Wednesday, June 05, 2013

Is the BBC afraid of the City of London?

Cross-posted from the Treasure Islands blog, and best read in the context of our recent publication, the Finance Curse, our research into what happens to a country (a tax haven or otherwise) when it starts to host an oversized financial centre.
I've chosen this headline because I wanted to follow on from an earlier blog I wrote entitled Is the BBC afraid of tax havens? That was a very good question then, and it remains a very good question now. Amid all the global noise now about tax havens, the BBC remains a timid follower of the story, at best, raising serious questions of the extent to which the BBC is fulfilling its mandate to be, in the words of its Director General, ‘unflinching in holding power to account.’

Today's blog looks at research from Dr. Mike Berry, lecturer at the University of Cardiff. It focuses on one small but influential part of the BBC - its flagship Today Programme on BBC Radio 4. I think it's fair to say that my colleagues and I have always been under the impression - hard to prove but still a strong impression -- that the Today Programme is substantially 'captured' by the City of London, the UK's Financial Services industry. (And for what 'capture' means here, see this.)

The article is called The Today programme and the banking crisis, and it meticulously researches six weeks' of coverage by the Today Programme, during the crucial period of the British bank rescues in October 2008. The article's abstract should surprise nobody who knows the programme:
"Results indicated that City sources dominated coverage, particularly during the two- week period around the British bank rescue plan. The consequence of this was that listeners were offered a prescribed range of debate on the UK government’s bank rescue plan and possible reforms to the financial sector. The research raises key questions regarding impartiality and balance in public service broadcasting."
Berry's paper provides some context, exploring other analyses that have been done of the media response to particular episodes: Forte's hostile takeover of Granada; the FT's coverage of the Asian financial crisis, the recent Greek crisis, and more. He cites earlier research into the run-up to Ireland's country's banking crisis, for example:
"They [journalists] viewed them [bankers and property developers] as friends and allies and essentially became advocates for them. Their approach was justified editorially because many developers and bankers limited access to such an extent that it became seen to be better to write soft stories about them than to lose access."
(Others have spoken of a Green Jersey agenda, which turned support for the Irish financial sector into something patriotic.)

All this goes back to the 'capture' I've been talking about.

The article looks at the entire range of the Today Programme's coverage of banking from September 15th, 2008, the day Lehman Brothers went bankrupt, to October 31, 2008, three weeks after the conclusion of the British banking rescue.

The results? This first graph gives a good idea:
Berry says this effectively understates the City input,
"since many of the individuals classified in Figure 1 as politicians, regulators, academics and business representatives also have close links with the City and broader financial services community.
. . .
This is magnified by the presence of other groups such as business lobbyists, neoclassical economists and journalists from the financial press who all tend to share a similar laissez-faire outlook on how the economy should be managed."
And for me, a more dramatic statistic:
"Organised labour is almost completely absent from the Today programme with only a single appearance from one union leader (0.4%)"
That shows an astonishing myopia from the BBC, especially given the City of London's impact of organised labour, as shown here.

Although Berry studied six weeks' radio output, he paid particular attention to a crucial two-week period around the banking bailout, from October 6th-17th, 2008. And here the picture is particularly telling:
City voices were dominant and overwhelmingly supportive of the bailout, and  alternatives -- such as full nationalisation - was never discussed, despite suggestions elsewhere that this could or should have been done. Business Secretary Vince Cable said this year that failure to fully nationalise Royal Bank of Scotland was:
"the worst of all worlds: responsibility without control."
(See also "Box 6: The capture of the British establishment" in the Finance Curse book, for a similar set of related issues demonstrating the capture of reform proposals by the City establishment.)
The Today Programme journalists used the word 'meddling' when describing politicians' involvement in the banking mess -- as loaded a word as you might find in this whole debate -- and Berry summarises:
"The assumption built into some reporting and the position taken by all sources interviewed during the crisis was that nationalisation would be bad for banking and bad for the wider economy."
he also cites research showing that it isn't necessarily a bad idea to have state-owned banks, but makes the point:
"The purpose of this analysis is not to argue for one model of banking over another. There are arguments for and against extensive state involvement in banking. However, what is clear is that listeners were offered a very limited range of debate in which the case for either short- or long-term state ownership is missing."
Now for something else, from the same paper.
"What is also missing is a broader series of structural critiques about the functioning of the finance sector and its role in Britain’s economy. For instance, Will Hutton (1996) has argued that the City has negative impacts on the wider economy and needs to be down- sized. Hutton argues that the City, by drawing in foreign investment, forces up sterling which severely damages manufacturing. He also argues that the City spurns long-term productive investment in favour of short-term financial speculation and that this unbal- ances the economy and creates asset bubbles and instability:

"The City of London is now too big and too risky for a country our size. It is not just that bailing it out has cost £850bn, as the National Audit Office reported, and that the recession it imposed has led to the biggest ever increase in peacetime public borrowing. For years it has crowded out exporters and manufacturers. Money has flowed into the City forcing the pound up to crazy levels, and making it hard for exporters to compete, while at the same time generating credit flows that have made property, construction and financial services the routes to quick profits ... It should be no surprise that half the growth between 1997 and 2007 came from finance, construction and property. Over the same period, manufacturing shrank from 20% to 12% of our national output. (Observer, 6 December 2009)"
Which speaks directly to the Finance Curse analysis. This perspective, Berry notes, was entirely absent from the Today Programme's analysis (and the Finance Curse analysis has been absent, I should add, from the BBC's entire output.)
Berry concludes:
"This research has demonstrated that, in reporting the banking crisis, the parameters of debate on the Today programme are set by a narrow group of City sources, regulators, IMF spokespersons and front bench politicians. As Elliot and Atkinson (2009) have noted, these groups share an almost identical outlook on the finance industry and how it might be reformed.
. . .
City voices are given almost monopoly status to define the issues and how they might be resolved."
Of course it's harder to find alternative 'outsider' voices on finance: most expertise in this highly complex area is obviously to be found in the City of London. But there are plenty of experts out there who don't toe the City's party line, even if they are harder to find.

So what if it's harder to find them? Since when was it the BBC's job to do what's easiest, when it could instead strive to do what's balanced, or even what's right?

Many people these days refer to the BBC as the Business Broadcasting Corporation. I'm inclined to say that they have a point.


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