Ideal Journalism Wouldn’t Have Stopped the Crisis

The U.S. Managing Editor of the FT addresses the validity of economists’ views, the alleged entanglement of news and opinion, and the ongoing attempt to build a “broad church.”
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Question: Did the FT’s news coverage help shape the way the crisis was perceived, or did the FT influence come primarily from its columns and blogs? (Felix Salmon, Reuters Finance)

Chrystia Freeland: I think the influence that the Financial Times came both through our new coverage and through our opinion pieces.  They do very different jobs.  Our reporting before, during, and I don't know if we want to say that now it's after the crisis, but at least in the aftermath of the most intense period of the crisis, is really about trying to fly as close to the ground as we can and trying as honestly and as intelligently as we can to tell people what is happening. 

Now, that doesn't mean, and I do think sometimes with hindsight, some of us think, well maybe journalists or economists should have known the crisis was going to happen.  I think that that notion comes from a very mistaken premise.  I don't think the future is knowable, I don't think that anyone has a crystal ball.  The best I think we can do is try to report on what is happening, what is knowable.  And certainly ahead of this crisis what it was possible to report on was that asset bubbles were starting to emerge.  And we did that.  We wrote very early about the bubble in sub prime assets.  We wrote very early about what was happening in some of the private equity deals, about some of the covenant light loans that were around.  We reported quite a lot about global financial imbalances.  So, we did have that reporting there and I think that was important. 

As the crisis began to snowball, I think what was important, and our strengths really were being able to write about this crisis as a global phenomenon.  I think it's our first truly global financial crisis and that meant that the fact that the FT I think is the most global of the big newspaper-based organizations right now, really gave us an advantage in covering it. 

Our commentary, I think, was important in two ways.  One was, in contrast with some other organizations in our pages, something that we very consciously do is try to have a broad church.  We don't have a single editorial line and we don't have voices all speaking in the same, or all singing in the same key.  I think with a crisis like this one that is particularly important because one of the things that we've seen is the consensus was often wrong.  The consensus was wrong ahead of the crisis and maybe the consensus had moments of being wrong in terms of what to do to address the crisis.  So, I think being open to a real diversity of points of view, a global diversity of outside voices has been a real advantage for our opinion coverage. 

The other thing that I would like to really sort of single out in terms of the strength of FT's opinion coverage is Martin Wolfe who is our Chief Global Economics Commentator.  And Martin was very, very prescient in terms of diagnosing global financial imbalances and the way in which they were skewing the whole global economy.  In the United States, I think this crisis tends to be thought of most often, as a crisis in the sub prime market, and that certainly was, if you will, the immediate symptom which emerged, maybe the immediate trigger.  I think though, if you look a little bit more deeply at the factors that play these global financial imbalances with China saving too much and the U.S. consuming too much really are one of the most important drivers of what was going on.  Martin, in his comment pieces, was very, very early to be writing about that and to be hitting on that. 

Question: Could business journalists have prevented the crisis if they’d asked different questions or covered different stories?

Chrystia Freeland: I absolutely do not think that even the most brilliant, insightful, thoughtful, journalism ahead of the crisis could have prevented it.  I think actually, that whole question speaks to what I would say is a mistake in mindset about financial crises and about the nature of bubbles in the economy. 

One of the things this crisis has reminded us of is booms and busts are endemic.  Booms and busts are the way the economy works, the way economic cycles work and one thing that I think has been quite important in terms of intellectual response to this crisis is to appreciate that we are never going to totally get rid of them.  I there may have been a train of thought, maybe particularly in the wake of the collapse of communism, when we had this moment of global capitalism really feeling invincible, feeling triumphant.  That we could get the economy exactly right and we could have happy days every day forever. 

What I think this crisis has reminded us of is that the workings of capitalism, the workings of the market are not perfect and you do inevitably have overshooting and then a response.  So, no, I don't think that even absolutely ideal financial journalism, which we didn't have by the way, would have stopped the crisis. 

Now, that's not to say that we business journalists could not have done better.  Of course we could have done better, and I do hope that in the wake of the crisis, we will do collectively now a couple of things.  I think the first thing is not to be scared by complexity.  One of the things that we have seen happening with globalization and with the technological revolution is financial markets becoming a lot more complicated and the global economy becoming a lot more complicated.  Sometimes I think journalists can be frightened by that complexity, maybe afraid that their readers or their watchers won't be interested in that level of complexity.  One thing that I think this crisis teaches us is we have to be really brave about that and really brave about taking on the complexity. 

The second thing that I would say that this crisis really teaches us is to be cautious about the consensus point of view and, again, as journalists, we have to be I think modest and humble in what we think we are able to do.  So, I think that it's too much to expect journalists to be the lone voice in the wilderness that notices the bubble and calls it, but I think at least what we can do is say, this is the consensus point of view, but here are two or three outlying voices and this is what the outlying voices have to say and these are their arguments, and at least make that descent a little bit more transparent. 

