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Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

How government money can corrupt the press: The story from Argentina

The element of the Downie/Schudson report that’s triggered the most fuss is its call for a larger role for the government in funding journalism — the creation of a “Fund for Local News,” supported by taxes or fees, that would support news organizations. And it’s true that the United States is a global anomaly in how little it spends to support journalism.

But an interesting new study gives some backing to critics who argue any government dollars come with strings attached.

The paper, by Harvard’s Rafael Di Tella and Northwestern’s Ignacio Franceschelli, analyzes Argentina’s four largest newspapers and finds a strong correlation between their willingness to cover government scandal and the amount of money they received from government coffers.

“There’s a huge correlation, controlling for everything,” Di Tella, the Joseph C. Wilson Professor of Business Administration at Harvard Business School, told me. “I’m interested in why people believe the things that they believe, and newspapers are extremely influential in that.”

Di Tella and Franceschelli compared two data sets covering the four major Argentine national dailies: Clarín, La Nación, Página 12, and Ámbito Financiero. The first was one they created: They took 10 years of each newspaper and measured the percentage of each paper’s front page taken up by stories about government corruption. That allowed them to compare how interested each paper was in covering corruption at any given moment, at least in comparison to its peer newspapers.

The second data set came from an Argentine NGO: details of how much the government spent in newspaper advertising, month-by-month and by newspaper. (The NGO had obtained the data through Argentina’s freedom of information act.)

Argentine governments have a long tradition of buying large amounts of advertising in newspapers. And the decisions of where to place ads is left to the government’s whims; in practice, advertising dollars (pesos, actually) are divvied up in ways that curry favor and reward media behavior. The paper quotes an Economist piece from 2006:

One of the government’s tools is money. The robust recovery in Argentina’s economy since its collapse of 2001-02 has boosted tax revenues. That has brought an eightfold increase in the real value of the federal publicity budget (to $46m in 2006) since [past president Nestor] Kirchner took office in 2003. Argentine governments have a long tradition of funneling official advertising to sympathetic media and withholding it from others.

Di Tella noted in our conversation that advertising revenues are only the most obvious and trackable form of government transfers to media. There are no doubt many other ways an Argentine administration can play financial favorites with a news organization.

More government money = less coverage of corruption

Their analysis found a “huge correlation” between, in any given month, how much money went to a newspaper and how much corruption coverage appeared on its front page. For example, if the government ad revenue in a month increased by one standard deviation — around $70,000 U.S. — corruption coverage would decrease by roughly half of a front page.

They also, in periods where newspapers were getting more money from the government, they produced fewer corruption scoops of their own and covered fewer of the scoops produced by other newspapers. (It should be noted here that the study only looked at the front pages of newspapers — so it’s possible rival papers were writing about the scandals uncovered by their peers. But if so, they were doing it on inside pages.)

Di Tella and Franceschelli also found that newspaper size was a notable buffer against the advertising-corruption connection. Corruption coverage in the larger newspapers (Clarín and La Nación) were less sensitive to changes in government advertising than coverage in the smaller newspapers. That would seem to back up the argument that a media world with a few larger players could have at least one advantage over a world of many smaller players. (Of course, there are lots of advantages in the other direction too.)

Lessons from the data

It should be noted that the evidence shows correlation, not causation. In other words, it’s not clear that more government money leads to less corruption coverage, or that less corruption coverage leads to more government money. But Di Tella said that, from his perspective, the difference isn’t particularly important, since either timing scenario indicates a non-independent press. He said the evidence they gathered seemed to support newspapers reacting to government money, not the other way around — but that the evidence on that point wasn’t as clear as their other findings.

The question that came to my mind when I saw the paper was whether ideology might be a confounding factor here. Say a conservative government came to power. It might choose to funnel more money to a conservative paper. And the conservative paper could choose to write fewer corruption articles about its favored government. Both could happen at the same time, but be independently driven by ideology, not cash payments.

But the study takes that into account by, for instance, tracking a particular newspaper’s coverage within a particular administration. Even when a liberal paper is covering a liberal government, month-by-month corruption coverage goes up or down as government ad payments go up or down. In fact, the data showed that government dollars were nearly five times as powerful in determining corruption coverage as the ideological proximity between newspaper and government decreased.

Di Tella told me his report should not be misinterpreted as saying that there’s no appropriate role for government funding in the news media. He sees the problem as the wide discretion Argentine governments have to dole out money as they see fit. If payments were determined by, say, a neutral formula based on circulation — or if they were set in stone far enough in advance that they couldn’t be influenced by government whim — many of the negative effects could go away.

If you’re a hard-nosed reporter looking for the bright side in all this data, it’s that the analysis also found very real rewards for corruption coverage among the newspapers’ audiences. One extra full front-page worth of corruption coverage a month was associated with a nearly 8 percent increase in circulation. So cutting back on corruption stories seems to lead to less circulation revenue — even if it’s associated with extra government money coming in.

What to read next
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  • Tom Regan

    The obvious rejoinder to this column is an alphabet of great media organizations: ABC, BBC and CBC. The government-funded TV, radio and Websites of the Australian, British and Canadian Broadcasting Corporations are among the best in the world (the way these reporters question politicians make the hosts of Meet the Press, This Week, et al, look like a bunch of pre-schoolers)and almost completely government funded. (I’d add Al Jazeera here as well, which is largely funded by the ruler of Qatar.)

