of increased labour mobility to reduce irregular migrants.
Irregular migrants are people who enter host countries through illegal chan-
nels and without proper documentation. Presently, host countries spend
enormous amounts of money on tightening border controls and in the depor-
tation of undocumented migrants. South Africa and Botswana are perhaps
two countries with the highest influx of these migrants. Other regional
countries such as Namibia and Mozambique have also experienced a rise in
undocumented workers. It is also important to highlight that the majority
of irregular migrants in SADC are from within the region. In both Botswana
and South Africa, most undocumented migrants who enter their territories
have their origins in Zimbabwe, a country where harsh economic realities
 Open Borders in Southern Africa? 91

have forced millions to look for work in other countries within the region
and beyond.39 It is estimated that since 1990, South Africa has deported
over one and a half million people, most of them back to Zimbabwe and
Mozambique.40 Yet deportations and border controls do not seem to have
the desired effect of preventing and deterring irregular migrants, as many
desperate people often find clandestine channels to re-enter destination
countries. According to Lorenzo Fioramonti,41 the lack of free labour move-
ment has facilitated the growth of irregular entry channels to host states,
which are often managed by traffickers.42 Recent reports reveal that traf-
fickers financially exploit those who use their services, as well as physically
abuse them.43 In addition, because irregular labour migrants cannot work in
formal sectors, they often take up employment in conditions where labour
standards are not observed and are paid very low wages. Additionally, skilled
labour migrants who could be of benefit in high-skilled sectors within host
countries end up in jobs way below their skill levels. A managed regional
labour migration regime that allows for the free movement of particularly
high-skilled workers can help reduce the number of irregular migrants in the
region and the problems that come with it. Furthermore, tackling irregular
migration through an increase in the mobility of workers could also reduce
‘brain waste’ by enabling un-regularised skilled migrants to move into indus-
tries where they can best employ their skills.
But the benefits of free labour movement are not just limited to host states.
An outflow of workers can reduce unemployment rates in sending countries,
and remittances sent back home can be a source of foreign exchange as well
as economically improve the lives of those left behind. In Zimbabwe, for
example, remittances from abroad are credited with staving off a complete
economic collapse in recent years. In addition, in case of return, the skills
migrants gain abroad can prove useful in the sender’s labour market.
From this, it may seem like free labour movement is a win-win situa-
tion for all parties involved. Overall, its benefits do clearly outweigh the
costs. However, it also important to highlight some of the drawbacks from
an increase in inter-regional labour mobility, as it helps in understanding
why some countries are reluctant to embrace it. The threat of immigrants
competing for jobs with locals is a real fear in host states. Joe Rispoli44 stresses
that in regions such as Southern Africa, where unemployment rates especially
among low-skilled workers are high, an increase in labour movement arouses
serious concerns over jobs. Moreover, if foreigners work for lower pay, this
may dampen the wages for local workers, creating tensions between the two
groups as a result. And while remittances are of significant benefit to coun-
tries of origin, brain drain and the possibility of losing people of the working
age could have negative economic repercussions for sending countries. It is
also possible that large outflows of labour from the least developed to the
more developed countries in SADC may create labour shortages in countries
of origin, stunting their economic growth as result. Some of these problems
92 Adrian Kitimbo

are well evidenced in the Zimbabwe case. The millions of Zimbabweans

escaping their country’s economic turmoil for ‘greener pastures’ elsewhere
has robbed the country of both its skilled and unskilled workers who could
play a role in rebuilding the country. This brain drain is sure to further
hinder Zimbabwe’s path toward economic recovery. Furthermore, this mass
exodus has also raised serious concerns over security and job losses for locals
in countries such as Botswana. As a consequence, hundreds of thousands of
Zimbabweans have been deported from Botswana.
However, an increase in labour movement does not have to necessarily
trigger these drawbacks. A clearly well-developed and managed regional
labour migration regime can limit these problems. Experts45 argue that a
multilateral framework like the recently developed ‘SADC Labour Migration
Policy Framework’ can ensure that SADC benefits from free labour move-
ment without many of the resultant problems of increased labour mobility.

