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by Roumeen Islam, World Bank Institute
09 the future of Media & Entertainment
The Role of Mass Media in Economic Development
The media industry, whether public or private, plays an important role in any economy by garnering support or opposition for those who govern, by highlighting or failing to do so the views and/or sins of industry, by providing a voice for the people or not doing so, and by simply spreading economic information. For their ultimate survival the media depend on the state that regulates them, on the firms that pay to advertise through them, and on the consumers they serve. Balancing these different interest groups is a difficult task. How the media industry does so determines not just its ability to survive, but its effect on economic performance. This book is about the factors that determine whether and how the media industry can support economic progress.
Clearly as important providers of information, the media are more likely to promote better economic performance when they are more likely to satisfy three conditions: the media are independent, provide goodquality information, and have a broad reach. That is, when they reduce the natural asymmetry of information, as Joseph Stiglitz puts it in chapter 2, between those who govern and those whom they are supposed to serve, and when they reduce information asymmetries between private agents. Such a media industry can increase the accountability of both businesses and government through monitoring and reputational penalties while also allowing consumers to make more informed decisions.
This book cites many examples that demonstrate the value of information provided by the media. Alexander Dyck and Luigi Zingales (chapter 7) discuss how the media can pressure corporate managers and directors to behave in ways that are socially acceptable, thereby avoiding actions that will result in censure and consumer boycotts. They also report that in Malaysia, a recent survey of institutional investors and equity analysts asked which factors were most important to them in considering corporate governance and the decision to invest in publicly listed corporations. Those surveyed gave more importance to the frequency and nature of public and press comments about companies than to a host of other factors considered key in the academic debate. However, the dissemination of credible information in a timely manner depends critically on how the media business is managed and regulated. The chapters in this book document evidence on media performance and regulations in countries around the world and highlight what type of public policies and economic conditions might hinder the media in supporting economic development in poor countries.
Before discussing the three criteria for effective media - independence, quality, and reach - I would like to draw attention to two general issues pertinent to the themes of the chapters in this volume. The first is the relationship between free media and democracy. It seems obvious that generally, more democratic countries also have a freer press, as figure 1.1 shows, but do free media promote greater democracy or does a functioning democracy promote free media? Undoubtedly the effect can work both ways, and there are degrees of media freedom and democracy. Even among democratic countries, the level of freedom of the media varies between countries, and even relatively undemocratic states may differ in their tolerance of media freedom. For example, two democracies, Russia and the United States, have quite different attitudes toward the media and the concept of media freedom. In addition, within the same democracy certain types of news coverage may be unregulated while other types may be regulated, for example, economic news may be less regulated than purely political news. Freedom of the press is also correlated with income: richer countries seem to value information more, but there is variation. Colombia, Portugal, and Ukraine have similar measures of democracy but quite different measures of press freedom.
The second issue I would like to address concerns the general relevance of laws and formal regulations for the independence, quality, and reach of the media. In many circumstances laws affecting the media sector have only limited relevance. In addition, adopting a law is no guarantee that it will be implemented or effective. This is partly because implementing a law is much more difficult that simply adopting it. Also informal codes of conduct may be in conflict with laws and dilute their effectiveness. In most countries the freedom and independence of the media are guaranteed not solely by laws, but by the culture or accepted mores of society. Thus while the United Kingdom has had a rather restrictive Official Secrets Act (until 1989 even the type of biscuit served to the prime minister was a secret), the British media rank highly on any measure of freedom: Freedom House gives the United Kingdom a score of 80 out of 100 on its index of press freedom.
Changes in media freedom are affected by changes in culture and expectations, just as culture and expectations can be changed through information provided by the media. In countries where the media have had a long tradition of independence and are wellestablished businesses, legal restrictions mandated by arbitrary governments are hard to maintain over time. Nascent media face the greatest challenge. In countries where information has always been scarce or kept secret, several effects work against the media, namely: (a) the potential value of more information is underestimated or not well understood; (b) the public perceives that information alone will not help, because coalitions strong enough to make use of the available information do not exist; and (c) the weak financial state of the media and their shaky consumer base make the industry vulnerable. Nevertheless, each of these elements can be expected to improve slowly over time.
The evidence suggests that legal systems are important. Governments have manipulated laws and legal systems to legitimize their actions against the media, but also to safeguard the rights of the media. Journalists have used laws to protect their right to know and tell. Sometimes a law is important because even though governments may not deliberately withhold information, it is not readily available because it is not required to be in an accessible format. Laws promoting greater freedom of expression and information can be useful even when all parties are not convinced of their relevance. Merely the act of adopting a law can limit certain abuses and can build expectations of what is permissible and what is not, particularly if the judiciary is effective and independent. Adopting laws brings freedom of information issues to the forefront of public discussion, and can result in genuine change. As Kavi Chongkittavorn explains in chapter 14, Thailand's adoption of the Freedom of Information Act has encouraged people to ask the government for information, in essence changing expectations and behavior. In contrast, as Mark Chavunduka discusses in chapter 17, Zimbabwe's government has adopted several laws with the intention of silencing the press. According to Hisham Kassem in chapter 16, however, innovative media entrepreneurs often find ways to operate around the laws that bind them.
In the remainder of the overview I have organized the discussion around the three main factors affecting media performance mentioned earlier: independence, quality, and reach.
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