Johannes Kepler University Linz, Altenberger Straße 69, 4040 Linz, Austria, www.jku.at
The strange non-crisis of
economics
Economic crisis and crisis policies in
economic and political discourses
Dissertation
zur Erlangung des akademischen Grades
Dr.rer.soc.oec.
im Doktoratsstudium Sozial- und Wirtschaftswissenschaften
an der Johannes Kepler Universität Linz
angefertigt am Institut für die Gesamtanalyse der Wirtschaft (ICAE)
Eingereicht von:
MMag. Stephan Pühringer
Betreut von:
Erstbetreuer: Univ. Prof. Dr. Walter O. Ötsch
Zweitbetreuer: PD Dr. Jakob Kapeller
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Eidesstattliche Erklärung
Ich erkläre an Eides statt, dass ich die vorliegende Dissertation selbstständig und ohne fremde Hilfe verfasst, andere als die angegebenen Quellen und Hilfsmittel nicht benutzt bzw. die wörtlich oder sinngemäß entnommenen Stellen als solche kenntlich gemacht habe.
Die vorliegende Dissertation ist mit dem elektronisch übermittelten Textdokument identisch.
ii
Acknowledgements
This doctoral thesis was prepared from 2012 to 2015 at the Institute for Comprehensive Analysis of the Economy (ICAE) at the Johannes Kepler University of Linz. The institute was founded in 2009 after the outbreak of the financial crisis as an interdisciplinary research institute, based on the conviction that the severe economic crisis of 2008ff. has to be interpreted as a crisis of the scientific discipline of economics, too. Therefore the question of the causes as well as the political and societal consequences of the crisis need to be addressed by a combination of economic, political and sociological approaches. This interdisciplinary atmosphere at the ICAE offered me an inspiring environment to develop and discuss my ideas. First and foremost my gratitude goes to my first supervisor and “academic teacher” Walter Ötsch, who supported me constantly over the last years. He provided me with a large degree of freedom and opened new perspectives for my research. With his open-minded approach to the scope and limits of economics, his critical attitude regarding recent developments in economic research as well as his broad knowledge about the cultural history of economic thought he offered me a possibility for reflection and discussion of my work. Furthermore he supported me also on a personal level, when I was confronted with fundamental critique for not applying econometric methodology.
I am very thankful to my second supervisor Jakob Kapeller, as well. With his enormous research experience and broad expertise he often helped me to concretize and clarify my arguments and direct my research in new directions. Moreover he always took the time to discuss my papers in early stage and provided me with valuable comments and suggestions.
During the preparation of my doctoral thesis I benefited a lot from discussions with my colleagues at the University of Linz and especially in the ICAE, including Katrin Hirte, who also co-authored one of the papers of my thesis, Karl Beyer, Lars Bräutigam, Markus Griesser, Wolfgang Plaimer, Andreas Reichl, as well as Carina Altreiter, Alexander Belabed, Christa Stelzer-Orthofer and Markus Pühringer. Günter Sageder supported my research and always offered me a helping hand.
I would have never been able to prepare and finish my thesis without the massive support of my family and friends. My parents Irmgard and Georg, my brother Markus and my sisters Maria, Gertrude and Michaela and their families have always offered me a place of warmth and love and supported me in several ways during my life. I
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also want to thank friends like Berndi, Chrisi, Thomas, Katin, Michi, Georg, Patrick, Maxi, Andi or my volleyball colleagues, with whom I spent many hours talking, discussing, practicing sports or simply having a good time together.
My deepest gratitude goes to me beloved Judith, Sophie, Miriam and later also Xaver. Their encouragement, great emotional support and love showed me that there are much more important things in life than being successful in academia.
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Content
Chapter 1: Introduction ... 1
References ... 8
Chapter 2: The financial crisis as a heart attack ... 11
Introduction ... 12
Metaphors of economists and economists in the media ... 15
1 Methodological framework and research design ... 18
2 Course of the public discourse on the financial crisis ... 21
3 Discussion: Real world events, thinking styles and metaphors ... 31
4 Conclusion ... 38
5 References ... 39
Chapter 3: Markets as ultimate judges of economic policies ... 43
Introduction ... 44
1 The interconnectedness of political and discursive power balances and the specific role of language ... 46
2 Methodological framework and research design ... 48
3 Crisis narratives and its consequences for the European crisis policy.... 50
3.1 Causes and characterization of the crisis ... 51
3.2 Consequences of the crisis for economic policies ... 52
4 The logic of the market in crisis policy ... 53
4.1 The impact of distinct market narratives on economic policies ... 53
4.2 Market narratives and market metaphors in Merkel’s speeches ... 55
5 Conclusion ... 58
References ... 59
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Chapter 4: “Harte” Sanktionen für budgetpolitische “Sünder” ... 64
Zusammenfassung ... 64
Abstract ... 65
Einleitung ... 66
Fiskalpakt als Symbol politischer Machtverschiebung? ... 69
1 1.1 Entstehungsgeschichte und historische Verortung des Fiskalpaktes ... 71
1.2 Kritische Reflexion der Vertragsinhalte der Fiskalpakts ... 73
Methodische Herangehensweise ... 78
2 Die Implementierung des Fiskalpakts im öffentlichen Diskurs ... 81
3 3.1 Quantitative und qualitative Analyse des Diskursverlaufs in österreichischen Medien... 81
3.2 Dominante Argumentationsmuster und Diskursprofile ... 87
Fazit ... 96
4 Quellen ... 98
Chapter 5: „Performativer Fußabdruck“ als Maß für Wirkmächtigkeit und Einfluss von ÖkonomInnen auf Politik und Gesellschaft ... 101
Abstract ... 101
Entwicklung der wirtschaftspolitischen Einflussnahme von ÖkonomInnen 1 in Deutschland ... 102
Performative Wirkung ökonomischen Wissens ... 107
2 Einflusspotenziale von ÖkonomInnen auf Politik und Gesellschaft... 110
3 3.1 Wissenschaftliche Publikationen und akademische Reputation ... 110
3.2 Akademische Reproduktion ... 119
3.3 Präsenz im öffentlichen Diskurs ... 124
3.4 Wirtschaftspolitische Beratungstätigkeit, politiknahe Institutionen und unmittelbares politisches Engagement ... 127
Methodik und Operationalisierung eines Performativen Fußabdrucks von 4 ÖkonomInnen ... 131
vi 4.1 Wissenschaftlicher Produktionskoeffizient ... 133 4.2 Wissenschaftlicher Reproduktionskoeffizient ... 134 4.3 Medialer Präsenzkoeffizient ... 135 4.4 Wirtschaftspolitischer Beratungskoeffizient ... 136 4.5 Wirtschaftspolitischer Akteurskoeffizient ... 137
Diskussion: Performatives Einflusspotenzial von ÖkonomInnen ... 141
5 Fazit ... 155 6 Quellen ... 162 Anhang ... 174 Curriculum Vitae ... 186
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Chapter 1:
Introduction
„Economics itself (that is the subject as it is thought in universities and evening classes and pronounced upon in leading articles) has always been partly a vehicle for the ruling ideology of each period as well as partly a method of scientific investigation.“ (Robinson 1962:7)
About seven years after the outbreak of the financial crisis, followed by a series of economic crises there are hardly any signs for a crisis of economics. After a short period of public, political and self-criticism of economics and distinct economists the dominant crisis narratives brought forward in economic, public and political discourses ignore the role of the ruling economic thought as potential cause of the crisis. On an individual level the increased prominence of economists like e.g. Paul Krugman – especially after winning the Nobel Prize in Economics in 2008 – on an institutional level the Institute for New Economic Thinking (INET), founded in 2009, and supporting alternative economic approaches partly challenge(d) mainstream economic thought1. Moreover several student initiatives urged for more pluralism in economics. Nevertheless a series of counteractive structural, institutional and discursive effects in economics as well as uneven politico-economic power balances in economic crisis policies countervailed and outperformed those effects. The Nobel Prize in Economics in 2013, awarded to Eugene Fama, heavily criticized for his Efficient Market Hypothesis as one of the main causes of the financial crisis by many
1 Although heterodox economists term Krugman as “mainstream dissenter” (King 2012), “orthodox
dissenter” (Lavoie 2012) or “heretic” (Lee 2009), they conclude that “moderate” mainstream
economists like Krugman or Stiglitz could pave the way to more plurality in economics. Nevertheless, referring to the dominant view of economists regarding to free markets, Krugman concluded after the crisis: “Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives.”
