Market Manipulation? Applying the Propaganda Model to Financial Media Reporting

Abstract

Herman and Chomsky's Propaganda Model (PM) has emphasized how the various 'filters' can lead to news reports misrepresenting the vested political and economic interests that underpin US foreign policy. However, there has been relatively little attention paid to the implications of the PM for media operations in another key dimension of capitalism: financial markets. Traders require timely and accurate information about changing market conditions. However, financial news announcements influence investor perceptions and sometimes trigger trading activity that reflexively changes the market conditions being reported. The interdependency of financial reporters, traders and analysts means that financial news production cannot be adequately understood in terms of how the PM filters distort media representations of markets. This article aims to critically analyse how financial news/information does not merely represent financial reality but reflexively constitutes it. The analysis will also highlight which aspects of financial news production are consistent with the PM as well as those that contradict it. Background: Propaganda Model DebatesThere can be little doubt that the Propaganda Model (hereafter PM) developed by Edward Herman and Noam Chomsky (1988) has been one of the most influential and controversial media theories to come out of North America. The PM's basic proposition is that news media coverage is systematically shaped in favour of elite state and corporate interests by the operation of five structural 'filters'. These include ownership arrangements, reliance on advertising revenue, dependency on elite sources, concern to avoid 'flak' (in the form of complaints, lawsuits, career penalization and so forth) and ideological conformity (originally anti-communism, but subsequent revisions include pro-neoliberalism and anti-terrorism).

Alarma y alarmismo: medios de comunicación y crisis económica

“…Siguiendo con esa visión estructural, hay otras propuestas de explicación de la de ficiente cobertura de la crisis, como por ejemplo la de Stiglitz (2011), desde la eco nomía de la información y de los incentivos que existen en el mercado para distorsionar los mensajes, o la de Thompson (2009), aplicando el modelo de propa ganda de Herman y Chomsky a la producción y difusión de noticias financieras. Asi mismo, varios autores han criticado la creciente "politización" del tratamiento periodístico, que ha llevado a los medios a dejar a un lado análisis e interpretaciones bien fundamentadas, para acabar alineándose con visiones partidistas de la situación (Becerra y Mastrini, 2010; Caruso, Cepernich y Rocarolo, 2012).…”

On Becoming an Exchange: Translating Michel Callon into a Political Economy of Communication

“…Thompson (2009Thompson ( , 2010 maintains that economic and symbolic processes constitute each other, which result in three kinds of relationship between financial reality and financial information. First, an implicit, performative relationship of which "the concepts, theories and discourses deployed by market actors to define, calculate, and articulate financial conditions help to constitute and performatively reproduce those conditions" (Thompson 2009, 85); Second, a transactional reflexivity that "crystalises" trading actions and generates price movement; Third, a game reflexivity that involves market participants guessing what others' actions might be and responding to those anticipated actions.…”

“…The markets were represented on screen with a constant update of explicit, transactional information (Thompson 2009) such as the volume and the price of shares bought and sold. Non-screen-based technologies that were also essential to trading became taken for granted.…”

“…During the 1997 market crash, both market makers and brokers had a sense of what the markets were, though these markets were not quantitatively measured, but qualitatively perceived. In other words, when technology disables transactional reflexivity (Thompson 2009) by not generating market prices, game reflexivity takes a more prominent role in participants' actions. Different types of information reflexibility perform different markets.…”

“…The political economic view contrasts a neo-classical view that information is generated in the markets and that technology is extraneous to them. Later, some other political economists provided an understanding of financial information by pointing out information is reflexive and constitutive (examples are: Davis 2005Davis , 2007Davis , 2011; Thompson 2009Thompson , 2010Thompson , 2013. Existing political economic studies have yet to offer a complete picture of the complex relationship between information, technology, and the financial markets.…”