Newspapers? Boring!

The Atlantic has a phenomenal piece in this month’s issue on the failing newspaper industry. We have all heard innumerable theories as to why our flagship papers are in bankruptcy (the Internet, an illiterate public, corporate control, etc.) but few have identified the stilted, overwrought prose style which has long been the newspaper industry standard, one which needs 1,500 words to express an idea requiring 500.

Stogy phrasing and sheer length are the main culprits The Atlantic identifies for print’s decline, which could be some of the best news in years for those still interested in the business of news. Fixing a “failing business model” would take some real work, but telling reporters not to write in an obscurantist fashion would be both easily implementable and fantastically cheap.

Some of Michael Kinsey’s excellent analysis:

Take, for example, the lead story in The New York Times on Sunday, November 8, 2009, headlined “Sweeping Health Care Plan Passes House.” There is nothing special about this article. November 8 is just the day I happened to need an example for this column. And there it was. The 1,456-word report begins:

“Handing President Obama a hard-fought victory, the House narrowly approved a sweeping overhaul of the nation’s health care system on Saturday night, advancing legislation that Democrats said could stand as their defining social policy achievement.”Fewer than half the words in this opening sentence are devoted to saying what happened. If someone saw you reading the paper and asked, “So what’s going on?,” you would not likely begin by saying that President Obama had won a hard-fought victory. You would say, “The House passed health-care reform last night.” And maybe, “It was a close vote.” And just possibly, “There was a kerfuffle about abortion.” You would not likely refer to “a sweeping overhaul of the nation’s health care system,” as if your friend was unaware that health-care reform was going on. Nor would you feel the need to inform your friend first thing that unnamed Democrats were bragging about what a big deal this is—an unsurprising development if ever there was one.

He’s making a lot of sense here, folks:

The software industry has a concept known as “legacy code,” meaning old stuff that is left in software programs, even after they are revised and updated, so that they will still work with older operating systems. The equivalent exists in newspaper stories, which are written to accommodate readers who have just emerged from a coma or a coal mine. Who needs to be told that reforming health care (three words) involves “a sweeping overhaul of the nation’s health care system” (nine words)? Who needs to be reminded that Hillary Clinton tried this in her husband’s administration without success? Anybody who doesn’t know these things already is unlikely to care. (Is, in fact, unlikely to be reading the article.)

Definitely check out the full article.

Gross Deceptive Product

Dissident economist Joseph Stiglitz writes a fantastic op-ed in a recent issue of The Guardian about the number-twisting that goes into our GDP figures. The article is well worth reading, as it challenges many of our basic assumptions regarding such concepts as “economic health”, “vitality”, and “well-being”.

Stiglitz argues persuasively that “GDP maximization” is often at odds with what most would consider a basic standard of living. Clean air laws, water purity acts,  food safety guidelines and a host of other legislation technically reduce our GDP, but they also make our lives incomparably better. By taking GDP as a paramount indicator of economic health, Stiglitz contends, many economists neglect their citizens’ standard of living.

Stiglitz also mentions a lack of any measure of income inequality in GDP statistics – an important point, as our income disparity is now the greatest it has been since the gilded gilt of the 1920s.

And we cannot forget the massive role of government in our recent GDP figures. The value of government spending is inherently unmeasurable – we must simply take their word that the money they spent was on items of value (and not, say, financial executive compensation). As Stiglitz mentions:

In the last 60 years, the share of government output in GDP has increased from 21.4% to 38.6% in the US, from 27.6% to 52.7% in France, from 34.2% to 47.6% in the UK, and from 30.4% to 44.0% in Germany. So what was a relatively minor problem has now become a major one.

Stiglitz’s weakness, however, stems from his inability or unwillingness to mention some of the more unsavory methods of boosting reported GDP. The faults he recognizes, while nefarious, are generally well known. But our government engages in many, many other artifices in order to make our GDP numbers look better.  Here I refer specifically to the practice of “product substitution” and “income imputation”.

