Governments can use ads to manage the media even in robust democracies

By Rob 0

On 12 February, a day after the first phase of the seven-phase Uttar Pradesh election ended, the widely read Dainik Jagran newspaper published exit poll results projecting a victory for the Bharatiya Janata Party (BJP) in the state, in contravention of India’s electoral laws and its editor was arrested. A recent report by political scientist Anoop Sadanandan contends that although the news item was removed, it helped the BJP wave in the state.

New research by Adam Szeidl, professor at the Central European University, and Ferenc Szucs of the University of California, Berkeley, shows that the media risks political capture even in robust democracies. They demonstrate that Hungary, a parliamentary democracy, with political power alternating between the left and right, often sees exchange of favours between politicians and the media, in the form of increase in advertisements from state-owned firms being reciprocated by favourable reporting for those in power. For example, they show that state-owned firms’ advertising allocated to Metropol, a tabloid in Hungary, rose substantially in a short time after it was bought by a right-wing investor in 2011. In contrast, private firms did not increase their advertising share of Metropol, suggesting there was no apparent sudden increase or change in the reader composition of the tabloid to warrant more advertisements. They conclude it was “media ownership, not media audience” which drove advertising favours.

Also Read | Media Capture through Favor Exchange

The Dutch election results may have brought relief for investors as it led to the defeat of the extreme right-wing populist who had challenged the incumbent centre-right leader of the country but the challenge posed by populist leaders to incumbents around the globe is unlikely to disappear as long as economic uncertainty persists. Using data from the multi-year European Social Survey (ESS), a latest research paper authored by Luigi Guiso, professor at the Einaudi Institute for Economics and Finance, and others, shows that voters tend to lose trust in traditional political parties when faced with economic uncertainty. This increases the allure of populist politics. In response, many establishment politicians also embrace some of the populist policies, leading to a surge in populism more generally in the polity.

Also Read | Demand and Supply of Populism

An experiment in a city in Netherlands, wherein envelopes containing cash or bank cards were intentionally “mis”-delivered to both rich and poor households, with the correct address being mentioned in the envelope, saw a significantly higher proportion of rich returning the envelopes to the correct address. However, the researchers, using various other sub-experiments, caution against concluding that the poor are necessarily more selfish. Many other factors could have been at play. For example, the rich households most probably identified the original intended recipient as someone worse off from them, owing to the “middle-class” neighbourhood address, while the poor likely identified the intended recipient as being someone better off than them. The research concludes that had the poor also had more money, they were likely to behave exactly like the rich.

Also Read | Are the Rich More Selfish than the Poor, or Do They Just Have More Money? A Natural Field Experiment

The official GDP (gross domestic product) statistics for October-December quarter likely failed to capture the true impact of “demonetisation”, especially on the informal sector of the economy, owing to the way quarterly GDP figures are estimated, according to R. Nagaraj, professor of economics at the Indira Gandhi Institute of Development Research, Mumbai. In his recent piece in the Economic and Political Weekly, he argues that with inadequate data available on a quarterly basis, and the CSO’s reliance on flawed indicators of corporate growth, the quarterly GDP numbers do not reflect the ground reality accurately.

Also Read | Quarterly GDP Estimation

China’s economic growth since the 1980s has been accompanied by a staggering rise in inequality, in large part owing to rural-urban differences which have been arguably exacerbated by the residential permit (hukou) system. However, it seems there has been a “great turnaround in Chinese inequality”, at least by 2010, according to a recent piece in Voxeu by Ravi Kanbur, professor of economics at Cornell University, and others. The economists attribute the transformation to the recent efforts of the Chinese government to provide more social security and to strengthen minimum wage regulations, which complement China’s stated intent to “rebalance” its economy away from investment and export-led growth to a more internal consumption-led growth. Besides, migration may have tightened rural labour markets in China helping raise incomes in rural areas and thereby mitigating inequality.

Also Read | The great Chinese inequality turnaround

Economics Digest runs weekly, and features interesting reads from the world of economics.

First Published: Fri, Mar 17 2017. 08 58 AM IST

[Source: livemint.com]