With our attention diverted to the tragicomedy of GM and Chrysler, one or two major newspapers seems to dying each month. As taxes increase and government expands as a percentage of GDP, this is worrisome. Mancur Olson wrote that the fundamental cause of economic stagnation in a rich country was special interest groups getting the government to do them a favor at the expense of dispersed consumers. Stories about government handouts aren’t visually interesting and don’t work well on TV news. A story about some sort of sweetheart deal for a particular group would usually require a lot of numbers to be understandable and therefore wouldn’t work well on radio. The local newspaper may be the only representative of the average taxpayer or consumer on an issue where a special interest is lobbying state or local government. How much is at stake? State and local governments spend about $3 trillion per year, not too different from federal spending ($4 trillion; source).
If need be, we could get cars from China and India. Without local newspapers, though, how will consumers and taxpayers find out how seriously they are being bled? A guy in Shenzen or Bangalore cannot be an effective reporter here. A typical example of good local reporting is this New York Times story on the Long Island Railroad, It required four reporters and ran to 7 pages. The story includes facts about how some train drivers earned $215-277,000 per year due to hard-to-understand work rules, how more than 90 percent of L.I.R.R. retirees, most in their 50s, were classified as disabled and received additional pensions (totaling up to $170,000 per year). Despite the billions of dollars in extra costs to taxpayers, the cost of this disability pension festival to most individual taxpayers is never going to be more than a few thousand dollars per year, not enough for them to spend a year digging around in public records. Even if an individual taxpayer did discover the same facts and published them on a personal Web site, would he or she attract the attention of public officials? (so far Mancur Olson has proved to be correct; various elected officials promised to investigate while the scandal was in the public eye, but there don’t seem to have been any conclusions or changes in policy)
When the dust settles on our downsized economy, we may we may find that the loss of hundreds of local newspapers hurts long-term growth more than the loss of a few automotive brands.
Question for readers: What could replace the local newspaper as a check to special interest power in state and local government? The replacement needs to generate enough money for a comparable number of full-time reporters. I don’t think that the answer is as simple as “an online newspaper” because ad revenues right now aren’t strong enough to pay for a full staff of reporters.