Harper’s ran a superior article about this phenomena in its May 2008 issue. In short, the doctrine of “product substitution” states that if flank steak becomes too expensive, consumers are expected to move down to ground beef – the same product is being consumed, but in less expensive a form. In this instance, for GDP calculators, the numbers for ground beef sales are adjusted upward to correspond to what flank steak would have cost (since the two products are made of the same cow). The GDP remains the same, but standard of living obviously goes down.

Also mentioned by Harper’s, but curiously neglected by Stiglitz, is the idea of “income imputation”. Put shortly, the Bureau of Economic Analysis, unbeknown to its subjects, will impute (or add) to household incomes at its discretion. From Harper’s:

The Bureau of Economic Analysis “imputes” to nationwide personal income data (known as phantom income boosters; for example, the imputed income from living in one’s own home, or the benefit one receives from a free checking account, or the value of employer-paid health- and life-insurance premiums). During 2007, believe it or not, imputed income accounted for some 15 percent of GDP.

I would strongly suggest reading the above Harper’s article in full – it gives a deep and terrifying account of the extent to which our government engages in daily statistical fraud. Joseph Stiglitz, valiant though his attempt may have been, unfortunately cannot give a full picture of our government’s manipulation.

Some sense from The New Republic

The New Republic has often drawn my ire for its steadfast support of the status quo, its corporatism, its hostility to the consumer, and, at times, its open agitation for war. I therefore take all the more pleasure in directing you to this informative piece on the Federal Reserve and its bungling of our current crisis. One would hardly expect such clear analysis from a publication whose role is to manufacture consent for the Fed’s policies, and one hopes such criticism portends a more vigorous phase in the magazine’s long and illustrious career.

After a short outline of the Fed’s birth and original purpose, TNR focuses on the organization’s role in the various booms and busts of the past 30 years. Startlingly, TNR asserts the Fed’s centrality to the boom-bust cycle, overturning the conventional wisdom that our central bank is merely an observer, able to lend a push in one direction or a pull in another, but largely helpless to shape the overall landscape. In their words:

The decisions he made during the recent crisis weren’t necessarily the wrong decisions; indeed, they were, in many respects, the decisions he had to make. But these decisions, however necessary in the moment, are almost guaranteed to hurt our economy in the long run–which, in turn, means that more necessary but harmful measures will be needed in the future. It is a debilitating, vicious cycle. And at the center of this cycle is the Fed.

Strong words; and a few even stronger:

Enabled by the Fed, our system’s tolerance for risk is out of control. This is an increasingly dangerous system. It is only a matter of time until it collapses again.

The New Republic attributes this risk to the age-old complaint: bankers and CEOs are simply not punished for poor performance – on the contrary, they are rewarded with dollar amounts we mere mortals can hardly fathom. For evidence they cite Citigroup’s $100 million CEO pay packages to Robert Rubin and Chuck Prince – some of the main architects of our current boondoggle.

When discussing solutions, unfortunately, TNR once again displays its establishment colors. The recommendations it puts forth are mostly watered down, and appear limp when compared to the magnitude of the problems they address.

“Reasonable personal liability” for failing CEOs sounds nice, but will inevitably translate to a small slap on the wrist. Contrary to popular belief, there is not a large difference between a $200 million annual paycheck and a $100 million paycheck. What seems like “reasonable liability” to most CEOs still leaves them unconscionably rich. We must truly divorce ourselves from the idea that as a financial leader you can bankrupt thousands of people and still walk away rich as a Midas. If this means the CEO goes bankrupt with his shareholders – well, so be it. Nobody said banking was a safe business.

Likewise with their reccomendations regarding conflicts of interest. The New Republic advises a “cooling off” period for public servants who enter a regulatory position after making their fortune in the private sector (for example Hank Paulson, who retained his Goldman Sachs holdings while serving as Treasury Secretary).

This is not enough. If our crisis has taught us anything (something which remains to be seen), it is that financial ties run deep, and are often not erased by time. It is ludicrous to appoint to a regulatory position anyone who has ever had anything to do with the financial industry. Such conflicts of interest are inherent – “cooling off period” or no.

A weak finish to an otherwise outstanding article.