Can Media Lies Prevent An Economic Downturn?

Until very recently, the official view of the pro-Republican supply-side camp was that while there may be some problems in the housing sector, the overall economy was doing great. The talk of a recession was, to use the words of former McCain economic advisor Phil Gramm, merely reflecting a "mental recession". The fact that most Americans said they experienced economic hardship merely reflected how America had become "a nation of whiners". Others came up with an interpretation somewhat less dismissive of regular people. While the economy was really doing great, the fact that many people thought otherwise simply reflected how it was being slandered by the liberal media. If only the media had said that everything was going great, this view implicitly argued, then everyone would have thought the economy was going great and if they had simply argued that, then there wouldn't have been any problems.

In reality, the economy was not doing great, and the media was hardly slandering it. It was if anything depicting it in a too positive way by consistently underestimating or failing to recognize the problems. But more important, while the media depiction of the economy is not unimportant, it can't prevent problems from happening simply by lying and pretending the underlying causes of the inevitable problems don't exist.

This theory is now being tested in Russia. The Russian economy has been hit hard by the dramatic decline in the price of oil, its by far most important exports. The rouble has therefore fallen significantly and the stock market is down 75%. Yet as the universally state-controlled medias have banned the use of words like "crisis" and "decline" with regard to the Russian economy, it continues to say that the Russian economy remains strong-and no dissenting opinion is allowed. That alleged strength is of course universally credited to Vladimir Putin's leadership.

We will now see in Russia whether or not the media can really prevent an economic downturn simply by not reporting bad news and pretending that everything is going great. Since first of all many Russians can access foreign news sources and since secondly and far more importantly, economic downturns are not caused by psychology, I don't think it will succeed.