INAUGURAL LECTURE

The Future of Financial in the Age of Austerity

Steve Schifferes, Marjorie Deane Professor of Financial Journalism, Department of Journalism, City University

The global financial crisis which began with a whimper in August 2007 – when BNP Paribas announced froze access to two of funds which were based on sub‐prime assets – spread with terrifying speed and depth around the world. Its consequences are not over, and will be with us for some time to come.

By 2010, the global crisis had reduced global wealth by some $50 trillion, cost governments some $10 trillion in bail‐out costs, and had reduced world trade by some 10% and global economic output by 5%. With governments reeling from the consequent budget deficits, major cutbacks in public services are underway from Athens to Whitehall to Washington.

But the crisis had another outcome that might prove even more damaging in the long‐term: the further erosion of trust in our institutions, from bankers to regulators to governments and indeed, to .

The inability to foresee the crisis and the lack of adequate mechanisms to deal with its aftermath, has produced a cynicism about the moral fecklessness and incompetence of the key actors in the drama.

It has been an interesting time to start a new programme in financial journalism, and I would like to thank the Department of Journalism, the Marjorie Dean Foundation for their generous funding, and our industry collaborators the Financial Times and the BBC for their support for this programme.

1 The key tasks for the next generation of financial journalists are:

‐to re‐establish the trust of the public in their professional judgement

‐to provide an independent perspective on key developments

‐to understand the from a global point‐of‐view

‐to make sense of the welter of financial information in a timely fashion

So how should we evaluate the role of journalists in the financial crisis? To answer this question I would like to look at the changes in financial journalism in the past twenty years and how they affected the coverage of the crisis.

When I started as a full‐time business some twenty years ago, the profession barely existed outside of the Financial Times or . What business and financial journalism that existed in the mainstream media was in its own ghetto where it struggled to get out onto the main news bulletins or onto the front pages. I even recall that the economics correspondent wanted to have nothing to do with the BBC business team at the time! There was very little training for financial journalists, and many of my colleagues regarded it as a stepping stone to something more glamorous in politics, entertainment or even consumer affairs. Coverage was very much driven by company news and the stock market, and a certain cosy relationship existed between chief executives who were willing to be interviewed and the business journalists who were keen to get interviews with them.

2 Growing pace of change

In the past twenty years we have had a revolution in the coverage of business and financial issues. Firstly there has been a big increase in the number of business or consumer finance programmes on television and in the size and scope of the business pages in the main . This has been driven by the need for individuals to know more about their own financial situation as they are being required to take more responsibility for it – for example, from the decline of occupational final salary pensions. And it is also a response to the extraordinary fluctuations in asset prices and therefore the wealth people have – whether in shares or house prices which have become one of the obsessions of the British middle class.

Secondly, the amount of financial information available to journalists and the public has grown exponentially, driven both by the internet and the availability of wire service feeds. One only has to look at the volume of information available today to both journalists and traders from a single Bloomberg terminal to see that it is almost impossible for any one person to comprehend it all. The rise of the internet and cable news channels has also feed an insatiable demand for financial news which has increased pressure on reporters from newspapers, broadcasters and wire services alike.

Thirdly, we have seen an expansion of analysis and comment in the financial sector, often driven by a need for major publications to differentiate themselves from “commoditised news”. The latest version of this trend has been the purchase of “Breaking Views” a commentary service founded online by former Financial Times Lex . We have also seen the growing use of syndication with wire services business news copy in major newspapers.

Fourthly, there is an increasing trend towards internationalisation of business coverage. The number of foreign bureaux of wire services in particular is being increased and international stories increasingly dominate the financial press. The attempt by the Financial Times to establish a presence in the USA, and the Wall St. Journal to tackle Europe, is another part of this trend – although so far it has been

3 markedly successful. The increasing spread of crises around the world, from the Asian crisis to the dot.com boom, has added to this impulse.

But we should not exaggerate the global nature of business news. In the major emerging market countries like China and India, a raft of both state‐owned and private media organisations have vastly increased the size and scale of business coverage, both in print and on television.

All these trends have led to changes in the way financial journalism was produced, some of which negatively rebounded on the profession.

