DRI-446: Murdoch ‘Show Trial’ Previews the End of the Rule of Law

This past week in London, media tycoon Rupert Murdoch appeared before a public court of inquiry empanelled to investigate the subject of “media ethics.” Murdoch was questioned for hours by a lawyer and judge. The questions ranged over the course of Murdoch’s entire business career. (He is now 81.)

An objective observer might wonder: What sort of proceeding is this? The participation of judges might at first suggest a criminal proceeding, but no – Murdoch is charged with no crime. Parliament, like its American Congressional counterpart, sometimes conducts investigations of activities deemed inimical to the public weal. In this case, however, Parliament had already had its innings in previous weeks. One way of getting a grip on this inquiry might be to think of it as a special prosecutor’s hearing without any prosecution.

Another good comparison would be with a “show trial.” In the 1930s, the Soviet Communist Party held show trials to try political figures for treason. The legal force of the trials was a useful pretext for the liquidation of the defendants, who opposed the Communist regime. But the overarching purpose of the trials was political – to publicly demonize the opposition.

The Murdoch hearing also resembles U.S. Congressional hearings in which lawmakers interrogate executives of the major domestic oil companies. These hearings are symbolic rituals in which the subject witnesses are urged to confess error, recant their sins, beg forgiveness and assume an attitude of submission toward their interrogators.

The common denominator behind all these examples is the absence of the Rule of Law.

The Inquiry

The proceeding at which Murdoch testified last week is actually called the Leveson Inquiry, named for Lord Justice Leveson. Leveson is the English jurist designated by Prime Minister David Cameron to investigate the wholesale interception of personal cell-phone messages of private individuals (“phone-hacking”) by English reporters that has occurred at least since 2006. A second, and broader, purpose of the inquiry is to probe the “general culture and ethics of the British media.”

A Martian tourist, unfamiliar with political manners and mores in the West, might mistake the purpose of the proceedings. Six barristers and six counsel advise the Inquiry, which is funded by the British Home Office and the Department for Culture, Media and Sport (!). Numerous experts have been solicited to educate the Inquiry; opinion-makers have been assembled to publicize its results; over 50 victims of phone-hacking have been invited to edify the public with their tales of woe. All this might move the Martian to view the Inquiry at face value as a Quest for Truth and Justice.

Why Now?

It is no coincidence that an investigation of the news media happens to follow charges of misconduct leveled against a newspaper owned and operated by the world’s leading conservative newspaper publisher.

For decades, liberal journalists committed one depredation after another. In the U.S., Pulitzer-winning reporter Janet Cooke turned out to have fabricated her stories; a television news team fabricated crash tests in order to make an automaker look bad; journalists marketed scare stories on subjects ranging from Alar to pollution to nuclear power; network insiders like Bernard Goldberg revealed rampant liberal bias among broadcast news executives; a network news director deliberately edited a 911 tape in order to create an appearance of racial bias on the part of a neighborhood-watch security man who shot a black youth. Meanwhile, in Great Britain, tabloids perfected the technique of invading the privacy of celebrities, taking a cue from their Italian brethren, the paparazzi.

Yet these ghastly errors and/or deliberate actions did not give rise to calls for government investigations of the press – let alone of individual liberal press lords. Such calls would have met with cries of censorship and fascism; the callers would have been accused of seeking to muzzle the press and eviscerate the First Amendment.

It was only when malfeasance came from the Right – from the tabloid News of the World, owned by the world’s leading newspaper publisher of conservative sympathies – that press censorship suddenly came into fashion.

Sessions, on Tuesday and Wednesday, April 24 and 25, 2012, did not so much as mention the subject of phone hacking. On Tuesday, Rupert’s son James was questioned about allegations that News Corp., the Murdoch newspaper-publishing arm, operated at closer than arm’s length to Peter Hunt, the British government regulator who oversaw the company’s proposed merger with British Sky Broadcasting Group PLC (BSkyB, for short). On Wednesday, Murdoch himself was grilled for four hours by journalist Robert Jay.

The Problem of Moguls Asking for Government Favors

After setting the scene with a review of Murdoch’s business history in the U.K., Jay led off on Wednesday with the “often-cited criticism…that [Murdoch] has allegedly sought to use his sizable media presence in the U.K. to influence politicians… to get favorable decisions on commercial matters.” We need to fight the heavy traffic in generalities like “sizable media presence,” “favorable decisions” and “commercial matters” to grapple with this complaint.

Mr. Jay clearly deplored the fact that a rich, successful man like Murdoch was willing to press his views on political leaders like Margaret Thatcher and David Cameron. The obvious implication was that it would be wrong for politicians to do what Murdoch asks them to do. Murdoch’s answer cut through the rhetorical overgrowth to the point: “I’ve never asked a prime minister for anything.”

Whether we believe Murdoch or not is utterly beside the point. Indeed, the sensible presumption would be that Murdoch is lying – that he asks government officials for special favors and, indeed, receives them. What then? What does that mean and what should be done about it?

