Both political parties used television licensing and the threat of cable TV to manipulate Murdoch, Packer and the other press barons. They were victims of Fred McChesney’s concept of rent extraction:
- Rent extraction is the politician’s pastime of threatening harmful legislation to extract political support and contributions from well-heeled private institutions.
- Payments to politicians are often made not for political favours, but to avoid political disfavour, that is, as part of a system of political extortion or rent extraction.
Rent extraction is money for nothing – money paid in exchange for politicians’ inaction.
The politician is paid, not for rent creation, but for withholding legislative and regulatory action that would destroy existing private rents.
McChesney establishes the conditions under which of rent creation or extraction will occur. The relative attractiveness of the two strategies depends on the elasticities of demand and supply.
- If demand is relatively inelastic, rent creation will occur; and
- If supply is relatively inelastic, rent extraction will occur.
The existence of an organization or a large established firm lowers transaction costs for the politicians negotiating and collecting donations and support, making rent expropriation threats easier.
It is hard to extort rents from those with little in the way of organisation. A cost of being an established lobbying organisation or a large firm with high fixed costs is a greater potential for rent extraction.
The print and electronic media are ripe for rent extraction because of their immobile assets and heavy regulation.
Investors in heavily regulated capital intensive industries such as the mass media, digital and print, do not bite the hand the feeds them.
Little wonder that the media barons were honoured supplicants to whomever is in power in Canberra. They are soon Labor’s business mates whenever Labor was in power.
Threatening to allow cable TV was the big stick in every Australian government’s hand until the 1990s to extract support or at least subservience from the media.
Rupert Murdoch has unashamedly backed political winners, only to dump them when he was convinced that they were washed up or that his newspapers might be left stranded on the losing side of politics.
Murdoch’s see-sawing political stances are entirely pragmatic. He has always been prepared to back winners just before they win, and to shift allegiances on non-ideological grounds.
Utopia, you are standing in it! 
Recent Comments