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Ukraine Invasion: What to Know Today About Inflation, Stocks, Gas Prices and More
Ukraine Invasion: What to Know Today About Inflation, Stocks, Gas Prices and More
Russia continued its assault on Ukraine on Monday, with heavy shelling in Kharkiv, the country's second-largest city, killing dozens of people and sending hundreds more to the hospital, according to Ukrainian officials.
Also on Monday, Russia and Ukraine sent delegates to neighboring Belarus for their first talks since the invasion began last week.
Russia's attacks have shut down shipping in Ukraine, a country with a massive agricultural industry, particularly corn and wheat. And economic sanctions against Russia have rattled stock markets, gas prices and more around the world.
Here's how the Ukraine crisis is affecting the US and global economies. For more, get the latest updates on the crisis, learn how to help those impacted by the conflict and find out where to get reliable updates online.
Gas and oil prices
Russia's invasion of Ukraine has caused global energy prices to spike, with crude oil rising Thursday above $105 a barrel for the first time since 2014. The price cooled down briefly but, by Monday morning, was back up to $105.07 a barrel in early trading.
At that time, the national average for a gallon of gas had reached $3.61, according to AAA, compared to $3.35 a gallon just a month ago and $2.71 one year ago. Many analysts believe the average could easily tick past $4 a gallon in March.
Russia is one of the world's largest producers of crude oil and natural gas, providing roughly 40% of the European Union's gas. Sanctions from the West could affect access to that supply, especially with Germany putting a halt to the Nord Stream 2 pipeline that was intended to bring natural gas from Russia to the EU via the Baltic Sea.
Analysts predict that the price of gas in the US could soar because of Russia's invasion of Ukraine.
Getty Images
The White House said President Joe Biden will work to offset gas prices by releasing oil from the Strategic Petroleum Reserve, a deep underground storage complex along the Gulf Coast holding an estimated 600 million gallons of crude.
However, some experts believe that won't have much effect on prices.
"We're already at the lowest level of reserves in the Strategic Petroleum Reserve since 2002, so we're already bumping up against constraints there," Isaac Boltansky, director of policy research for BTIG, told Yahoo Finance. "And, frankly, it hasn't had that much of an impact."
Continued inflation
"We could see a new burst of inflation," the American Enterprise Institute's Christopher Miller told The New York Times about the possibility of a sustained war in Ukraine.
Russia is the largest exporter of platinum and palladium, a metal used in mobile phones, automotive exhaust systems and fuel cells, and on Thursday prices for palladium hit a six-month high. Rising prices for essential metals could lead to increases for manufacturers and, ultimately, consumers.
In January, the Consumer Price Index, which measures consumer costs for goods and services, surged 7.5% over the same time last year, representing a 40-year high. If the invasion continues to disrupt supply chains and cause energy prices to spike, inflation could rise even further from already "very high levels," Goldman Sachs analysts said in a report Sunday, CNN reported.
"The inflation picture has worsened this winter as we expected, and how much it will improve later this year is now in question," economists for the Wall Street institution wrote.
Stock market volatility
As word of the Russian invasion broke Thursday morning, global stock markets took a hit: The Dow Jones Industrial Average dropped 830 points, while the Nasdaq slipped about 1.5% and the S&P 500 tumbled 2.5% at the start of trading.
After rallying on Friday, stocks prices tumbled again on Monday, the last day of February: The Dow fell about 489 points, or 1.43%, by 3 p.m. ET, while the S&P 500 dropped 54 points, or 1.23%, and Nasdaq dipped 0.76%, or about 106 points.
In Europe, on Friday, the German DAX, French CAC 40 and British FTSE also all marked strong rebounds from Thursday lows. But by Monday, the DAX had declined 106.21 points, or 0.73%.
Hong Kong's Hang Seng Index shed 0.24% Monday, while China's Shanghai Composite Index ticked up 11 points, or 0.32%.
Russia's main stock market, the Moex Index, suspended trading Thursday morning, according to The Wall Street Journal. On Friday, it bounced back, rising 20% to 2,470 points.
Trading on the Moex was suspended again on Monday, the same day the Nasdaq and the New York Stock Exchange temporarily halted trading of select Russian companies.
More cyberattacks
The US departments of Treasury and Homeland Security have both sounded the alarm over possible cyberattacks on US banks, hospitals, government offices and power grids in retaliation for sanctions against Moscow.
On Thursday morning local time, websites for the Ukrainian cabinet and foreign affairs and education ministries were all experiencing disruptions.