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heterodox economists, is a good indicator for a “strange non-crisis of economics”2
, i.e. the declining possibilities for a fundamental re-orientation of economics.
The struggle for discursive power in the explanation of the causes of the crisis also reflects the struggle for political power to formulate economic policies to overcome the crisis. In this context Kurt Rothschild (2009), referring to the short “window of opportunity”3 for a paradigm shift in economics after the financial crisis, stated: “In the
end a democratic-participatory claim is always a question of societal power balances, too. One has to hold up the conviction, that an alternative is possible, that capitalism is not the only option.”
The fight for discourse hegemony about crisis narratives takes place on many different levels and consists of economic expert debates as well as the political debates in mass media about economic causes and consequences of the crisis. In this context Bob Jessop (2013:252) stresses the importance of the dominant “economic imaginaries” in times of crisis: “(…) the ‘deficit hysteria’ is an excellent (but disastrous) example of how economic imaginaries can shape crisis management. Attention has thereby been redirected from the crisis in the financial sector (…) to the public sector, framed in terms of accumulated government debt.”4
Following this line of argument dominant “economic imaginaries” emerge in the interaction of economic thought, politico-economic power balances of actors and institutions and dominant discourses in the political and public debate.
The financial crisis and the subsequent crisis policies offer a good example to study the formation of new and persistence of old “economic imaginaries” as well as their impact on the process of policy-making at a time when the dominant economic paradigm is potentially contested. The debate, whether or not and to what extent “economic imaginaries”, i.e. economic ideas and economic thought has an impact on the course of political and societal processes yet lasts for a long time. In 1936 John Maynard Keynes (1936:383) famously pointed out: “(T)he ideas of economists and political philosophers (…) are more powerful than is commonly understood. Indeed
2 The term “non-crisis of economics” is referring to Colin Crouch’s book The strange non-crisis of
neoliberalism in 2011, where he is trying to shed light on the persistence of neoliberal political thought after the crisis. He concludes that “the combination of economic and political forces behind this agenda is too powerful for it to be fundamentally dislodged from its predominance” (Crouch 2011:179)
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Nevertheless, Rothschild yet in autumn 2009 in the same interview declared that the window of opportunity is about to close. The quote is translated by the author.
4 Similarly yet in 1956 Kenneth Boulding stressed: “The process of reorganization of economic images
through messages is the key to the understanding of economic dynamics. The great over-all
processes of economic life – inflation, deflation, depression, recovery, and economic development are governed largely by the process of reorganization of economic images” (Boulding 1956:90)
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the world is ruled by little else.” Friedrich August von Hayek (1991:37), one of Keynes’ early opponents agreed, but restricted that “economists have this great influence only in the long run and indirectly”. The history of economics in this context can also be interpreted as the history of competing “economic imaginaries”. A very telling – and for the argumentation of my thesis very important example – is the emergence of the “economic imaginary” of the “market mechanism”.
Throughout the process of the evolution to a separate and professional scientific discipline, economics has been subject to a series of categorical shifts accompanied by shifts in dominant “economic imaginaries”. Whereas economic classics shared the conviction that political economy is a moral science, neoclassical economics seeks to align “economics” to the positive, natural sciences. William Jevons (1871:pf. 3), one of the founders of neoclassical economics in the preface of The Theory of Political
Economy points out: “I have long thought that as it (The science of the economy,
rem. SP) deals throughout with quantities, it must be a mathematical science in matter if not in language.” In sharp contrast to the moral conception of humans as it appears in Smith’s Theory of the Moral Sentiments the founders of neoclassic economic thought understand and develop economics as a positivist “social physics” (Ötsch 2007).
The narrow assumptions of the homo oeconomicus as a rational, solely self-interested and utility and profit maximizing agent allows Jevons (1871:pf.3) “to treat Economy as a Calculus of Pleasure and Pain.” The effort to formulate all human actions as well as all economic processes in terms of rational decisions based on utility and profit maximization resulted in the General Equilibrium Theory5: If all agents act according to this basic assumptions the economy is in an equilibrium situation, where demand equals supply and all markets are cleared (Arrow/Debreu 1954). Without external interventions the “classical law of supply and demand” leads the economy back to its equilibrium. This simplistic “economic imaginary” of self-regulation of markets, which still appears in economic textbooks of the 21st century, had consequences for economics as a scientific discipline but also societal and political consequences.
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About 70 years later, after the second wave of mathematical formalization of economics, Paul Samuelson (1947) accomplishes Jevons’ claim for a “hard science” and declares that “mathematics is a language” in economics. Samuelson work symbolizes a turning point in the process of
mathematization of economics or as Mark Blaug (1999:257) put it: “it might as well have been written in Sanskrit for all the incomprehension with which (it was) received by the older generation of pre-war economists.”