It means that government has the power to grant such requests. What should be done about it is to deny government that power. Any other reaction is both impractical and immoral.

The phrase “commercial matters” covers a multitude of possible sins. But this much stands out like a blaring car alarm at 3AM – marketplace outcomes are supposed to be determined by supply and demand, not by government officials. Prime ministers or antitrust arbiters or petty regulators can only bestow favors that they have the power to grant. If they don’t have the power, the Murdochs of the world aren’t going to come around asking for special treatment.

Of course, this isn’t an answer calculated to satisfy the kind of people who hold hearings into press ethics. Those people see government as the source of all, or most, good things. They demand that government have the power to control markets, because otherwise the Murdochs of the world will (somehow) gain control and run roughshod over the little guys of the world.

The obvious weakness of this attitude is that, while the Murdochs of the world are sometimes abrasive and unattractive people, their wealth and position results from their ability to make people happy, not unhappy. Murdoch himself has tremendous talents – for running newspapers that people want to read and for revitalizing businesses that have been badly run by others. He will succeed as long as these talents thrive and fail if they ever wither. The superiority of free markets is that they require unpleasant people to make people happy in order to become rich. Or, to put it differently, that they provide a productive outlet for the acquisitive energies of dominant personalities. Prior to the advent of free markets, this same type of person could become – and remain – filthy rich by inheritance, murder, terror and intimidation. On the other hand, unpleasantness is not a prerequisite for gaining vast wealth, whereas it usually was in pre-market times.

The presumption that we need government to prevent the Murdochs of the world from wielding power over us rests on the conflation of power and wealth. Power over us is the ability to coerce or compel us; in a free society, it is wielded only by government. Wealth implies the ability to obtain goods and services voluntarily in markets; it is generated by satisfying the wants of other people. In a free society, it cannot be coerced or compelled into existence.

In a free society, the Murdochs of the world are a benefit to us but not a threat. They are a threat only in a society in which government can coerce and compel the results of markets. In that event, market outcomes can no longer be trusted to benefit us, and it becomes profitable for the Murdochs to buy government to obtain or preserve their wealth.

The Problem of Personality

The issue of personality arose when Mr. Jay broached the subject of editorial influence. He alluded to “perceptions among some people… that underlings need to be cautious about taking a different view than Mr. Murdoch’s.”

Mr. Murdoch demurred, somewhat “obliquely,” according to the Journal. But once again, let us assume the worst. We will stipulate that the rumors are exactly right. Murdoch is hell on wheels toward subordinates; editors must echo the Murdoch line for fear of dismissal. This is averred by at least one former employee, Harold Evans, who served as editor of the London Times under Murdoch. He groused online that “political independence was only one of the promises he made and broke.”

What makes this an issue of public policy or concern? Newspaper publishers have been using editorial mastheads as personal megaphones ever since Gutenberg invented the printing press. This poses no danger to the general welfare either in theory or practice.

The theory of competition says that readers who don’t like an editorial position can cancel their subscription – or their advertising. A journalist who cannot stomach the publisher’s position is free to move elsewhere. A publisher who tortures his employees must either pay them enough to compensate for the pain or risk getting stuck with inferior help.

In practice, Murdoch’s conservative views do not predominate in journalism. Disaffected employees can take comfort from the unlikelihood of facing a conservative litmus test in their next position. Of course, that next position may not be in print journalism. Editorial liberalism is much more popular with editors than with readers; it has produced a steady decline in newspaper circulation over the last three decades. In turn, this has reduced advertising revenue and slowly but steadily thinned the ranks of daily American newspapers.

The beauty of free markets is that they regulate the behavior of publishers and editors automatically, obviating the need to convene parliamentary hearings.

The Problem of Endorsements

Mr. Jay clinched the case that the hearing was an exercise in political theater when he asked whether the Murdoch papers’ endorsement of the Conservative Party candidates in 2010 “was motivated by a desire to install a government… friendly to approving the BSkyB deal.” Murdoch’s answer – “We’ve never pushed our commercial interests in our newspapers” – was only slightly less disingenuous than the question itself.

In the same week as the Murdoch hearings, two seemingly unrelated incidents shed considerable light on this question. A bureaucrat in our Environmental Protection Agency was revealed to have advised treating regulated companies as the ancient Romans did captured territories. “They’d find the first five guys they saw [and] crucify them… that town was [then] really easy to manage…that’s our general philosophy.”

We pretended shock at this revelation, but it confirmed what we had known all along. Regulators consider it their prerogative and their duty to terrorize owners and executives of businesses that are out of favor with the administration. And there are no laws, statutory or constitutional, forbidding them from doing just that. After all, isn’t that exactly what happened year after year, when oil-company executives were called to Washington to endure brow-beatings by Congress?