Herbert Lin, senior research scholar at Stanford's Center for International Security and Cooperation, told The Atlantic's Rachel Gutman that the Russians have elevated cyberattacks to an "art form."
Though US banks have been heightening their defenses, Lin added, utilities in larger cities might be more at risk because they lack the extra funding for cybersecurity.
Lin discouraged a panicked response by everyday Americans but said having extra cash and a go bag might not be a bad idea. He underscored that those items should always be in place regardless.
Rising food prices
Food prices have already risen in the US and abroad, and analysts say the Russian invasion of Ukraine is only pushing them higher.
Ukraine is the world's largest exporter of sunflower seed oil, an industry that has come to a virtual standstill amid the ongoing attacks. That absence will undoubtedly drive up the price of soybean oil, palm oil and other alternatives, even as the world faces a shortage of vegetable oils.
Ukraine is also one of the top five corn exporters in the world, trading some 35.9 million metric tons in 2019 alone. An extended open conflict would likely see prices go up in Europe for corn and related goods, including cooking oil, corn syrup and livestock feed.
Soybean prices have also surged in the US in recent months, following an unusually poor crop in South America. If US farmers have to make up the difference in both corn and soybeans, which compete for land, prices for both crops will likely rise in the United States, as will the cost of packaged goods made with them.
Prices of wheat and corn could rise, with a ripple effect on packaged goods made with grain.
Aja Koska/Getty Images
Russia is the world's largest exporter of wheat, a crop that Ukraine exports as well. Together the two countries account for nearly a third of the global wheat trade.
The US doesn't rely on Russian wheat, but Robb MacKie, president of the American Bakers Association, told The Washington Post the grain markets "are all tied to each other."
If the conflict continues for more than a few weeks, American consumers will see rising prices for anything that has grain in it: flour, pasta, pizza, cereal, animal feed -- even beer.
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Amid War in Ukraine, Should Ordinary Russians Be Banned From Trading Crypto?
Amid War in Ukraine, Should Ordinary Russians Be Banned From Trading Crypto?
This story is part of War in Ukraine, CNET's coverage of events there and of the wider effects on the world.
As Russia's war on Ukraine intensifies, the US and its allies have continued to increase their economic pressure on the Russian government, to isolate the country further from the global financial system and debilitate its military capacity. Western allies have frozen Russian assets abroad, removed Russian banks from international banking networks and even banned all gas and oil imports, among other unprecedented penalties. But there's still growing concern that Russian President Vladimir Putin and his supporters might turn to cryptocurrencies to avoid economic sanctions.
With their ability to operate as alternatives to the traditional financial system, cryptocurrency exchanges -- digital marketplaces where you can buy and trade digital currencies -- have become an effective option both for Ukraine supporters to raise funds for relief efforts and for ordinary Russians to seek financial shelter from the economic sanctions imposed on their country.
That's why both the Ukrainian government and advocates for even further economic penalties against Russia have become increasingly vocal about the role crypto exchanges can play in the conflict. Hundreds of Western businesses, such as oil companies Shell and BP and tech players Netflix and Microsoft, have scaled back or halted their dealings in Russia since the beginning of the war. And some people argue that similarly stopping crypto operations in the country could significantly weaken Putin's hold on Russia's economy and its citizens.
"I'm asking all major crypto exchanges to block addresses of Russian users," Ukraine's vice prime minister and minister of digital transformation, Mykhailo Fedorov, tweeted Feb. 28. "It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians but also to sabotage ordinary users."
Fedorov also sent letters to eight cryptocurrency exchanges, including two of the largest by volume, Coinbase and Binance, asking them to stop offering service to Russian users out of concern digital currencies are being used to evade sanctions.
The response was swift.
"We are not preemptively banning all Russians from using Coinbase," CEO Brian Armstrong tweeted March 3. "We believe everyone deserves access to basic financial services unless the law says otherwise." And hours after getting Fedorov's letter, a Binance spokesperson told CNBC, "We are not going to unilaterally freeze millions of innocent users' accounts. Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists."
But the CEOs of several exchanges, including some that got Fedorov's letter, said that though they'll continue to offer access to ordinary Russians, they're complying with US law in regard to sanctions. On March 7, Coinbase reportedly said that to facilitate sanctions enforcement, it had blocked more than 25,000 wallet addresses related to Russian individuals or entities thought to have engaged in illicit activity and had reported them to the US government.