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As a consequence of the fact that economics is the only social science dominated by one dominant paradigm - neoclassical economic thought - the strong support for efficient market forces over the years coined the hegemonic discourse about the economy and formed the strong “economic imaginary” of a “functioning market”. Against the political background of the Cold War and then especially after the breakdown of Keynesian economics in the 1970s the reference to free markets and the free market mechanism at the same time served as theoretical background to promote neoliberal policies of deregulation, privatization and austerity.
There is already much literature about the predominance of neoclassical economic thought in the economics discipline inducing a marginalization and exclusion of heterodox approaches on several levels (see also chapter 5) on the one hand as well as about the impact of narrow neoclassical (financial market or macro) models as one cause of the financial crisis (see also chapter 2) on the other hand. Whereas in the former case neoclassical dominance is especially analyzed on the level of economic research and teaching in the latter case criticism points at the immediate impact of economic models on policy-making processes.
In this thesis, however, I am demonstrating that a broader conception of “economic imaginaries” present in economic, political and public discourses in combination with a social network perspective on the actors and institutions active in these discourses allows better understanding of the crisis and subsequent crisis policies. Although Deidre McCloskey (1983, 1985, 1990, 1995), building on George Lakoff and Mark Johnson’s influential book Metaphors we live by (Lakoff/Johnson 1980), yet in the 1980s argued that language and especially metaphors are highly present in economics and also shape our perception of economic processes, the role of language in economic discourses is still underestimated and is hardly taken into account in economic literature. In this thesis I am arguing that specific economists’ language resp. language used in economic discourses is reflecting dominant “economic imaginaries” and hence a key to the proposed “strange non-crisis of economics”.
The methodological approach employed in this thesis therefore offers a combination of tools of discourse analysis and social network analysis. Critical discourse analysis (CDA) (Fairclough/Wodak 1997, Wodak/Meyer 2009, Wodak 2013) investigates the role of semiosis, i.e. sense- and meaning making and the formation of social power in discourses. In combination with the theoretical approach of Cognitive Metaphor
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Theory (CMT) (Lakoff/Johnson 1980, 1999, Lakoff 2002, Kövecses 2008) I use a CDA approach especially when focusing on the persuasive function of language in economic discourses and economists’ discourses in order to highlight dominant “economic imaginaries” in crisis debates. Especially in chapter 5 I also employ a social network analytical (SNA) approach (Granovetter 1974, Wellman/Berkowitz 1988, Freeman 2004) to study the potential political and societal impact (or “performative footprint”6
as I call it) of distinct (groups of) economists resp. schools of economic thought in Germany. SNA allows analyzing the inner-economic as well as politico-economic and institutional settings, in which “economic imaginaries” develop. The thesis consists of four different papers. Chapter 2 highlights the immediate crisis discourse of German speaking economists from summer 2008 to winter 2009 in opinion-leading Austrian, German and Swiss newspapers and magazines. Chapters 3 and 4 present the impact of economic crisis narratives on economic policies after the financial crisis, thereby analyzing a specific policy process (The Fiscal Compact) in chapter 4 and dominant “economic imaginaries” in political speeches in chapter 3. Whereas the first three papers analyze specific aspects of economic crisis and crisis policy discourses, the last paper focuses on the institutional interconnections of economics, politics and the society.
Chapter 2 is a joint work with Katrin Hirte from the University of Linz and is published in the Journal of Language and Politics 14(4). Immediately after the outbreak of the financial crisis with the bankruptcy of Lehman Brothers economists were confronted with heavily critique for not having foreseen the crisis as well as for their late or non-reaction to the crisis. We therefore analyze prevailing rhetorical strategies and “economic imaginaries” of German-speaking economists in explaining the causes and consequences of the crisis to a broader public. Special attention is thereby given to the metaphors used by economists as they – following CMT approaches – reflect their underlying basic convictions about how the economy works.
The result of this article is that the observation that there are hardly any signs for a re-orientation of economics in the German-speaking area can be explained as a consequence of the stability of “economic imaginaries” over the crisis. We find that the crisis is attributed with metaphors suggesting that the financial crisis has to be
6 The term is referring to the conception of “performativity of economics” (e.g. Callon 1998, 2005,
MacKenzie 2006) arguing that “economics does not describe an existing external ‘economy’, but brings that economy into being: economics performs the economy, creating the phenomena it describes” (MacKenzie/Millo 2003:108).
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interpreted as a series of extraordinary and exogenously given events (e.g. “a tsunami”, “heart attack” or “earthquake”), whereas the “economic imaginary” of a “functioning market mechanism” in times of “normality” is hardly contested.
Chapter 3, published in a special edition on “Language and Economics” in On the
Horizon 23(3) analyzes the use of market analogies and metaphorical analogies for
markets in crisis and crisis policy speeches of German Chancellor Angela Merkel from 2008 to 2014. First, I discuss the interconnectedness of political and discursive power balances after the financial crisis. It can be demonstrated that specific narratives and topoi in explaining the causes of the crisis led to implicit and explicit suggestions how to fight the crisis. The two most far-reaching and efficacious crisis and crisis policy narratives were on the one hand the conviction that “we have lived beyond our means” and that “policy-making has to be rearranged in a way that it still conforms to the markets”, thereby indicating the superiority of market mechanisms over political processes.
The result of this paper is that Merkel’s reference to markets can be assigned to four distinct conceptual market metaphors. First, markets are conceived as human beings, which one should not upset. Second, markets are attributed with natural characteristics of vitality and prosperity. Third, the market mechanism is understood as a mechanistic and rational process, with a high degree of functionality as long as they are not disturbed. Fourth, the market order is conceived as a building built by the government, thereby directly hinting at the ordoliberal image of a Social Market Eocnomy. The strong support for the “economic imaginary” of functioning markets, present in these conceptual metaphors, offers an explanation for the sole focus on austerity policies after the crisis especially in Germany.
Chapter 4, published in Momentum Quarterly 4(1), offers an analysis of the course of the economic and public debate about the Fiscal Compact in Austria during its implementation process in the Austrian Parliament. The Fiscal Compact can be interpreted as a post-democratic phenomenon as most of the political power shifted from legislative to the executive authorities, i.e. the power to sanctify and punish member states in case of non-compliance is handed over to the European Commission. Applying a CDA approach on the discourse in opinion-forming Austrian newspapers six main patterns of argument supporting the Fiscal Compact can be detected.
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The core result of the paper is that the whole debate about fiscal policy measures was discursively framed in a moral dichotomy of “good” and “bad” economic policy. As a consequence states like Greece and Portugal as well as supporters of expansive fiscal policies are attributed with “bad moral” or blamed as “sinners” of “debt-making”, thereby constantly ignoring specific politico-economic causes and political and societal consequences of strict austerity measures. As a consequence (financial) markets and EU executive authorities are provided with discursive and real political power to punish “moral misconducts” with “severe sanctions”.
