World War II is still a source of fascination. It was global conflict, fought and won by what Tom Brokaw called “The Greatest Generation” of Americans, and its drama, death and destruction still capture imaginations — even of younger generations otherwise uninformed and uninterested in history.
During the war, radio broadcasts were a prime vehicle for both news and propaganda. Television had been invented, but with its primitive technology and dubious image quality it was not ready for prime time.
From the beginning of the war the British Broadcasting Corp. (BBC), then the government radio monopoly in Britain, established a policy of reporting the news accurately. Even when most of the news involved a recitation of British defeats as the war progressed, they broadcast the truth.
The official policy of the BBC during the war was that for reasons of the national interest they might delay a news story briefly, but they would air the story and they would not knowingly falsify it, bend it or apply cosmetics to make it more attractive. They had a well-deserved reputation for telling the truth. This was a stark contrast to the radio broadcasts in Germany, Italy, Japan and Russia, where the news was reworked into something closer to fantasy than fact.
One result was an expansion of BBC’s audience. Its listener base expanded to create a global audience that even included listeners in Germany, Italy and Nazi-occupied Europe, even though it was a criminal act, punishable by death, for most people there even to have a radio capable of tuning in.
Another result was that BBC gained a reputation as a trusted news source; a reputation that lasted for two generations and lingers even now, despite the organization’s self-inflicted wounds and the occasional official inquiry into its broadcasting as fact things it knew to be untrue.
Today’s news media organizations, including BBC, no longer enjoy the level of public esteem and trust that they once did. That is probably a factor in their no longer enjoying the cash flow that they once did, either, but that is very much “the elephant in the room” that no one talks about.
One of the interesting aspects of our recession is the absence of tears as institutions, some with glorious and long histories, collapse and disappear. Many years ago, Don Owen directed a Canadian Film Board movie — one that would eventually achieve cult-film status with the title, “Nobody Waved Goodbye.” And it was difficult to erase that title’s thought as we watched Washington Mutual be vaporized by the federal banking authorities, the Seattle Post-Intelligencer launch itself into virtual reality, and General Motors prepare for a new life as a bankrupt business. No one shed a tear. Nobody waved goodbye.
The relationship between an organization’s reputation and its ability to survive and prosper is not something that has been explored very actively by economic theorists. It seems there is no place on our supply and demand curves or in our more complex economic models for a seller’s reputation — with all that entails for the connection and trust that might exist between the seller and the market, its customers, and the community.
If this meltdown of financial firms, automobile makers and media empires has taught us anything, though, it is that a firm’s reputation has cash value. It is the foundation of a firm’s “market presence,” and absolutely essential to survival. Like most foundations, though, it isn’t normally visible, or perhaps appreciated, until something goes wrong.
When it comes down to how fast our economy will recover, how we will finance the huge, and growing, federal deficit, and what our financial, automotive and news media sectors will look like after this recession, foundations are revealed — and it is clear that more than just price issues are involved.
Would General Motors be in its straits if its relationship to the market and to the public were stronger? For years now, many of its cars have been judged — by independent authorities — to be of equal or better quality than its foreign-based competition. But its diminished reputation with car buyers made that fact hard to believe. And now its reputation with the public in general has made all but its legal stakeholders pretty much indifferent to its fate.
While perhaps greed was a factor in the recession, the major culprit was in thinking that reputations were built solely on earnings reports and that everything important in economics, and in this world, can be expressed in terms of relative prices and rates of return. If we can rid ourselves of those ideas, we stand a chance of not repeating this recession again, and again. We don’t need the practice.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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