Ukraine's request for an all-out ban on Russian users, and the unequivocal rejection from most regulated crypto exchanges, has sparked a debate about the responsibilities digital currency platforms have in an international conflict. As a growing number of Western companies decide to stop conducting business in Russia, should crypto exchanges follow suit and go beyond what they're required to do by law? And even if they did, would banning all Russian users from crypto exchanges make a difference in slowing down Russia's invasion of Ukraine?
Some crypto specialists interviewed by CNET, including executives from crypto companies and public officials working to prevent Russia from using digital assets to sidestep economic sanctions, said a full Russian ban from crypto platforms could do more harm than good in regard to ordinary Russians. And some said the volume of the whole crypto market is still too small to really help Putin's government counter the impact of Western economic penalties, even if it tried.
But other experts on the role the private sector can play in global conflicts said bringing the Russian economy to a standstill is the one nonmilitary way to thwart Putin's advance on Ukraine, and that crypto exchanges can contribute to that only if they stop operating in Russia altogether.
Cryptocurrencies are digital assets that are recorded on a blockchain, a distributed digital ledger that can't be altered. They usually aren't backed by an underlying asset, such as fiat currency. That's why they could be an ideal safe haven amid a wave of economic sanctions.
Why crypto exchanges won't budge on Russia
In refusing to kick ordinary Russians off their platforms, cryptocurrency exchanges argue that the move would further hurt Russian citizens who are suffering from the economic impact of the war and who might consider buying cryptocurrencies as a way to protect their financial standing.
"We all saw those photos of runs on ATMs from Russian citizens -- lines around the block in Moscow," said Todd Conklin, counselor to the deputy secretary of the US Treasury Department. "One would suspect ordinary citizens may have been looking for an alternative to the ruble." Conklin made the remarks during a March 4 webinar hosted by blockchain analytics company TRM Labs about the possibility Russia could use cryptocurrencies to avoid economic sanctions.
The ruble, Russia's national currency, has lost nearly 50% of its value against the US dollar since the start of the year, according to Reuters. Other parts of Russia's financial system have also been impacted by the West's pressure on the country to stop its aggression on Ukraine. Digital payment services such as Apple Pay, Google Pay and Samsung Pay aren't available in Russia any longer. Visa, Mastercard and PayPal also halted operations in the country. Ordinary Russian citizens, worried that economic sanctions will devastate the Russian economy even further, have flocked to ATMs and banks, seeking to withdraw as much cash as possible before it might be too late.
"Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed," Armstrong, the Coinbase CEO, tweeted. "Many of them likely oppose what their country is doing, and a ban would hurt them, too."
As long as US crypto businesses are complying with US laws in ensuring that sanctioned individuals or entities aren't using their platforms, "crypto could be a vital lifeline for ordinary Russians to preserve their savings [and] receive familial remittances," Michael Parker said in an email. Parker is a former federal prosecutor who's now head of anti-money laundering and sanctions practice at Ferrari & Associates, a Washington, DC-based law firm.
Jesse Powell, co-founder and CEO of Kraken Exchange, another crypto platform, tweeted that though he understood the rationale behind Ukraine's request to remove all Russians from crypto exchanges, Kraken "cannot freeze the accounts of our Russian clients without a legal requirement to do so."
"I would guess that the vast majority of crypto holders on @krakenfx are anti-war," Powell tweeted. "#Bitcoin is the embodiment of libertarian values, which strongly favor individualism and human rights."
Given the anti-authority libertarian streak that fuels so much of the cryptocurrency sector, the refusal from crypto exchange executives to stop operations in Russia isn't surprising, said Yale University professor Jeffrey Sonnenfeld, who's the president of the Chief Executive Leadership Institute, a nonprofit focused on CEO leadership and corporate governance.
Crypto executives don't like "being told what to do," Sonnenfeld said. "And yet, there's a striking naivete [in] that they are working in support of [Putin], the greatest autocrat alive today, the most restricted world leader, [who] they are tacitly supporting by enabling a bypass, if it's even for the cognoscenti, for elites and for oligarchs, if it was as limited as some claim."
Sonnenfeld said that the reason more than 300 Western companies have pulled out of Russia so far isn't that the government told them to do so. "It's the maverick streak of these CEOs who pulled out and started this thundering herd," he said, "courageous CEOs who had the moral character to pull out."
What a full ban on Russia would and wouldn't do
Some specialists said that blocking all Russians from crypto would not only potentially inflict damage on millions of innocent citizens, but it would also do little to amplify the West's sanctions on Russia's economy. The reason? Russia doesn't have the digital infrastructure to tap into crypto assets at a level required to outmaneuver the economic penalties already imposed by the US and its allies.