The huge volume of detailed information led to a reinforcement for many publications of the “beat” system of reporting, where journalists specialised in a narrow section of the financial world such as the bond market, oil prices, or a particular industry sector. This led to the growth of a “silo” mentality where reporters were unable to connect the dots between say, financial markets and housing markets.

Secondly, the demand for more and more information from a limited number of sources – the companies and the markets themselves – led to ways of limiting and controlling access to such information. Unlike politicians, companies are not required to speak to the public and the press unless they want to. The role of sophisticated financial PR companies in “managing risk” for chief executives by limiting exposure has become a much more important part of the equation than 20 years ago.

Thirdly, very volume of information and the demands on journalists – and the increased pressure of time – produced sometimes a formulaic and superficial approach to reporting, with more volume and less substance. In particular, the analysis and commentary became increasingly separated from the role of reporting on the ground.

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And finally, very expansion of financial journalism also increased the split between the two very different audiences that business journalists seek to address – the sophisticated investor or trader (the City audience) and the newly awakened general public.

5 The financial crisis and journalists

The financial crisis cast a harsh light on the newly enlarged world of financial journalism, and raised many questions about its effectiveness.

It has been argued that the financial press had become corrupted by being too close to its sources, and had been swept up by the ideology of free markets,

In the heat of the crisis, however, the initial attacks on the press coverage of the crisis came from those – in the City, in business, and indeed in Parliament – who should have known better, who blamed the press for spreading panic and false rumours that exacerbated the collapse in the financial system. There are few financial journalists who have the dubious privilege of a full page attack on his role on the front page of the Daily Mail as the BBC’s Robert Peston did at the height of the crisis, In Britain, where the press lacks the First Amendment free speech protections of the US constitution, there is a need to be continually vigilant on attacks on the ability of financial journalists to report on a financial crisis, such as those recently proposed by the FSA..

A more serious criticism – made particularly strongly in the US – is that the financial press should have been able to spot the serious nature of the looming crisis – and the increasingly risky behaviour the banks and investment houses – in time to prevent the financial collapse that eventually occurred.

Now a crisis – as Professor Charles Goodhardt said in a seminar at City last year –is by its nature sudden and unpredictable, and it would be astounding if journalists had been able to predict something that neither regulators nor economists saw coming.

6 However, I think that financial journalists could have done better in both examining the roots and spotting the serious consequences of the crisis sooner – and why they didn’t reveals much about the nature of the trade.

First, there was a kind of group‐think, a “cognitive bias” to use the fashionable words of behavioural economics – in favour of the efficiency of free markets, and in particular their ability to price risk, which was shared by policy‐makers, economists and financial journalists alike.

The limitations view was perhaps most elegantly expressed by Adair Turner, the chairman of the Financial Services Authority during the crisis, in his post‐mortem speech in 2009:

“We have to recognise that what occurred was not just a crisis of specific institutions and a failure of specific regulations, but a crisis for the entire intellectual theory of efficient, rational and self‐equilibrating markets.

In the aftermath of the crisis we must therefore challenge previous assumptions – for instance that increased liquidity in all markets is always beneficial, or that financial innovation will always deliver beneficial results.

The failure of imagination involved in group‐think was also a difficulty in finding dissenting views, or taking them seriously, such as Professor Nouriel Roubini of NYU, dubbed Dr Doom by the press, or Professor Joseph Stiglitz of Columbia. There were of course also dissenters in the markets, such as the hedge funds, who eventually shorted the banks, as outlined – post hoc, of course, by journalist Michael Lewis in The Big Short. But this was a broader failure shared by most public intellectuals and major institutions, such as the US Federal Reserve and the International Monetary Fund. The recent Independent Evaluation Office report on the IMF’s failure to

7 anticipate the crisis in the period between 2004 and 2007 is particularly revealing in this regard. It says that

“The IMF did not warn the countries at the centre of the crisis of the vulnerabilities and risks that eventually brought about the crisis..even as last as April 2007, the IMF’s banner message was of continued optimism within a prevailing benign global environment.”

