Ann Pettifor – The Metaphors of Economics and Austerity

A brilliant weekend read.

This post was written as introduction to the very recently published book “Discourse Analysis and Austerity: Critical Studies from Economics and Linguistics”, edited by Kate Power, Tanweer Ali and Eva Lebdušková. Published by Routledge, it is available from here.

Ann Pettifor is a Director of Policy Research in Macroeconomics (PRIME) and a Council Member of the Prgressive Economy Forum

Cross posted from Prime Economics

Fixing the roof whle the sun shines? (Photo: Jeremy Smith)

As a non-academic of lifelong duration, I am honoured to be invited to provide an introduction to this ground-breaking (agricultural metaphor!) set of essays.

I have been a long-time admirer of George Lakoff and his colleagues, and try to find Metaphors We Can Live By.  But in the modern world (perhaps in the ancient world too) metaphors cannot live by words alone – it is the deeper associations and linkages of tone, image and cultural assumption – as well as the exercise of dominance and power – that make metaphors work, or not work, as tools of persuasion, or (too often) propaganda.

One area of contested discourse and metaphor with which I am fully conversant relates to international debt.  When I was director of Jubilee 2000 in the late 1990s, our task was to persuade the “international community” to cancel the unpayable debts of the poorest countries (in the event, around $100 billion owed by 35 countries was written off by the official institutions).  In developing our global advocacy campaign, we had to decide on the images and metaphors to adopt, and chose – as our dominant image – the chains of debt.  This both echoed the chains of slavery, and also in a practical sense helped to mobilise millions through the active task of forming ‘human chains’ at G7 meetings.

But the image of debt as bondage or slavery was in opposition to the dominant metaphor even of those in the “international community” (work on the deeper meaning of that phrase is overdue!), who far prefer to speak of “debt forgiveness” or “debt relief”.  Both of these terms locate the role of the ‘forgiver’ within the frame of charity, the first as an individual act, the latter as a more collective approach.  The first – “forgiveness” – in fact still echoes, though from a different perspective, the frame of both sinfulness on the part of the debtor, and debt as bondage; in this case the “good” slave-owner who manumits his loyal long-standing personal slave. 

The rhetoric of reaction

In his 1991 book “Rhetoric of Reaction”, Alfed O.Hirschman proposes that conservative thinkers and rhetoricians tend to use three techniques of persuasion – “perversity, futility, jeopardy.” 

Perversity here means that any intended progressive reform can only have adverse consequences.  You try to improve the lot of the poor, but in so doing, you make things worse.  In the words of a 19th century English essayist ,

“The Poor-laws were intended to prevent mendicants; they have made mendicancy a legal profession; they were established in the spirit of a noble and sublime provision, which contained all the theory of Virtue; they have produced all the consequences of Vice…. The Poor-laws, formed to relieve the distress, have been the arch creators of distress.” (Edward Bulwer Lytton, cited in Hirschman (1991) Belknap Press, p.29)

This Hirschmann compares with Charles Murray’s similarly-angled attack on the Welfare State in 1984 (“Losing Ground”):

“We tried to provide more for the poor and produced more poor instead.” (Cited ibid. p.29)

Closely aligned to perversity is “futility”.  Here, any action to promote progressive change is pointless, because it will have no lasting effect.  As Hirschmann points out,

“The claims of the futility thesis seem more moderate than those of the perverse effect, but they are in reality more insulting to the change agents… The demonstration or discovery that such action is incapable of ‘making a dent’ at all leaves the promoters of change humiliated, demoralized, in doubt about the meaning and true motive of their endeavors.” (Ibid. p.45)

As an example of this, he draws on the work of the Italian economist Vilfredo Pareto, who claimed there to be a “natural law”- Pareto’s Law – on the fixity of the distribution of income across societies.  Pareto was a far-right Italian nationalist, and It does not seem to me to be a coincidence that he is still associated, in contemporary mainstream economics, with reactionary economic concepts that bear his name:

“Pareto efficiency or Pareto optimality is a state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.” (Wikipedia’s short definition).