"You can't flip a switch overnight and run a G20 economy on cryptocurrency," Conklin said during the webinar hosted by blockchain intelligence company TRM. He explained that in recent years, Russia has worked to bolster the ruble and build up its reserves, instead of laying the rails needed to support crypto. That's why US economic sanctions have been focused on preventing Russia from accessing the reserves it keeps overseas. "Big banks in an economy need real liquidity," Conklin said. "Conducting large-scale transactions in virtual currency is likely to be slow and expensive."
Anthony Citrano, founder of Los Angeles-based NFT platform Acquicent, pointed to crypto prices as a clue to what's going on. "If the Russian government really were using crypto as a major piece of their international finance strategy, you'd expect to see absolutely explosive growth in prices of major crypto [currencies]," he said, "which we have not seen. Time will tell, but for now there is zero evidence this is happening."
Former federal prosecutor Ari Redbord, who's now head of legal and government affairs at TRM, said the economic sanctions levied so far have been so "serious and so draconian in their measures" that Russia would need much more than crypto assets to counterbalance them. "We're talking about [the] potential loss of, or no access to, hundreds of billions of dollars in frozen [Russian] Central Bank assets. We're talking about $1.5 trillion in potential trade losses," he said. "The entire crypto market cap doesn't approach what ultimately Russia would need to prop up a G20 [economy] government and fight what is going to become a more and more costly war."
But that doesn't mean the Russian government or Putin's supporters won't try to use crypto to circumvent economic sanctions. "Russian actors are very adept at money laundering and have been for a long time," Redbord said. In the case of crypto, they'll be looking for "noncompliant exchanges in order to move those funds."
Such exchanges include platforms like Suex, which was blacklisted by the Biden administration in September for allegedly helping launder ransomware payments. TRM has identified about 340 exchanges that are either in Russia or Russia-related and don't have compliance controls in place, "and that is where illicit actors will look to move on as on-ramps and off-ramps for crypto," Redbord said.
Those digital platforms are already operating outside the law, though. For any US business, including businesses in the crypto industry, "there is still a full compliance obligation to not deal with sanctioned parties or interests in blocked property," said Parker, from Ferrari & Associates. "US crypto businesses must, and largely do, institute robust compliance programs, including advanced analytics software, to ensure legal compliance with US sanctions."
Bringing Russia to a standstill
Yale's Sonnenfeld argues that it's beside the point whether Putin and his supporters can actually get their hands on enough digital assets to offset the impact of Western sanctions. He said that by halting all operations in Russia, crypto exchanges could contribute to putting even more pressure on Putin's government, until it reaches a tipping point.
"Government-ordered sanctions have limits," Sonnenfeld said, even if they're a coordinated effort between multiple international actors, including the US, the EU, the UK, Australia, Japan and the UN. "They work best when voluntary efforts of the private sector rally."
That's what happened in South Africa in the late 1980s, Sonnenfeld said, when international pressure contributed to putting an end to apartheid, a system of institutionalized racial segregation that had ruled the country for more than 40 years. Economic sanctions imposed by the US government had an effect only when dozens of major private companies joined in. "It brought civil society to a stop/standstill," he said.
Sonnenfeld and his research team at Yale compiled a list of companies that continued operating in Russia following its invasion of Ukraine. After the publication of a Washington Post story that mentioned that McDonald's and Starbucks were on the list, both chains announced plans to stop operating in Russia. Since the list was created and made public, it now shows "over 330 companies [that] have announced their withdrawal from Russia in protest" of the Ukraine war.
For Sonnenfeld, paralyzing Russia's economy is the only nonmilitary option the West has against Putin's advances on Ukraine.
"The humanitarian thing to do is to not go with bombs and bullets, and to strangle civil society" and dissolve Putin's image of being a totalitarian with full control over all sectors, he said. "If you can show him to be truly impotent over the economy, that he doesn't have control over civil society, then he and the oligarchs fall flat on their face, and that's what cryptocurrency mavericks can do" should they decide to halt operations in Russia. "They can be really helpful here."
Allowing ordinary Russians to have access to digital assets through crypto exchanges is "not doing anything humanitarian," Sonnenfeld said. "People should be thrown out of work, they should be out on the street" due to an economic collapse brought on by government-ordered sanctions and to private companies denying Russian citizens access to services, goods and money. "Is that cruel?" Sonnenfeld said. "No, it is better than shooting them, than bombing them -- and that's the stage we're at right now."
