Bad press: how business journalism helped inflate the bubble

Washington Monthly, Oct, 2002 by Phillip J. Longman

When Enron declared bankruptcy on Dec. 2, 2001, the largest corporate insolvency in U.S. history merited only brief mentions in the media that night and was not front-page news in most of the next morning's papers. To Fortune's credit, and U.S. News's as well, they had begun waving a few red flags about Enron shortly before its collapse. But only after the Bush administration's links to the company became known did the Enron story acquire "legs" (as reporters like to say). And we now know that in 1999, enterprising reporters who penetrated Enron's balance sheet had trouble getting much play for the story because it was a company most Americans had never heard of, its products were hard to describe, its sins were highly technical, its victims were diffuse, and its management was very aggressive with any critics.

This failure of business journalism is more the rule than the exception. Twelve years ago, when investigative reporters and editors gathered, the talk was about how we had all failed to see the S&L crisis coming. Since then, the obstacles to serious investigative reporting on American business have only grown more severe. Media conglomeration means that many of the biggest business stories involve media companies themselves. (How would you like a shot at covering AOL Time Warner's accounting irregularities from a desk at Time, Fortune, Money, Business 2.0, CNN, or any of its other vast media holdings?) The entrenchment of public-relations managers in business--abetted by schools of journalism that now offer degrees in flackery--means that press access to workers and hands-on executives becomes ever more limited and controlled. And lay-offs in the newsroom and shrinking budgets leave few resources available for enterprise reporting.

Movin' On Up

But there are reasons for optimism. One of the benefits of hard times is that they create a market for serious analysis of economic conditions and corporate culture, and reduce tolerance for hype. The golden age of business journalism began during the Great Depression, when the first issue of Fortune magazine hit the stands in February of 1930. Though it might seem that founder Henry Luce's timing couldn't have been worse, he was actually quite savvy in realizing that the crash on Wall Street would only increase the market for a very smart and exhaustive journal of corporate culture, even if it cost a whopping $1 per issue. The times demanded that corporate managers understand the big picture, including the huge economic decisions being made in Washington and other foreign capitals. Luce satisfied that need by hiring bright young writers of the likes of Archibald MacLeish, John Kenneth Galbraith, and Alfred Kazin, who offered far more than an M.B.A.'s view of the world, with features running up to 8,000 words. From its beginning, Fortune earned consistent and respectable profits, and in 1937, the magazine netted close to half a million dollars with a circulation of 460,000, making it one of the crown jewels of Luce's media empire.