Tuesday, 8 June 2010

Miron: The Decline of Newspapers Shows Capitalism is Working

Yesterday I blogged about the slow death of traditional newspapers.

Today I discovered a piece by Jeffrey Miron for Forbes - The Decline of Newspapers Shows Capitalism is Working:

The staff of the Federal Trade Commission has released a draft discussion paper titled "Potential Policy Recommendations to Support the Reinvention of Journalism." The draft suggests that government should "support" journalism because:

existing newspapers are struggling to find a sustainable business model for the future.

This call for government funding will horrify defenders of the First Amendment, since such funding would inevitably pressure newspapers and other media to soften their critiques of government.

And the entire document is bizarre because it seems to regard the decline of traditional newspapers as something that policy should prevent. This view exhibits a fundamental misunderstanding of capitalism, which works because failure of outdated industries allows resources to flow to more productive uses.

One would think that a government agency devoted to promoting competition would understand that point.


The authors of the document acknowledge that "care must be taken to ensure that government support does not result in biased and politicized news coverage", but they are either naïve or disingenuous to suggest that such politicisation can be avoided.

The report outlines "a variety of proposals ... to allow further government support for journalism through either indirect or direct means":
  • Establish a “journalism” division of AmeriCorps. AmeriCorps is the federal program that places young people with nonprofits to get training and do public service work....
  • Provide a tax credit to news organizations for every journalist they employ. This could help pay the salary of every journalist....
  • Establish Citizenship News Vouchers. Citizenship news vouchers would allow every American tax payer to allocate some amount of government funds to the non- profit media organization of their choice....
  • Provide grants to universities to conduct investigative journalism
They've also thought of innovative ways to fund this increased expenditure:
  • Tax on broadcast spectrum...which should result in a fund of between $3 and $6 billion.
  • Tax on consumer electronics. A 5 percent tax on consumer electronics would generate approximately $4 billion annually.
  • Spectrum auction tax.
  • Advertising taxes...a 2 percent sales tax on advertising would generate approximately $5 to $6 billion annually.
  • ISP-cell phone tax...consumers could pay a small tax on their monthly ISP-cell phone bills to fund content they access on their digital services. A tax of 3 percent on the monthly fees would generate $6 billion annually.
The mind boggles. Even without the risks of politicised news coverage, any sane person would be shocked by the arbitrary nature of these taxes, the support for vested interests, and the inevitable bureaucracy that would be involved. It is astounding that these ideas are being considered.

It is equally astounding that people believe the current economic system in the US and Europe is 'free market capitalism'.

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