Table of Contents
The global downturn that followed the collapse of major US financial institutions is no doubt the most significant economic crisis of our times. Its effects on corporate and governmental balance sheets have been devastating. It destroyed the employment and compromised the wellbeing of tens of millions of people. At the time of writing, it continues to pose major challenges to public policymakers and economic actors around the world.
Although it had been bubbling away for more than a year in the form of a US-based ‘credit crunch’, the crisis deepened and widened to a truly global and whole-of-economy phenomenon during a number of critical months in 2008. This volume studies how public policymakers in a range of polities responded to the cascading problems in financial institutions and their growing impact on the ‘real’ economy. In particular, our focus is on how these public leaders described and explained the downturn to the public and sought to persuade it of the courses of action they proposed to tackle the crisis.
Ours is, therefore, a study of crisis rhetoric, embedded in a broader perspective of the challenges of leadership and governance in times of crisis. When nagging problems such as financial-sector instability escalate, policymakers face the challenge of switching from ‘business as usual’ into ‘crisis management’ mode. Doing so entails much more than turning to emergency plans and invoking emergency powers. The very act of perceiving a certain set of events as a ‘crisis’ and publicly labelling it as such involves numerous judgment calls. When are economic conditions considered to be so bad one can start using the otherwise dreaded ‘r’, ‘c’, or ‘d’ words (recession, crisis, depression) to describe them? What does using those words do in terms of public perceptions and emotions? How does one use the language of crisis without sounding defeatist or opportunistic? How does one persuade audiences not just that a crisis is occurring, but that it has done so for particular reasons and should be met with particular responses?
These are questions in which issues of fact, speculation, values and interests are intimately intertwined. Policymakers will grapple with these problems in their own minds, particularly when situations are fast moving, uncertain, ambiguous or when different bodies of evidence and advice seem to pull them in different directions. At the same time, however, policymakers can seldom afford to wait until they really know what’s going on before communicating about it publicly. In the case of economic turbulence, for example, markets, media and mass audiences will be talking about the issues constantly, and if the voices of key leaders are absent from those debates, governments will be on the back foot and will in effect lose credibility.
Risk and crisis communication is a tricky business in any sector—witness the recent dilemmas regarding the global ‘swine flu’ outbreak: how should one respond to and talk to the public about a virus with ominous potential but whose current manifestations are quite mild? Such communication is especially tricky in the world of finance and economics. If, as is often observed, economics is essentially about psychology, then the ill-considered use of terms such as crisis, recession or depression by authority figures can generate self-fulfilling prophecies. That is a scary thought in an age when truly massive capital flows can be redirected across the world in a matter of seconds. If, however, key economic or political elites maintain an upbeat, business-as-usual facade when public sentiment is already heading south, they might look out of touch, inept or impotent—which will create a backlash in markets in a different way. Talking up the economy makes sense for public leaders only when there is at least some basis in fact and when the intended audience has not already made up its mind in the other direction. Timing and the tone of conveying both good and bad news about the economy in an overall climate of uncertainty and anxiety are, therefore, crucial.