Efforts to establish free movement in SADC

The first Draft Protocol on free movement in SADC was proposed in 1995.
It was an ambitious Protocol that sought to gradually eliminate obstacles
to free movement among member states within a period of ten years.46 It
was crafted in alignment with the African Union’s objective of eventually
building an ‘African Regional Economic Community’ where there would
be free movement throughout the continent.47 More specifically, the 1995
Protocol set out, in relation to every citizen of a member state, to ‘confer,
promote, and protect onto SADC citizens (i) the right to freely enter another
Member State for a short visit without needing a visa (ii) the right to reside in
the territory of another Member State (iii) the right to establish oneself and
work in the territory of a Member State’.48
However, this rather ambitious Protocol was never adopted, as SADC
countries, including South Africa, Namibia and Botswana, rejected it. The
idea that there would be free movement of persons in a region that was then
seen as having enormous economic disparities did not bode well with some
members.49 Also, concerns over the potential for free movement to usurp
national policies, as well as socially and economically burden receiving
countries, were a big influence on the decision by a number of members
to reject the Draft Protocol.50After successfully thwarting the 1995 Draft
Protocol, South Africa crafted a new version and titled it the ‘Facilitation
of Movement Protocol’. The new Protocol, among other things, sought to
assert national interests over those of the Region, prevent countries from
committing to an implementation time-table, as well as delay harmonisation
of policies.51 However, this version was seen as a significant step backwards
by some SADC members and was hence not adopted. Following
the rejection of the Facilitation Protocol presented by South Africa, the
 Open Borders in Southern Africa? 93

secretariat redrafted the original Protocol, taking into account the concerns
of member states, but kept the name proposed by South Africa – ‘Facilitation
of Movement’.
The Facilitation of Movement Protocol seeks to progressively eliminate
obstacles to movement among and within SADC member states and facili-
tate entry of citizens into a second country visa-free for a maximum period
of three months.52 The SADC Charter of Fundamental Social Rights supports
the Protocol with regard to the free movement of labour. Article 2 of the
Charter seeks to ‘promote policies, practices and measures, which facilitate
labour mobility, remove distortions in labour markets and enhance industrial
harmony and increase productivity, in SADC Member States’.53 After being
shelved for many years, the Facilitation of Movement Protocol was finally
tabled in 2005 at the SADC Summit. Presently, thirteen SADC member states
have signed and adopted it. But only six members (South Africa, Zambia,
Lesotho, Mozambique, Botswana and Swaziland) have ratified it. For the
Protocol to come into force, it has to be signed and ratified by at least two-
thirds of SADC members.
Factors limiting the ratification of the Protocol include lack of funding
and technical expertise required to put it into force.54 Implementation
requires funding administrative practices and making policy changes. For
some SADC members, the Protocol is seen as both an extra burden and not
really a priority. This is especially the case in countries such as the DRC who
are struggling with internal conflicts among other social and economic chal-
lenges. Harmonisation of laws, which requires modifications in domestic
laws as well as subordinating national political interests to long-term regional
goals, is also not regarded as much of a priority by some SADC states. In addi-
tion, present bilateral agreements also contribute to a reluctance to ratify the
Protocol.55 Because some countries already have strong bilateral ties which
allow their citizens to move freely, the Protocol is not seen as contributing
much. The failure of SADC to implement the ‘Protocol on Facilitation of
Movement’ is also attributed to a lack of commitment and political will to
embrace policies on labour movement.56 Other African RECs, as the figures
demonstrate, have taken much faster steps toward opening up borders for
member citizens.