Chapter 5 suggests the methodology of a “performative footprint” (PFP) of economists as a means to measure economists’ potential impact on politics and society, thereby going far beyond the narrow range of academic rankings. Instead, potential influence of economists’ and economic thought is presented in five categories of internal and external influence. Whereas the former (academic productivity and academic re-productivity coefficient) focus on inner-acadmic influence, the latter (political advice, political actor and public presence coefficient) take into account the efficacy of “eoconomic imaginaries”. Building on a data base of a sample of German economists from 1954-1995 the paper provides PFPs for about 800 economists in these five categories. In a further step a SNA approach is used to highlight the institutional relations in a politico-economic framing, thereby especially focusing on the role of economic think tanks.
The result of the paper shows that over the analyzed period there is a strong dominance of “German neoliberal networks”7
among German economists in the external influence categories. Hence, 54% of German economists with the highest political and societal influence according to the measure of the PFP of economists are linked via “German neoliberal networks”, where one supposes the adherence to the “economic imaginary” of a “functioning market mechanism” to be very strong. As I indicate in the title of my thesis, we are nowadays facing a “strange non-crisis of economics”. Alternative economic approaches have been marginalized even more after the crisis, especially in French (FAPE 2014) and British (Lee 2007, Holland 2014) universities. The conception of “economic imaginaries” assumes a close interaction of economic thought, politico-economic power balances of actors and institutions and discursive effects in political and public debates. At least as far as the
7 “German neoliberal network“ indicates that a Mont Pelerin Society-member is in leading position or
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latter is concerned one can observe a growing number of anti-austerity movements during the last years. Hence, the state of economics at the universities may hide an already ongoing process of a shift of dominant “economic imaginaries”. Or again, as Rothschild (2009) put it: “One has to hold up the conviction, that an alternative is possible, that capitalism is not the only option.”
References
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Michigan Press.
Callon, M. (2005): Why Virtualism paves the way to political Impotence. European Electronic Newsletter 6 (2): 3-20.
Callon, Michel (1998): The Laws of the Markets. Blackwell Press Oxford.
Crouch, Colin (2011): The strange non-death of neoliberalism. Cambridge: Polity Press. Fairclough, Norman/Wodak, Ruth (1997): Critical discourse analysis. In: van Dijk, Teun A.
(ed.): Discourse Studies: A Multidisciplinary Introduction. Vol. 2. London: Sage: 258-284.
FAPE (2014): Evolution of Economics Professors’ Recruitment since 2000 in France: The End of Pluralism. Working Paper.
URL: http://www.heterodoxnews.com/HEN/attach/hen167/FAPE_pluralism_france.pdf
(dl: 12.5.2015)
Freeman, Linton C. (2004):The Development of Social Network Analysis: A Study in the Sociology of Science. Vancouver: Empirical Press.
Granovetter, Mark (1974): Getting a Job. A Study of Contacts and Careers. The University of Chicago Press.
Hayek, Friedrich A. (1991). On Being an Economist. In: Bartley, William W./Kresge, Stephen (eds.): The Trend of Economic History. Chicago, University of Chicago Press: 35-48. Holland, Dominic (2014): Integrating Knowledge through Interdisciplinary Research.
Problems of theory and practice. New York: Routledge.
Jessop, Bob (2013): Recovered imaginaries, imagined recoveries: a cultural political economy of crisis construals and crisis-management in the North Atlantic financial crisis. In Benner, Mats (Ed.): Before and beyond the global economic crisis: economics, politics, settlement. Cheltenham: Edward Elgar: 234-54.
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Jevons, William S. (1871/2013): The Theory of Political Economy. London: Palgrave Macmillan.
Keynes, John M. (1936): The General Theory of Employment, Interest and Money. London: Palgrave Macmillan.
King, John (2012): The Microfoundations Delusion. Metaphor and Dogma in the History of Macroeconomy. Celtenham: Edward Elgar.
Kövecses, Zoltan (2008): Conceptual metaphor theory. Some criticisms and alternative proposals. Annual Review of Cognitive Linguistics 6: 168-184.
Krugman, Paul (2009): How Did Economists Get It So Wrong? In: New York Times Magazine 2.9.2009.
URL: http://www.nytimes.com/ 2009/09/06/magazine/06Economic-t.html (dl: 2.7.2014) Lakoff, George (2002): Moral Politics. How Liberals and Conservatives Think. Chicago and
London: The University of Chicago Press.
Lakoff, George/Johnson, Mark (1980): Metaphors we live by. University of Chicago Press Chicago.
Lakoff, George/Johnson, Mark (1999): Philosophy In The Flesh: the Embodied Mind and its Challenge to Western Thought. New York: Basic Books.
Lavoie, Marc (2012): Perspectives for Post-Keynesian Economics. Review of Political Economy 24(2): 321-335.
Lee, Fred S. (2007): The Research Assessment Exercise, the state and the dominance of mainstream economics in British universities. Cambridge Journal of Economics, 31(2): 309-325.
Lee, Fred S. (2009): A History of Heterodox Economics: Challenging the Mainstream in the Twentieth Century. New York: Routledge.
MacKenzie, Donald (2006). An Engine, Not a Camera. How Financial Models Shape Markets. Cambridge: MIT Press.
MacKenzie, Donald/Millo, Yuval (2003): Constructing a Market, Performing Theory – The Historical Sociology of a Financial Derivatives Exchange. American Journal of Sociology 109(1): 107-145.
McCloskey, Deidre (1983): The rhetoric of economics. Journal of Economic Literature 21(2): 481-517.
McCloskey, Deidre (1985): The Rhetoric of Economics. University of Wisconsin Press. McCloskey, Deidre (1990): If you’re so smart: The narrative of economic expertise. University
of Chicago Press.
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Ötsch, Walter O. (2007): Gottesbilder und ökonomische Theorie: Naturtheologie und Moralität bei Adam Smith. In: Jahrbuch Normative und institutionelle Grundfragen der Ökonomik: 161-179.
Plehwe, Dieter/Walpen, Bernhard (2006): Between Network and Complex Organization: The Making of Neoliberal Knowledge and Hegemony. In: Walpen, Bernhard/Plehwe, Dieter Plehwe/Neunhöffer, Gisela (eds.): Neoliberal Hegemony: A Global Critique. London: Routledge: 27–70.
Robinson, Joan (1962): Economic Philosophy. Penguin Books: Harmondsworth. Rothschild, Kurt W. (2009): Wenn man die Welt ändern will, muss man die Wirtschaft
ändern. Interview im Wespennest 157/2009. URL:
http://www.eurozine.com/articles/2009-11-18-rothschild-de.html (dl: 5.9.2015) Samuelson, Paul (1947): Foundations of Economic Analysis. Harvard University Press. Wellman, Barry/Berkowitz, Stephen D. (1988): Social Structures: A Network Approach.
