Integrity and independence must be the North Star that guides both central banks and journalism – Daily Maverick

South African Reserve Bank deputy governor o Kuben Naidoo says SAs big five retail banks Absa, FNB, Nedbank, Standard Bank, and Capitec will still rule the banking roost over the coming decade. (Photo: Gallo Images / Phill Magakoe)

This year, 19 October marks 42 years since Black Wednesday. Black Wednesday saw the banning of several prominent South African newspapers, the arrest and subsequent torture of numerous editors and journalists, and the banning of 19 black consciousness organisations. It marks one of the darkest days for media freedom in the history of South Africa.

As Glenda Daniels wrote in a piece marking the 40th anniversary of Black Wednesday: Nothing as violent as this has occurred since 1994. But today, the media is a murky, ambivalent and contested space marred by political interference, commercial imperatives and depleted newsrooms.

Carefully chosen words, the media is a murky, ambivalent and contested space marred by political interference, commercial imperatives and depleted newsrooms. As with so much in South Africa since 1994, our world has become much more complex and the old dichotomies have broken down. Apartheid was universally accepted as evil and so fighting apartheid was universally accepted as good. There was a clear right and a clear wrong, a visible enemy and a tangible end goal. We were guided by a singular vision of creating a non-racial, non-sexist, democratic and prosperous South Africa. We knew who was on which side of the Struggle.

Today, our country flounders in a volatile ocean without such a North Star, without a clear sense of good and evil, and without an understanding of who is on which side of the fence.

Unfortunately, this has become the new normal. Life will never be as simple as it was during the Struggle, and our country may never again produce leaders of the likes of Mandela, Tambo, Sisulu, Kathrada, Helen Joseph, Lilian Ngoyi or Bram Fischer. That is a bygone era. Were on our own, trying to make our way in this new, much more daunting world.

In this murkiness, each of us must grapple with issues of integrity. What does it truly mean today? I believe that, in this singular term, we will find our direction again. It should become our new North Star.

In many ways, the media and central banks struggle with the same dance: the need for independence balanced by the need to be held accountable to society. Journalists integrity rests on the need to be independent of political interference and commercial imperatives, at the same time holding public trust through being accountable for what they say, write, publish or broadcast. Similarly, central banks seek to be independent from political and commercial interference while holding the trust of the public through being open, transparent, impartial and accountable. Neither of us, journalists nor central banks, are in a popularity contest. It is our responsibility to tell the truth, in all its gory detail. Hence, our social licence to operate depends not on our popularity but on our integrity.

This battle for independence while being trusted by society occurs in an environment of mind-boggling complexity. There are commercial pressures, political noise and the all-important societal context within which South Africa finds itself today the baggage we all carry, as a nation, so to speak. Added to this is a rapid technological change which democratises the media while simultaneously lowering standards. This technological advance makes it easier and quicker to communicate, tell stories, and to share an experience or a narrative, but it also makes it harder to distil truth from fiction. Seeking truth and facts has become that much harder.

At this point, let me opine that I think journalists have a tougher job than I do. Maintaining journalistic integrity in todays world is harder than safeguarding an independent central bank. There is only one central bank per country, and with some effort and careful institutional design, we can try to maintain our independence while still creating mechanisms for society to hold us accountable. We still require integrity, though.

In the case of journalists, there are multiple platforms: from print to the internet, from radio to television, dozens of large media groups, hundreds of smaller ones, and literally tens of thousands of individuals plying their trade, some with only the pretence of being a journalist in the true sense of the word. Designing the correct institutional mechanisms for independence and accountability in that context is just so much harder.

I am paid by an institution, a central bank, that literally prints money. Journalists are paid by firms better known for burning cash than for making it. We central bankers have a fairly detailed, though perhaps untested, mechanism for dealing with a rogue or errant central banker. Your industry is much more prone to rogue elements or rogue journalists breaching journalistic ethics codes. It is much harder to prove beyond a reasonable doubt that a journalist has breached their ethical code than in my world.

So let me admit up front that I have a few pieces of advice for you on how to do your job, including your job of maintaining the highest ethical standards in journalism.

But first, let me set out the case for an independent central bank in our country and in our context. Central bankers deal with what we call a time-inconsistency problem, meaning that the actions we take today have different, sometimes even opposite, effects today compared to the effects in the future. Central banks are almost unique in that respect. Actions that we take today to boost the economy may have the opposite effects in the future. Similarly, the constraints imposed today may allow for higher living standards in the future. Very few institutions have this problem.

