Everybody in the world knows who is responsible for the wrongdoing of News Corp: Rupert Murdoch. More than any individual alive, he is to blame. Morally, the deeds are his. He paid the piper and he called the tune.
Tom Watson, UK Labour MP, passes his judgement on News Corporation chairman Rupert Murdoch and his role in the phone-hacking scandal that culminated in the closing of the popular News of the World.
Overnight, a British parliamentary inquiry into allegations of phone hacking by UK newspapers handed down its findings. It does not make for pleasant reading for News Corporation, whose News of the World Sunday tabloid was at the centre of the storm. NotW is no longer with us, having been shuttered last year. But the fallout continues, with Labour and Liberal Democrat MPs declaring that octogenarian media tycoon Rupert Murdoch was not a ‘fit and proper person’ to run a news empire.
The one saving grace for Murdoch is that while agreeing with the broad thrust of the inquiry report, the Conservative MPs on the committee flat out rejected the judgement — championed in particular by Labour’s Tom Watson — that Murdoch should be hammered. As the Conservatives’ Louise Mensch argued, it was not the committee’s place to make a determination of whether Murdoch was a ‘fit and proper’ media proprietor. Furthermore, she felt that given the size of the News Corp empire, it was simply too much to expect that one man could possibly know every single detail of what was happening at one newspaper in one country in which his company operated.
Despite the partisan split, the committee’s majority findings will inevitably have significant impacts. In the United States, where News Corp is primarily based, the inquiry report may prompt the Justice Department or the FBI to investigate News Corp’s conduct in that country. Even if it does not, it could still increase shareholder pressure on News Corp to consider management changes — while Murdoch is unlikely to be ousted out in a boardroom coup, the heat may bring forward any retirement plans he already has.
There could still be further ramifications in Britain as well. The communications regulator, Ofcom, could force News Corp to divest itself of its sizeable shareholding of subscription television broadcaster BSkyB — a company that News Corp was attempting to take over outright just as the phone hacking scandal erupted. This scenario becomes even more likely if the parliament as a whole takes up the committee’s report, with the possibility of a vote in the House of Commons to condemn Murdoch and News Corp.
Today is plainly a dark day for News Corp. But there will likely be many more dark days to come.
By holding down rates in the state-controlled banking system since 2003, the [Chinese] government promoted an investment-led boom in exports. That boom has reached the end of the road.
Wall Street Journal editorial
In recent months, markets have been rattled by the prospect that China’s state-led engine for economic growth is spluttering — or, more charitably, the state is taking its foot off the accelerator. The plentiful supply of labour that has helped to supercharge the Chinese economy is starting to dry up (although even this can only be a relative judgement in a country with well over a billion people). That means that greater emphasis must be placed on lifting productivity.
China’s workers are certainly becoming more productive, partly due to the fruits of the country’s development: a more educated workforce, and greater technical innovation. But there is much still to be done. Capital misallocation remains a danger for China. To overcome this, greater liberalisation of financial markets is necessary. This isn’t just a story about the yuan — which American politicians love to attack as artificially undervalued. It’s about capital controls, with government calling the shots on where banks should invest the savings of Chinese workers. China’s banks, while seemingly profitable, are still highly dependent on the state. They hold vast sums of non-performing loans, and given rising costs of capital, this is hobbling the domestic banking sector.
Less state-directed investment would aid the growth of China’s financial sector. It would also limit the scope for corruption, with senior bureaucrats less able to grant favours to feather their own nests. Finally, a freer economy will be less open to criticism from foreigners. All in all, the Wall Street Journal reckons that it’s a recipe for making China easier to govern.
When the Fed leans toward the bright side, it isn’t accidental. As the organization that sets monetary policy and communicates the likely future direction of interest rates, the Fed feels the need to be careful about what it says, and goes out of its way to convey calmness.
Simon Johnson, Bloomberg View
Last week, the US Federal Reserve released the results of its banking ‘stress tests’ — intended to show the health of the country’s financial sector in the face of hypothetical future crises. Many (but not all) institutions apparently passed with flying colours. Some banks were reckoned to vastly exceed the sufficient level of capital to withstand unexpected shocks, and were therefore allowed to increase their dividend payments and buy back shares.
