Quote of the Day: Liberalism’s trifecta

The industry was liberalism’s trifecta: newspapers, television networks, and the school system. Two are bleeding red ink. The third soon will be, as online education enables students to live at home, take courses online, graduate with accredited degrees, and pay $15,000 in tuition, total. A widely accepted estimate is that half of all American universities will go under over the next five decades. It won’t take anywhere near that long. The no-name private colleges will go under first, Cutbacks in tax funding will complete the procedure. Legislators will figure out that they can fire two-thirds of the faculty and replace them with online lectures and low-paid, untenured professors and graduate students to grade written exams.

All that liberalism will have left is the public school system, K-12. This dinosaur has been caught trapped in the tar pit ever since 1963, when SAT scores peaked. Online education is invading today. The American Federation of Teachers is on the defensive. In 50 years, the suburban schools will be online. Competition will demonstrate that the public school bureaucracies cannot compete.

Liberalism made entrepreneurial decisions on where the future was headed. The World Wide Web is taking the world in a different direction. It is leaving liberalism behind.

Liberals call this process of ideological decentralization “Balkanization.” I call it the break-up of a cartel that can no longer compete on the free market.

This is from Austrian economist Gary North at the lewrockwell.com. Decentralization will likewise erode the 20th century top-down political institutions.

Is The Newspaper Industry Dead? Probably Not If It Is For Free

We talked about the potential fate of the newspapers in the advent of the internet [see Creative Destruction: Newspaper Industry Headed For The Dinosaur Age?], where traditional newspapers represent as the "old industrial age economy", which currently suffers from "creative destruction" from the transition to news based on the web or the "information economy'.




Nevertheless, this interesting commentary and picture from the Wall Street Journal Blog,

``If Ben Bernanke drops newspapers from a helicopter, will it save the beleaguered publishing industry?

``Probably not. But the plucky Hong Kong newspaper The Standard is using a cartoon drawing of such a fantastical occurrence to brag about the paper’s circulation, now above 200,000.

``In a so-called house ad (called that because the house, the newspaper, couldn’t sell the page to a paying advertiser), Chairman Bernanke tosses copies of the Standard from a red helicopter over Hong Kong’s skyline. The headline on the paper “WORST LIKELY OVER.”

Free newspaper will probably not end for as long as the other sources of revenues outside subscription -particularly advertisements- will be able to cover the costs of maintaining these prints, overhead and distribution.

However, competition from the web and the TV for ads will be tight as to render the sustenance of free news as suspect.

Importantly, the diminishing role of newspaper is likely to reconfigure the flow of information which is likely to impact the distribution of power held by the mainstream via mainstream news.

As Professor Gary North projects (bold emphasis mine),

``Printed daily newspapers are doomed. On-line daily paid-subscription newspapers are also doomed. Conclusion: the Establishment is about to lose one of its three major instruments for shaping public opinion: newspapers, the TV networks, and the tax-funded schools...

``The era of Establishment control over the flow of ideas is ending. That era rested on the high cost of entry. Now anyone can enter. The mammoths are in the par pits, with their huge buildings, huge staffs, and huge debts."

So creative destruction in media is likely to also affect the distribution of political power.

Creative Destruction: Newspaper Industry Headed For The Dinosaur Age?

When one or several companies of an industry are in the red financially, the losses may be attributed to the developments within the companies themselves.

However, when losses are evident on an industry scale, then the core dynamics of the industry may be in question.

This predicament currently applies to America's newspaper industry, whose survival seems threatened by the growing use of the internet for acquiring news.

Yet developments in the US could be an ominous sign for the world.

According to the Economist, ``MORE bad news for America's newspaper industry. In the six months to the end of September, daily circulation fell by 10.1% to 30.4m compared with the same period in 2008. All of the top 20 papers have seen their circulation plunge, with the exception of the Wall Street Journal. The Journal now has the biggest circulation in the country, surpassing USA Today, which suffered an enormous 17.5% drop in readership over the same period. Paying readers are now turning to the internet to get the news free." (bold highlights mine)

First, in terms of internet penetration level rates, North America appears to be the leader.

The chart above is from internetworldstats.com. In other words, perhaps the best measure for the evolving shift in the way news is being acquired would be from the world's most connected.

Next, the trend towards the internet as a source for information appears to be validated by survey.


The chart above courtesy of Pew Research.

According to a Pew report issued last December, ``Currently, 40% say they get most of their news about national and international issues from the internet, up from just 24% in September 2007. For the first time in a Pew survey, more people say they rely mostly on the internet for news than cite newspapers (35%). Television continues to be cited most frequently as a main source for national and international news, at 70%." (emphasis added)

So empirical evidence connects the cost- financial losses and the flagging usage trend of the of the news industry- to the beneficiary- the burgeoning use of the internet as a source of news.

Why this appears to be so?

Mr. Scott Bradner of Network world gives a clue, ``The three most important observations to me are that power is shifting from institutions (like newspapers) to individual journalists; that people increasingly want news "on demand" rather than scheduled, like the evening news; and that there has been a raise in importance of "minute-by-minute judgment in political journalism." These trends greatly benefit the Internet and Internet-based journalists. The latter two trends also benefit the full-time cable news channels, but only when the cable is available. And, in the office, cable is not generally available." (bold emphasis mine)

In other words, the conspicuous shift marks of a market based redistribution of power and wealth to the industry that satisfies the consumer most.

Bottom line: This seems to be a manifestation of Joseph Schumpeter's "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one" or in short, the process known as "creative destruction" at work. This phenomenon largely emanates from the competitive nature brought about by capitalism.