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Parallel Universes: EconVue Spotlight April 2022
Has the 4th Estate Eaten Up the Other Three?
Most Russian experts and military strategists I follow doubted Putin would invade Ukraine. I agreed with their rational arguments, but here we are. I’m reminded of the Haruki Murakami novel 1Q84. The heroine alights from her taxi and gradually discovers that she is living in a world where everything is almost the same, except there are two moons. Since Covid began, I doubt I’m alone in feeling that I have somehow gotten off at the wrong stop, and am living in a hellishly perverse alternative universe.
The two-moon metaphor illuminates how geopolitics has recently evolved. We live between the tidal pulls of two opposing celestial bodies, the East including the Global South, and the West including Japan, which are rapidly developing their own separate ecosystems. The cross-currents are proving treacherous.
Both increasingly disconnected worlds have their own competing views of reality that transcend ideology, the old marker. The role of the media in driving these opposing narratives has been underestimated, because each is blind to the other, except to the few who navigate both sides. I imagine that the Venn diagram of people who read the Washington Post and People’s Daily is basically two circles that barely touch.
Media has another superpower. Not only does it tell us how things are, it can also forecast the future. A new website The Structure of Economic News uses AI tools to search for key phrases in news reports. Researchers found that mentions of the word “recession” for example, were far more predictive of an actual recession than any other numerical data, including government data releases and market reports. From their paper Business News and Business Cycles:
A central function of the economics profession is measuring the state of the economy and developing models that link these measurements to distributions of future outcomes…The media sector, as a central information intermediary in society, continually transforms perceptions of economic events into a verbal description that we call “news.”
Remarkably, we find that news attention explains 25% of the variation in aggregate stock market fluctuations. Thus, news text partly resolves a central puzzle in financial economics—the notorious inability to explain stock market fluctuations even ex post with anything except other asset prices.
Based on this dynamic, since we know inflation expectations matter, is it much of a leap to believe that media coverage of inflation might increase the chances that inflation will in fact occur?
Media is not just a witness, it is an active participant in key events. This is equally true in democracies and autocracies. What you think about Ukraine, Covid, and the economy depends a lot upon where you live. This is very obvious in Russia and China, where media is state-controlled, but less apparent in the West.
With few exceptions since the Iraq War, US legacy news organizations have taken remarkably similar, institutionally aligned positions on critical policy issues. What they decide to report, and fail to report, matters. However, they are clearly under threat from new entrants and are struggling to adapt. CNN+ failed to attract even 10,000 subscribers.
This platform, Substack, was featured in a recent New York Times article, Why We are Freaking Out About Substack and in an article last summer Is the Rise of the Substack Economy Bad for Democracy? What they probably mean by democracy is their business model, but they also fear losing their dominant place in public debate.
What about social media? In many ways it has become indistinguishable from the rest, a primary source of news for many. They are not neutral either. The minute these platforms began to decide what type of content was acceptable, and who was allowed to speak, they became editors.
To understand this, look no further than the furor that Elon Musk is creating as he tries to buy Twitter with the promise to loosen these controls. This twitter exchange between Prince Alwaleed bin Talal of the Kingdom of Saudi Arabia and Elon Musk perfectly illustrates the cross-currents of geopolitics, money, and control in the media today.
Recent events illustrate the role of the media in enlarging the schism between East and West.
Russia/Ukraine: the West sees Putin as mortally wounded by the conflict in Ukraine, and bound to lose. He is certainly on the back foot—it is hard to imagine how things could have gone worse for him, and now a battleship has been sunk. But how is he seen within his own country and in the East? In Russia, where the government has complete control of the media, he purportedly has tremendous popular support. For an insider elite view from Russia, see this interview in the Italian press with Kremlin advisor Sergey Karaganov.
In Western media there is not much discussion about Russian strengths other than its nuclear capabilities and energy reserves—not food self-sufficiency, the support of the world’s second largest economy and access to its technology, and a $20B current account surplus that will 10X this year. A few weeks ago, the Bank of Russia set up its first foreign branch office-in Beijing. In the US press at least, regime change is both a the primary goal and a foregone conclusion.
China/ Covid: US media coverage of tens of millions of people in massive lockdowns in China has paled in comparison to its focus on Ukraine. This is however a moment to watch. China is in the throes of widespread public resistance to its Zero Covid restrictions. In Shanghai, one of the world’s richest cities, 29 million people struggle to find food, and there is no emergent or critical medical care. Health care workers are exhausted. Here is an excellent if disturbing video that is a montage of Chinese social media takes on the situation in Shanghai, with translation.
Most of the segments included have been taken down by censors, and official Chinese official media is largely silent. Today’s People’s Daily shows Xi Jinping on a tour of national parks.
This human rights disaster is seriously underreported in the West as well. Omicron will not confine itself to Shanghai. Hong Kong consultancy GavKal says that only 13 of China’s top 100 cities are unaffected by lockdowns. This could have a huge negative impact on Western economies, but the US public is mostly unaware of what is going on. There are no fundraisers for Shanghai.