The text-books go out of their way to say that Pareto optimality is not the same as equitable or productive optimality, but what on earth is the point in having such a sub-optimal definition of optimality, if not to implant ideas that any negative impact on the economic interests of the very rich is somehow inefficient or suboptimal?

And so to “jeopardy”, which is surely the most common rhetorical flourish in support of “austerity”.

Conservative Jeopardists,  as Catherine Resche exemplifies in her essay in this book, commonly use three metaphors of potential doom – meteorological, seismological and medical – when arguing for austerity:

“In both the institutional and the academic corpora analysed here, the crises are first presented in terms of natural catastrophes or fast spreading contagious diseases. The ship “Economy” is caught in extraordinary storms and winds at sea; the economic structure, like that of a building, is threatened by devastating earthquakes or fire, and economies must be protected from a deadly epidemic.”

As Eduardo Strachman and Inês Signorini identify in their chapter on Brazil, there is in fact a fourth, the runaway train model, where only a brave train driver and his mate are able to first slow the train down, then reverse it back to safety, getting it “back on the right track”.

And we must not forget the fifth, the most enduring, metaphor – the national economy is a household that needs prudent management – if the householder is a spendthrift, the Debtor’s Prison and the Workhouse face the whole family.

Steering the ship through the storm

In his 2009 speech to the Conservative Party’s spring Conference, David Cameron (then UK Leader of the Opposition) announced the coming of the Age of Austerity, which is the title of the speech:

“There are deep, dark clouds over our economy, our society, and our whole political system.

Steering our country through this storm; reaching the sunshine on the far side cannot mean sticking to the same, wrong course”.

Ah yes, the Great Helmsman steers the nation safely through the Storm to the Sunshine far beyond.  George Osborne, when Chancellor of the Exchequer, much favoured the meteorological approach, with his frequent references to Mending the Roof While the Sun Shines, though this is more about seizing the moment (the sun will maybe soon stop shining) than Cameron’s vision of Steering through the Storm.

Now, another favourite metaphor – there is no more money!:

“Labour’s Debt Crisis. The highest borrowing in peacetime history. The deepest recession since the war. Labour are spent. The money has run out.”

The spendthrift – the incompetent patriarch, or head of the household.  Time for a new patriarch  to take control of the family’s finances, and restore the confidence of the local tradesmen who have extended credit but have Frankly Had Enough.  (This metaphor is closely associated with the central bankers’ favoured trope of Taking Away the Punchbowl; “governments are too undisciplined and profligate to be trusted with the family finances”).

But what’s this?

“Unless we deal with this debt crisis, we risk becoming once again the sick man of Europe.”

Ah, that old favourite, the sick man of Europe – so it’s time for the medical metaphor and medical men to step in and take back control, cure the disease (by blood-letting?), stop the infection from spreading.

The millstone

And finally, back to debt as unjust burden –

“Our recovery will be held back, and our children will be weighed down, by a millstone of debt”.

A “millstone of debt”?  This is an odd choice, since a millstone (or rather, two millstones working together) forms the basis for grinding grain to make our daily bread. It does not, if used properly, hold anyone back, or weigh anyone down. In the Old Testament (Deuteronomy 24.6) of the Bible, we are forbidden to take a single millstone as a pledge for a debt, since that deprives a man and his family of their means of living.  Maybe Cameron meant to imply a millstone round the neck – a metaphor to be found in Saint Mark’s Gospel in the New Testament. Perhaps Cameron was back to his Great Helmsman metaphor, since according to Saint Mark Jesus said,

“Whosoever shall offend one of these little ones that believe in me, it is better for him that a millstone were hanged about his neck, and he were cast into the sea.” (Mark 9.42)

Thus, so far from our children, “these little ones”, being weighed down, the millstone is to be a punishment of death round the neck of the offender.  But to place a millstone round a person’s neck, however guilty you claim them to be, would involve dismantling a functioning pair of millstones, thereby reducing the economic capacity and productivity of the economy.  So maybe this is a more telling metaphor than Cameron imagined.