Cambridge University Press.
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Wodak, Ruth/Meyer, Michael (ed.) (2009): Methods for critical discourse analysis. Introducing qualitative methods. London: Sage.
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Chapter 2:
The financial crisis as a heart attack
Discourse profiles of economists in the financial crisis
Abstract:
The article analyzes the role of economists in public discourse with regard to the financial crisis. Specifically, it focuses on the prevailing rhetorical strategies and the economic convictions of leading German-speaking economists as they appear in seven leading newspapers and magazines in the German-speaking area. Special attention is given to the prevailing rationales and explanations for the financial crisis as well as on the metaphors used for describing specific economic events in particular and the market economy in general. The results of this article show that while the financial crisis could have offered a possibility for a paradigm shift in economic thinking, there is not much evidence for such a shift among German-speaking economists. The observed stability of the dominant paradigm is attributed primarily to the very stable role of certain basic economic convictions, which are exposed through the use of specific metaphors as well as a characterization of the financial crisis as a series of extraordinary and exogenously given events. (e.g. “a tsunami” or “earthquake”)
Keywords: financial crisis; failure of economics; language of economists; metaphors
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Introduction
The financial crisis in general and the inability of the majority of the economic profession to foresee the crisis in particular (Schneider and Kirchgässner 2009; Acemoglu 2009; Sinn 2009) led to a growing distrust in economic research and the economics profession. The criticism put forward against the current state of economics was manifold. It included fundamental dismissals of the monolithic formation of mainstream economics, attacks against the self-confident attitude of economists before (Colander et al. 2009.) and their often very passive role after the crisis (Ahmia 2008 called it “the silence of economists”), critical comments with regard to the major influence of economists as market makers (i.e. Black-Scholes-model, see: MacKenzie et al. 2007, Callon 2005) or as “innovators” (Faulhaber and Baumol 1988) as well as the massive conflicts of interest due to their secondary position as board-members of various companies (Epstein and Carrick-Hagenbarth 2010).
In this context, this paper examines the role of economists in public discourse about the financial crisis in the German-speaking area. The main focus of the analysis is on the use of metaphors by leading economists when explaining the financial crisis and its origins to a general audience. Using the metaphor conception of Lakoff and Johnson (1980a)8 we thereby tacitly assume that conceptual metaphors reflect the way people think about the world – in economic discourse the use of metaphorical analogies with natural disasters can therefore be understood as complete impotence in the crisis, whereas the use of metaphors of diseases suggests a possibility of “curing”, etc. The use of specific metaphorical rhetoric therefore provides information about basic convictions of economists and what they believe to be relevant for illuminating the financial crisis.
The analysis is based on a text corpus of statements, interviews and self-authored articles of economists in eight influential German, Austrian and Swiss newspapers and magazines (concerning coverage, print run and availability) from July 2008 to December 2009. The analysis covers the following main questions. First, what have been the predominant discourses and metaphors over the period? Second, what rhetorical strategies, patterns of argument and metaphorical analogies were used in
8 Lakoff and Johnson’s approach has been very influential in the social sciences in the last decades.
Musolff (2011) examines the use of metaphor in politics, Semino (2008) as well as Goatly (2007) focus on the role of metaphor in discourses, thereby interconnecting metaphor analysis to critical discourse analysis (Musolff 2012).
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the financial crisis discourse? Third, who, that is, which (groups of) economists dominated mass media reporting and what is their institutional background and paradigmatic orientation? Fourth and as a consequence of the former questions: what sort of explanation and interpretation of the financial crisis were brought forward?
The main concern of this analysis is to facilitate a deeper understanding of the way of thinking and the main reference frameworks of economists with different paradigmatic orientation and prove whether there are any differences among them. A far-reaching and dramatic event as the global financial crisis beginning with 2007/08 could eventually have offered a possibility of a turning point in the paradigmatic thinking and the hegemonic discourse over economy or economics as a scientific discipline. There is much empirical evidence that at least in the latter point this turn has not taken place in the German-speaking area until now and the question is, why not? Although even in the United States the financial and economic crises have not led to a fundamental re-thinking of the role of economics, there has been and continues to be a public discourse over the economic policy after the financial crisis and economists like Paul Krugman, who oppose the free market doctrine, play an important role in this discourse (c.f. the prominence of Krugman’s blog Economics and Politics). On an institutional level the foundation of the Institute for new economic thinking (INET) by George Soros can be interpreted as an attempt to support a fundamental shift of economic thinking in October 2009.
Our central argument however is that the observed stability of German-speaking economists’ patterns of argument and more specific their economic framing of “normal” and “extraordinary” events during the public financial crisis discourse is one of the main sources of the rather reserved attitude towards reactions to the financial crisis in the German-speaking area. The dominance of market-radical thinking (Ötsch 2009b) among economists is on the one hand an indication of a monolithic formation of economists in the German-speaking area and, on the other hand, of the hegemonic discourse in economics, which manifests itself by using a specific terminology in economic discourse. Therefore the article provides a classification system of patterns of arguments and metaphorical analogies and shows how specific rhetorical strategies were used to manipulate the public opinion in a way that the financial crisis is interpreted as an exogenous effect, which has nothing to do with the economic system in general. The underlying framework of such an understanding is
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based on a specific conception of “normality” among economists, which allows a framework for interfering, and possibly contradicting events as “exceptional cases” or “extraordinary events” in contrast to the image of a well-functioning economic system. Following this line of argument the article is structured as follows. First we will present the theoretical (Section 1) and methodological (Section 2) background of this article. Section 3 illustrates the course of the economists’ public discourse about the financial crisis from summer 2008 to winter 2009 and the patterns of arguments brought forward during this time. Section 4 discusses the interconnection of economist’s framing of the financial crisis and their basic convictions. Section 5 offers some concluding thoughts.
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Metaphors of economists and economists in the media
1
This article examines the prevailing discourse profiles of economists during the financial crisis. The concept of “discourse profiles” in this context is understood as the outcome of a meta-analysis of patterns of argumentation, rhetorical strategies and usage of language. The investigation mainly rests on an analysis of the metaphorical content of economists’ statements, thereby following the cognitive metaphor theory (CMT) of Lakoff and Johnson (1980a, 1980b, 1999; Lakoff 1995, 2002; Kövecses 2010). Metaphors in their understanding reflect the way people think and speak. Lakoff and Johnson show in detail and with many examples (Lakoff and Johnson 1980a) that every text is saturated with metaphors and that metaphors are an indispensable part of the functioning of the human brain in general. Especially Lakoff (1995, 2002) also applied CMT in his analysis of the political discourse of the Conservatives and the Liberals in the US.