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All media is biased but has the Fourth Estate eaten up the other three, as Oscar Wilde once asked? Countries where freedom of the press is foundational need to be vigilant, because an informed public makes better decisions. If they wish to regain public trust, journalists should report facts rather than their personal opinions. As individuals, we should make an effort to encourage and understand divergent points of view and seek out alternative sources of information. That in fact what EconVue is all about, and I hope you enjoy reading some of the iconoclastic views of our contributors below.
Autocracies are disadvantaged by their relative lack of information. If we don’t know much about what people are thinking in China and Russia, in part they have themselves to blame. These countries have made it difficult for foreign journalists to report, or even enter their countries. Their own reporters serve the state, not their readers. In that world, journalism remains a dangerous profession.
It is ironic that now that we have access to more global news and data than ever before, instantly transmitted and instantly translated, so few choose to use media other than to reinforce the views they already hold. New resources become available every day. I recommend taking a look at the Twitter account of the Great Translation Movement, started by a group of Chinese dissidents in order to shame pro-Putin propagandists in China. It enraged Chinese officials. But someone here did not get it -and the account was suspended by…Twitter.
Circling back to 1Q84, we find ourselves in a brave new world that perhaps only a novelist, not an economist, could possibly imagine. 1984 is here in many ways, but if they choose, media can still play a useful role in the resistance.
Korea grows more than Japan, without a weak currency crutch.
Russia’s invasion of Ukraine—indirectly underwritten by China and with the Western response hampered by the threat of nuclear war—highlights a world transitioning away from the institutional, economic, and ideological order that has prevailed since the end of World War II. The transition will have significant and grave implications, and its dynamics are likely to be uneven, with the U.S. and democratic, market-oriented states likely to be some of the most adversely affected.
This work examines the strategic implications of the incorporation of Taiwan into the People’s Republic of China (PRC) under three scenarios.
The commentary explores the intricate economic synergies linking broad digital exchanges with branded digital platforms.
The railroad industry can give us some singular insights into the conditions, costs and benefits of economic regulation, and today’s essay is for those interested in those insights.
Website: The Economic Structure of News
Leland Bybee, Bryan T. Kelly, Asaf Manela, Dacheng Xiu
We demonstrate that these text-based inputs accurately track a wide range of economic activity measures and that they have incremental forecasting power for macroeconomic outcomes, above and beyond standard numerical predictors. Finally, we use our model to retrieve the news-based narratives that underly “shocks” in numerical economic data.
April 11, 2020 / MSNBC
As effective as Zelenskyy has been in drumming up Western support, Ukraine’s message has been far less compelling to audiences in the Global South, where many countries have declined to join Western campaigns to sanction Russia’s economy and isolate it diplomatically.
April 8, 2022 / CNN
With the political stakes so high, the tremendous cost associated with the policy becomes a secondary concern, and zero-Covid becomes a by-all-means and at-all-cost approach. Dr. Huang’s podcast is here.
April 13, 2022 / Forbes
China is facing what is arguably the worst crisis in governance since the end of the Cultural Revolution in 1976. Even the 1989 Tiananmen uprising did not affect as many people as the Covid lockdowns.
April 5, 2022 / Lawfare
China and Russia will build a robust alternative to SWIFT, which incorporates a messaging system with a settlement layer.
April 14, 2022 / Asia Global Online
In the new monetary geography, writes technology policy expert Andy Yee of the University College London Centre for Blockchain Technologies, the authority of states is by no means eliminated, but they have to operate with reduced monopoly power. With the emergence of Bitcoin and other decentralized crypto-currency and central bank digital money such as China’s e-CNY, governments must now act like strategic oligopolists, competing for the allegiance of end users for their currencies. This suggests a future of public-private partnership, with central banks creating their digital currencies, while outsourcing the distribution, innovation, and consumer-facing activity to the private sector
April 7, 2022 / Independent
‘The central banks are going bankrupt,’ Peter Thiel says. ‘We are at the end of the fiat money regime’
April 6, 2022 / Bitcoin Magazine
Despite the fact that I was blocked by Nick Szabo on Twitter for suggesting that crypto exchanges have utility, I am providing this link. He explains the history of philosophical and technical work by the cypherpunks that led up to the invention of Bitcoin, at the Bitcoin 2022 conference in Miami.
Our wide-ranging conversation with Dr Michael Green. We covered a variety of topics, including Dr Green’s recent trip to Taipei as part of a US government delegation, in the wake of the crisis in Ukraine.
Let me say at the outset that I expected to disagree with the thesis of my esteemed guests today. However, I have to admit that their research into the underlying causes of the current unrest and division is enlightening and intriguing.
This week’s guest is an expert I have followed for a long time, Yanzhong Huang, who is Senior Fellow for Global Health at the Council on Foreign Relations and Professor at Seton Hall University. He writes extensively about global public health and China’s health care system in Foreign Affairs and major publications.
My guest today is Elizabeth C. Economy. We first met while she was Director of Asia Studies at the Council on Foreign Relations. On leave from the Hoover Institution at Stanford, she now serves as Senior Advisor for China to the Secretary of Commerce. Everyone who follows China follows Liz Economy. She has become one of the most listened to voices in her field in the Biden Administration.
With all best wishes for a wonderful holiday weekend, however you celebrate.
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