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As Russia's Cyberattacks on Ukraine Mount, the Risk of Impact in Other Countries Rises
As Russia's Cyberattacks on Ukraine Mount, the Risk of Impact in Other Countries Rises
This story is part of War in Ukraine, CNET's coverage of events there and of the wider effects on the world.
Russia could ramp up cyberattacks against Ukraine in an effort to destabilize its government and economy, security experts warn, an online assault that potentially might spread to other countries, including the US.
In recent weeks, the Russian government is believed to have initiated a handful of cyberattacks against Ukraine. Last month, hacker groups linked to Russia's intelligence services were blamed for a cyberattack that defaced dozens of Ukrainian government sites with a message warning the country to "be afraid and expect the worst."
Days later, Microsoft said it had identified dozens of computer networks at Ukrainian government agencies and organizations infected with destructive malware disguised as ransomware. On Feb. 16, the New York Police Department warned that Russian or pro-Russian criminal threat actors could launch cyberattacks on infrastructure, government entities, and local law enforcement according to CBS News.
Cybersecurity experts say the attacks could be a precursor to more serious cyberassaults on Ukraine, which Russia is determined to prevent from joining the NATO security alliance. Russia has amassed more than 100,000 troops on Ukraine's border, raising concerns Moscow may be preparing for an invasion of its neighbor. Russia annexed a portion of Ukraine in 2014.
The Russian troop buildup has prompted a flurry of diplomatic activity aimed at defusing tension. So far, those efforts haven't been successful. US intelligence officials said in early February that they had evidence that Russia was planning to create a video that will depict a fake attack on its troops that could be used as a pretext to invade Ukraine. Days later, President Joe Biden urged Americans in Ukraine to leave rather than risk getting caught in a potential invasion.
If Russia does invade, it will undoubtedly employ more cyberattacks as part of its military strategy, researchers say.
Adam Meyers, senior vice president of intelligence at CrowdStrike, says the current round of cyberattacks on Ukraine could indicate Russia is refining its cyber capabilities. Russia's game plan with online attacks, he says, is to create chaos and inflame tensions between the two countries.
"From what we've seen in Ukraine historically, it's almost been a laboratory of experimentation for Russia," Meyers said.
He pointed to the NotPetya attack, which crippled computers across Ukraine in 2017. The malware locked up files like criminal ransomware would. When experts took a closer look, however, they realized that its true purpose was to destroy data rather than make money.
NotPetya did what it was intended to do -- wreak havoc in Ukraine. It also spread to unintended targets far outside of that country, shutting down companies including FedEx, Merck, Cadbury and AP Moller-Maersk.
The most recent malware attacks against Ukrainian targets, dubbed WhisperGate, also appear to be bent on destruction rather than making money, Meyers said.
Of course, cyberattacks will only be part of a broader campaign if Russia chooses to invade Ukraine, with malware and online disinformation being among the many weapons the country could use.
Quentin Hodgson, a senior international and defense researcher at the Rand Corporation focusing on cybersecurity, said Russia's cyberoperations are unique because they aren't clearly separated from conventional military and intelligence operations as they are in other countries, including the US.
Still, Russia will likely lean on old-school military muscle to grab the attention of the Ukrainian people, he says
"At the end of the day, they're still massing troops on the border," Hodgson said. "That's sending a signal that cyber can't."
According to a memo obtained by CNN in January, the Department of Homeland Security warned operators of US critical infrastructure, along with state and local governments, that Russia could launch a cyberattack on US targets if it feels its long-term security is threatened by a NATO or US response to what's going on in Ukraine.
CrowdStrike's Meyers said he thinks it's unlikely Russia would intentionally provoke the US with a state-sponsored attack against an American target. But US companies with a presence in Ukraine, such as hotel chains, along with international aid groups and think tanks, might have something to worry about.
Russia also could just look the other way, as it has for many years, when the cybercrime gangs known to run rampant within its borders go after US targets.
While Russian government arrests of known ransomware gang members and other cybercriminals have grabbed headlines recently, President Vladimir Putin hasn't historically been much help in bringing cybercriminals that target the West to justice, says James Turgal, former executive assistant director for the FBI's information and technology branch.
Turgal, who now serves as vice president of cyber risk, strategy and board relations for Optiv Security, says last year's ransomware attacks against Colonial Pipeline and meat processor JBS USA should serve as wakeup calls to all companies, especially those that can be considered critical infrastructure. Both those attacks were attributed to cybercriminals in Russia.
