Just caught up with Eli Noam‘s piece on private equity in the FT.

Private equity has been in the ascendancy, buoyed by cheap debt, rising equity prices and high liquidity. In 2006, almost a quarter of all mergers and acquisitions were financed that way.

This trend has raised questions. Many private equity deals are fuelled by a desire to flee closer regulation and disclosure requirements of public companies. This reduces the transparency of the economy, even as it may make some companies more efficient.

There are additional considerations for media companies. On the positive side, private equity deals often lead to a break-up of media conglomerates to reduce debt that paid for the acquisition. Thus, Clear Channel, poster boy for media concentration, is selling off almost half of its 1,100 radio stations.

On the negative side, the same cost-cutting has impacts on newsrooms, film budgets and re-search and development. Unlike start-up venture capital, this kind of private equity is basically conservative in its search for cash flows to meet debt payments and position the company for resale. It is also short-term orientated and unlikely to undertake big upgrades of communications infrastructure that have long-term benefits for the economy.

Noam also wrote one of my favourite pieces on the Internet and democracy:

…isn’t information good for democracy? Free access to information is indeed helpful, which is why the internet undermines totalitarianism. But it undermines pretty much everything else, too, including democracy. And the value of information to peace and harmony tends to get overblown. Civil war situations are not typically based on a lack of information. Yet there is an enduring belief that if people “only knew,” for example by going online, they would become more tolerant of each other. That is a nice thought, but is it based on history? Hitler came to power in a republic where political information and communication were plentiful.

It is easy to subscribe to romantic notions of a “golden age” of democracy, of Athenian debates in front of an involved citizenry, and to believe that its return by electronic means is nigh. A quick look in the rear-view mirror, to radio and then TV, is sobering. Here, too, the then new media were heralded as harbingers of a new and improved political dialogue. But the reality of those media has been one of cacophony, fragmentation, increasing cost, and the declining value of “hard” information.

It would be simplistic to deny that the internet can mobilise hard-to-reach groups and help them to express themselves. It has unleashed much energy and creativity. Obviously there will be shining success stories, but we should wary of extrapolating. Large segments of society are disenchanted with a political system that is often unresponsive, frequently affected by campaign contributions and usually slow. Many see the internet as the silver bullet that will change all that. Others cling to the image of the early internet – open and free – that created new forms of community. They will be disappointed.