ECOWAS’ Protocol on free movement of persons

Founded in 1975, ECOWAS is a regional body comprising fifteen countries,

these being: Sierra Leone, Cote d’Ivoire, Togo, Niger, Mali, Nigeria, Ghana,
Guinea-Bissau, Guinea, Cape Verde, Liberia, Benin, Burkina Faso, Gambia
and Senegal. The ECOWAS Protocol on free movement of persons is perhaps
the most ambitious and advanced on the continent (Figure 6.1).57
94 Adrian Kitimbo

Intent of the Protocol on free movement

Implementation
• Enacted out of a need to achieve the ECOWAS
Treaty objective to eliminate obstacles to ‘free • Phase one, right of entry and abolition of visas
movement of persons, goods, service and for citizens of Member countries, was ratified in
capital, and to the right of residence and 1980; the second phase, which gives citizens the
establishment.’ right to reside and take up employment in
another ECOWAS Member State came into force
• The Protocol lays out the legal and
in 1986; and the third phase of the Protocol, the
administrative frame work for the
right of establishment, is still in the process of
implementation of free movement and
being ratified.
residence.
• The Protocol envisioned a West Africa where • The adoption of a common Passport and
citizens could traverse the Region without National Identity Cards, both of which are said to
being limited by either natural, socio- have increased mobility in the region, illustrates
economic, or political boundaries. the ECOWAS resolve to eventually remove all
obstacles to movement and right of
• The rationale for adopting the Protocol was establishment among Members.
based on the understanding that in order to
improve the welfare of Member States, the • Implementation of the Protocol has also been
sub-region needed to face the economic, met with problems such as harassment and
political and social challenges as a collective. extortion at border checks.

Figure 6.1 Intent and implementation of the protocol on free movement

Sources: Adapted by the author from the Treaty of ECOWAS; A Region without Borders? Policy
Frameworks for Regional Labour Migrations towards South Africa’, MiWORC Report, 2013.

The EAC Common Market Protocol

The EAC is a Regional Economic Community comprising Uganda, Kenya,

Tanzania, Burundi and Rwanda. The Treaty establishing the existing EAC was
signed in 1999 by the original three founders (Kenya, Uganda and Tanzania)
and came into force in 2000. Rwanda and Burundi joined the Community
after acceding to the EAC Treaty in 2007.

How can SADC catch up with EAC and ECOWAS?

SADC can begin with harmonising labour movement policies among member
states. The EAC, for example, already had relatively uniform labour move-
ment policies between partner states. In SADC, current policies vary from
one country to another. One example of this is the procedures for granting
work permits which are different in every country. This lack of uniformity
makes the process of applying for work permits confusing and extremely
cumbersome for those who wish to work in another member state. The
recently adopted Regional Labour Migration Policy Framework is a step in
 Open Borders in Southern Africa? 95

Intent of the Common Market Protocol

Implementation
• The EAC aims at deepening political, economic
and social cooperation among Member States • Presently, EAC citizens can freely visit Member
for their mutual benefit. States as long as they possess valid travel
documents. These may include temporary
• EAC integration has four stages which include permits, passports, emergency travel
forming a Customs Union, a Common Market, a documents, etc.
Monetary Union and eventually a Political
Federation. A Customs Union and Common • A common East Africa passport for travel is
Market were ratified in 2005 and 2010 currently in use by Uganda, Kenya and Tanzania.
respectively. Along with a common EAC passport, the region
also boasts a common flag and free
• The Common Market Protocol objectives, among exchangeable currencies.
other things, aims to accelerate economic
growth and development of partner States • EAC has also harmonised procedures for issuing
through the attainment of free movement of work permits.
goods, persons and labour, the rights of • Rwanda and Kenya have even gone a step
establishment and residence and the free further by eliminating requirements for work
movement of services and capital. permits for citizens of Member States

Figure 6.2 Intent and implementation of common market protocol

Sources: Adapted by the author from the Treaty Establishing the East African Community; A
Region without Borders? Policy Frameworks for Regional Labour Migrations towards South Africa’,
MiWORC Report, 2013.