    And as someone who had more things I’ve written killed because it might “upset the advertiser” than anything I ever wrote about the government, I smell a red herring.

    The problem is that the moment the media hears “government money,” they run around yelling ‘The sky is falling, the sky is falling.” Well, the sky is falling, but it’s not the government’s fault. Ultimately, it’s the way you would use government money that would make the difference.

    You could do it arms length, as in Canada. Or a dozen other ways.

    But it’s not an automatic evil – there are too many examples that prove that it can be done, if it’s done in the right way.

    A true story that happened to me during my Nieman year in 91-92. During a brown bag lunch at the Kennedy School, I was sitting next to a very prominent conservative politician from Canada who had been one of the leaders of the movement to cutback on government money to the CBC. He recognized me as a journalist from Canada and leaned over and said, “I never knew how good we had it with the CBC. It really is the best.”

    Anhere in the US, the government money that NPR receives (the whole single-digit amount) doesn’t seem to stop them from regularly whacking the government upside of the dead.

  • Tom Regan

    By the way, the problem with the Downie/Schudson report is that it’s five-miles wide and 1 inch deep and talks about stuff that people were talking about at ONA conferences two years ago and that J-Lab at American University is already experimenting on.

  • Joshua Benton

    Hey Tom: I don’t disagree one bit with your main argument, and personally, I’m significantly more pro-public investment in journalism than most journalists. I’d love an American BBC (or, better yet, an Ohio BBC, a Louisiana BBC, a Texas BBC, etc.).

    I see the paper’s value not in opposing public funding but in making the point that, if there’s going to be public funding, it needs to be done in a smart way. There’s a difference between a government-funded operation (BBC, CBC, etc.) and government payments to private news organizations (i.e. direct subsidies to newspapers and the like). And there’s another difference between government payments that are determined by some objective rule (say, audience size, or whatever) and government payments that are open to the political whims of the current administration (i.e. Argentina).

    Personally, despite your hopes and mine, I think government support for journalism is a long shot in this country. But if it were to happen, I suspect it’d be most likely to take the form of government subsidies to existing news organizations, not the creation of some BBC-like entity. And that opens up a whole different set of questions and potential problems.

  • Michael Paterakis

    If only you knew about Greece.

  • James

    Too bad that Messrs Regan and Benton can not appreciate what liberal elitists they sound like.
    Just because the BBC and NPR reflect your ideological philosophy, does not make them objective. As in, just because MSNBC kisses Obama’s…ring, makes it a news organization, while because Fox is critical of the administration, it is not a news organization.
    The fact is that the media establishment has failed, and continues to fail, the American people. As much as that moves the country toward collectivism and statism, to the satisfaction of the liberal media elites, the people’s rejection of the liberal media should will make further incestuous relations between the government and the media a very difficult sell. As much of a blow to j-school ideology as it may be, the tv ratings and latest circulation data should be telling some people that their indoctrination programs aren’t selling outside of academia.

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  • Marty

    If a product sold to the public cannot command sufficient market revenues to cover its costs (including necessary reinvestment), that is a sign it is not performing a function the utility of which exceeds its cost. Fairly simple, even for a J-school prof or graduate.

    The media companies, news included, need to look at their business models and make changes to improve the value equation. If they can’t do it, they should die off and clear the ecological space for something that can.

    There are no great externalities or market failures or public goods issues here, that require govt intervention. If they cannot provide something the public wants at a price people are willing to pay, they need to look at themselves, not get the govt to steal from that same public that doesn’t want what they’re selling.

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  • Jonathan Stray

    Marty wrote:

    “… that is a sign it is not performing a function the utility of which exceeds its cost. … There are no great externalities or market failures or public goods issues here.”

    It isn’t obvious to me that general interest news reporting is not, at least in some cases, a public good. It’s certainly non-rivalrous, and often non-excludable.

    I am not necessarily arguing for market intervention. However, I think we have to face the fact that news organizations are not going to make money selling news. My understanding of history is that they never have — that’s why we had advertising.

    The only way out that I can see for journalism is for media organizations to subsidize news with something else that they can do well.

    Take, for example, Reuters. It collects high-end information for financial clients, which subsidizes the network for foreign correspondents who produce general news.

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  • Martinbelgrano1

    Argentina is one of the most corrupt countries in the world, everything you do
    here requires a fee or “payoff” to someone or you can’t get anything done. If
    you own a business you get regularly shaken down for bribes from so called
    “inspectors”. This is a way of life for people in this country. This is such a
    wonderful country it’s such a shame it’s run by the most corrupt government on
    the face of the earth. The president Cristina Fernandez de Kirchner and her
    supposedly dead husband Nestor Kirchner, increased their personal wealth from
    less than 1 million dollars to 80 million dollars in just a few years. Cristina
    Fernandez de Kirchner also claims to be a lawyer, yet has never practiced law
    and nobody is allowed to see her degree. It’s a total scam country. STAY AWAY.