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How public broadcasters soak taxpayers

Fri, 22 Jun 2012

I’ve often wondered about the ethics of publicly-funded broadcasting organisations urging greater spending of taxpayer funds thorough “news” promoting money-hungry causes and public service advocacy.

An interesting twist has arisen in the UK, where the BBC also pumps out programme after programme giving dire warnings about the government cuts on child poverty, starvation, suicide and plenty else. 

It’s no different on Radio New Zealand, where the effects of reduced government spending is a staple of most news bulletins.

New light has been shed on the nature of these organisations in a report by the IEA (Institute of Economic Affairs) called Sock Puppets: How the Government Lobbies Itself and Why.

The Daily Telegraph summarises his report:

Some 27,000 charities are now dependent on the government for more than 75% of their income and the “voluntary sector” now receives more money from the state than it receives in actual voluntary donations, [report writer Christopher] Snowdon explains.

As a result, state-funded charities have helped to shape public policy by campaigning for causes that aren’t actually that popular with the public.

Similar research would probably reach the same conclusions here.

What's eating Gina Rinehart
Elsewhere in the media, the focus this week has been on Australia’s (and the world’s) richest woman, Gina Rinehart, getting control of Fairfax Media, home to the left-leaning metropolitan dailies The Age (Melbourne) and Sydney Morning Herald.

Short of eating babies, Mrs Rinehart has been accused of everything most journalists consider unpalatable, including, naturally, running newspapers at a profit.

I won’t bore readers with the plethora of commentary, which is available on Facebook at Kiwi Journalists Association and elsewhere, but it is worth noting that a trend is for newspapers to still attract the attention of rich individuals.

As ex-Age editor Andrew Jaspan says,

Is this the modern, open, progressive, democratic, tolerant, knowledge-based, clever country we aspire to be? Or are we seeing the same rise of the oligarch as in Russia where the resource-rich billionaires also dominate the media?

Jaspan’s fears are not restricted to Australia (or presumably Rupert Murdoch). Warren Buffett has recently bought a chain of papers in the US, though he might be considered benign, while Transitions Online, which collects news about Eastern Europe, says it’s no different in the Czech Republic:

Czech Prime Minister Petr Necas wants to strip Medea of its lucrative ad contracts with state-controlled companies, including electricity provider CEZ, forest manager Lesy CR, rail operator Ceske Drahy, and the postal service.

Necas and his party colleagues are peeved, I’m told, that Medea handled the advertising for the opposition Social Democrats in the 2010 parliamentary elections campaign.

Tide runs out at
On the other side of the Atlantic, one of the biggest names in internet media,, has struck hard times. Writing on, Chris O’Brien suggests pulling the plug on the pioneering website, once heralded as the future of journalism.

For a start the figures don’t stack up: the company lost $US997,000 the three months ending to December 2011 on $1.03 million in revenues and, it says, needs “approximately ($US1 million) in additional funding to meet its operating needs for the balance of its fiscal year".

The interesting point is that started as a subscription model with premium content – earning some $US8 million in revenue annually – but, according to O’Brien

… over time, the company turned its attention to focus more on its free, ad-driven business and lost most of those subscribers and its revenue. At the same time, the web changed, and Salon failed to change with it.

Over the past decade, the emergence of blogs and social media changed the digital game. Salon, for many years, failed to embrace this new dynamic.

Instead, new media companies like the Huffington Post emerged, which was powered initially by aggregating content created by others and recruiting large networks of unpaid bloggers. Eventually, Huffington Post started making enough money to hire its own stable of professional journalists on the way to being acquired by AOL.

The way out for Greece, et al
Back on the topic of Eastern Europe, that region is being held up as an example of how to solve the eurozone crisis with a dose of shock economics.

Speaking to a conference in the Latvian capital of Riga, IMF head Christine Lagarde praised Latvia for making a crucial decision when it decided "to bite the bullet" and make drastic changes to the budget through a mix of tax increases and spending cuts.

"Instead of spreading the pain over a number of years, doing it gently, you decided to go hard and to go quickly," she said, adding that Latvia's budget adjustment amounted to 15% of GDP over three years. "It's hard to believe when you look back that you actually did it. We see the success of the programme as a real achievement, a real tour de force."

Her comment have been backed up by the IMF’s pointsman in Eastern Europe, Mark Allen,  who explained at the conference how the Baltics has achieved their turnaround by the very same austerity policies that are despised in the much richer and most indebted countries of Western Europe.

Latvia, Lithuania and Estonia all declined to devalue their currencies in the face of the recession, which would have boosted competitiveness. Instead, they cut wages and spending in austerity packages to achieve the same end.

Latvia also had to take a €7.5 billion euro bailout, led by the IMF and the European Commission. Despite the economic woes, Estonia managed to keep its budget deficit low enough to quality for eurozone entry next year.

Needless to say, privatisation was the key feature of all these so-called austerity programmes and as formerly living under communism the citizens knew the dangers of adding to their woes with more government spending.

World Bank president Robert Zoellick is more specific on how emerging economies are handling the global financial crisis better than many of those considered more mature:

When this global crisis hit, many developing countries were quicker than developed countries in understanding the need for structural reforms. There is an irony that the need for structural reforms is well understood in emerging markets, but in the US and Europe, people are not paying enough attention to the need for structural reforms for future productivity.

Deeper integration of the service sector markets could boost productivity and opportunities while strengthening the single market. The EU could make the movement of people easier. The EU is never going to have labour mobility like the United States because of language differences. But there are things the EU can do to help people to be able to move to where the jobs are.

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How public broadcasters soak taxpayers