The difficulty of manufacturing consent on the bank bailout

One of my TIME overlords called me this afternoon to say that he had read James Surowiecki’s thoughtful defense of the Geithner plan in the latest New Yorker and Joe Stiglitz’s thoughtful attack on it in today’s New York Times and the juxtaposition made his head hurt.

Welcome to my world, I more or less said. Regular readers of this blog know I’m more in Surowiecki’s camp than in Stiglitz’s, but I’m far from sure about it, so I try to give at least a halfway fair hearing to every halfway credible argument on this banking stuff. Doing that is enough to make my head spin, day after day after day.

A few years ago, I finally got around to reading Noam Chomsky and Edward Herman’s famous book Manufacturing Consent, which is all about how the mass media craft the news agenda to protect the interests of those in power. It was kind of weird reading for me, given that during some of the late-1970s and early-1980s news events that Chomsky and Herman describe I was getting a significant amount of my information from the East Bay Express and KPFA radio (which both specialized in manufacturing dissent) and then from the Dutch media (which presumably had different powerful interests to protect than the American TV networks did). Even correcting for that, I didn’t see what was so scandalous about the mass media acting as establishment-driven news filter, as long as that establishment was subjected to some checks and balances and could, if it really went off the rails, be thrown out. Societies work better when there’s broad agreement about important matters, and if some of that agreement has to be manufactured by the mass media, so be it.

I’m sure there is still a lot of that consent-manufacturing happening on TV (although less than there used to be), but I get very little of my information from TV. The media I consume are a cacaphony of often diametrically opposed voices. And on this banking stuff, they tend to be sincere, thoughtful, disinterested voices. The disagreements don’t follow partisan lines. It’s not a dumb vs. smart thing. It’s just that it’s not obvious what the right answer is and the financial establishment which once had all the answers now has almost no credibility. So we all argue and argue and argue.

Which is far better than manufacturing consent to a bad idea, of course. But it’s really tiring, and it makes me very glad not be working in communications in the Obama administration.

Stocks Rally Further in Run-up to EU Summit

MOSCOW — Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.

willhslade

Hi Justin,

If I might suggest a great book that sheds a lot of light on banking practices in this country?

Read Infectious Greed by Frank Partnoy.

Infectious Greed: How Deceit and Risk Corrupted the Financial Markets

Almost all the financial innovation of the past thirty years is designed to avoid taxation and regulation. There are hundreds of pages of examples in this book which show the motives of the bankers and what happens when they get it wrong.

Usually, it’s nothing. Accounting frauds are very difficult to prosecute, and the government picks up the tab.

Just a suggestion.
Will
Justin Fox

@willhslade: Thanks! I’m a big Frank Partnoy fan and have read lots of his academic papers, but never, I’m ashamed to say, that book.
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While I’m at it, let me plug his new book, about the Ponzi schemer who put Bernie Madoff to shame:

The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals
whatsmyteam

Hello Justin,

I’ve been around of late but rarely commenting.

It is a tangent to this point really but i’ve had a tiny realisation lately about the media and economics/business. For the first time in several decades the majority of the population have suddenly realised that economics is a discipline with multiple competing schools of thought. That probably sounds silly to someone who specialises in it but it has come as a shock to many out here in the real world that there have been different ideas around economics and even competing theories of capitalism.

Most of the mass media coverage and dynamics for the last decade or more down here (in Australia) has been as though “economics” was a fixed thing and not a contested field and as though debates over issues of development, investment, taxes, government policy etc. were between “economics” and everything else rather than within the field.

It is one of the interesting consequences of the bust and the recession (which we are yet to technically enter down here) is that debates between economists are suddenly news.

Your thoughts?

Marcus (of Australia)
previouslyjustlindas

Thank you for admitting that this makes your head spin too. It really is hard to know what to believe and I think the administration makes it harder because it says one thing and then takes action that imply the potential for a different outcome.

I’ve stated my concern about this new toxic asset plan before, but I have to say the actions taken on the car industry give me more hope that you are correct about the administration’s plans. I guess if you’re going to do a test run on how to restructure a large, complicated, multi-national corporation with a large financing operation, it is easier to start with Big Auto as most of the players already expect a massive restructuring or a liquidation. If they really can hold fast and force necessary change, maybe it will be a blue print for our financial sector’s future.