The IEO says that:

“The IMF’s ability to correctly identify these risks was hindered by a high degree of groupthink, intellectual capture, and a general mindset that a major financial crisis in large advanced countries was unlikely…

A lack of incentives to work across units and raise contrarian views, a review process that did not ‘connect the dots’ and an insular culture also played a big role.” (Independent Evaluation Office, IMF, “IMF Performance in the Run‐up to the Financial Crisis: IMF Surveillance in 2004‐7” IMF, January 10, 2011)

For financial journalists, this failure was compounded by the difficulties of understanding what was happening in the big picture because of the growing specialisation of function and beat. One of the journalists who did understand the growing risks that banks were taking on was Gillian Tett, the capital markets reporter for the Financial Times But her difficulty was in getting her views accepted more widely across the . It is telling that Martin Wolf, the FT’s leading economic commentator has recently admitted that he did not really see the broader consequences of her concerns until the crisis broke.

8 The problem of over‐specialisation was not unique to journalist. Professor Rag Rajan, of the University of Chicago, another of the small band of economists to warn of the looming crisis – and top ranked among economists in a recent Economist poll ‐ argues that the increased specialisation in the economics profession – as well as the increasing detachment of its economic models from the real world – was one of the underlying causes of the failure of economics to spot the dangers. He has recently written that:

I would argue that three factors largely explain our collective failure [as economists]: specialization, the difficulty of forecasting, and the disengagement of much of the profession from the real world.

Like medicine, economics has become highly compartmentalized – macroeconomists typically do not pay attention to what financial economists or real‐estate economists study, and vice versa. Yet, to see the crisis coming would have required someone who knew about each of these areas.” 11 Feb 2011)

There is a third factor which is particular to journalism which also made it more difficult to put the crisis high on the general news agenda in its early stages. This was the lack of business or financial expertise among the top rank of editors and front page subs who choose the top stories of the day. Once the crisis broke in October 2008, there were willing to be guided by their financial journalists. But before then, it was a brave front page editor who put a story about the collapse of bond markets for certain derivatives on his front page. This was another kind of failure of imagination, and one that emphasised the growing split between the specialist and generalist functions of the financial press.

In broad terms, the specialist press did not, for the most part, fail to cover these events, even if their full meaning was not always apparent. The disjunction was perhaps greatest in the case of personal finance journalists, who were perhaps most caught unaware by the looming breakdown of the financial system. In fact, one of the least explored areas of the financial crisis was how significant the endless stories

9 about rising house prices the ease of getting credit that was reported in the press and a huge number of television programmes such as Relocation, Relocation contributed to the huge build‐up of household debt in the UK and US.

Now we are in a situation – having socialised much of the banking debt onto national budgets and put ourselves in a deep financial hole – where we and many other countries are again at the mercy of a different sort of debt market – those trading in sovereign debt, which has already brought down two a weaker countries in the euro zone and is currently threatening two more. Here perceptions are even more important than ever, and the role of the financial press is even more critical in maintaining or destroying the credit rating of a country. I am not sure how well the financial press has taken on its the responsibilities for this role either, and whether the dangers of group think could loom just as large.

10 Four Scenarios for Financial Journalism

I believe that in order to understand more deeply the direction of travel for financial journalism in the future we have to step back and learn from the past.

I would like to propose that four different scenarios, or ways of thinking, have broadly dominated our coverage of financial crises both past and present. These are the “frames” which enable us to tell our stories and make sense of the torrent of events that confront us particularly in times of crisis.

The four frames: Tulipmania, or the Madness of Crowds;

The History of Standard Oil

Lombard Street

Reuters and the Rothschilds

The Madness of Crowds and Moral Panic

The first scenario, I would argue, has been the dominant metaphor for financial crises since they began. In fact, I would like to take you back to Holland in the early 1600s, when it was the cradle of early capitalism with its rich merchant traders whose conspicuous consumption led to the Golden Age of Dutch culture. Among the goods its traders brought back from the Ottoman Empire were tulips, then rare flowers that soon became a sign of affluence and good taste. The Dutch taste for tulips, and skill at breeding them, soon led to a proliferation of new types – increasingly rare and prized. By the summer of 1636, the price of these rare types began to rise uncontrollably on Dutch auction markets, sparking a frenzy of trading and speculation that threatened to unhinge Dutch society. The price of tulips rose to ten times the annual wages of an average worker, to the price of an Amsterdam mansion, or equivalent of the cost of provisioning a ship for a year – until they finally crashed in 1637.