In fact, I’m inspired to take Cameron’s metaphor one step further.  If we take the upper millstone to represent private credit and debt, and the lower to represent public credit and debt, working and adjusting together they grind the “grain” of the economy – the raw products – into economically useful and digestible commodities; they ensure us our daily bread.  But if one wheel stops working, the whole mill “grinds” to a halt.  The local community may starve, unless  the expense of a new mill or major repair is incurred.  Through public spending, in all probability.

Maybe it’s easy game to mock the use of metaphors by politicians.  It is their task to create images and narratives – “discourses” – that touch on their listeners’ emotions and inspire (I nearly wrote “trigger”) a shared supportive response.

All economics is political

But economics claims to be neutral and scientific, free from political bias.  This is of course pure fantasy. It is impossible to separate economics from politics.  All economics is political. The two are inextricably intertwined.  Often, the preference or bias is unconscious, but at other times, it is quite deliberate.  The ‘father’ of economics as science, Alfred Marshall, was in many respects fairly progressive for the age, but occasionally displayed his prejudices in open form.  This was surely without awareness that they were deep prejudices, as when he says – in a chapter of his “Principles” on “Industrial Organisation”:

“For, though biology and social science alike show that parasites sometimes benefit in unexpected ways the race on which they thrive; yet in many cases they turn the peculiarities of that race to good account for their own purposes without giving any good return. The fact that there is an economic demand for the services of Jewish and Armenian money-dealers in Eastern Europe and Asia, or for Chinese labour in California, is not by itself a proof, nor even a very strong ground for believing, that such arrangements tend to raise the quality of human life as a whole.” (Marshall, Principles of Economics, 1890, p.304)

Or again,

“The wages of women are for similar reasons rising fast relatively to those of men. And this is a great gain in so far as it tends to develop their faculties; but an injury in so far as it tempts them to neglect their duty of building up a true home, and of investing their efforts in the personal capital of their children’s character and abilities” (Ibid. p.727-8)

(I am struck by the reference to the “personal capital” of children – an early forerunner of Gary Becker and the “human capital” school).

It is less common for modern economists to display their bias so openly, but one of our favourite examples relates to “financial repression”, a term much beloved by  economists and commentators alike to represent any policy that controls or regulates the finance sector, including the alleged use of inflation as a deliberate tactic for reducing public debt as a proportion of GDP.  One of the most egregious users of the term is Carmen Reinhart, who with Kenneth Rogoff claimed to find that if debt as a percentage of GDP rises above 90%, economic activity tends to adversely affected. More specifically, with M.Belen Sbrancia she wrote “The Liquidation of Government Debt” in which they claim:

“A subtle type of debt restructuring takes the form of “financial repression.” Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks. In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s. Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt.”

Professor Alan Taylor of the University of California at Davis responded:

“We must be wary of confusing financial repression (which sounds like a terrible thing) with financial regulation (which sounds a good deal more wholesome).  In the context of current debate on how better to regulate the financial sector after the recent debacle, it is entirely understandable that the authorities have decided that banks and other entities were given far too much leeway to pursue activities that were not only self-destructive, but also destructive of the wider economy…

Whether we call it financial repression, lack of competition, tough regulation, the fact remains that the 1945 to 1975 era was a glorious period of economic growth in the advanced countries, as well as in many emerging economies.  It was a time of rapid economic growth with the allocation and mobilization of large amounts of capital, generalized macroeconomic and financial stability, sustained real wage growth and low unemployment.”