The NotPetya attack was a perfect example of how cyberattacks can affect countries far away from the conflict, he said.
"Whether it's intentional or not, whether you're a particular target or just collateral damage," Turgal said, "the threat is real."
When Local Newspapers Fold, Polarization Rises. Here's What You Can Do
When Local Newspapers Fold, Polarization Rises. Here's What You Can Do
Russia's invasion of Ukraine, rising energy costs and our ongoing struggles with the coronavirus pandemic take up a lot of our attention these days. But there's more going on a lot closer to home -- you just might not know it, because your local newspaper is gone.
More than a quarter of hometown newspapers have disappeared in the last century, leaving about 70 million Americans with little or no way to stay informed about their city and county governments, schools or businesses. As the country heads toward the 2022 midterm elections, Americans are increasingly turning to friends and social media to stay informed -- which isn't always trustworthy, as we learned during the 2016 election when around 44% of Americans were exposed to disinformation and misinformation through untrustworthy websites.
"The state of local news in America is dire," said Tim Franklin, senior associate dean of Northwestern's Medill School of Journalism and head of the Medill Local News Initiative.
Local journalism isn't just a nice idea. Community newspapers report some of the most important stories in our country. That includes the Boston Globe's 2002 series exposing the Catholic Archdiocese of Boston's sex abuse of minors, Sara Ganim and The Patriot-News' coverage revealing Penn State sex abuse scandal involving Jerry Sandusky and the Charleston Gazette-Mail's 2017 expose on opioids flooding into West Virginia.
This is part of Citizen Now, a package that aims to empower readers with information about our changing world.
CNET
But for every Pulitzer Prize-winning local journalism story, there are countless more that have served as chroniclers of their communities and watchdogs of the people in power. And when they aren't there, research from the Brookings Institute found there's generally more government waste and fraud.
"When you have less local news, there's various effects, some of which you'd find predictable: lower voting turnout, more corruption, more waste," said Steven Walden, president and co-founder of Report For America, a nonprofit that funds young reporters to work in understaffed newsrooms throughout the US. "There's also evidence that you have more polarization and misinformation."
The journalism industry has been struggling to adapt. Advertising, once a vital part of the newspaper world, has shifted to online. Meanwhile, profit-hungry newspaper owners have chosen to lay off staff and reduce the quality of their products.
Nonprofit organizations have stepped up to support newsrooms in several ways, but ultimately, they live or die by their communities. Many local papers and radio stations depend on individual donations to fund reporting that would never be done by larger publications, covering civic meetings and investigating local issues that lead to exposés which fix injustices. Even simply signing up for and reading local news draws people closer to issues that affect them -- and reinforces what publications do.
"Most of these stories weren't big but they mattered immensely to the residents in a community larger outlets didn't regularly cover," said Greg Yee, now a reporter at the Los Angeles Times, speaking about his year writing for the Farmington Daily Times in Farmington, New Mexico. (Full disclosure: Yee is a former colleague of this article's author.) Stories that stick out from that time include a mobile home park cut off from natural gas in winter and a new gas station opening in a Navajo Nation community, the only fuel access in 30 miles, that significantly improved locals' quality of life.
"A good local news organization is a problem solver: it identifies problems and helps a community come together to solve it," said Penelope Abernathy, visiting professor at Northwestern's Medill School of Journalism, who heads a site dedicated to mapping news deserts, areas with one or zero local papers. "And a good news organization shows you how you are related to people you may not know you're related to in another part of the county, region or state."
The Washington Post / Getty Images
Long, withering decline
Journalism jobs have been shrinking for decades, driven by declining newspaper circulation and the rise in digital advertising. The news industry's advertising and subscription businesses have roughly halved over the past decade. Much of that money's shifted to Google, Facebook and Amazon, which together now hold 64% of the US online advertising market.
For newspapers, that shift in spending is catastrophic. In the decade after the great recession in 2009, the Pew Research Center found newspaper newsroom employment in the US had dropped by more than half, to about 35,000 workers.
Ironically, the news industry has more readers than ever before – upwards of 10 times as many, according to Danielle Coffey, vice president and general council of the News Media Alliance.
"We don't have a broken product. It's being consumed at exponential rates," she said. "The source of the problem is the revenue problem."
It wasn't always this way.
The founding fathers believed so strongly in newspapers as a public good that they set up government subsidies for postal rates, reducing the cost of distributing the news – which at the time, was delivered on horseback.
