Sep 15th 2008, CNN: Breaking News: ‘Lehman Brother’s filed for bankruptcy, World in great financial crisis’ …. and the Wall Street was down 800 points in no time.
In the class of Monetary and Fiscal Policy today, we discussed about the ‘psychological effect’ that leads to boom or recession in economy literally affecting the life of people. I was wondering if the recession could have been avoided had the media played its role in a controlled manner.
The news we saw above actually went across to more than a billion people worldwide through media and in no time people’s thought process was hijacked. Gradually, the pesky media started making stories that unnerved consumers and discouraged them from shopping. Before long, the spending slowdown caused inventories to build up, which forced more manufacturers to lay off workers. People started ‘thinking’ the moment as the start of financial crisis and voila! There it was, actually.
The macro economy is all about expectations and perceptions. And these are not developed in isolation. We hear, we see, we discuss and then form these expectations and perceptions. And then they build hopes and when suddenly somebody communicates something against the hopes, everything is shattered.
Let’s just imagine for a while that the news of bankruptcy had not been communicated by media in a plain blunt manner as it was, who knows we might have been able to control pre-intimidated market emotions and the great financial crises wouldn’t have even started or may be avoided. Time is the greatest healer and we saw this in 2007 when suddenly Wall Street fall due to short selling by steel giants on one of the Fridays triggering the start of the crisis but the market recovered the following Monday.
The media communication today works as nuclear reaction. You communicate to millions of people and these people become the ambassadors for the bad news spreading it to every corner of the world shaping the perceptions of the people exactly the way communicated by media. So if the media says it is good, it becomes good and if says it is bad, it becomes so.
Leveraging on the grounds of Right to information, media is simply playing with the emotions of people globally by spreading the devastating news in an exaggerated manner at times and this situation gets worsened with the race of being first to communicate to increased the TRPs.
I think it is time to give a second thought to media freedom and develop some control over the same so that there is no incentive for media to exaggerate the news and thus communicate the same in a controlled and sensible manner. I am not saying that we get biased with the news but at least we can communicate in a sensible manner considering the impact it would have on the people’s perceptions and thus the global economy as a whole.
Any comments on the thoughts are welcome.