Governing the future: the European Central Bank’s expectation management during the Great Moderation

Abstract

The experience of the global financial crisis has sparked renewed interest in the role of futurity in the capitalist economy in general and in the formation and coordination of expectations under uncertainty in particular. Economic sociologists have carefully studied the ‘defuturizing’ technologies devised by private actors, but have tended to neglect the increasingly pivotal part played by central banks. Political economists have had more to say on central banks, but have focused on institutional issues rather than on the concrete practices of central banking. Making an original contribution to both literatures, this paper traces the construction and subsequent evolution, up to 2007, of the European Central Bank’s communicative apparatus. Drawing on official documents and on interviews with both ECB staff and market participants, the paper shows how this apparatus created the conditions for the formation and coordination of private sector expectations. The insights from this empirical analysis into the performative dimensions of ‘credibility’ and ‘knowledge’ in monetary governance contribute directly to ongoing debates about the recent extension of the ECB’s communicative apparatus through forward guidance and quantitative easing.     

European elites and the narrative of the Greek crisis: A discursive institutionalist analysis

This article examines elite European discourses during the Greek financial crisis from its pre-history in September 2008 up to the arrival of the SYRIZA government in January 2015. The article employs the conceptual literature on Discursive Institutionalism (DI) and Historical Institutionalism (HI). Having coded 1,153 unique quotes drawn from a dataset of 15,354 news wires from Reuters, the authors argue that the communicative discourse of 63 senior European (and IMF) officials on the Greek crisis during that period demonstrates significant volatility. Four distinct narrative frames are identified: ‘neglect’, ‘suspicious cooperation’, ‘blame’ and ‘reluctant redemption’, punctuated by three discursive junctures in 2010, 2011 and 2012, which reflect the content of the changing communicative discourse of the Greek crisis. The article's contribution is twofold: empirically, it is the first to provide a systematic analysis of the protagonists’ communication of the Greek crisis; and theoretically, it combines DI and HI in an effort to conceptualise an important part of our understanding of ‘bail-out politics’ throughout the Eurozone crisis.     

The theory of value and the value of theory — a reply to Cutler et al.

Abstract

Serving as a pledge against a future promise, collateral has traditionally been understood as a ‘back office’ technicality that reduces the risk of default. Yet in the wake of the 2008 financial crisis and the erosion of faith among market participants in the credit quality of large banks, collateral is playing an increasingly important epistemic role within finance, as an anchor that underpins the valuation of a growing number of financial instruments. This paper explores the increasing importance of collateral to the modelling practices used by ‘quants’ to value ‘over-the-counter’ interest rate derivatives since the 2008 financial crisis, and how the inclusion of collateral expertise into quants’ own modelling practices has affected these markets. This historical episode suggests that while the inclusion of collateral expertise into banks’ front office modelling practices has made banks’ pricing models less abstract and more aligned to the traditionally overlooked legal practices that underpin derivatives trading, it has also led to an explosion of complexity in the valuation of these instruments that now threatens the future existence of these markets.     

Playing the credit score game: algorithms, ‘positive’ data and the personification of financial objects

This paper is about how people are learning to ‘make themselves up’ in response to the market’s new algorithmic ways of seeing. More specifically, it explores how the self-datafication of informal financial relations is being used to affect the calculation of credit score. I argue that credit score functions as a legal technology of arbitration beset with contradictions that are giving rise to inchoate struggles over the distribution of calculative agency in consumer credit markets. Drawing on an ethnographic case study of credit building peer ‘lending circles’, the paper explores how financially marginalized groups and financial inclusion advocates are reacting to the blind spots and biases of credit-scoring algorithms through compensatory and transgressive data-generation practices.     

‘Whatever it takes’: Polanyian perspectives on the eurozone crisis and the gold standard