In the 1960s and '70s, though, publicly traded paper owners began fixating on profits. To impress shareholders, news organizations conglomerated into big chains that gobbled up local papers into regional networks, said Amanda Lotz, professor of the Digital Media Research Centre at Queensland University.
"The financialization pressure really moves [newspapers] away from the balance between a commercial and public service enterprise of providing news to a community," Lotz said.
Rounds of acquisitions resulted in the gutting of editorial budgets and staff. With fewer reporters, newspapers started relying on national stories published by wire services, a trend that created "ghost papers" that had little or no local content. Meanwhile, the internet became an easy substitution for things online that had until then been exclusive to the paper, like weather, sports scores, classifieds and even news.
Venture capitalists and other financial firms began buying up newspapers in the 1980s but rapidly accelerated in the last two decades, growing to own over 23% of US newsrooms today while wringing out profits with more layoffs.
"Those losses put more strain on already stretched newsrooms and the publications ended up churning through staff," said Yee, who worked for four years at a pair of newspapers owned by hedge fund Alden Global Capital. "All of that translates into worse, inconsistent coverage of the communities they're trying to serve."
As a result, from 2004 until the start of the pandemic in 2020, the US lost a quarter (around 2100) of its newspapers, according to a report from the University of North Carolina's Hussman School of Journalism and Media. By the end of last year, another hundred were gone, Poynter reported, expanding news deserts that are mostly located in financially-impacted rural areas in the country's interior.
Some papers have tried to rely more heavily on subscriptions, while transitioning to mainly digital publishing. Some success stories include the Chattanooga Times Free Press, which has been operating since 1869. Last September, it switched to a daily digital edition and a single print edition on Sunday from a daily print edition. The publication spent $6.1 million to give all its monthly subscribers iPads and train them one-on-one how to use them to access their daily paper, and it's retained subscribers through the transition.
"There are some real success stories in this transition. If you can lower your paper costs and your distribution costs and if you can attract enough digital subscribers, you can support a local newsroom on that. But many local news organizations are still getting a significant chunk of their revenue from print advertising," Medill's Franklin said.
Bloomberg / Getty News
Legislative fix, maybe
One way the news industry could regain revenue and profit is to seek compensation from big tech platforms. After all, advocates say, Facebook, Google, Twitter make money selling ads next to links, videos and photos published and shared freely to their networks.
Legislators in Australia were the first to pass a law in February 2021 requiring Google and Facebook to negotiate with publishers for compensation to use their work, while France followed with its own legislation shortly thereafter. The latter locked horns with Google before finally securing legal assurance that the search giant would pay local media outlets when they appear in search results. Critics like the Electronic Frontier Foundation lament that the Australian and French laws ensured deals for big media publishers at the expense of smaller ones, but that hasn't stopped Canada and the UK from gearing up to pass their own versions.
A version of that idea in the US, called the Journalism Competition and Preservation Act, was proposed in March, 2021 by Senators Amy Klobuchar, Rand Paul, Cory Booker, and Lindsey Graham -- a rare bipartisan effort. The bill would allow news organizations to collectively bargain with tech companies for compensation, but hasn't moved out of committee yet.
Another idea to fund journalism Is the Local Journalism Sustainability Act introduced a year ago in the House by Representatives Ann Kirkpatrick and Dan Newhouse. That bill, if it were to become law, would give newsrooms around $50,000 annually in tax breaks to hire reporters. Small businesses, meanwhile, would receive $5,000 for the first year to advertise in local papers, and Americans would get a $250 stipend to pay for news subscriptions. It's unlikely to pass, though, in part because of partisan bickering over other spending plans on Capitol Hill.
"We need to make sure these publications can sustain themselves through this crisis and beyond, and I believe the credits in this bill make significant progress in providing a pathway to that sustainability," Rep. Kirkpatrick said when announcing the bill.
Nonprofit newsrooms
Some news organizations are finding funding beyond ads and subscriptions. Nonprofit foundations and philanthropic organizations are funneling grants and other aid money to newsrooms, including a new wave of nonprofit publications, like ProPublica, which run mostly on foundation and individual donations.
The American Journalism Project is a self-described venture philanthropy firm that to date has raised $90 million to back 32 local nonprofit newsrooms. Founded in 2019, it's also helped launch four more, taking the startup incubation model and applying it to digital newsrooms.
The organization focuses on both funding newsrooms and guiding them toward self-sustainability by diversifying their revenue streams, said Sarabeth Berman, CEO of the American Journalism Project. Newsrooms they've helped grow by around 67% in their first year and are projected to double their revenue in three years.