Economist Simon Johnson argues that this is wrong-headed. Given the amount of uncertainty in global financial markets, he contends that now is not the time to be relaxing requirements on American banks. Stress tests might be designed to model crises. But their robustness ultimately depends on the quality of the assumptions underpinning them. Johnson considers the Fed to have been too optimistic. For instance, in the light of the European debt crisis, it only considered the prospect of one major European bank going belly up. As Johnson notes, history suggests such failures are seldom limited to just one institution — the interconnectedness of the financial system means one bank failure can trigger terminal problems for other banks.
Even putting this to one side, the core problem is that such stress tests imply an ability to forecast the future. The events of the past five years confirm that no regulator is omniscient. Far better, says Johnson, to err on the side of caution rather than risk another financial catastrophe.
Media misconduct and the regulatory fallout
Much of the commentary around the British media inquiry chaired by Lord Justice Leveson has expressed nothing short of delight about the prospect of a sledgehammer being brought down upon Rupert Murdoch, the head of News International (the UK arm of News Corporation). Outrage at the phone-hacking conducted for the now defunct Sunday tabloid News of the World, and further evidence that journalists at a number of newspapers (including News of the World’s daily counterpart, The Sun) have been bribing public officials, has revealed much anger about the power and influence of Murdoch, with many hoping to bring the old man down a peg or two.
But caution is also required about what the Leveson inquiry might lead to. And Brendan O’Neill delivers a bucketful. O’Neill is concerned that Lord Justice Leveson has been demonstrating some ‘authoritarian’ inclinations, including an assertion that his own inquiry should be above public criticism. The fear is that Leveson may seek to curb the freedom of the press — backed by many, including some from higher-brow broadsheet mastheads, who disapprove of the muckraking that passes for tabloid ‘journalism’.
It seems plain, based on the evidence presently available, that too many journalists have considered themselves above the law in plying their trade. Such lawbreaking cannot be defended. That, however, does not mean a full-frontal assault on the press — even the gutter press — is justified. Crimes should be prosecuted, whoever they are perpetrated by and against. The fact they have apparently not been is less a fault of the media, and more the independent institutions of authority and justice that have until now failed to hold them to account.
Textbooks and Apples
As many parents and students know, paying for new textbooks — whether for high school or university — can leave a wallet feeling decidedly lighter (or a credit card painfully overloaded). So many will have been delighted at the prospect that the cosy ‘cartel’ of textbook publishers was going to be cracked wide open by tech giant Apple. This month, Apple announced a new model for distributing textbooks via its popular iPad tablet device. Their digital books would be cheaper than the hardcopies stocking shelves, and would also allow individual schools and faculties to produce their own course material to match their syllabuses.
But hold the (i)phone, warn the editors at Bloomberg View. They note that the picture isn’t quite as rosy as Apple, and its supporters, are making out. For a start, the fixed upfront cost of buying an iPad has to be factored in — while well known, they certainly aren’t ubiquitous (even among young consumers who might be regarded as more tech-savvy). And Apple’s digital textbooks, because they are easier to produce, could render cheap second-hand textbooks obsolete more rapidly. In fact, rather than break apart the limited supply of textbooks, Apple looks to be carving out a new — and potentially lucrative — monopoly for itself. Its digital textbooks will essentially only be compatible with Apple devices (tough luck for those who are Android users), while Apple will claim a 30 per cent slice of the sales revenue from all digital textbooks sold. Given public funding of education systems, and direct subsidies for many students, the already wildly profitable Apple would be getting a decent bite at some serious tax dollars.
One way around this, as the editors propose, is to require all education institutions that receive taxpayer money to support ‘open’ digital resources. That would allow for platform-neutrality (so if you own one of Amazon’s Kindle readers, but not an iPad, you’re not going to be penalised). But it presumably would also weaken the benefits to Apple, since its capacity to make money from digital books would be reduced — you wouldn’t need to buy an iPad in the first place, but you also wouldn’t need to buy texts using its own controlled marketplace (through which it is able to take its 30 per cent cut). To a large extent, innovation in this area is virtually inevitable — as people become more accustomed to reading books on digital devices, they will surely come to expect the ability to study using those devices as well. But without profit, producers’ innovative drive will be lessened. The question here is, would insisting on a more competitive platform be better (at least from taxpayers’ perspective) than allowing Apple’s model to flourish now?