Abstract

The parallels between the monetary politics of the gold standard and that of the eurozone crisis are striking and have informed contemporary debate about the future of European integration. The eurozone crisis has been widely interpreted as the result of a mismatch between international monetary integration and a concomitant lack of fiscal integration, or more broadly as the result of a European Union which is economically integrated, yet politically fragmented. The prospect of a 1930s-style descent into division and nationalism has formed the backdrop against which moves towards extensive integration at the supranational level have been made. Polanyi diagnosed the political effects of monetary integration through his analysis of the gold standard system in The great transformation, making it important that we unpack his analysis and consider carefully how a Polanyian perspective might apply to the eurozone today. I argue that Polanyi encourages us to look beyond ‘monetary vs. fiscal’ and ‘economic vs. political’ characterizations of European integration, and instead to examine how such oppositions are formed in the first place and how they constrain political debate, particularly in terms of how ‘sound money’ is established as the highest policy concern. Through a re-reading of Polanyi's distinction between ‘all-purpose’ and ‘special-purpose’ money, I highlight how, despite the huge efforts undertaken to preserve the identity of the euro as an all-purpose currency, the eurozone crisis has rendered visible a series of latent conflicts between the different functions of money. This analysis moves us away from the ‘monetary vs. fiscal’ integration view of the eurozone crisis and towards a more open study of how the various possible purposes of money are being articulated and challenged, offering some limited hope for alternatives to the current eurozone policy agenda.     

Will we work in twenty-first century capitalism? A critique of the fourth industrial revolution literature

Abstract

The fourth industrial revolution has become a prominent concept and imminent technological change a major issue. Facets are everyone’s concern but currently no one’s ultimate responsibility (perhaps a little like financial stability before the global financial crisis). In this paper, we argue that the future is being shaped now by the way the fourth industrial revolution is being positioned. Whilst no one has set out to argue for or defend technological determinism, anxiety combined with passivity and complacency are being produced in the context of a quasi-determinism. The contingent quantification of the future with regard to the potential for job displacement provides an influential source of authority for this position. A background narrative of ‘the future is coming, so you better get used to it’ is being disseminated. This favours a capitalism that may ‘deny work to the many’ perspective rather than a more fundamental rethink that encompasses change that may liberate the many from work. This, in turn, positions workers and responsibility for future employment, reducing the urgency of calls for wider societal preparation. Public understanding and policy are thus affected and along with them the future of work.     

A cultural political economy of crisis recovery: (trans-)national imaginaries of ‘BRIC’ and subaltern groups in China

Abstract

This paper explores crisis recovery from a cultural political economy (CPE) perspective. It examines the role of (trans-)national forces in constructing BRIC (Brazil, Russia, India, China) as drivers for recovery. First, it comments on some ‘cultural economy’ studies and indicates the value of a CPE approach. Second, it examines the ‘BRIC’ as a symbolic condensation of ‘hope’ knowledge and shows how this signifier evolved in three overlapping moments referring to its role as investor, consumer and lender. Third, it considers the material basis of the appeal of BRIC discourses, especially the credibility acquired through BRIC stimulus packages in the global financial crisis. Fourth, it indicates how China's ‘gold standard’ stimulus package has intensified some deep-rooted political tensions and harmed subaltern groups. Finally, it reflects on how CPE can contribute to studies of crisis and recovery.     

Intervention and Statebuilding Beyond the Human: From the ‘Black Box’ to the ‘Great Outdoors’

This article analyses intervention and statebuilding as shifting towards a posthuman discursive regime. It seeks to explore how the shift to ‘bottom-up’ or post-liberal approaches has evolved into a focus upon epistemological barriers to intervention and an appreciation of complexity. It attempts to describe a process of reflection upon intervention as a policy practice, whereby the need to focus on local context and relations – in order to take problems seriously – begins to further undermine confidence in the Western episteme. In other words, the bottom-up approach, rather than resolving the crisis of policy practices of intervention, seems to further intensify it. It is argued that the way out of this crisis seems to be found in the rejection of the aspiration to know from a position of a ‘problem-solving’ external authority and instead to learn from the opportunities opened up through the practices of intervention. However, what is learnt does not seem to be able to fit into traditional modes and categories of expertise.     

‘Together in the National Interest’: The Rhetoric of Unity and the Formation of the Cameron–Clegg Government

Following the formation of the Conservative–Liberal Democrat government in May 2010, David Cameron and Nick Clegg sought to persuade party members, the electorate and a sceptical media that their partnership would hold together for the duration of the parliament. Taking as its starting point Kenneth Burke's theory of rhetoric as identification, this article explores the strategies employed by senior Coalition figures to construct and present an image of unity to these different audiences. Of particular concern are appeals to the parties’ shared values and to the ‘national interest’, as well as the narrative of Britain's ‘debt crisis’. This narrative served to minimise inter‐party divisions by inviting MPs and supporters to unite behind the cause of deficit reduction, in opposition to the ‘fiscally irresponsible’ Labour party that had allegedly wrecked the economy. The article concludes by reflecting on the lessons for the partners in a future UK coalition government.     