"Will local news only be nonprofit? No. Is nonprofit news vital for the future of an informed citizenry? We think so," Berman said.
Report For America, founded in 2017, describes itself as a service organization, which helps pair young reporters fresh out of college with legacy newsrooms. The organization financially supports the reporter by paying half their salary (up to $25,000) the first year, then a third (up to $20,000) the following year. After that, it's up to the publication to decide whether to hire them permanently.
"If you're not in New York or Boston or Washington, some of these news organizations have trouble getting people to go out to smaller towns," said Report For America's Waldman. "We have a very significant recruiting operation and are able to create a sort of self-selected group of people who are really passionate about local."
Report For America has grown its graduating class to 130 reporters this year, up from its first class of 13 in 2018 -- to date, over 560 reporters have gone through the program and partnered with local newsrooms. They include Laura Roche of the Charlotte News & Observer writing about the fraught debate over museums returning the unethically sourced remains of Black people, Sierra Clark of the Traverse City Record-Eagle writing about Melissa Isaac and many others in her Anishinaabek Neighbors series, and Brandon Drenon of the Indianapolis Star writing about the NAACP and others criticizing Indiana schools for failing Black students.
Report for America also connects newsrooms with donors in their area in an effort to get the community more involved in funding its local news again.
"Our goal is to actually help change the local business models in a way that they can sustain that," Waldman said.
The nonprofit Knight Foundation pledged to give $300 million to news organizations in 2019, some of which will go to both the American Journalism Project and Report For America, among other nonprofits that in turn support local newsrooms -- efforts that can be seen city by city on this interactive map. The flow of financial support is important for local newsrooms that operate on nonprofit and for-profit models, which are both valuable to their communities, said Jim Brady, vice president of the Knight Foundation's journalism program.
"Nonprofits tend to be more investigative or enterprise in nature, and the for-profits tend to provide more information on how consumers can live their daily lives. So we think both must be part of the answer to how local news can thrive," Brady said.
An infographic from the UNC Hussman School of Journalism and Media's project website, The Expanding News Desert, headed by Penelope Abernathy.
UNC Hussman
What to do if you don't have local journalism
News experts have advice for what to do if you live in a news desert, with little or no coverage. First on the list: Stop thinking that social media posts are an informative replacement for reporting. Social media can help people know what's going on, but it's rife with bias and misinformation.
"There's a proliferation of misinformation and disinformation that goes unchecked because there's no local journalist checking on the facts. [Social media is] a place where unvetted gossip can get spread," Franklin said.
People need to learn to spot misinformation that's spread on social media by publications that look like they're trustworthy but aren't. Both the World Health Organization and the Poynter Institute have their own free online courses to learn how to fact-check posts yourself -- not just to spot fake news, but also to understand the agenda behind why they're spreading in the first place.
In the voids left by local papers, citizen journalists and bloggers have stepped up to provide their communities with informative coverage, but they lack the oversight and vetting a newsroom provides. For lack of better options, a citizen reporter could start a site on Substack and write about local events, Franklin suggested.
The best thing to do is to reach out to regional papers the next town over and request coverage. You can find your nearest local or regional paper on Newspapers.com or NewspaperMap.com. The Corporation for Public Broadcasting has a station finder site too, and if you're a fan of National Public Radio, you can sign up to become a member of your local station in order to help support it. It isn't a perfect solution for an existing newsroom to stretch to cover another area, but is far better than starting a new local publication from scratch.
But if your community decides to launch a new publication, organizing it as a nonprofit newsroom is a successful way to go. They rely on donations -- foundation support and individual giving account for a combined 83% of nonprofit revenue, according to the Institute of Nonprofit Newsrooms' 2021 Index. And that model is working: 83 of the over 400 nonprofit newsrooms affiliated with INN are less than five years old.
Then there's nonprofit newsroom Berkeleyside, which hosted the so-called first 'direct public offering' where it solicited a combined $1 million in funding from 355 of its readers (an average of $2,816 per person) in 2018 to get started. These are technically securities, but sold directly to its readers, and the publication continues to publish today. It's one of many ways newsrooms are innovating new ownership structures to stay solvent.
"We need to get more support from communities, from local community foundations, from national media foundations and from high net-worth individuals to help make local news sustainable in all areas of the country," Brady said.
Correction, June 28: The original version of this story incorrectly stated how many reporters were in Report For America's first graduating class. Its first graduating class of reporters was in 2018 and had 13 members.
