Chapter 4: Constructing crises: Understanding the politics of economic crises
4.4 Constructing crises, constructing crisis responses
4.4.1 Constructing crises
As a result of their desire to explain periods of rapid institutional change, both HI and CI theories have placed much of their focus on moments of economic crisis, which are recognised as catalysts for change (Hall 1993; Blyth 2002; Matthijs 2011). The key
intervention in this debate was Hall’s (1993) account of how the monetarist ‘paradigm’ came to replace the dominant Keynesian paradigm, which had been in place throughout the post- War period. At the root of Hall’s account is an understanding that the inflationary crises of the 1970s had compromised the viability of the extant Keynesian framework, opening up space for a new set of ideas to frame the political economic environment, specify the issues at hand and identify the policy path to take. Such important periods of change, wherein such ‘paradigmatic’ shifts can occur, have been conceptualised within the literature in terms of a ‘punctuated equilibrium’ theory of change (see Hay 2002: chapter 4). That is, in contrast to both revolutionary and evolutionary dynamics, crises represent ‘critical junctures’ wherein the timeframe of political change has the capacity to shrink, as existing dominant political economic ideas are fundamentally challenged by unfolding events, leaving the political environment more susceptible to change (Hay 2002; see Collier and Collier 1991).
Herein lies the key difference between Hall’s HI approach and the more
constructivist-oriented approach as taken here. Whilst Hall’s classic ‘Bayesian’ account of paradigm shifts views responses to economic crises as largely a given product of the material nature of the crisis (see Blyth 2013c), constructivist scholars have revealed the salience of how crises themselves come to be popularly understood and experienced, for the nature of the ideational struggle thereafter (see Blyth 2013a; Hay 2016; Gamble 2009a; Widmaier et al. 2007). Mark Blyth (2002), for instance, has conceptualised these periods in time as moments of ‘Knightian uncertainty’, wherein elite actors’ ideas are thrown into doubt by the crisis environment, leaving the field open for an ideational battle to commence over what the new paradigmatic settlement might look like (see also Matthijs 2011: 5, 26-8).
If, as I have already established, social and political realities are constituted through the subjective and intersubjective ideas held by actors about their environment, as part of a process of how they make sense of the world around them, the nature of economic crisis definitions must be recognised as contingent (Hay 2016: 525; see also Matthijs 2011: 5; Gamble 2009a). As Widmaier (2003: 62) writes, ‘neither state nor societal agents can react to
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events until they have interpreted those events’. In effect, this means that ‘all social and political events and institutional settings are interpretively ambiguous’, that is, events such as economic crises, ‘can sustain a variety of different and competing narratives’ about their nature (Hay 2016: 528). This is not to gloss over the ‘brute’ material fundamentals of crises; clearly, crises of all kinds may pose significant issues for societies, whether I believe them to or not. Rather, the crux of the argument made here is that, as Gamble (2009a: 65, 141) submits, the conception of the crisis that ‘becomes dominant’ matters, because ‘that will shape the political response. Interpretations of the crisis become part of the politics of the crisis’ (see also Blyth 2002; 2013; Hay 2013; Watson 2009; Matthijs 2011).75
In short, ‘it is politics, not economics, and it is authority, not facts, that matter for both paradigm maintenance and change’ (Blyth 2013c: 210). It is necessary, therefore, to pay particular attention to the way in which crises are ‘argued over and written about; defined into and out of existence; influenced, shaped and reconstituted’ (Watson 2014: 2).
Understanding the construction of a dominant crisis narrative is significant because it informs our conception of the appropriate response to that crisis (Hay 2016: 528; Watson 2014; Widmaier et al. 2007). As understandings of crises help orient actors towards the
environment they are operating in, informing their perception of what is both necessary and what ought to be done to resolve the crisis, they are the cornerstone of accounts of post-crisis political economic strategies.
75 I will utilise the example of a non-economic ‘crisis’ to explain this a little further. For example, a hurricane
sweeps through a city and destroys most of the city’s housing. The brute material consequences of this hurricane are severe and few would deny that it had created a range of serious problems for that society. Yet, given the nature of institutional and socially constructed knowledge, we can still suggest that this event can ‘sustain a variety of different and competing narratives’ surrounding the nature of this ‘crisis’ which are critical to its resolution (Hay 2016: 528). For instance, the emergency response and after-care offered by the government rests entirely upon socially constructed norms about the appropriate role for the state in such instances. For instance, is the state required to provide emergency care, shelter or even compensation for loss? Whilst real-world governments in developed economies would be expected to offer significant response measures, hypothetically it is possible to conceive of an ultra-laissez-faire governing arrangement wherein responsibility to ensure that properties are adequately protected against such natural disasters falls squarely upon individual property- owners. Despite there being no ambiguity over the ‘brute’ material nature of this crisis, the hypothetical laissez- faire governing paradigm sustains an alternative crisis narrative to the one we might expect wherein the central state is absolved of any duty to help resolve the situation. Thus, even the most tangible ‘crises’ can be socially constructed in different ways, shaping responses to them in important ways.
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4.4.2 Constructing crisis responses
Understanding the ways in which actors respond to their environments is itself also contestable, as there are competing accounts of what is involved. As has already been explored, the classic conception in the constructivist literature is that of ‘paradigmatic’ change, particularly following exogenous shocks such as economic crises (Hall 1993; Weir 1989; Blyth 2002; Matthijs 2011). This conception of paradigmatic change has, however, been criticised for how it tends to view the emergence of new ideas non-situationally rather than as part of a protracted process of change (see Carstensen and Matthijs 2018; Carstensen 2011), as well as for its assumption of the ‘auto-legitimating’ nature of such ideas (see Seabrooke 2007a; 2010; Hobson and Seabrooke 2007; 2009).