From ‘There is No Alternative’ to ‘Maybe There are Alternatives’: five Challenges to Economic Orthodoxy after the Crash

Prior to the 2008 financial crisis, politicians famously told the public and themselves that ‘there is no alternative’ to a neoliberal economic paradigm. Fast‐forward to 2019 and there is, instead, the sense that ‘maybe there are alternatives’. However, when many observers and commentators look back to the 2008 crisis, they see a general continuity with what went before. In order to gain a better understanding of this ‘interregnum’, we map five sets of ideas and practices that challenge the policies, ideas, and conventions of pre‐crash orthodoxy. In doing so, we argue that there has been a fundamental transformation in legitimate public discourse about the economy since 2008: ideas and practices that were previously unimaginable or illegitimate in mainstream economic debate are now commonplace. Although this does not represent a ‘paradigm shift’, it represents significant political change that is important to understand and interrogate on its own terms.     

From asset to patrimony: the re-emergence of the housing question

Abstract

The global financial crisis has ushered in a major housing crisis in many European countries. The paper seeks to shed light on why, despite massive housing crises, there are few policy efforts at tackling it. Probing into the policy paradigms that have informed housing policies, the paper demonstrates a shift towards housing as an asset before the crisis. Increasingly, housing policies have become interwoven with financial markets. This has led to a major policy mismatch after the crisis: while the return of the ‘housing question’ would have required renewed efforts at establishing housing as a social right, de facto policy makers sought to stabilise financial markets. The result is a paradoxical outcome, where neoliberal market-driven programmes are embedded in increased dependence on family wealth. The article demonstrates the shift from housing as asset to housing as patrimony in three different varieties of residential regimes, represented by Ireland, Denmark and Hungary.     

The Eurozone crisis and the European corporate elite: bringing corporate actors into focus

This paper uses a framework referred to as the ‘corporate reconstruction of European capitalism theory of integration’ to analyse the European Union’s response to the Eurozone crisis. Most political economy analyses of the Eurozone crisis have focused on political leaders, clashes between creditor and debtor member states and public opinions in analysing the handling of the crisis. This paper focuses instead on the input of corporate actors. It is argued that both the setting up of the European Monetary Union (EMU) and the handling of its crisis were congenial to corporate preferences. Europe’s nascent corporate elite was concerned with eliminating currency risk when the EMU was set up and therefore did not push for fiscal federalism. When the flawed architecture of the Eurozone transformed that currency risk into sovereign credit risk, corporate preferences adapted and now favoured fiscal liability pooling and ultimately the setting up of a fiscal union.     

An Obituary for the Third Way: The Financial Crisis and Social Democracy in Europe

Why has the financial crisis not served as an occasion for social democratic revival? It is because, with the ‘Third Way’, European social democracy became imbricated with the financial system in crisis to such an extent that it is in no position to offer an alternative to it. The financial crisis is the crisis of the Third Way. Furthermore, the Third Way was based on the faulty premise that it was possible to replicate USA's apparent success in the 1990s, which, however, was based on very particular conditions. The argument is pursued with reference to inter alia Third Way ideology, transatlantic relations, the political economy of capitalist variety, and the political sociology of mass parties.     

Deep finance: sovereign debt crises and the secondary market ‘fix’

Links between ballooning national debts and official aid conditionalities are well understood. Private sovereign debt markets, in contrast, have been largely overlooked outside mainstream economics. Yet, since the 1980s, a ‘secondary market regime’ in sovereign bonds has transformed financial geographies and legal practices, facilitating the build-up of riskier sovereign debts and strengthening specialized distressed debt investors. This secondary market ‘fix’ has enabled the international financial system to muddle through successive crises. Using the recently concluded Argentine debt saga as an example, I show how the secondary market regime’s effects on debtors are intertwined with, but distinct from, those of structural adjustment programmes; in cases of resistance to neoliberalism, ‘deep’ secondary market debt structures serve to push countries (back) into the neoliberal fold.     

Is E-Government Promoting Convergence Towards More Accountable Local Governments?