The final thing, and I do think this is a little bit less characteristic of FT culture, but particularly in the boom moment of this decade, I think in some parts of the business press there tended to be a certain triumphalism in coverage of business success.  Now, I do think that it is the job of business journalists to write about the success stories as well as the failures, and I think our readers are interested in that.  They want to know what's working and how to make it work.  But I think we have to be a little bit careful, maybe more careful than one tends to be in a boom time, not to blindly lionize the people who seem to be winning. 

Question: When the FT presents an economists’ view, how does their past track record play a factor in the credibility assigned to their views? (Dean Baker, Beat the Press)

Chrystia Freeland: I think that's a really good question and I do think that at the level of reporters, and also editors, we are thoughtful about, has the person been right in the past?  Is this person someone whose views therefore have credibility? 

Having said that, one of the interesting things I think about this crisis is it has shown that just as when we run advertisements for mutual funds, let's say, very often there is a disclaimer that says "Past performance is no guarantee of future performance."  And I think that disclaimer needs to apply to all sorts of performances including the performance of economists.

So, even if someone has a stellar record, that doesn't mean their prediction today will be right partly because someone might be very good at analyzing the contours of a sort of boom economy, but not be so good at calling the moment of disequilibrium.  Likewise, there might be some economists who were very good at spotting that moment of disequilibrium, but are less good at calling the boom.  And that's actually a phenomenon we have actually seen. 

So, for example, some of the people who were absolutely right on in assessing and diagnosing this bubble had appeared to be very wrong in the one or two or three years prior to the bubble bursting because they were the guys who were saying, "Oh my God, everything is going to go wrong.  Prices are inflated, this is an asset bubble."  And if you said that in 2007, you looked like a genius, but if you were saying that in 2004, or 2005, 2006, you were starting to look a little bit crazy.  And your underlying analysis may have been true to the fact, but the market kept on going up. 

So, while I am very sympathetic to Dean's point that we need to be thoughtful about the credibility of the people we are quoting, I think we also need to realize, ultimately there is going to be no formula, no algorithm that will validate which economist is going to be right and which economist is going to be wrong.  We need to use our judgment. 

Question: It seems that news and opinion are becoming entangled. What is the FT doing to ensure that it is viewed by the public as a credible broker of information? (Mark Thoma, Economist’s View)

Chrystia Freeland: I actually would very strongly challenge the premise of Mark's question, certainly as it applies to the FT.  I have had readers complain to me a lot about almost everything ranging from the size of our typeface to the headshots of our journalists to the placement of stories, and then of course to what those stories contain.  So, I am no stranger to reader complaints and if anyone has complaints, please send them to me. 

Having said that, I can't remember an occasion when someone has complained to me about too much of a mingling of opinion and news in the FT, or when anyone has complained that as a result of that, the credibility of the FT is in anyway undermined.  So, I'm not sure that applies to us. 

What I will say is we believe that it's our job to perform both functions and that we perform those functions quite differently.  So, the job of our news gathering and our news analysis is to be really rigorous about trying to figure out what's going on and trying to analyze what are the most important issues.  We don't cover every single thing in the world so our choice of what we cover is really important.  And then to trying to report as deeply as we can on what's happening.  That is quite separate from our opinion.  I think the real strength of the opinion in the Financial Times is that we are very open to outside voices and we are open to a real diversity of outside voices. 

Having said that, we in contrast with some news organizations don't believe that journalists or reporters should never express an opinion on our pages, and we do sometimes have our reporters writing opinion pieces in the pages of the Financial Times.  That, for us, has never really been a problem.  Maybe because the sorts of opinion pieces that our reporters do write, when they write them, are really analytical and fact-based.  It's less about making a partisan argument and more about saying, in this particular debate about financial regulation, I believe that such and such is the right policy and here are my reasons why.  So, maybe that's part of the reason why these issues are a little bit less heated for us. 

Maybe having said that, I might go on to add that I think that Mark's question speaks to what looks like the much more partisan coloration of the media in the United States.  This is a relatively new thing for America, not so new for lots of other countries.  The European media, for a long time has had explicitly point of view newspapers and news organizations.  And there again, I'm not sure that's a terrible thing.  I think where the point of view is explicit, then I think that viewers and readers are smart enough to know -- Fox, for example is going to present a more right-wing point of view.  And I think people are sophisticated enough to understand that.  I also think, and this may sound paradoxical, that as you see more exclusively partisan voices emerging there's actually going to be more of an audience and consequently more of a market for people like us who really see our job as being to provide people with, insofar as it is humanly possible, and none of us are perfect, what approaches an objective analysis and objective reporting.

Recorded on December 10, 2009