The End of Conventional Wisdom? Economic Governance After The

The End of Conventional Wisdom? Dr. Jonathan Luckhurst* Economic Governance after the World Economic Crisis Abstract 1980s, have been undermined by the world economic crisis of 2008-09. This had the effect of increasing doubts about existing economic policy This article examines how the conventional wisdoms of laissez-faire, options in a way that could encourage policy supply-side economic policy discourse innovation now and in the future. Core have constrained international assumptions have been displaced or at least policymaking, but also how the world economic crisis of 2008-09 led to greater brought into question by an economic crisis that discursive contestation that weakened the grew from the rationality of orthodox policy influence of this formerly-prevalent discourse, rather than deviance from it. discourse. The so-called „Keynesian revival‟ of the crisis period continues to Consequently the standard solutions no longer impact international policymaking, at seem to offer an obvious path out of the least to the extent that the supply-side economic crisis, as several national economies approach is no longer so readily accepted as „commonsense‟ by many policy actors. continue to endure problems with debt; poor Now there is no single set of conventional growth; weak housing and financial markets; wisdoms on economic strategy that is currency fluctuations; and general pessimism uncontested amongst international policy about economic prospects. élites. I also examine the effects of „repoliticization‟ as a political strategy The following examines how and a tool of politics. Such a discursive strategy can be a highly effective tool for conventional wisdom and dominant discourses policy actors to achieve political goals. tend to constrain policymakers during normal periods of economic growth, or even during periods of recession in which core elements of the economy still seem to function in a normal Introduction way. It argues for a specifically political This article analyzes how „conventional conception of economic policymaking that wisdoms‟ on economic governance, especially includes skepticism about dominant discourses from the „Washington consensus‟ and neoliberal and eschews general laws in favor of a focus on policy strategies that became popular after the the particularities of a context, e.g. within a 2 specific region or country. The first section context in which policies are being applied. focuses on this broad issue by analyzing how This article presents a philosophical „repoliticization‟ becomes possible during discussion of key issues of economic moments of crisis. It also argues that even though policymaking following the world economic there might be pressures to revert to conventional crisis. It also constitutes a critical discussion of wisdom or the rationalities of dominant governance and public policymaking beyond discourses once a crisis period has passed, questions of economics and political economy, nevertheless good public policymaking, or more especially concerning the significance of broadly „good governance‟, should include a „conventional wisdom‟ and political discourse for heightened skepticism about common wisdom public policymaking. I conclude that a greater and stay focused on contextual factors. The emphasis on context, a heightened willingness second section analyzes some interesting aspects and confidence to reject core shibboleths of of the international policy responses to the world conventional wisdom, combined with a focus on economic crisis of 2008-09, including the revival innovation and lateral thinking, should enhance of Keynesian policy strategies and the subsequent policymaking and lead to more effective debt crises in certain European countries. Such governance across the gamut of policy issues that developments have raised new questions about must be addressed in the contemporary world. contemporary policymaking trends in the world. However, electoral success in twenty-first The final section examines the long-term century politics will be shaped especially by the consequences of this reevaluation of policy capacity of political actors to construct discursive responses to the world economic crisis, including strategies that enable them to gain advantages in the philosophical question of how public politics. Policy actors who manage to increase policymakers can achieve long-term policy the influence of their favored political discourse success without blindly following fashionable and its articulated conventional wisdoms economic theories. Instead I argue that they effectively are rewriting the rules of the game to should develop policy strategies that emphasize, suit their goals. and respond to, the specificities of the particular 3 a way that remains open to new evidence and, potentially, uncomfortable or challenging findings. However such openness can be difficult to sustain, especially in the face of professional Beyond ‘conventional wisdom’: repoliticizing opposition and incentives to conform. economic governance Professional prestige and academic research There are many terms for commonly-held funding can be strong motives in this sense. Also perceptions about the correct or best form of scholars and policy practitioners might find it governance for a particular field of policymaking. difficult to engage in some important Terms such as „best practice‟, „commonsense‟, professional debates without accepting, or „accepted norms‟ and „conventional wisdom‟ implicitly accepting by referencing, some imply the sedimentation and broad acceptance of commonly-held assumptions. As Robert Keohane particular strategies or practices for dealing with (2002: 14) notes, when discussing his initial a given issue. Specifically when we talk of the skepticism about the popularity of the term latter, i.e. „conventional wisdom‟, this implies a „globalization‟: “[I]t is frustrating to try to row commonly-held perception and in scholarly or against a strong tide, or to sail directly into the policy circles it indicates one that is considered wind. To be heard, the scholar has to speak to the appropriate for experts and opinion-leaders in a concerns of his era in the language of his era.” particular field (Krugman 1996: 725). However, conventional wisdom Paul Krugman has written some sometimes has limitations and might be brought interesting points about the potential into question. The following considers how consequences of conventional wisdom in contestation of such dominant discourses occurs, economic theory and in scholarly work on especially during moments of perceived crisis. I economic development. He argues (ibid.: 732) should emphasize that discursive contestation is that economists and policymakers should not possible at other times but it always depends on depend on such common beliefs, but instead whether actors are able to „repoliticize‟ a deploy economic theory and empirical analysis in particular discursive context. Having noted this 4 point — and as the poststructuralist political discourse, as the policy-constraining effects of a theorist Ernesto Laclau has argued, moments of formerly-dominant discourse are weakened and „dislocation‟ become more likely during periods this increases the likelihood that policymakers of increased political uncertainty, as “events that will consider policy options beyond the usual. cannot be symbolized by an existent discursive The broadly commented upon „Keynesian order, and thus function to disturb that order” revival‟ during 2008-09,1 as policy actors sought (Howarth 2000: 111). Keohane (2002: 265) ways to boost world economic growth and also to makes a similar point from a rationalist develop effective new regulatory mechanisms for perspective, with reference to the „prisoner‟s international finance, happened because the dilemma‟ from game theory, asserting that dominant laissez-faire policy discourse was “under conditions of uncertainty in the real discredited by the collapse of the financial sector world, the chain of “inheritability” will be in the United States after September 2008. It is broken, and actors‟ preferences about future useful to consider the linkage between this notion outcomes will not dictate their choices of of dislocation and Jenny Edkins‟ (1999: 126) alternatives in the present” (original emphasis). definition of „the political‟, when she writes that In other words, even supposedly-rational actors “the political represents the moment of openness cannot act to maximize their benefits from or undecidability, when a new social order is on predicted outcomes if the future is no longer the point of establishment, when its limits are predictable, e.g. during moments of political being contested”. By contrast, she considers crisis when key actors and traditional institutional „politics‟ to be “what takes place once the new practices might subsequently cease to comply order is institutionalized… [,] the debate that with previous rules or expectations. occurs within the limits set by that order” (original emphasis). Returning to my example, This dislocatory effect was indicated by „politics‟ in this definition implies the business- the greater openness to policy innovation of as-usual international policy discourse before the influential actors during the economic crisis of financial markets slumped in September 2008. 2008-09. Such a period constitutes an opportunity to challenge the dominance of a particular 1 This „Keynesian revival‟ is discussed below. 5 After the crisis deepened, there was an endorsed by policy élites. interruption

Load more