11 In the words of a later commentator, Charles Mackay:

Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey‐pot. Every one imagined that the passion for tulips would last for ever..Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.

The lure of such “get rich quick” schemes, and the gullibility of the public in falling for them, has been repeated again and again in descriptions of financial crises and panics. It figures in accounts of the “South Sea Bubble,” the first financial panic in Britain, when the government sought to offload its public debt through a private company in the 1720s (echoes of today?); in accounts of the Railway Mania of the 1840s, in the speculation that led to the 1929 stock market crash, and in explanations of the dot.com bubble and the speculations in houses and shares of the past decade, and is often repeated both by academics and commentators when considering the recent crisis.

An editorial in the Washington Post newspaper from August 11, 2007, just as the current crisis broke, captures some of the flavor:

BY THE HEIGHT of the 17th‐century Dutch tulip mania, bulbs were selling for the equivalent of up to $76,000 apiece, and tulip options were trading on markets across Europe. The ensuing crash crippled the Dutch economy for years, establishing a cautionary model of speculative excess that investors have learned from, and ignored, in a seemingly endless cycle of boom and bust. Today's tulip bulb is the subprime mortgage: a loan to a not terribly creditworthy person in the United States to buy a house that he or she really can't afford.

12 Yet the striking fact is that, after 350 years of nearly continuous use by journalists, tulipmania turns out to be a largely a myth, invented by pamphleteers and progandists years after the actual events.

A careful study by historian Anne Golgar of Kings College has concluded that nearly all written accounts of Tulipmania are wrong. Far from spreading throughout society, the phenomenon was limited to "a fairly small group of wealthy merchants and dealers", that it caused no lasting economic damage, and that most accounts from the period "are based on one or two contemporary pieces of propaganda and a prodigious amount of plagiarism. Mackay, who was writing in the 1840s, was largely sourced to a 1797 work by German academic Johann Beckmann titled A History of Inventions, Discoveries, and Origins. In fact, Beckmann's account, and thus Mackay's by association, was primarily sourced to three anonymous pamphlets published in 1637 with an anti‐speculative agenda.

Now I am not suggesting that the current crisis had as few victims as the half a dozen burghers who were all that Prof Golgar could find who were ruined by tulipmania. . But it does suggest that the frame of moral panic, the desire to blame evil bankers or foolish regulators for our current problems, has deep roots in our cultural narrative of disaster as much as it is a sober analysis of our current difficulties.

What is also brings to mind is the whole issue of rationality in regard to economic behaviour, ‘irrational exuberance’ which is now being examined by behavioural economics.

13 The Trustbusters and the Origins of

Now the second historical example I want to bring up is again something that will be familiar with you – indeed it goes to the origins of investigative journalism. It is the role of the trust busters, or as they were labeled by President Teddy Roosevelt, a group of courageous journalists who took on the trusts – the big monopoly companies in the USA which dominated both industry and politics at the turn of the 20th century. The muckrakers investigated many things, from the origins of the slums to police and municipal corruption. But none was so famous, or destined to have such a great effect, as the expose of the way Standard Oil – then, and now as Exxon Mobil – the world’s largest private oil company, and in 1900 having a virtual monopoly on the production and refining of oil in the USA. In the process it turned the founder of Standard Oil, John D Rockefeller, from a hero into a villain.

The book The History of Standard Oil – was the founding text of investigative financial journalism. It was first serialised in the muckraking journal McClure’s Magazine starting in 1902 – was aimed at giving the general reader “a clear and succinct notion of the process by which a particular industry passes from the control of the many to the few.” It was no accident that its author, Ida Tarbell, was herself from the oil‐producing town of Titusville, Pennsylvania, and her father had been an independent oil producer before being forced out by the business practices of Standard Oil.

Ida Tarbell’s methods were not those of a propagandist but rather of a fact‐gatherer. She and her researcher spent years coming the records of hearings and court cases to gather evidence about the methods used by Standard Oil, and using her family connections she even managed to gain an interview with one of Rockefeller’s lieutenants. Her even‐handed and factual account of how Rockefeller agreed secret rebates with rail companies to undercut his competitors was hugely influential –

14 leading to an anti‐trust case against Standard Oil which went all the way up to the US Supreme Court, and resulted in the company being broken up in 1911.

