Why subsidising news won't save democracy

A response to Koi Tū's “news deserts” report

Local journalism faces genuine crisis. Towns across New Zealand risk becoming “news deserts” where civic life unfolds without professional scrutiny. Dr Gavin Ellis’s comprehensive report for Koi Tū documents this decline with sobering thoroughness.

Ellis deserves credit for mapping an urgent problem. His 48-page analysis reveals how newspaper closures correlate with reduced civic engagement, higher corruption rates, and weakened democratic participation. The data is extensive, the international scope impressive.

Where the report falters is not in diagnosing the disease but in prescribing the cure. Ellis puts forward a long menu of options for government intervention – funding schemes, tax credits, infrastructure platforms, and obligations for state advertising in local outlets. His analysis faces several challenges: dismissive treatment of legitimate concerns raised by New Zealand’s experience with the $55 million Public Interest Journalism Fund, questionable assumptions about market failure, and weak international evidence for subsidy effectiveness.

The PIJF’s real lessons

Ellis describes criticism of the PIJF as a “disinformation campaign.” This mischaracterises legitimate concerns about the fund’s design and consequences. The problem wasn’t imaginary bribery but the structural risk created when government funding comes with political conditions.

The fund required recipients to commit to specific political interpretations and policy positions as eligibility criteria. Whatever the merit of those positions, requiring journalists to affirm particular viewpoints to access taxpayer money creates obvious independence concerns. The problem isn’t the content of the conditions but the principle of conditioning media funding on political alignment.

This created a form of state capture – where government effectively controls an industry through funding conditions. Even outlets that didn’t receive funding understood they needed to maintain positions acceptable to funders to remain eligible. As I wrote in the Herald earlier this year, the result was predictable: trust in media fell from 53% to 45% during the fund’s operation.

Market evolution, not failure

Ellis frames journalism’s decline as market failure requiring correction. But markets adapt to consumer preferences. If people increasingly choose different information sources, this may reflect changing needs rather than collective delusion.

The report notes New Zealanders show high interest in local news but low willingness to pay for it. This “paradox” might simply mean people value local information but not the particular bundle traditional outlets offer. Facebook groups, community blogs, and WhatsApp networks may serve neighbourhood connection better than we realise.

Modern audiences increasingly bypass traditional media for social networks, podcasts, and direct sources. This shift may reflect rational preferences rather than market failure requiring correction.

The correlation problem

Ellis’s report suffers from another weakness common to policy advocacy: confusing correlation with causation. Yes, areas without newspapers show higher corruption and lower civic engagement. But this doesn’t prove that creating subsidised outlets will restore civic health.

Perhaps both newspaper closures and civic dysfunction reflect deeper changes in how communities function and citizens engage with public life. The report acknowledges that “institutional trust is in short supply, affecting both media and governments.” But it doesn’t seriously consider whether declining trust drives both media failure and democratic problems. If citizens don’t trust institutions, subsidising one institution to monitor others may not restore civic engagement.

International evidence

Ellis catalogues government media interventions worldwide but provides little evidence they’ve solved democratic problems. Canada spends millions on journalism tax credits. Ireland has launched democracy reporting schemes. Sweden heavily subsidises newspapers. Yet none show measurably improved civic participation.

Nordic countries supposedly exemplify successful media support. But these societies achieved high civic engagement and low corruption long before current subsidy schemes. Their success likely reflects deep cultural factors that can’t be replicated through journalism funding.

Moreover, even subsidised European newspapers struggle with the same technological forces disrupting New Zealand media. Government money may delay closures but hasn’t solved the fundamental challenge of connecting with modern audiences.

A different path

Ellis's menu does include some healthy choices that avoid the pitfalls of state funding. Relaxing charitable status rules for community journalism would remove barriers without creating dependence. Philanthropic funding could support outlets without political interference.

These targeted approaches work through civil society rather than state bureaucracy. They diversify funding sources instead of concentrating risk in political decisions about eligibility and conditions.

The distinction matters because any government funding scheme faces an impossible choice. Either it’s so broad that profitable companies receive windfalls, or so targeted that conditions inevitably creep in. The PIJF chose targeting and got political conditions. Future schemes would face identical pressures.

Professional journalism serves vital democratic functions, and local democracy deserves better than news deserts. But it also deserves better than subsidised journalism whose independence becomes negotiable. The cure must not prove worse than the disease.