The work of Lakoff and Johnson symbolizes a turning point of metaphor analysis from the classical approach to metaphor coined by Aristotle’s Rhetoric and Poetic to the cognitive approach9. In the classical metaphor approach metaphors are interpreted as a rhetorical element of language, because metaphor in this conception might be envisioned as “…a transfer of meaning or significance from one term to another...”. (Kirby 1997, 532) In Aristotle’s pattern metaphors belong to the figurative and therefore non-literal sphere. As a consequence the necessity of an analysis of metaphors was for a long time restricted to linguistics and literary studies. The relevance of the metaphorical content of scientific language was thus rather unimportant following the classical approach to metaphors.
CMT interprets language not only as a rhetorical element but reflects the impact of language use in the process of how realities are constructed: “Primarily on the basis of linguistic evidence, we have found that most of our ordinary conceptual system is metaphorical in nature. And we have found a way to begin to identify in detail just what the metaphors are that structure how we perceive, how we think, and what we do” (Lakoff and Johnson, 1980a, 124). The systematic metaphor analysis of Schmitt (2005) offers an instrument to classify and systematize metaphors and their underlying patterns of arguments. Metaphors, in such an interpretation, combine
9 Besides Aristotle’s classical approach and Lakoff and Johnson’s cognitive approach Black and
Richardson’s interaction theory can be seen as a third important strand of metaphor theories (Jäkel 1997). However, Lakoff and Johnson’s cognitive approach has been most influential for metaphor analysis in the social sciences over the last decades.
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abstract ways of thinking with sensory perception and experiences of the body. Metaphors map a source domain (e.g. a concrete machine like a computer) on a target domain (e.g. the economy): the economy is described as a rational mechanism (Ötsch 2009a).
There is already much literature about the usage of metaphors in economics and by economists. Kubon-Gilke (1996) discusses the use of the evolutionary metaphor in institutional economic theory, whereas McCloskey (1990, 1995) focuses on the interpretation of models as metaphors in mainstream economics. Hodgson (1993) claims that the economy should rather be conceived as an organism than as a machine, whereas Mirowski (1989, 2002) highlights the pure mechanical view of modern economics and its strong metaphorical analogies with the natural sciences. McGoun (1996) as well as Oberlechner et al. (2004) on the other hand analyze the specific use of metaphorical content in finance respectively in foreign exchange markets. Kutter (2013) analyzes the financial crisis discourse of leading financial journalists and shows legitimation strategies to maintain pre-crisis economic policy. This article, however, provides an analysis of economist’s metaphor in the public discourse about a real world event (the financial crisis), which illustrates their attempt to provide a specific interpretation of the sources and possible consequences of this crisis. The debates and the patterns of argument in the financial crisis, its causes and consequences offer a possibility of examining the way economists think about the economy in general and the role of economics in particular. Distinct metaphors of the crisis led to distinct recommendations for handling the crisis. In this article we will analyze how and with which metaphors economists describe and interpret the crisis, the role of the market or other institutions.
Although the analysis is based on a corpus of articles in influential media, the aim of this article is not an analysis of the role of the mass media in the discourse about the financial crisis. The impact of economic journalists on the reporting about the financial crisis is well described in Engelen et al. (2011) as well as in Starkman (2009) or for the German-speaking media discourse in Arlt and Storz (2010) or Imhof (2009). Instead we focus on the role of the economists as experts for “the economy” in the discourse about the financial crisis and the specific interpretations about the nature and characteristics of the crisis brought forward by them. As an explanation for the passive role of economists in the direct aftermath of the crisis in the German-speaking area it will be shown that the predominant argumentation pattern among
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economists is based on a specific and rather narrow concept of normality in economics, which (following Fleck 1980) can be interpreted as an example for an insistence on the dominant neoclassical paradigm in economics.
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Methodological framework and research design
2
The basic analytical approach employed in this article is based on discourse analysis as practiced in the field of sociology of knowledge. The methodological framework underlying this article is based on the conceptions of critical discourse analysis (CDA) (Fairclough and Wodak 1997, Fairclough 1992, Wodak and Meyer 2009, Jäger 2004, Van Dijk 2008, Wodak 2013). CDA is a sociolinguistic approach, focusing on the use of language in combination with social and cultural hegemonic processes. This means that CDA deconstructs the formation of social power in discourses and analyzes the interactions between discourses and the social world in much detail. The methodological approach of this article assumes a close connection between human thought, the specific use of language and argumentation patterns and the social settings and social contexts from which it develops. Discourses are therefore understood as a complex of statements and discursive practices of participants, which generate hierarchical systems of knowledge and from social reality (Van Dijk 2008, Wodak and Chilton 2005). The analysis of metaphorical content of basic patterns of economists’ arguments in the public financial crisis discourse therefore facilitates the understanding of characteristic “styles of thought” (Fleck 1980) and allows insights in the social relations of power as well as their paradigmatic orientation (Kuhn 1970). Following the observation of Fairclough (1989) we focused on the role of economists in the public media discourse, because the predominant explanations of the causes and effects of the crisis are brought forward in the public discourse.
The analysis in this article is based on a corpus of newspaper and magazine articles10. The sample of chosen articles consists of about 1,300 articles and about 3,000 pages of influential public print media in the German-speaking area (concerning coverage, print run and availability11) in the period from July 1, 2008 to December 31, 2009 (table 1). The first selection of articles for the sample was made with a standardized retrieval from the electronic archives of the media with the catch-phrases “Ökonom”, “Volkswirt”, “Wirtschaftswissenschaftler” (three common used
10
A combination of CDA approaches and corpus linguistic approaches has already been demonstrated (Baker 2006, Baker et al. 2008)
11
We moreover tried to use media which represent the political spectrum in the countries. Nevertheless we decided first, not to make separate analyses of each media as well as second, distinct groups of characteristic thinking amongst economists but concentrate on the whole community of “economists” and their dominant “public discourse” in the German-speaking area. These questions for sure leave space for further research.
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terms describing “economist”) in combination with “Finanzkrise” (“financial crisis”). This procedure made sure that only articles are accepted in the sample, where economists talk about the financial crisis (either in an interview or just as experts in a short comment) or they are even the authors of articles.
