The Times/Kingsley Napley Student Advocacy Competition 2017 launched on 18 May 2017. The title this year is:
'Do we need new laws to combat fake news?'
In our previous blogs we have seen how fake news can affect political and social spheres. But politics and the social aspects of life are not the only targets of fabricated stories; the global economy has also felt the impact of rumours and misinformation.
Given the way financial markets operate, with investors basing their decisions on whether to trade or not on information, it is vital that information available is trustworthy, reliable and true. Some stories seem so far-fetched that they must be fake, but they often contain some elements believable enough to create some doubt in our minds. This can affect the economy both directly and indirectly.
Between 2012 and 2013, fake news articles published in Chinese news outlets directly caused a company’s share price to tumble. The stories claimed that the company had lost state assets, and had engaged in abnormal sales practices and false financial reporting. This led to reputational damage and a fall in the company’s stock price. After being arrested in 2013, the journalist who wrote the stories about the company admitted that they were untrue and that he had been paid more than $70,000 to write them.
The increase of fake news in the last year has also given the Chinese government the opportunity to point the finger at the western democracies’ apparent failure to address this problem and justify the imposition of even more stringent measures to censor the content of publications.
Publishing sensational (albeit untrue) stories can be very profitable, making writers thousands of dollars a month. The possibility of a high revenue combined with a negligible cost to produce a fake blog, that requires no research and minimal costs to publish, fake news stories have become a very attractive and economically-efficient business. As noted by Oxford University Press, “Anyone with a laptop and an Internet connection can be in the news business”. With so-called ‘citizen journalists’ on the rise and an attractive business model for spreading lies, it is no surprise that governments around the world are becoming increasingly concerned about this dark age of journalism.
Although predicting what will happen in the stock market is pretty much impossible, there is a direct relationship between the stock market and government elections or other major political events. During the Tiananmen Square protests in 1989, the Hang Seng fell 22% in a single day, and lost 37% from its peak. The day after Britain voted to leave the EU, the S&P 500 and the Dow both wiped out all of their gains for 2016, and Nasdaq suffered its biggest one-day drop since 2011. In the aftermath, the pound fell dramatically and has been trading at around 15% lower compared to the dollar, and 12% lower compared to the euro, than it had been prior to the referendum.
Brexit was no fake news story. But if concerns that misinformation influenced the referendum result are true, then fake news stories have had an indirect impact on the global economy.
“There should be just as little tolerance for criminal incitement on social networks as on the street.” This is the view of Heiko Maas, the German Justice Minister. In fact, the German government is so concerned about the influence fake news stories can have to the democratic process that they have agreed plans to fine social networks up to €50 million (£43 million) for failing to remove defamatory fake news, hate speech and other illegal content.
The measures imposed by Germany and China are only a few examples of the measures imposed by governments around the world in order to combat fake news. Given the widespread, global effects of fake news on politics, society and the economy, are all measures imposed by the governments justifiable or is there a line that they should not cross?
In part two of this blog, we will look at more specific examples to establish the effect fake news stories can have on corporations and the wider economy.