Andreas Whittam Smith in The Independent
How did the media on the one hand and the financial markets on the other build themselves up as such great forces in society?
Thursday, 26 May 2011
It was surely resentment at the power of the media that led a gang of masked men to vandalise reporters' cars outside the home of Ryan Giggs on Tuesday. An injunction taken out by Mr Giggs to prevent press coverage of an alleged extramarital affair had been dramatically revealed in the House of Commons on Monday after details had been made freely available on Twitter.
As to the power of the financial markets, my colleague Hamish McRae noted yesterday that the Greek government "may have the electorate's mandate but it does not set policy. That is being determined... in Brussels, Berlin, Frankfurt and Washington. Power has gone". In turn the politicians and civil servants in such cities look to the financial markets to discover what actions are required. Take another case, Spain. As the Financial Times commented: "Watching Spain's agony as it tries to escape the clutches of the eurozone's expanding sovereign debt crisis is like being a spectator at a particularly cruel gladiatorial fight. Whenever the weaker contestant skilfully sidesteps an assault by his opponent, he is promptly confronted with a still more ferocious attack."
How did the media and the financial markets build themselves up as great powers? The most significant date in plotting the growing influence of national newspapers in Britain was 17 November 1969 when Rupert Murdoch launched the Sun as a tabloid. Thirteen years later Associated Newspapers created the Mail On Sunday. In little over a decade, therefore, the market for scandalous news had been substantially expanded. Until then the Daily Mirror and the News Of The World had dominated this area.
This was an era when everything began to change, as much in the financial markets as in the behaviour of the media. Governments strictly controlled exchange rates, for instance, until the early 1970s. When US President Richard Nixon closed the so-called "gold window" on 15 August 1971, ending free exchange between US dollars and gold, he brought to a close a 25-year period during which the world's leading currencies, including sterling, had been fixed in terms of the dollar. Speculation against them had been almost impossible.
From then onwards they could "float", and when a particular currency declined in value against its neighbours', the government concerned began to feel the pressure. In 1979, one of the first decisions of Mrs Thatcher's newly formed government was to abolish UK exchange control. It was a welcome act of self-confident liberation, but it also, in accordance with the law of unintended consequences, handed a weapon to currency speculators, who would use it ruthlessly in 1992 to drive Britain out of the European Exchange Rate Mechanism on a day known forever afterwards as "Black Wednesday".
Repeated oil shocks since the 1970s have also contributed to the power of financial markets. Essentially a higher oil price takes spending power out of the pockets of consumers and places it into the treasuries of countries, mainly in the Middle East, who have no means of spending their new wealth – other than by investing it back into the financial markets of the West. By this mechanism the financial markets have become larger and larger in relation to national economies. Since the first oil shock in 1973 when the price of oil shot up to $10 a barrel – it's now $100 – there have been at least a dozen oil spikes, each time magnifying the size of the financial markets as the unspent surplus was invested in securities.
During the same period, the power of the media has also continued to increase. In the UK, the politicians partly brought this on themselves. From the early 1990s they began a process of non-stop electioneering. So great are the penalties for losing power – the splitting of the party into warring groups, the lengthy period in exile – that party leaders feel they must do what it takes to regain or retain office.
In relationship to the press, Tony Blair described what was needed: "Our news today is instant, hostile to subtlety or qualification... To avoid misinterpretation, strip down a policy or opinion to one key clear line before the media does it for you. Think in headlines." Then when Labour came to power in 1997, the Government Information Service was taught the same rule. Alastair Campbell told Whitehall press officers a few months after the election: "Decide your headlines. Sell your story and if you disagree with what is being written, argue your case." But the more the political parties sought control, the more aggressively the press struck back.
Add to this the dramatic expansion of unregulated digital media. The first email was sent in 1971 (the two computers were sitting next to each other!). The first web browsers became available in 1978. The first social networking site saw the light of day in in 1994. MySpace was created in 2003, Facebook in 2004 and Twitter in 2006.
I don't describe the rise of the media and the financial markets to positions of great power to argue that something should be done about them, though they are both, in their different ways, crude and rough. I particularly dislike the untrammeled greed of bankers though doubtless they equally hate the untrammeled inquisitiveness of journalists. Where the power of media and finance is at its most objectionable, however, is in their ability to deter governments from protecting us from their worst excesses.
In the United States the banks, for instance, use their formidable lobbying skills and resources in Congress to deter lawmakers from curbing their abuses and this phenomenon in turn has the effect of holding back regulation in other markets around the world. In Britain, so far as the media is concerned, there is a strong case for a law on privacy, but I doubt whether any Cabinet would have the courage to propose such a measure. Of course even democratically elected governments can be frightening bodies, but so are their most formidable opponents, finance and media.