Discuss the failure of business journalism in reporting the great market crash of 1929 - Essay Example

? Failure of Business Journalism in Reporting During the Great Market Crash of 1929 Introduction The great market crash of 1929 marked the most devastating crash in the stock market, in the United States. The citizens of United States scrambled to gain entry into the stock market in early 1929. The profits seemed to be more assured, a factor that attracted many companies to invest in stock markets. Furthermore, banks invested customers’ money in stock markets. The upward bound in the stock market was highly promising, and the great market crash in October 1929 hit everyone by surprise. Nevertheless, there had been warning signs like the mini-crash in March 25th, 1929 when prices began falling, but with the assurance of Charles Mitchell of the continued lending of money; the panic was suppressed (King 2000, p. 67). The spring of 1929 also gave more signs of a serious setback to the economy due to the slowing down of steel production, car sales and house constructions. During this time, some few individuals warned of impending serious crash in the stock markets, but they were cautioned, ignored and labelled as pessimists. Most economists believe in cycling of the overall economic activities between the expansion and contraction of the economic periods. The economic growth alternates with depressions and recessions. Analysis of the great depression indicates efforts by economists and journalists and their determination of the causes of depression (Burgan 2002, p.78). Discussion Business journalism requires that the journalists know exactly what is required, and the content should be critically analyzed before distribution to the audience. Some business journalists do not know the appropriate sources for their information to back up a story or an event. Others do not understand the principles of economics and the importance of stock markets. Some business reporting lack contextualization, which helps readers understand the meaning of the economic situation. The major goal of business reporting is to enhance more customer cover up and retention. This is especially notable since many people have shifted to the media for them to know the prevailing economic conditions. People simply want better business coverage (King 2000, p. 67). Business journalism in reporting during the great market crash The business journalists knew about the great depression, but their ignorance of the economic history was massive. Ignorance in expressing their opinions rendered everything wrong during their reporting on the great depression. For instance, in 1920, the forecasting reported on flourished economy and failure to recognize the coming depression, a factor that totally put them out of business. J. K. Galbraith’s reporting on The Great Crash 1929 relates to the forecasts of the Harvard Economic Service who failed in warning the business of impending depression. Galbraith wrote in November 1929 that the U.S. was not facing a protracted liquidation and that severe depression like that which was in 1929-1931 was less likely to be experienced. This, according to Wood, is shallow, misleading and lacks permanent value, and that any journalist who relies on ‘great market crash’ account by Galbraith deserves the sack (Ewing et al 2007, p. 1123-128). Business journalism failed to recognize the warnings from some economists of the impending depression. For instance, Ludwig von Mises, in summer of 1929, refused a job offer in Kreditanstalt Bank since he saw the coming of the depression and feared to be associated with it. Furthermore, Mises warned that the loose money policies by central banks would have caused the depression. Also, Friedlich von Hayek warned of the impending depression in US. Writing from the Institute of Economic Research in Australia, in February 1929, he predicted that the boom was to collapse in few months time. September 1929, he warned of the imminent crash. Also, the founder of the Institute of Economic Research in America, E. C. Harwood, warned of unavoidable crash (Ewing et al. 2007, p.1123-128). The daily news media ignored the bleakness of the stock crash despite the billions of dollars and records selling at a loss. Major newspapers had words like ‘hope’ and ‘optimism’. For instance, the New York Times in October 31st, 1929 reported of the stock market gaining poise and stability, and in the same day, Washington Post discussed on the ‘passing of crises’. This was not true; it marked the beginning of disasters. The market underwent a drastic fall heating the rock bottom in May 1932. It had lost more than 85% of its value (Tofel 2009, p.10). The period was the darkest in American economic history. The reporter (John Donyan) described the problems that were being experienced by people but denied that this was predicted by Bashir. The daily media in 1929 treated the crisis as a market apocalypse. The news from TVs talked of the bank crash and highlighted the economy heading on a cliff. Such negative media reporting was harmful to the economy. Americans felt both the pain of the economic downturn as well as the impact that the mainstream media had (McGeehan 2000, p. 23). From the analysis done on the leading daily news reports from Washington Post, Wall Street Journal and New York Times by BMI in November, 3, 1929, the three papers viewed the crash as a challenging time that was overcome by the Wall Street. The Wall Street