The attack on the role of the rich in controlling “other people’s money” – in the words of Louis Brandeis – became an important part of the American political tradition, and particularly associated with the Progressive Movement which stretched from TR to FDR in the l930s.

The Progressives argued that a group of influential financial leaders had gained control of major manufacturing, transportation, mining, telecommunications and financial markets of the United States. In the context of the 1929 Crash, the widely publicised investigations of the Pecora committee in the US Congress about the questionable practices of bankers in the 1920s led directly to the creation of the Securities and Exchange Commission which still regulates financial markets in the USA, and the Glass‐Steagell Act which separated commercial and investment banking.

But investigative journalism has had a far less powerful effect on the currents crisis. It is noticeable that the even when committees have been set up to investigate the crisis, whether in the US or the UK, they have not gripped the public or journalist’s imagination. The hopes that major investigative journalism would have mitigated the crisis, or provided the impetus for major reform, have proved unfounded. Why?

First, I would note two characteristics of Ida Tarbell’s kind of investigative journalism. It involved a lot of fact‐digging and it was retrospective, not prospective. Her objective was to ensure the law was enforced, but she was also looking back at 25 years of history of business practices aimed at consolidation. And where did she get her sources? Again, she was reliant on official investigations and records – something which today’s regulators were notably lax in carrying out in the complex world of derivatives and CDOs.

15 The second point I would make is access. It would be unheard of today that an investigative journalist could get the kind of access to details of Rockefeller’s life and interviews with his associates.

Indeed the result of Ida Tarbell’s investigation was to prompt Rockefeller to employ one of the first executives ever hired by a US corporation, former newspaper editor Joseph Clarke, who tried to get journalists to paint his boss as a cuddly grandfather. Standard Oil printed and distributed 5 million copies of a booklet disputing Tarbell’s findings. The pioneering public relations executive Ivy Lee was hired by the Rockefellers to defend their image and urged them to spend more money on philanthropy and other public projects such as Rockefeller Centre in New York City.

But there is a more general point to make about the importance and significance of the trust‐busting journalists. They had influence because they were part of a movement – a very significant political movement in US politics – which had a clear political agenda and direction of travel.

Financial investigative journalism of the early 1900s had clout because it was part of a political movement with a clear narrative and plenty of resonance with the general public. The target was monopoly, and the constituency was the mass of small businessmen and farmers who were not far removed from an earlier form of capitalism. It was the power of that consensus which led the US Senate to pass the SEC bill unanimously.

But today we lack the clear narrative and consensus on reform, and I would argue that it is absence of such a frame that makes the message of investigation and reform far more difficult. .

16 Walter Bagehot and Overend and Gurney

Now I would like to turn to the third tradition I want to discuss today. In contrast to the highly politically charged atmosphere of early 20th century America to the more rarified atmosphere of late Victorian London. I will focus on the role of Walter Bagehot, the influential editor of the Economist for 15 years.

Walter Bagehot’s study of Lombard Street, about the role of London as the world’s financial capital, written in 1873, was probably the most influential book ever written by a journalist on the subject of how to deal with a financial crisis.

Bagehot was writing during a period which had been characterized by growing financial instability as London expanded it role as a national and international financial centre..

Just a few years before Bagehot’s book came out, London’s financial district had suffered one its worst financial panics, when the discount house Overend Gurney & Co, collapsed, bringing down a number of other financial houses around the UK. Overend Gurney has extended too much credit to other firms and banks based on its holdings of railway bonds which had collapsed in value. By the way Norwich Gurneys survived the crash and became one of the several Quaker families that came together to form Barclays Bank.

Bagehot’s response to the crisis in his book (Overend and Gurney were based at 65 Lombard St) and to argue that the needed to be a lender of last resort – precisely to prevent a financial panic spreading and damaging sound firms as well.

17 “Just when money is most scarce you have it.., you should lend it as fast as you can at such moments, for it is ready lending that cures panics, and non‐lending or niggardly lending which aggravates them.”‐ Lombard Street, 1873.