Table 1: Text corpus of analyzed newspapers and magazines Name of the newspaper/
magazine (abbreviation) Place of publication Number of relevant text fragments Number of interviews/ self-authored articles
Der Spiegel (Spiegel) Germany 125 12
Der Standard (Standard) Austria 82 12
Die Zeit (Zeit) Germany 170 10
Die Presse (Presse) Austria 64 3
Frankfurter Allgemeine
Zeitung (FAZ) Germany 148 12
Neue Zürcher Zeitung (NZZ) Switzerland 91 8 Salzburger Nachrichten (SN) Austria 31 8 Süddeutsche Zeitung (SZ) Germany 273 11
In a second step we had to determine what we understand by “economists”. For the purpose of this article the institutional as well as the academic position of the participants doesn’t really matter. So we decided to limit the analysis to text fragments of people who are in the same article declared as “ÖkonomIn”, “VolkswirtIn” or “WirtschaftswissenschaftlerIn” (“economist” in the male and female form) including also variations of that term or as “FinanzwissenschaftlerIn” or “Finanzexpert/-in” (“financial experts”). This text corpus was reduced to relevant text fragments with statements of economists or indirect quotes of economists. This procedure ensures that only those people join this sample, who are declared as experts in the field of economics in public - no matter how high their reputation in the scientific community is - because the analysis should focus on the role of “economists” as one the most influential symbolic elite in the public discourse (van Dijk 2005) about causes and effects of the financial crisis. The result is a list of 984 decontextualized text fragments, which were used to illustrate the course of the financial crisis discourse of economists. These text fragments were then supplemented with 76 interviews and self-authored articles of economists. In the next step the relevant text fragments were again reduced to expressions with
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metaphorical or imaginary context and assigned to six metaphorical frames (Oberlechner et al. 2004). The text fragments in combination with the interviews and the self-written articles are the basis for the further analysis of patterns of argument, use of language and use of metaphors, which should allow an insight in the way economists think about the (financial) crisis.
The time period from July 1, 2008 to December 31, 2009 is long enough to illustrate, how the patterns of arguments used by economists in context with the financial crisis describe their thinking about the functionality of economics including a possible change in their view. Because the analysis ends in winter 2009, the dominant public discourse beginning in winter 2009 and then especially in 2010 in the German-speaking area about the future of the EURO and the EURO-Zone respectively of some particular states (Greece, Spain, Italy, Ireland etc.) was no longer the subject of the analysis. But it is certainly quite enlightening that the discourse about debts in the European Union and possible exclusion of several “debt-states” is nearly totally separated from the discourse about bank rescuing programs and stimulus packages in the aftermath of the crisis, which is maybe best described by the separation between “Finanz- und Wirtschaftskrise” (financial and economic crisis) and “Staats- oder Euroschuldenkrise” (public or euro debt crisis) in the German public discourse (a critical view on this separation is presented by Neubäumer 2011).
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Course of the public discourse on the financial crisis
3
The aim of the following section is to illustrate the dominant sub-discourses and the economists’ dominant narratives and patterns of argumentation as well as the commonly used metaphors in these discourses. On the one hand this discourse analysis approach reflects the real events in connection with the crisis and the reactions to these but, on the other hand, it should facilitate developing “discourse profiles of economists” and therefore the way some economists think about the economy or the system of the market.
In a first step the text corpus is split in quarters and some crucial and representative quotes are given for each quarter in order to provide a connection between the course of the discourse about the financial crisis and specific real world events induced by the crisis. The time-line presented in figure 1 gives a first overview of the course of events and related discourses of economists in the German-speaking area.
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Time "Real world events" (sub-)discourses of economists‘
2008-Q3
Bankruptcy of Lehman Brothers
rescuing programs for banks in Germany and
Austria Increase in long-term
interest rates
Fear of a spillover of the "American Crisis" Financial crisis as a "Confidence
Crisis"
reckless and "greedy" bankers banks and companies "too big to fail"
2008-Q4 Worldwide credit crisis
First stimulus packages
credit crunch and its economic consequences skepticism against government
interventionism efficiency and consequences of
stimulus packages Danger of "moral hazard" in
EURO-Zone
2009-Q1
More stimulus packages Bank packages Massive export slumps
stimulus packages as "extraordinary case"
debate about prospective government debts
responsibility of economists ("dispute over method")
2009-Q2
World recession Increasing
unemployment
Increasing public debt Short-time work in
Germany and Austria
role of economic prognoses and forecasts
second (bigger) German stimulus
package (short-time work) Debate about the installation of the
debt brake in the German constitution
2009-Q3
Deflation in Europe Expansion of the U.S.
bank rescue program Bad banks in Europe
Increasing unemployment rates and uncertainty about economic development
Debate about the public responsibility
of credit institutions and banks exit-scenarios for the government
2009-Q4
ECB declares the end of the crisis Austerity packages
(Greece, Ireland) Continued low interest
rates
Role of Germany as driver of
economic growth ("strong Germany") financial feasibility of social security
systems
austerity programs for "debt-states" in EURO-Zone
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3
rdquarter of 2008: “The American Crisis will overthrow other
dominoes – we have to be fast”
The third quarter of 2008 is coined by big troubles of the mortgage banks Fannie Mae and Freddie Mac, as well as of the biggest insurance company AIG and also the bankruptcy of Lehman Brothers. These events led to a collapse of the inter-banking market and the market for commercial papers. In the German-speaking discourse the crisis is mainly interpreted as an “American crisis”, which could affect the German economy but at the same time most economists state, that Germany is still quite “robust” against those “external shocks”. Thomas Straubhaar, head of the Hamburg institute of international economics (HWWI) and also member of the German neoliberal think tank “Initiative Neue Soziale Marktwirtschaft” (“Initiative for new social market economy”, INSM), is convinced that the “American Crisis” and the subsequent recession will harm the German economy much less than all other American recessions in the 20th century. This optimism is based on the belief that through “many important structural reforms in the last few years (…) we are better armed12
for those challenges now than ever”. (Straubhaar in SZ 2008-0913
) The central topic in the third quarter of 2008 is nevertheless the worry about the business cycle and the growth rates and an infection of the real economy by the crisis of the financial markets. The frequent use of disease metaphors like “infection” supports the image of an external threat for the German economy.
Psychological factors always play an important role in the discourse about economic development. The crisis is referred to as a confidence crisis (“Vertrauenskrise”) and it is often stressed that changed expectation and the fear about an economic slump in connection with pessimistic prognoses can turn out to become a “Self-Fulfilling-Prophecy”. This argumentation fosters a personalization of responsibility and guilt for the developments in the financial market on two levels. First, analysts and economic researchers – and especially later on rating agencies – are criticized for publishing pessimistic prognoses on the economic development. Second and on a rather moral
12 The usage of expressions like “better armed” (“besser gerüstet”), “external shocks” (“externe
Schocks”) or robust (“robust”), which are all military metaphors reflects the viewpoint that the crisis is interpreted as a kind of external threat (“the American Crisis”), against which one has to defend. Meunier (2013) discusses the role of Anti-Americanism in the European financial crisis discourse.
13
All citations which refer to the text corpus of newspaper and magazine articles are denoted in the following way (“name of the newspaper/magazine” “year of the publication”-“month of the publication” and are translated by the authors.
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level, bank managers are blamed for their reckless behavior and their exorbitant and “greedy” profit expectations14
and excessive bonuses.