Journal in October 29, 1929, reported that the decline in market rendered the good stocks a higher attractiveness for the future investment. It has the headlines as ‘bright future’, ‘fear waning’, ‘market orderly’ and ‘optimism of officials’ to indicate that though the losses were enormous, the business maintained its soundness. Journalists were aware of the impending crisis in 1929. Usually, a journalist undergoes both tough and good times. The best times present them with an opportunity of reporting real lifetime events such as the great market crisis of 1929. The worst situation comes with the criticisms of the media for missing out of global financial crisis and failure in warning the unsuspecting public of the crisis (James 2010, p. 129-144). Barber acknowledged that the business journalists knew of the impending crisis, but they deliberately ignored the unwelcome news, which does not sell the paper. Some business journalists were willing to acknowledge the coming crisis, but there was drawback power. Most journalists confessed that as a journalist, one is obliged to push critical issues to the consciousness of the public, and this is faced by greed, which is a powerful force. For instance, the Washington Post published that the shaky financial cards have been erected in public view, and this is believed to have ignored the real sense of alarm until institutions begin collapsing (Singh 2011, p.45). Barber said that it was not only journalists who were supposed to predict and warn people of the impending crisis, but the financial reporters failed to pay attention to few warnings that emerged. First, the crisis seemed to be a highly technical story and it took a long time before going to the mainstream. This made it hard for journalists to persuade the superiors for a lot of information on prominence of the crisis. Secondly, they were the credit derivative stories with little on daily news. The default swaps in credit and the collateralized debt obligations were unclear (Nicholas 2008, p. 1370-396). Furthermore, Barber fundamentally explained that the main sources of the information on impending crisis, like the financial reporters, banking regulators and executives never saw the coming of the crisis. According to him, the accusations by Jon Stewart of the Daily Show of CNBC overlooking the trouble in the market due to closeness to Wall Street bankers and traders, as well as those by Danny Schechter, who alleged that the newspaper never wanted to pursue the mortgage scandals so as not to alienate the property advertisers, were wrong (Roush 2006, p. 56). Barber explains the five weaknesses of the business journalists in covering the events that led to the great market crash. Firstly, the business journalists failed in grasping the significance of failure to regulate the over-the-counter derivatives that consisted bulk of the counterparty risks in credit explosion in the mid-decade following dotcom bubble. Secondly, business journalists failed in understanding the risks posed by implicit state guarantees enjoyed by Freddie Mac and Fannie Mae who were the financial giants in mortgage. Thirdly, the journalists failed in grasping the significance of growth within the financing of the off-balance sheet by the banks. Fourthly, the business journalists were unusually slow in their recognition of the impacts of the market crash in the banking system and the profound impacts to the corresponding economy. Finally, the business journalists sought for the rationales for the unfolding events instead of evaluating on their sustainability (Shapiro 2003, p. 23-26). Conclusion Based on all the issues that unfolded during the great market depression of 1929, the business journalists should be trained to avoid future failures. This entails lessons like reading of the balance sheets. Also, trainings should involve events that challenge the assumptions of journalists to avoid linear thinking. However, it is critical to note that blaming journalists for anything they miss out is neither fair nor productive. They should be encouraged to learn from the experiences and increase their vigilance. References List Burgan, M. (2002). The Great Depression, Minneapolis, MN, Compass Point. p. 78. Ewing, B., Mark, T., & Mark, Y. (2007). Using Volume to Forecast Stock Market Volatility around the Time of the 1929 Crash. Applied Financial Economics 17 (14). pp. 1123-1128. James, H. (2010). The New York Stock Market Crash; 1929. Representations 110(1). pp. 129-144. King, S. R. (2000). The Stock Market. In Terri Thompson (Ed) Writing About Business: The New Knight- Bagehot Guide to Economics and Business Journalism, Columbia, Columbia University Press. p. 67. McGeehan, P. (2000). Where Wall Street Meets Main Street. In Terri Thompson (Ed) Writing About Business: The New Knight- Bagehot Guide to Economics and Business Journalism, Clumbia, Columbia University Press. p. 23. Nicholas, T. (2008). Does Innovation Cause Stock Market Runups? Evidence from the Great Crash. American Economic Review 98(4). pp. 1370-1396. Roush, C. (2006). Profits and Losses: Business Journalism and its role in society, New York, Marion Street Press. p.56. Shapiro, B. (2003). Shaking the Foundations: 200 Years of Investigative Journalism in America, New York, Thunder's Mouth/Nation. p.23-26 Singh, D. P. (2011). Business Journalism, New Delhi, Anmol Publications. p.45. Tofel, R. (2009). The Wall Street Journal, and the Invention of Modern Journalism, New York, St. Martin's. p. 10 Read More