We believe that we do not have the ability to boost long-run growth; we can only intervene to smooth out the cycles in the economy. Long-run growth is determined outside of a central bank. Similarly, in your world, you can only tell the stories, analyse the news, and make comment. You cannot make up facts. Facts are not made by you; they are made outside of the newsroom.

In a democracy, elected governments have fiscal powers. They have the right to levy taxes, to spend public resources, and to borrow if need be. In theory, there is almost no constraint on these powers. Politicians are incentivised to maximise benefits in the near future, sometimes the very near future. They are, by design, incentivised to borrow from tomorrow for the benefit of citizens today. The future taxpayers who have to pay back that debt are sometimes not even born yet, and most probably have no vote or voice in our political system.

This is probably the same reason why most politicians cannot respond appropriately to climate change, since responding appropriately imposes costs on citizens today for the benefit of tomorrow. Markets are similarly incapable of solving this time-inconsistency problem.

Back to central banking. Not all countries have independent central banks, but most democracies do have them. And they have them because, without such an institutional mechanism, politicians would want too much of a good thing for todays voters at the expense of tomorrows voters. And its not just governments in this equation. Citizens, too, can legitimately borrow to finance benefits today, in some cases long-term benefits, but in many cases, they are provided with a benefit today at a cost tomorrow. A house or a good education, or even a car to commute with, is a justifiable expense because it raises both todays and tomorrows living standards. But many other expenses my shirt, the watch I wear, the dinner I eat at night provide only transitory benefits, and if the expense is financed from borrowings, then, by definition, it lowers my living standards in the future.

Central banks dont stand directly in the way of these politicians. Neither do we stand in the way of you swiping your credit card for a night out at the Saxon, for example. Central banks merely set the price at which you or your government can finance todays goods at the expense of tomorrows. In theory, the market could fulfil this function without a central bank, putting up the price of credit when the amount of credit demanded rises above the savings rate. And some, if not many, interest rates are indeed set by efficient markets. But markets themselves cannot solve the time-inconsistency problem.

Similarly, as journalists, you do not stand in the way of injustice or malfeasance. You merely shine a light on it, bringing to the fore the costs of such actions.

The role of the central bank, in general, is a disciplining one. It brings forward, in an open and transparent manner, a part of the cost of borrowing from tomorrow. It makes the trade-offs starker, so that everyone can see the cost in todays prices. As Ive said earlier, this is not a popularity contest.

If central banks did not play this role, or if this role was unduly influenced by a political cycle, we would perhaps have lower interest rates before an election and higher interest rates after. A former governor, Gerhard de Kock, operating in a time without central bank independence, once lowered rates before an election only to raise them soon after. President Richard Nixon is famous for calling a central bank governor to remind him of the upcoming election and the need for some economic stimulus in the run-up to the election. The term quantity easing had not been coined yet, but you get the point.

Democracy brings freedoms, but it also requires disciplining institutions institutions that tell the truth without fear or favour. This is your task too: to bring reality and facts to light in order to balance our freedoms.

Besides facing the time-inconsistency problem and the risk of being prone to political cycles, central banks also mediate between borrowers and savers in a society. In many countries, the power of these two groupings is not equal. In South Africa, which is a savings-constrained economy, the power of borrowers is bigger than that of savers. In some countries, Germany for example, the power of savers exceeds the power of borrowers. Markets do not always play an impartial mediating role in this complex relationship. Central banks are supposed to be the honest brokers in this relationship, respected because of their integrity and competence rather than being popular or well-liked.

As already mentioned, not all countries have independent central banks. Countries without an electoral democracy do not need this kind of discipline because there are no elections and politicians are not incentivised to deliver short-term gains at the expense of the long term. Dont get me wrong. I would rather have the freedoms in our democracy than the alternative. But that, in some ways, is my point. With freedom comes the responsibility to construct institutions which limit our freedom to do as we please. Such a construct is itself important in sustaining democracy.

A free and respected media with integrity is similarly central to safeguarding democracy. But it, too, must be subject to a certain degree of discipline. Ethics codes, standards for journalistic integrity, a press ombud and the rule of law are all mechanisms to discipline the media to play their essential role in safeguarding democracy.