In the post-crisis period, with the benefit of a decade’s worth of hindsight, it is clear that a single powerful new ‘oracular’ idea or ideology (see Osborne 2004) has not yet taken hold and produced ‘paradigmatic change’ in the way that, for instance, Keynesian economics did in the post-War period (see Hall 1993). Hall’s (1993) conception of ‘paradigmatic’ change involves a total upheaval of the ‘framework of ideas and standards that specifies not only the goals of policy and the kind of instruments that can be used to attain them, but also the very nature of the problems they are meant to be addressing’ (Hall 1993: 279). This thesis recognises the value of the concept of paradigms – and, indeed, contends that we have
witnessed the continued resilience of the pre-crisis neoliberal paradigm since 2008. Yet, rather than see political change in paradigmatic terms as ‘all or nothing’ (Blyth 2013c: 208), Carstensen (2011; 2013) has sought to develop the concept of ideational ‘bricolage’ in order to recognise the more common process of fragmented, agent-led change. Paradigmatic accounts have tended to ignore the process of ideational development, viewing paradigmatic change as occurring once a new set of powerful ideas becomes available. The concept of bricolage, on the other hand, recognises how political actors utilise all ideational, institutional and political resources they have to hand at the time, drawing upon the ideas of the pre-crisis regime, as well as new ideas, to build a new coalition of ideas to fit the new circumstances (Carstensen 2011; 2013; see also Campbell 1998; Clift 2018: chapter 2). For instance, although not conceptualising his account in terms of bricolage, Widmaier (2003)
demonstrates how actors come to view new economic events through old or established ‘New Classical’ and ‘New Keynesian’ lenses.
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The classic accounts of paradigmatic change have also been criticised for the way they under-theorise how new ideas are legitimised. The CI literature has largely been
premised upon a conception of new ideas being developed and legitimised by so-called norm entrepreneurs (see Finnemore and Sikkink 1998). Within this framework, ideas have been seen as ‘frames’ that help to determine a range of responses to a particular situation (see Campbell 1998: 385; Schmidt 2008a: 306), weapons in ideational battles (Blyth 2002), and ‘vehicles’ that act as problem-solving devices to help in ‘moving things on’ (McLennan 2004: 485).
Emerging as a branch of constructivist political economy, scholars within the field of ‘Everyday’ International Political Economy (EIPE) have, however, criticised the top-down ‘auto-legitimating’ nature of ideas within the above literature, arguing that legitimation must be recognised as a ‘two-way street’ of contestation between different social groups
(Seabrooke 2007a; 2010; Hobson and Seabrooke 2007; 2009). Particularly in the context of crisis construction, Widmaier et al. (2007) argue, for instance, that ‘crises must resonate with an intersubjective consensus about the legitimacy of change among the broader population if they are to be successfully accepted as blueprints for a post-crisis order’. This ‘intersubjective consensus’ has also been conceptualised as a ‘mood of the times’ (Stanley 2014). We can see evidence of this in the private household/public household analogy used to argue the
necessity of the state ‘living within its means’ fiscally, for instance (Stanley, 2014; Gamble, 2013a; 2013b; Schmidt and Thatcher, 2014b: 343), or how the New Labour government appealed to a sense of ‘middle class moral panic’ amongst mortgage borrowers in order to justify the exorbitant costs of bailing out the banks in 2008 (Watson 2009: 431).
Whilst the EIPE literature rightly points to a methodological elitism within prior constructivist work, constructivist scholarship also has an ontological appreciation of the role that non-elite agents have in legitimation. Even within Hall’s foundational HI work, he recognises that political elites ‘do not simply “exert power”; they acquire power in part by trying to influence the political discourse of their day’ (Hall 1993: 290). This idea was built upon in the literature throughout the 1990s and 2000s, as DI evolved. For instance, John L. Campbell (1998) made significant reference to the necessity of utilising discourse to generate ‘public legitimacy’. Indeed, Campbell’s (1998) entire analytical schema is, in fact, based around the relationship between elite assumptions and policy ‘programs’, the normative concepts or ‘frames’ that elites use to legitimise their programs to the public, and how these resonate with ‘public sentiments’. Schmidt, too, is well aware of the importance of this
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process, defining discourse as ‘whatever policy actors say to one another and to the public in their efforts to generate and legitimize a policy programme’ (Schmidt, 2002: 210). This discussion therefore reveals that crisis constructions and the wider ideational and institutional context are integral to the establishment of which economic policies come to be viewed as ‘credible’ (see Clift and Tomlinson 2004; 2007). I explore this further in the next chapter (see Section 5.6.2).
The criticisms of both paradigmatic accounts and the ‘elite’ focus of constructivist scholarship are nonetheless important points of departure, especially when looking to
understand periods characterised by the failure of ideational renewal; that is, if one wishes to better understand why social democratic actors were unable and/or unwilling to articulate an effective economic alternative to austerity, one must take a tour through this ideational landscape to discover what ideational processes went on, why some ideas were promoted and others pushed to the side in the attempt to develop a discourse that could legitimise a social democratic alternative.76 The following sections sets out a framework for doing so.
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