Bagehot insights represent the style of analytic journalism that played an important role in the financial crisis, and I believe is central to the future of financial journalism. Such commentary has been a strong part of the UK’s financial news tradition ever since – and it is still one of its strengths, compared to the US financial press, where the investigative tradition still reigns supreme.

But the key for Bagehot was the behind‐the‐scenes role of the Bank of England which should work quietly and out of the public eye. It was not for nothing that Bagehot’s other famous work, The English Constitution, distinguished between the “pretty” and public bits and the behind‐the‐scenes “efficient” bits such as Cabinet meetings.

In the next major financial crisis to hit London, the Barings crisis of 1890, when Barings had overexposed itself to Argentine bonds, the Bank of England worked effectively behind the scenes to organise a rescue package for Barings before the news became public.

It was no accident that when the financial crisis began in the UK with the rescue of Northern Rock, one of the most bitter complaints from the Bank of England that it was not able to keep this rescue out of the press.

Part of the reason this was not possible was the change in the nature of commentary – and in particular the rise of blogging. It was on the blog of Robert Peston, the BBC Business Editor, that the story of Northern Rock broke – and subsequently many other stories of the financial crisis.

18 of this sort, however – and the vast panoply of sometimes skeptical blogs by a diverse groups of economists such as Brad Stetser, Nouriel Roubini, and Glenn Hubbard from different sides of the political spectrum – are an increasingly important part of the debate, widening the information available to interested observers and policy makers alike

And there is no doubt that in the critical period when the shape of the looming crisis was still unclear – between August 2007 and September 2008 when Lehman collapsed – maintaining such a dialogue was vitally important to understanding the nature of the crisis.

However, we should note the ambiguous legacy of this tradition. It is about talking among elites, not among the public. It is well suited to times of paradigm change when explanations for the way the economy works undergo a sea change. Indeed it was Peter Jay as economic editor of the Times in the l970s, when he was advocating a shift from within the Labour party away from Keynesian views to a more sophisticated version of that he famously observed that he was only writing for 3 people – and two of them were in the Treasury.

One of our difficulties, however, in understanding and analysing the crisis is that we are still in the process of developing alternative economic paradigms. The market‐ based approach which replaced Keynes as the dominant paradigm in economics in the Thatcher years is now holed below the waterline. It may be that the insights of behavioural economics or the insights that unequal access to information distorts markets may prove the key to a new over‐arching theory. But developing such an overarching new perspective – which history suggests may take years if not decades – could be one the most important outcomes of the current crisis – and financial journalists should be at the centre of that debate.

19 Reuters and the Rothschilds: Making Money, Setting Prices

My final story returns us to the more mundane function of financial journalists and their effects on markets. From the beginning financial journalism has been more about reporting prices than anything else. Indeed both the newspaper and the stock market have a common origin in the 17th century coffee house, where information was exchanged for profit on a semi‐exclusive basis.

The key role technological revolution in financial journalism began not in the 1980s with the invention of the World Wide Web, but in the l840s with the invention of the telegraph. And it was the spread of instantaneous proprietary information that was to have the most revolutionary effects on markets. It also created what was for a long time a secure monopoly on the private reporting of information.

And one of the keys is the role the Rothschild Bank played in the origins of Reuters, the financial wire service that is still one of the dominant players in data collection and dissemination today. Reuters started by providing news to the Rothschild Bank on an exclusive basis, and the bank had indeed built up the most extensive network of agents in all the capitals of Europe to get what we would now call insider information about what was going on, particularly in government lending.

In 1855, a decade after the invention of the telegraph, Julius Reuters came to the Rothschilds with a proposition, for them to back an electronic telegraph price reporting system between London and Paris.

To his surprise, Rothschild turned him down flat. “I do not wish to see such a system established. It will ruin our business,” he asserted. Undaunted, Reuters went ahead and established his service. The key breakthrough in telegraph transmission, however, was the laying of inter‐ocean cables, starting the Atlantic cable in 1866,

20 and eventually reached the furthest reaches of the British Empire – Australia – by the 1880s. The cables were all routed through London and Reuters – and the British government – controlled the worldwide distribution of information (a point reinforced in World War I when the British Navy disconnected the German cables to North America). The world was divided into different territories for the purpose of transmitting financial information – they were too expensive for ordinary telegrams – with Havas taking part of continental Europe and Western Union and later AP the US – a system which lasted for nearly 100 years.