The concept of a free and credible media enjoys widespread public support. Even if some politicians observe it only in the breach, at least they all argue publicly for a free and independent media. You are fortunate in this regard. But dont take this privilege for granted; it comes on the shoulders of those journalists arrested and tortured 42 years ago.

As for central bankers, we still have to fight the fight for an independent central bank in the court of public opinion. It is because, like journalists, we love democracy and cherish its freedoms, that we fight for independent institutions to safeguard our democracy.

As important as the role of a free press was in the struggle for democracy, it is not a sufficient condition for good governance. Kenya and Nigeria are good examples of countries with a free and thriving media sometimes operating in a context characterised by corruption and weak governance.

In addition to a free press, we need something else to secure good governance: accountability. In our case as a central bank, we recognise the need to be held accountable by society for our actions. I would even posit that, as a society, we have been poorly served by our Parliament in holding the central bank accountable. In my seven years at the South African Reserve Bank, weve actually had to ask Parliament to call us to account. And when we are called to Parliament, many MPs focus on political grandstanding rather than holding us accountable for our actions.

The media is not a single, homogenous entity, so it cannot be held accountable in the same manner as central banks are. Accountability to society is, by its nature, an ill-defined concept anyway. Accountable to whom, when and how? You rely, rightly so, on internal processes, a press council and a press ombud to support this role. These institutions are working better today than in days gone by, but this is still not optimal. As our politics became more corrupt in the past decade or so, both business and the media have been sucked in, to the detriment of the reputation and standing of the industry.

Sanef has the dual role of vigorously protecting the independence and freedom of the media while simultaneously holding the industry accountable to society. This is the correct role and a laudable one, but its by no means an easy one. I do believe that you need to do more work on defining how the media is held accountable by society, as vague and amorphous as this concept may seem.

The economics of the media have changed fundamentally over the past decade. News is a commodity and, in general, freely available. I started using Twitter during the Oscar Pistorius trial. I was hooked. I could get up-to-the-second news of what was happening in court, and it cost me nothing. Similarly, I once read an article on the Internet, of 26,000 words, in the New Yorker magazine on the Church of Scientology. It was an excellent article, which took almost a year to investigate and write. I wondered how much it would have cost to put such an article together and how the magazine could afford this when many people could get the article on the net for free.

How do we sustain an independent media with integrity when the economics of news and the media are changing so drastically? With great difficulty, I assume. No one can be sure of what the future holds for the media industry, in particular for news, analysis, opinions and editorials. Perhaps news organisations will become like symphony orchestras. The economics would never justify their existence, but a combination of sales, philanthropic donations and public funding would sustain smaller but sizeable centres of excellence. Society recognises the media as a public good.

I have to watch this space closely because my industry may well be similarly disrupted. At present, we derive our power from the ability to produce money, either physically or electronically. We manage a foundational piece of the national payments system, and we issue licences to institutions able to take deposits of this money that weve produced. But what if the production of a currency becomes as democratised as a newsfeed on Twitter? Virtual currencies, with parallel and diffused payments systems bypassing banks, could render central bankers completely useless.

So we can learn from you about the disruptive effects of technology and about rapid change in the economics of an industry. We may well need your advice in a few years time when trying to manage these complex changes.

Let me conclude by going back to the issue I began with, the issue of integrity. A cynic would say there will always be journalists with a political or factional agenda. There will always be media houses with less editorial independence than is deemed appropriate. There will always be brown envelopes and character assassinations for political or commercial reasons.

We must, however, rise above such cynicism and continue to advance an agenda of free speech, journalistic integrity, and accountability to society. And, like central banks, weve got to fight these fights in the court of public opinion, not just in courtrooms or newsrooms.

It is a fight you can only win if you stand firm to the highest standards of integrity and hold yourself accountable to society, in its broadest sense. Technological change makes our lives harder but potentially more interesting too. Popularity is not your goal; its your opium. Keep telling it like it is.

Democracy sorely needs an independent and respected media. DM

Kuben Naidoo is deputy governor of the South African Reserve Bank. This is an edited version of his speech delivered at the annual South African National Editors Forum (Sanef) Black Wednesday gala dinner at Emoyeni in Parktown, Johannesburg on Friday 18 October 2019.

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Integrity and independence must be the North Star that guides both central banks and journalism - Daily Maverick