A reduction of the crisis to a confidence crisis suggests, on the other hand, that the government has to do everything to re-establish confidence in the financial system: “No matter how high the sum will be at the end, the state will have to pay it, otherwise (…) the financial system at all will be ruined”. (Hellmeyer in the SZ 2008-08) This rhetorical strategy puts high pressure on the government to rescue every company that is possibly “too big to fail”. The argumentation of economists in this case is mostly in a “there is no alternative”- style, which heavily limits the scope of action for political leaders and forces them to act in an “economically rational way” (Weber in the SZ 2008-10). In this context the political decision-making process is often criticized for being too slow.
4
thquarter of 2008: State failure in regulation leads to a “tsunami” in
Germany
After the uncertainties concerning the liquidity of some central financial market performers and potential toxic assets – a neologism for worthless stocks and shares - in their respective balance sheets, the main discourse in the 4th quarter 2008 is about credit crunches and its consequences for the economic development at a time of a danger of recession. The fear of an economic collapse is reflected in the use of physical and medical metaphors to describe the high relevance of a functioning credit system for the economy. Thomas Url, economist at the Austrian Institute of Economic Research (WIFO) for instance compares a credit crunch with a heart attack, because if banks and other credit institutes stop lending money to each other, “the arteries of the economy are blocked this can lead to a heart attack.”15
(Url in the SN 2008-10) In such kind of thinking the economy is interpreted as a body and the crisis as some kind of disease, which has to be cured. Economists as experts for the “body economy” are then responsible – like doctors in cases of diseases – to find the right medicine.
The time of a fundamental crisis is then consequently the time when politicians have to step back and let economists do their work. So it is quite conclusive that there is a
14
There was for instance a stark controversy about the statement of Josef Ackermann, CEO of the Deutsche Bank, that 25% return on investment are standard. In many German public media Ackermann was often presented as the symbol of the “greedy banker”.
15 Another very telling metaphor is presented by Josef Ackermann (Spiegel 2008-10): “The market is
currently only oriented on surviving and not on making profits”, which indicates an anthropomorphization of the economy.
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strong reservation against political decision-making processes or state activism in such a framework. Daniel Zimmer, economist at the University of Bonn, alerts: “Unfortunately there is a reflex to rely too much in the state in dire straits (…) this is
very dangerous.” (Zimmer in the FAZ 2008-10) Stefan Homburg, economist at the
University of Hannover, even warns that the financial crisis could have a “disinhibiting
effect” (“enthemmende Wirkung”) on politics, because now “everyone can demand
everything”. (Homburg in the Zeit 2008-11)
These two statements show that although there has been a period of broad support of state interventions in the market to rescue individual economic performers, the basic conviction - that in general the state is a bad economic performer and should therefore keep out of the economy - is dominant in the public discourse of economists.
1
stquarter of 2009: “Keynesian Moment?” Or the fear of the state?
The public discourse of economists in the first quarter of 2009 is coined by several debates about the rights and obligations of the state in economic policy, especially in combating the financial crisis. This trend towards traditionally Keynesian economic policy in this “extraordinary situation” manifests on the one hand in the fact that even liberal and neoclassical oriented economists support governmental actions16. On the other hand the “Keynesian Moment” in Germany is reflected in the high presence of Keynesian-oriented economists in the public media in the first few months of 2009 compared to their overall presence17. Besides this relatively broad consensus about governmental interventions in the case of the severe crisis (the “extraordinary event”), there is also an intensified debate about prospective government debts. Especially liberal economists like Johann Eekhoff (Spiegel 2009-01), spokesman of the neoliberal think tank “Kronberger Kreis” or Justus Haucap, chairman of the German monopoly commission and active member in the neoliberal think tank INSM, stress that after the peak of the crisis it would now, in the first months of 2009, be unavoidable for the state to withdraw from the economy and let the self-regulation
16
For instance Martin Feldstein, economist in the neoliberal area of Ronald Reagan, who represented the dogma of a small state, supported an increase of government expenditures “although I have a hard time saying that” (Cited in the FAZ 2009-02). And even the pronounced free-market liberal Hans Werner Sinn (Zeit 2009-09) stated retrospectively in August 2009 that “the programs were necessary in this dimension”.
17
The public media presence of Peter Bofinger (58% of his mentions in the first two quarters of 2009), Rudolf Hickel (42% in the first quarter of 2009) and Jürgen Kromphard (67% in the first quarter of 2009), which are all pronounced Keynesians, is significantly higher in the first quarter respectively the first two quarters of 2009.
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forces of the market do its work, because otherwise all those interventions could lead to “massive displacements on the markets” (Haucap in the SZ 2009-02) and prevent the formation of “objective market prices”. In the FAZ for instance the attempt to smooth the high volatility of asset prices due to uncertainty about toxic assets is then discussed as a possible case of a Hayekian “pretense of knowledge”.
Another important discourse strand in the first quarter of 2009 is about the responsibility of economists because they did not foresee the rise of the financial crisis. The debate was initially inspired by the famous question of the British Queen to the leading economists in the London School of Economics and lead to a claim for more ethics in the academic education of economists as well as for a reorientation of economics away from the dominance of formal mathematical approaches. This debate culminated in a dispute between older, mainly ordo-liberal German economists, who supported a plea initiated to preserve professorships for economic policy at the University of Cologne, and younger economists, who published a plea for formal mathematical argumentation as the international standard of modern economics18. This confrontation, referred to as “Methodenstreit” (dispute over methods), was partially polemic. On the one hand there was the critique that pure mathematical approaches have nothing to say about real world problems (Issing in the FAZ 2009-01) and on the other hand, formal methods were denoted as simply “more scientific”. (Fuest in the FAZ 2009-01)
2
ndquarter of 2009: Self-reflection about the influence of
economists and their prognoses?
The first dominant sub-discourse in the second quarter of 2009 was about the role of economic prognoses induced by the announcement of the president of the German Institute for economic research (DIW), Klaus Zimmermann that the DIW will stop publishing prognoses about the economic development. The viscous circle of pessimistic prognoses, herding behavior of prognosticators and negative real economic developments showed, according to Zimmermann, that economic forecasts in times of “historical setbacks (“historische Wachstumseinbrüche”) in growth stumble against the boarder of feasibility”. (FAZ 2009-04) The announcement of Zimmermann
18
The formation of the two opposing groups was also a nice example for the coherence of the direction of argumentation and the institutional establishment of economists. From the 83 economists who supported the plea “Save economic policy at the Universities!” only 4% were listed in the economist ranking of the German “Handelsblatt”. On the other side from the 188 economists who signed the plea “Rebuild German economics according to international standards!” about 40% were listed in the ranking (Rothschild 2010).