the right direction. If all member countries do indeed implement its objec-
tives, the Framework will ensure that national labour migration policies are
harmonised throughout the entire region.
SADC should also strive to gain the full support of its members to finally
bring the ‘Facilitation of Movement Protocol’ into force. One way of enabling
this is to pool technical expertise and resources to help those countries that
have not ratified the Protocol because they lack the know-how and resources
to domesticate its provisions.
More communication between the Ministries of Labour and Home Affairs is
also needed if the Protocol is to garner full support. Joni Musabayana, the Deputy
Director of the International Labour Organization (ILO) in South Africa, spoke
about the tension that often exists between the security concerns of Home Affairs
and the labour needs of Labour Ministries.58 These competing interests have
played a role in stifling progress toward free labour movement in the region.
Dialogue between these Ministries is significant to ensure that the security
concerns of SADC countries are addressed, while at the same time allowing for
the free movement of labour that is economically beneficial to member states.
Furthermore, unlike the EAC and the ECOWAS, SADC seems to lack the
same sense of urgency and political will to enable free labour movement
96 Adrian Kitimbo

in the region. Commitment to free movement in ECOWAS is, for example,

reflected in the Common Approach, a Policy Paper meant to speed up the
implementation of the free movement protocol. The Paper also re-empha-
sises the significance of free movement to regional integration and the link
between migration and development. Realising the benefits of free move-
ment, Rwanda and Kenya have also moved faster than other EAC countries
by abolishing work permit requirements for citizens of member countries.
If SADC is to fulfil its Treaty objective of free movement among members,
leaders in the region have to take free movement of labour more seriously.
Another important way forward is for major host states (South Africa and
Botswana) to do a better job of highlighting the benefits of labour migra-
tion to their citizens. Since migration in the region often invokes negative
sentiments, it is imperative that governments spell out to their citizens the
potential economic gains of this kind of movement.
The private sector, which has a large stake in migration, particularly labour
mobility, can help push the region toward a larger labour market. Labour
mobility is significant for the private sector, especially because companies
and businesses are not accountable to the public but to their shareholders and
they understand that migrants and increased mobility generate profit. Also,
private sector companies are among the most affected if the labour market
lacks workers with the right competencies to fill vacancies. Intra-company
transfers, which are critical to human resource strategies, also depend on
the ease of workers to move from one country to another. Unfortunately,
however, there is very little interaction between governments and private
sector on migration policies. Loane Sharp, the Labour Market Specialist for
Adcorp, pointed out that the South African government, for example, rarely
consults the private sector when drafting migration laws.59 Migration laws
are often passed in response to political and social concerns but with little
economic considerations. But it is also fair to say that the private sector
throughout Southern Africa could take a more active role in lobbying govern-
ments to act more quickly in enabling free labour mobility for the much
needed high-skilled workers. This lack of engagement or limited communi-
cation between the public and private sectors is a problem, as governments
tend to pass laws which are not in tandem with private sector labour needs.
Private sector companies and businesses are major drivers of economies in
Southern Africa. A united voice from them can provide the impetus to quickly
implement the Labour Migration Framework as well as the ratification of the
free movement protocol by those countries that are still on the fence.

Conclusion

This chapter illustrates that there are several potential economic benefits
from increased labour mobility within SADC. Free labour movement has the
potential to address skills shortages, reduce the number of undocumented
 Open Borders in Southern Africa? 97

