Profit Is Good

Every time I write about how freedom of the press is deteriorating in Russia, I get a letter from a reader asking, “If things are so bad, how are you able to write so freely in Vedomosti?”

I recently co-authored a research paper with Sergei Guriev, Morgan Stanley professor of economics at the New Economic School, and Georgy Egorov, assistant professor at Northwestern University’s Kellogg School of Management, titled “Why Resource-Poor Dictators Allow Freer Media.” We cite statistical data from more than 100 countries over the last 15 years to show that in countries with weak democracies and abundant oil reserves, higher world oil prices generally lead to less freedom of the press.

Russia is a vivid example of this model. Over the past eight years, freedom of the press was curtailed as oil prices surged. And it’s true. During the five years that I have been writing my column, Vedomosti editors never once tried to censor my ideas. This is despite the fact that I have often written that a third term for then-President Vladimir Putin would be bad for the country and that Russia’s electoral system does not meet even minimum democratic standards.

Why does Vedomosti’s opinion page enjoy such freedom? Why do the regular news and business articles — the backbone of the newspaper — often include material for which some politicians and businesspeople would, under other circumstances, pay hefty sums to prevent them from appearing in print? It is not because Vedomosti editors are Mother Teresas or Andrei Sakharovs, who are motivated by the highest ethical principles. The editors and the publisher know that for a business newspaper to turn a profit, the most important factor is its reputation. Even the slightest hint that the publication has compromised on its journalistic standards or that the opinions expressed are filtered through censors will mean that readers will lose faith in the newspaper and stop buying it. As it turns out, journalistic ethics and impartial opinions are not only important professional standards, but they also help the newspaper’s bottom line.

And that is exactly how a free press is born. In the article, “Newspapers and Parties: How Advertising Revenues Created an Independent Press,” New Economic School assistant professor Maria Petrova traced the first appearance 130 years ago of major U.S. publications holding no affiliation to a political party. In those places where advertising revenues could generate the most income, newspapers became less politically biased. What’s more, the desire to earn more advertising dollars led to higher journalistic standards and more impartial commentary.

Of course, Russia’s independent press did not begin with Vedomosti but started 20 years ago with publications such as Ogonyok, Argumenty i Fakty, Kommersant and Nezavisimaya Gazeta. But a new era in Russia’s newspaper market began in September 1999, when Vedomosti, which celebrated its 10-year anniversary Monday, was born. Its ideals of a free press are based not so much on moral grounds as they are on the banal profit motive. And in business, this is the firmest foundation there is.

Konstantin Sonin, a professor at the New Economic School/CEFIR, is a columnist for Vedomosti.