ABSTRACT

This article analyzes how extensively European Union local governments are using their websites to disseminate financial information in order to evaluate whether electronic-government (e-government) is promoting convergence towards more accountable local governments. We also posit and test various hypotheses about the influence of internal and contextual factors on Internet financial reporting (IFR) practices. Results show that the public administration style, the size of the city, and the audit of financial information by private firms are significant explanatory factors of IFR practices. Our findings also suggest that multilateral organizations are overly optimistic about the possible convergence in transparency and financial accountability through the use of common modes of IFR. That is, the introduction of information and communication technologies without the corresponding institutional reform is leading to limited success of IFR.     

Narrating the Landscapes of Entrepreneurial Regionalism: Rescaling, ‘New’ Regionalism and the Planned Remaking of València,Spain

Abstract

This paper analyses the instrumental role of cultural landscape in the regionalisation of European states and identities through a case study of the planned redevelopment of València, capital of the Spanish autonomous region the Comunitat Valenciana. Briefly articulating recent theories of state rescaling and ‘new regionalism’ to cultural landscape this paper poses the question: how may landscapes be planned by ‘new’ regional states to rescale regionalist territories and imaginaries? The planning and promotion of the cultural entertainment complex the City of Arts and Sciences demonstrates how one regional state—the Generalitat Valenciana—sought to redefine an historically contested and historicist regionalism through landscapes of modern, entrepreneurial regionalism. Paying more attention to the cultural landscape enriches our theories of how state rescaling and ‘new’ regionalism are narrated discursively and represented materially.     

Time for a New Paradigm? Past and Present Transitions in Economic Policy

This article seeks to place the UK's present economic ‘moment’ in historical context. Over the course of the decade since the 2007 financial crisis, it has increasingly been acknowledged that a cyclical crisis has become a structural crisis. The failure of most economists to predict the financial crash in the first place, and the inadequacy of economic policy in responding to its lasting effects, has led many to conclude that economics itself is in crisis. This article seeks to contribute to a better understanding of the present period of disjuncture. Drawing on theories of paradigm shift from both the physical and social sciences, we argue that the speed of change in UK economic policy is comparable to the two major historical transitions that ended with the post‐war consensus and neoliberalism. We conclude by offering some remarks on how and where the present change might take us.     

Lessons from the malfunctioning of the Eurozone's financial system

The persisting Eurozone's crisis is a combination of a sovereign debt crisis and a banking crisis that have been triggered by the Global Financial Crisis. The sovereign debt crisis is the consequence of a policy laxity for applying the principles and fiscal rules of the monetary union, which led to macroeconomic imbalances and enforced the mispricing of risks by the markets that in turn contributed to escalate the banking crisis. To address the consequences of the Eurozone's crisis, the European Union has implemented a new crisis management framework, which, however, is not immune to trials. The present paper follows a tripartite structure and begins by examining the causes of the Eurozone's crisis and draws its lessons. Second, it examines the reforms of the new crisis management framework and highlights their key challenges. Third, in light of these lessons and challenges, a return to three ‘fundamentals’ is advocated and the case of enhancing the position of the European Union within the area of international financial regulation is built to highlight how this is an optimal policy area for addressing the endemic weaknesses of the Eurozone and how this can contribute to securing a sustainable growth. Copyright © 2014 John Wiley & Sons, Ltd.     

New Region,New Story: Imagining Mobile Subjects in Transnational Space

This paper investigates the changing relations between citizens and Europe's internal borders by seeing these relations as objects of governmentality of mobilities. It focuses on the particular discursive space of one transnational ‘corridor in the making’, studying how, through practices of visioning and strategy-making, governmental actors make new transnational governmental territories by breathing life into the imagined mobile subjects of these future territories. These mobile subjects play a central part in the politics of emergent transnational governmentalities and in legitimising potential border-crossing infrastructures. In a case study of the COINCO project (Corridor of Innovation and Co-operation), linking Oslo, Gothenburg, Copenhagen, Malmö and Berlin, it is shown how deconstructing imagined mobile subjects reveals the will to power over mobility and sheds light on how governmental practices are remaking European borders.     

The Politics of ‘Third Country Equivalence’ in Post-Crisis Financial Services Regulation in the European Union

After the global financial crisis, the European Union has adopted a new regulatory approach towards foreign countries by making use of equivalence rules in finance. Why? This paper argues that it is the EU’s attempt to restore financial stability in its territory and maintain the competitiveness of its financial industry. However, this ‘old’ dilemma between stability and competition in financial regulation is further complicated in a regional jurisdiction, such as the EU, because different regulatory paradigms play off in the dilemma.