2008 Economic Crisis in the U.S. and media connection - Assignment Example

?Running Head: 2008 ECONOMIC CRISIS IN THE U.S. AND MEDIA CONNECTION 2008 Economic Crisis in the U.S. and Media Connection Here Here 2008 ECONOMIC CRISIS IN THE U.S. AND MEDIA CONNECTION The United States of America was founded on the principles of democracy, freedom and a dream where any citizen has the opportunity to pull themselves up by their bootstraps to make a good life for themselves and their families. While millions of people have spent their lives adhering to this American dream, there have been periods throughout our history where tireless amounts of work and sacrifice have not been able to stop the economy of this nation from crashing down upon the very people who work endlessly to build it. Nearly five years ago, 2008 was no exception as the core of the American economy crumbled beneath the people of this nation who were standing upon it to bolster their careers, their lives and their homes. As this recession immediately spurred talk of the next Great Depression, the American people as well as the rest of the world watched in varying states of horror as the media depicted an economic downfall which the country was not prepared for. The purpose of this paper is to establish that the America people give the media almost an absolute power in determining what we believe, see, think and feel about the world around us. In order to demonstrate the proposed goal of this literary work, the following pages will first define the “economic crisis” the country faced and then will break into discussions on how the media covered the events which unfolded in the midst of such a crisis at both a national and international level. Economic Crisis Upon its arrival, the 2008 economic crisis left families decimated and crippled the financial outlook of this nation. As soon as the reality of what was happening became apparent, the media became fixated with determining a cause and definition for this crisis. Initially after the crisis, news media turned to the experts and featured a high number of guest experts who could immediately pinpoint causes of the economic situation. One such example comes from the Accuracy in Media group with a guest column from financial expert James Davis. According to Davis, an international bank analyst, the complete downfall which caused the 2008 financial crisis was caused by faulty bank lenders (2008). From a media perspective, using these analysts in such a heavy rotation placed incredible emphasis on their words to the public. Essentially, whatever reasoning these analysts were giving were becoming the scapegoats of the financial crisis with heavy rotation of media coverage. In 2011, the New York Times was able to compile and pinpoint key causes of this economic crisis. According to the article, the economic crisis can be defined as the combination of “widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street,” (Chan, 2011). In addition to these components, the New York Times also highlights that the key parts of these economic failures included a factor of American life which affected nearly all people in the country – the real estate market. As Chan wrote, the economic crisis can be defined as a “calamitous concoction – shoddy mortgage lending, excessive packaging and sale of loans to investors and risky bets on securities backed by the loans” (2011). With the gravity of the situation recognized by news organizations, the chain of events was quickly dubbed an “economic crisis” as the amount of families standing to lose their homes was staggering. According to Baily, Litan and Johnson in “The Origins of he Financial Crisis,” the issues which were at the center of the economic crisis included faulty lending practices in the form of adjustable rate mortgages (ARMs) and allowing homebuyers to purchase homes with no money down, substandard financial portfolios and credit default swaps (2008). As the housing market buckled in the wake this crisis, financial panic spread through America with the result resoundingly higher fuel costs, consumers in a heap of sticker shock over the costs of food, household supplies and college tuition to name a few items. In a seemingly near defeat of capitalism, consumer spending practically ceased and therefore crippled the American economy thus creating the term and definition of the “economic crisis.” With the combination of these components, the news media created the package of the American economic crisis as a sea of lost people and families searching for answers in the desolation of recession and finding no hope. An example of such news media coverage is evident through news stories such as those of Eunice Winchester. Covered for National Public Radio, journalist Liane Hansen wrote a piece about Winchester and the difficulty she was facing as she was on the verge of foreclosure (2008). The purpose of doing stories such as this was that it allowed people across the country who were being affected by this crisis to identify with a tangible person who was dealing with the same issues they were facing. Focus of the Media Coverage of the Crisis While quite an ordeal for those who found themselves impacted by it, the 2008 economic crisis was not the first financial hardship America has faced. According to Steverman in Bloomberg Business week, this latest recession follows America’s struggles in 1907, 1929, the 1970s and 1987. Although these times were often more difficult than what the country faced in 2008, there is one distinct difference with this most recent turn for the worse with the economy – the state of the media (2008). In today’s world the media has grown from the realm of daily newspapers, nightly news casts and am radio broadcasts to an all encompassing news world where continuous updates, stories and interviews are a standard part of daily life. With this reality, it is evident that consumers today are constantly bombarded with the news coverage. While this allows for a more informed society, the problem is that the issues brought forward tend to resonate with greater significance that is actually worth. This notion is discussed in Steverman’s article as he highlights the media’s ability to reach the masses. “When conditions look good, analysts on TV are often ‘excessively optimistic.’ When things go sour, they outdo each other telling people how bad things could get," (2008). Keeping this concept in mind, it is clear that the 2008 economic crisis was spurred on by overwhelming media coverage which preyed on the fact that most consumers are uneducated about the financial issues which were plaguing the country at this point. Steverman noted that this problem had two-fold implications. First, the mass attention drawn to economics garnered attention from consumers with average to novice level education in finances themselves. Secondly, the glaring attention given this problem from all news media outlets caused an underlying sense of panic among consumers. In order to combat their questions and potential problems, consumers turned to their banks and lenders trying to determine if their money was safe. When combining their entry level understanding of the issues as well as the answers given them, consumers found themselves attempting to solve complex financial questions without the necessary knowledge on the topic. As Steverman notes, this combination equaled devastation for American banks. “Financial media outlets are used to serving active investors who are usually fairly well informed, but the crisis has attracted attention from plenty of Americans with very basic questions, such as whether bank accounts are safe. Moreover, ‘there's also the huge danger of giving someone the wrong advice. What might be great advice for me might be bad advice for you,’” (2008). Trends in News Coverage Along with combining media attention and fears of economic collapse, the Pew Research Center’s Project for Excellence in Journalism analyzed media coverage trends during the 2008 economic crisis. Through their work, the Pew Research Center found that the leading terms which were bombarded upon the American people were the concepts of “bailout and banking,” “stimulus plan” and the “auto industry financial troubles” (2009). With the immense saturation of these terms throughout American news coverage, the Pew Research Center found that the general majority of the country was caught in the conflicted state between trying to understand the implications of what was happening in the city of Detroit and the reality of giving the auto industry an incredible bailout. Although these broad topics were the pinnacle points of discussion throughout the 2008 economic crisis, the Pew Research Center found through their research that the majority of news coverage kept the stories about how the general public was affected by the situation at a minimum. The peculiar nature of this problem with news coverage is that it is the responsibility of journalists to act as a window to the world for everyone. By seemingly ignoring how the whole of the American people was dealing with the worst economic situation since the Great Depression, it seems that the media did a great disservice by forgetting to cover a major piece of the puzzle. “If one looked inside some of larger narratives for a focus on ordinary lives, it was elusive. The narrative about the auto industry’s hard times and plant closings, for instance, accounted for almost one-tenth of all economic coverage. Yet the storyline devoted about labor issues and worker layoffs in the car industry was negligible, filling less than 1%” (2009). This reality strikes a sad portrait of what history will be able to recover from how normal people survived and attempted to build their lives during this crisis. The unfortunate downfall of this negligence in media coverage is two-fold as the focus on major events perpetuated the stigma of the events unfolding within the country. In addition, the Pew Research Center’s analysis of the situation shows that the neglect of understanding what regular Americans were doing to cope with this economic crisis resulted in skewed news coverage that did little to demonstrate how the country’s backbone was breaking during this time (2009). While the events have passed, it is a strong hope that future journalists and media members learn from the news coverage mistakes made when covering major historical events such as the 2008 economic crisis. Reality versus the Effect of the Media Coverage of the 2008 Economic Crisis With the focus of media coverage of the 2008 economic crisis established, the analysis of this paper can shift to how these choices in coverage related to the actual facts of the 2008 economic crisis. The importance of featuring this analysis is to demonstrate the power and the impact media coverage can have on public opinion. Before discussing the implications on public opinion in regard to the effects of the media coverage on the 2008 economic crisis, it is first necessary to determine what the actual impact was the American people. According to the Pew Charitable Trusts, the resulting catastrophe of the September 2008 economic crisis can be summarized in the following categories as such: Income: The Congressional Budget Office estimated that the United States economy slowed by $684 billion from September 2008 to September 2009. This loss can be broken down per household as a loss of $5,800 of income. Government Response: In an effort to assist people, the Troubled Asset Relief Program costs taxpayers $73 billion. These funds translate to $2,050 of taxes on each household. Home Values: Perhaps the most startling of statistics, the country lost $3.4 trillion of real estate value from July 2008 to March 2009. This devastating figure equals a household total of $30,000 in value lost. In addition to the loss of home value, the United States experienced 500,000 more foreclosures than expected during this time. Stock Values: The stock market also took devastating hits during this period with the average household