And what of Rothschild? Well, according to Niall Ferguson’s magnificent biography, the creation of Reuters was indeed a turning point in the bank’s fortunes, beginning the long term decline from the most pre‐eminent European bank in Napoleonic times to a minor player today.

There are two legacies I take from this tale. The first is that the most revolutionary effect of financial journalism has been its effect on markets through price disclosure. The current structure of financial markets, and the revolutionary changes in production and consumption worldwide, owe as much to the reporting of financial prices as to the steam engine or the motor car.

The second point I would make is that in many ways the future of financial journalism as a well funded activity depends on its ability to provide proprietary, real‐time information. And so far financial journalism has been remarkably successful in preserving this – as the expansion of Reuters and now Bloomberg has shown. Whether this continues, and what effect it will have on the character of reporting, is one of the most important questions for the future of financial journalism.

21 The Future of Financial Journalism – The Western Version

Now I would like to summarize where we are and where we are going. But I would like to caution that this is really the Anglo‐Saxon version of events, heavily influenced by what happens in the US and the UK – which are still the centres of financial journalism in the West, due to their greater reliance on markets and their stronger laws on disclosure. There are very different trends at work in the rest of the world, particularly in the emerging markets of Asia and the Middle East.

There are three trends I see dominating the next decades of financial journalism.

The first is the increasingly convergence between and financial journalism. The next decade is likely to be dominated both the US and the UK over what to do about the deficit and what its effect will be on politics, society and the economy. This requires the kind of journalism that can move seamlessly from the boardroom to the committee room and understand the political economy of the crisis. It is even clearer in the case of the Euro zone crisis that there are political as well as economic interests at stake.

The second trend is the continuing split between the specialist and generalist functions of financial journalism, after a temporary but brief coming together during the financial crisis. In particular, the economic viability of specialist financial journalism looks more promising than that of the generalists, where much economic news has become commoditised.

The third trend, which I think may be inevitable if not desirable, is the growing importance of commentary and analysis and the relative decline of investigative journalism, as resources shrink and the regulatory climate gets more difficult. And although the internet has also proved an important place to find and release data, it is also the place in which commentary will especially reside. The growing complexity

22 of the financial world in which we leave, and the need to make sense of it, as well as the desire of paid‐for journalism to differentiate itself, will ensure that this will continue.

And finally financial viability. I do not share the pessimism about the future of the press in the age of the internet applying to financial journalism in the same way. The need for real time financial data – which can still be organised in a proprietary way – will provide financial journalists with at least some of the resources they need to survive.

The Future of Financial Journalism – the Global Version

But perhaps the most important clues to the future of financial journalism lie not in London or New York but in the booming mega‐cities of Shanghai, Mumbai, Nairobi or Sao Paolo. Here there is no question of the survival of the financial press – rather what we are seeing, particularly in the emerging market economies in Asia, is a huge boom, with the growth of financial news channels, financial magazines and newspaper supplements. And the new channels of communication, the internet and mobile phones, are also increasing sources of news.

However, with such a rapid expansion has also come uneven development. The biggest challenge for the business media in developing countries is to detach itself from its dependence on the state and corporations for its stories and funding.

This is not just a matter of “red envelopes” where sometimes reporters are given gifts in return for writing stories. It is also the ability to develop editorial

23 independence in a situation where corporations and governments (and in the case of China, the party and the army) are deeply inter‐twined.

The creation of an independent class of journalists working to professional ethics is a vital part of this process, as is the improvement of journalism training and recruitment. As long as journalism is seen as a route to a PR job, rather than the other way round, our journey is not complete.

But financial journalists also have a tremendous opportunity in the emerging market countries, not just to expose corruption, but also to report and understand the tremendous economic transformation that is taking place in these countries at breakneck speed. Understanding the consequences and pathways of this drive to modernization – and how it will play throughout the global economy – is the biggest challenge facing journalists today.

And I have no doubt that they will rise to that challenge of providing the essential guide and companion as our economic and financial world is remade once again.

Thank you for listening.

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