It was also last week that Wal-Mart was revealed to have bribed officials in Mexico in order to secure expedited approval for store openings. Political corruption in Mexico is a favorite whipping boy of both the Right and the Left in the U.S., but this time commentators chose to shake the finger of disapproval at Wal-Mart. But what, exactly, were Wal-Mart’s choices? It could pay the bribe – indistinguishable to its shareholders from, say, a regulatory permitting fee – or suffer millions of dollars in lost revenue.

In a world of all-powerful government, a company is faced with a menu of unpalatable choices. It can simply abandon itself to the fates. But a corporation would leave itself open to shareholder lawsuits if it failed to make reasonable efforts to protect their interests. Years ago, the left wing mercilessly criticized CEOs for drawing big salaries but doing little and producing poor or mediocre returns. Now it excoriates the Murdochs for doing too much and succeeding too well. Of course we want a world in which CEOs are not wasting time and effort lobbying government for wasteful measures like subsidies, quotas, tariffs and bailouts – let alone suborning illegal behavior on their behalf. But the very Leviathan state created by the left wing makes it impossible for CEOs to act in the single-minded, dutiful pursuit of productivity. Failure to act a la Murdoch leaves them open to crucifixion.

Parliament’s Crucifixion of Murdoch

Any doubt about the weight of this warning was erased by the findings of the Parliamentary committee that held hearings on phone-hacking by News of the World. The Labor and Liberal members, comprising a majority, found Murdoch “not fit to head a global company.” This contention was based entirely on a belief that Murdoch chose to remain ignorant of wrongdoing committed by subordinates, not on actions committed by Murdoch.

Aside from the dubiety of MPs pretending to pass judgment on matters of high-level business expertise, this is arrant nonsense on its face. In a newspaper industry collapsing under the weight of its own sins and incompetence on the one hand and technological competition from the Internet, cable and hand-held devices on the other hand, Rupert Murdoch owns and supervises 175 newspapers located throughout the world. Unlike most liberal papers, Murdoch’s are successful. If he is not fit to run a global company, who is?

The one-two punch of Parliamentary and Leveson inquiries landing directly on Murdoch can hardly be accidental. The short-term objective is to damage or even destroy a competitive threat to liberal media around the globe. The long-term goal, encompassing right-wing talk radio in the U.S. and other forms of competition, is to remove ideological obstacles to the Left.

The Murdoch Hearings and the Rule of Law

The Rule of Law, as outlined by the great social theorist F. A. Hayek, does not mean mere adherence to statute. It refers to a system of law in which “government… is bound by rules fixed and announced beforehand… which make it possible to foresee… how the authority will use its coercive powers in given circumstances, and to plan one’s individual affairs on the basis of this knowledge.” Thus, “the government is prevented from stultifying individual efforts by ad hoc action.”

Rupert Murdoch was called to testify under oath for hours on subjects that were none of the public’s business. The implicit message of the Murdoch hearings is: “We, the elite, can demand an accounting of your behavior at any time or place, at our pleasure. If you do something, we can make you show that you were required to do it. If you weren’t, we can choose to prosecute you, for we reserve to ourselves the right to judge the fitness of your actions and to grant you discretion to act. There are so many laws on the books that one of them is sure to proscribe your actions. Meanwhile, other people who act as you did can escape censure if we choose not to prosecute them.” This is an operational definitional of a totalitarian state.

Members of the left wing want to be rich. Thus, they must leave avenues open for the Murdochs of the world to become rich as well. When the Left gains power, it gains the privilege of exercising the absolute power of the state to pick and choose whom it prosecutes. That is why the Left pursues political power so fanatically. It cannot afford to allow the Right to apply its modified version of the behavioral Golden Rule – do unto others before they do unto you.

This state of the world may conform to a technical description of democracy. But it does not comport with the Rule of Law. It is a form of absolutism.

Today, the victims of absolute democracy may be the wealthy – along with other groups whose popularity is at low ebb. But a system that flouts the Rule of Law does not respect the laws of competitive markets. This causes its material wealth to fall more and more below it potential and its rate of growth to decline. This means, in turn, that the growing class of expropriators will be forced to victimize the middle class to support itself.

The Exit Ramp

In the movie Spartacus, the slaves who survive the climactic battle with the Roman army are ordered to identify their leader, Spartacus, so that he can suffer crucifixion. Instead, one by one, they rise to their feet and proclaim defiantly, “I am Spartacus!”

The Left can get away with crucifying celebrities like Rupert Murdoch today because intellectuals and the news media tend to derogate the humanity of very wealthy people. We will hit the exit ramp on this road to serfdom when we begin to associate our fate with those on the cross.

Someday it will dawn on us that in order to preserve – and deserve – our freedom, we must guarantee it even to the wealthiest among us. We will have to rise up against the Left and resist the crucifixion of the rich and famous. We will have to cry: “I am Murdoch!”

Brad Furnish
Chief Economist
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