migrants and also enhance trade within the region. While the drawbacks
from such labour mobility including brain drain and the dampening of local
wages cannot be overlooked, these problems can be addressed through a
managed regional labour migration system that, for example, initially allows
for the free movement of workers with particular skills (e.g., high-skilled
workers).
Conditions do exist to finally establish free labour movement in SADC. A
Regional Labour Migration Framework that would allow for the harmonisa-
tion of labour migration policies across the region is already in place. It is
incumbent on member states to implement what is set out in the Framework.
A protocol to facilitate free movement, including labour, also already exists.
More political will as well as the pooling together of technical expertise
and resources are required to finally bring the Facilitation of Movement
Protocol into force. And, as stated earlier, successful implementation of the
protocol (when it finally comes into force) requires a closer working rela-
tionship between the Ministries of Labour and Ministries of Home Affairs
in individual SADC countries to ensure that the concerns and needs of both
Ministries are met. Furthermore, a united voice from the private sector and
a stronger working relationship with the public sector could also go a long
way in enabling free labour movement in the region.
If SADC wishes to strengthen its integration, as well as collectively address
the economic imbalances in the region, the migration-development nexus
cannot be forever avoided. Other African RECs, including ECOWAS and EAC,
show that even among regions where there are significant economic dispari-
ties among neighbours, free labour movement is possible and can be bene-
ficial. While SADC does have a few strong economies such as South Africa
and Botswana, most of its members have weak economies and markets. These
economies cannot grow in isolation. More regional integration, through
increased labour mobility, can generate the impetus needed to solve the socio-
economic problems this region faces.

Notes
1. See http://www.adcorp.co.za/NEws/Pages/SA%E2%80%99seconomydesperatelyne
edshigh- skilledworkers.aspx.
2. See http://businesstech.co.za/news/general/52918/south-africas-critical-skills-
shortage/.
3. See Ibid.
4. At http://sun.com.na/content/national-news/skills-shortage-biggest-obstacle-growth.
5. Bertelsmann Stiftung, ‘The Case for Harnessing European Labour Mobility: Scenario
Analysis and Policy Recommendations’ (2014), http://www.labourmobility.com/
wp- content/uploads/2014/04/HELM.pdf.
6. European Commission, ‘Evaluation of the Impact of the Free Movement of EU
Citizens at Local Level’ (2014), http://ec.europa.eu/justice/citizen/files/dg_just_
eva_free_mov_final_report_27.01.14.pdf.
98 Adrian Kitimbo

7. Lorenzo Fioramonti, ‘Is It Time to Take Free Movement of People in Southern

Africa Seriously?’ Africa Development Bank, June 2013.
8. OECD, World Migration Figures, http://www.oecd.org/els/mig/World-Migration-in-
Figures.pdf.
9. Ibid.
10. Christopher Nshimbi and Lorenzo Fioramonti, ‘A Region without Borders? Policy
Frameworks for Regional Labour Migrations towards South Africa’, MiWORC
Report, 2013.
11. Nshimbi and Fioramonti, ‘A Region without Borders?’
12. Ibid.
13. Marie Wentzel, ‘Historical and Contemporary Dimensions of Migration between
South Africa and its Neighbouring Countries’, HSRC Migration Workshop, 2003.
14. Marie Wentzel, ‘Historical and Contemporary Dimensions of Migration’.
15. Ibid.
16. Jonathan Crush and Vincent Williams, ‘Labour Migration Trends and Policies in
Southern Africa’, SAMP Policy Brief, March 2010.
17. Crush and Williams, ‘Labour Migration Trends and Policies in Southern Africa’.
18. Jonathan Crush, Vincent Williams and Sally Peberdy, ‘Migration in Southern
Africa’, Global Commission on International Migration, September 2005.
19. Crush and Williams, ‘Labour Migration Trends and Policies in Southern Africa’.
20. Crush et al., ‘Migration in Southern Africa’.
21. SADC Labour Migration Policy Framework, 2013.
22. Interview with Joe Rispoli, International Organization for Migration (IOM),
21 May 2014.
23. SADC Treaty (1992), http://www.sadc.int/files/8613/5292/8378/Declaration__
Treaty_of_SADC.pdf.
24. Department of Home Affairs, Republic of South Africa, http://www.dha.gov.za/
index.php/immigration-services/types-of-temporary-permits.
25. SADC Migration Policy, International Labour Organization (ILO) (December
2013), http://www.ilo.org/wcmsp5/groups/public/ – -africa/ – -ro-addis_ababa/ –
-ilo-pretoria/documents/meetingdocument/wcms_239821.pdf.
26. Nshimbi and Fioramonti, ‘A Region without Borders?’
27. Crush and Williams, ‘Labour Migration Trends and Policies in Southern Africa’.
28. Informal Interview with Zaheera Jinnah, migration expert at University of
Witwatersrand, 23 May 2014.
29. Costs and Benefits of Migration, World Migration (2005).
30. Kristina Touzenis, ‘Free Movement of Persons in the European Union and
Economic Community of West African States: A Comparison of Law and Practice’,
UNESCO Migration Studies (2012).
31. Nshimbi and Fioramonti, ‘A Region without Borders?’
32. Ibid.
33. European Commission, ‘Evaluation of the Impact of the Free Movement of EU
Citizens at Local Level’ (2014), http://ec.europa.eu/justice/citizen/files/dg_just_
eva_free_mov_final_report_27.01.14.pdf.
34. European Commission, ‘Evaluation of the Impact of the Free Movement of EU
Citizens at Local Level’.
35. See http://www.nytimes.com/2013/05/28/world/europe/28iht-letter28.html.
36. At http://allafrica.com/stories/201307051072.html.
37. Reiner Munz, Erste Bank, Thomas Straubhaar, Florin Vadean and Nadia Vadean,
‘What Are the Migrants’ Contributions to Employment and Growth? A European
Approach’, Hamburgisches Weltwirtschafts Institute, 2007.
 Open Borders in Southern Africa? 99