seeing a decrease in value of $66,200. This translates to $7.4 trillion in stock wealth lost from July 2008 to March 2009, according to the Federal Reserve (2010). When reviewing the summary of the intense financial loss Americans faced in the fall of 2008, it is easily understood why the big three topics of bailouts and banking, stimulus plans and the auto industry financial troubles dominated headlines across the country as well as the world (Pew Research Center, 2009). Although these issues have had lasting effects which will impact the country for decades, the heavy media coverage given to these topics missed one key question – what about the people behind these figures? While there is no real way to answer this hypothetical question as the chance to interview and chronicle the efforts of those who faced life during this tough period has passed, it is important to analyze the reaction to the media coverage provided. The World Association of Newspapers and News Publishers found two major areas of fault within the news coverage during this crisis – the lack of knowledge within financial journalism as well as an adherence to advertising (2012). As this Editors Weblog discusses, until the economic collapse of 2008, financial journalism had never really found its feet. The reasons for this lack of knowledge can be attributed to the journalistic principle that all reporters need to write for Mabel, meaning the notion that any story written needs to make sense to any person sitting at their kitchen table reading about it. While this is a foundational principle of journalism, the error with this way of thinking in this sense is that these issues were much too large to be kept at such an elementary level. This awareness is important for future media people to keep in mind in an effort to bolster financial reporting and writing to ensure that citizens will get the most informative information possible (2012). Along with the misunderstanding of the financial realm in general, the other major mistake made by this country’s media was the underlying sense of self preservation through advertising. As with any business, each has the goal of making money to continue. The media is no exception. In regard to the economic crisis, the main area of error came with how newspapers decided to cover the financial crisis. According to the World Association of Newspapers and News Publishers, the beginning of the crisis saw newspapers thinking about their own bottom lines instead of reporting what consumers actually needed to know in order to protect their clients. “The newspaper industry is the marketing arm of the real estate industry. In some cities you actually had newspapers getting a piece of the action of sales through the ads that they generated. So they were actually part of the corruption of this whole relationship. So of course there was little real scrutiny about what was actually happening in the neighborhoods where houses were flipping, where people who couldn't afford to buy houses were buying them with bogus mortgages. Newspapers were making money on the sales of these homes,” (2012). With this clear view of what was happening within the newspaper world, it is clear to see that the media put themselves first and forgot their responsibility to be the watchdogs of government for the sake of their own bottom line. When comparing the reality of media coverage to the actual facts of this recession, it is evident that the American people were misinformed to the state their economy was actually in. With the ability of hindsight, we can see that the major flaw of the media coverage during this economic crisis is that the American people were not given the proper knowledge to make the decisions necessary to determine how to survive. Upon conclusion, the 2008 economic crisis cast a grim shadow over the United States of America which then spread across the world. The dim reality of what life was like in economic collapse was not effectively captured at the level of consumers across the country. For their part, the media was just as guilty as the banks offering faulty mortgages with their knowledge of what was happening but, their goal to minimize the effect of it on the American people in an effort to save their own bottom lines and budgets. It is the hope that future journalists and media members while understand the responsibility of keeping the public informed and do just that. Resources Baily, M., Litan, R., & Johnson, M. (2008). The Origins of the Financial Crisis. Initiative on Business and Public Policy at Brookings. Retrieved from http://www.brookings.edu/~/media/research/files/papers/2008/11/origin%20crisis%20baily%20litan/11_origins_crisis_baily_litan.pdf. Chan, S. (2011). Financial Crisis was Avoidable, Inquiry Finds. New York Times. Retrieved from http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html. Davis, J. (2008). The Cause of the 2008 Financial Crisis. Accuracy in Media. Retrieved from http://www.aim.org/guest-column/the-cause-of-the-2008-financial-crisis/. Hansen, L. (2008). How is the Economic Crisis Affecting Middle Class America? National Public Radio. Retrieved from http://www.npr.org/blogs/sundaysoapbox/2008/09/how_is_the_economic_crisis_aff.html. Pew Research Center. (2009). Covering the Great Research: How the Media have Depicted the Economic Crisis During Obama’s Presidency. Retrieved from http://www.journalism.org/analysis_report/covering_great_recession. Steverman, B. (2008). Stocks: The Meltdown and the Media. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/stories/2008-10-28/stocks-the-meltdown-and-the-mediabusinessweek-business-news-stock-market-and-financial-advice. The Pew Charitable Trusts. (2010). The Impact of the September 2008 Economic Collapse. Retrieved from http://www.pewtrusts.org/our_work_report_detail.aspx?id=58695. World Association of Newspapers and News Publishers. (2012). Financial Crisis: A Media Failure? Retrieved from http://www.editorsweblog.org/2008/11/07/financial-crisis-a-media-failure. Read More