38. Munz et al., ‘What Are the Migrants’ Contributions to Employment and
Growth?’
39. Crush and Williams, ‘Labour Migration Trends and Policies in Southern Africa’.
40. Ibid.
41. Fioramonti, ‘Is It Time to Take Free Movement of People in Southern Africa
Seriously?’
42. Ibid.
43. International Organization for Migration (IOM), http://www.iom.int/cms/en/
sites/iom/home/where-we-work/africa-and-the-middle-east/southern-africa.html.
44. Interview with Joe Rispoli, International Organization for Migration (IOM), 21
May 2014.
45. See http://www.opendemocracy.net/chris-nshimbi/state-of-denial.
46. Hussein Solomon, ‘Toward the Free Movement of People in Southern Africa?’,
Institute for Security Studies (1997), http://www.issafrica.org/uploads/paper_
18.pdf.
47. Solomon ‘Toward the Free Movement of People in Southern Africa?’ (1997).
48. Draft Protocol on the Free Movement of Persons in SADC, http://www.unisa.ac.za/
contents/faculties/law/docs/FACILITATION_OF_MOVEMENT_OF_PERSONS_
SADC_1996.pdf.
49. V. Williams and L. Carr, ‘The Draft Protocol on the Facilitation of Movement of
Persons in SADC: Implications for State Parties’, Migration Policy Brief No. 18,
2006.
50. Williams and Carr, ‘The Draft Protocol on the Facilitation of Movement of Persons
in SADC’.
51. Nshimbi and Fioramonti, ‘A Region without Borders?’
52. Protocol on the Facilitation of Movement in SADC, http://www.sadc.int/
files/9513/5292/8363/Protocol_on_Facilitation_of_Movement_of_Persons2005.pdf.
53. Charter of Fundamental and Social Rights, http://www.sadc.int/files/6613/
5292/8383/Charter_of_the_Fundamental_Social_Rights_in_SADC2003.pdf.
54. Interview with Joni Musabayana, Deputy Director, International Labour
Organization (ILO), South Africa, 25 July 2014.
55. Informal Interview with Zaheera Jinnah, migration expert at University of
Witwatersrand, 23 May 2014.
56. Nshimbi and Fioramonti, ‘A Region without Borders?’
57. Ibid.
58. Interview with Joni Musabayana, Deputy Director, International Labour Organization,
South Africa, 25 July 2014.
59. Interview with Loane Sharp, Labour Market Specialist at Adcorp, 23 July 2014.