[BIS Working Paper 363 (2011), “The Liquidation of Government Debt “ – Carmen M. Reinhart & M. Belen Sbrancia, Discussion Comments by Ignazio Visco and Alan Taylor]

The term “financial repression” was invented in 1973 by two Stanford University economists, Ronald McKinnon and Edward Shaw, who worked in the field of LDCs (“less developed countries”). McKinnon argued, in the first instance, that it was the rural poor in poor countries who were financially repressed – a reasonable argument.  His remedy, however, was to remove all maximum interest rates, and let banks lend at 15 to 25% interest.  He swiftly moved on to argue that in most LDCs it is the whole monetary system that is ‘repressed’ – and others swiftly applied the metaphor to any limitations of the finance sector.  The term found almost universal – and positive – acceptance among the economists’ profession, infused as it was by the 1980s with hard neoliberal ideology, and appears in learned paper after learned paper.  In a more recent interview with Der Spiegel, Reinhart described financial repression as a “technical term”.

Not long before his death in 2014, McKinnon, a respected conservative economist, explained the origin of the term – it was to make a political point.

“In the 1970s, the term financial repression originated with McKinnon and Shaw when inflation was a problem in a number of less developed countries (LDCs). In the 1960s and 1970s, governments in many LDCs intervened to put ceilings on nominal interest rates and impose high reserve requirements on their banks, along with other techniques to direct the flow of credit in the economy… Wanting to find a pejorative term—akin to political repression — to describe this syndrome, McKinnon and Shaw first used the term financial repression in 1973.”

[Ronald McKinnon & Zhao Liu (2013), “Hot Money Flows, Commodity Price Cycles, and Financial Repression in the US and the People’s Republic of China: The Consequences of Near Zero US Interest Rates “]

So here we have a “pejorative term” invented to make a political point on behalf of neoliberal policies, using the analogy of political repression with all of its mental associations, propagated to stand against any management or regulation of the finance sector, and later transmuted by Carmen Reinhart into a purely “technical term”! 

  It is of course not my purpose to criticize the use of metaphor or other rhetorical techniques in economic discourse – especially since, as we have known at least since Lakoff and Johnson opened our eyes to the metaphors we live by, our whole human world is structured by metaphor.  But what is important is (a) to work to identify and make public the means of conceptual manipulation used by the powerful to maintain  control or denigrate any policy of a progressive character, and (b) ensure that the hidden, or not so hidden, biases or assumptions of economists are made explicit.  After all, as Keynes remarked in the General Theory:

 “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

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1 Comment

  1. The political is financial and the financial is political. So-called progressive policies always have a cost in terms of money, economic loss and further loss of political representation. Who pays, who benefits? Even more to the point, which particular partisan political lobbying interest has the wherewithal to persuade the people in charge to advantage without concomitant recompense some people, nationalities, races, sex or genders, classes or interest groups at the expense of other such groups of people? By what right? At what cost to the political, civil and equal right of the particular group or groups which are paying for other people to be given an advantage?
    In politics, there is always a quid pro quo. Any lobbying which is successful has a price tag attached to it. Any lobbying which is not successful also has a price tag attached to it. Lobby groups and other professionals in the business of persuading governments to give money for nothing to certain interests at taxpayers’ expense, or through the creation of fiat money or loading debt on the state, do not work for free, even if they did, there would be expenses to be paid. It is rare for these lobbying entities to be funded out of private individuals’ after-tax income. Usually it is shareholders and clients/consumers of companies who pay for lobbying efforts without these shareholders and clients/consumers being asked for permission to fund this lobbying. The lobbying industry needs cleaning up, for a start, to be funded by after-tax income voluntarily given so as to level the political playing field. The corporates have all the advantages here.

    Next, to consider what happens when lobbying is successful, we need to look at the political, financial and economic quid pro quo involved. The people in charge, the government nominally but the power brokers behind the government, will not give up any of their power to extend political, financial and economic advantage, even for a single instance or on a temporary basis, for free. We know from the aftermath of the GFC that it was a stitch-up. The people who caused this crisis and made big bucks were let off, the banks were saved by the taxpayers and and others who bore no responsibility whatever for this debacle, a crisis caused by years of irresponsible management on the part of bankers.

    Lobbying for debt forgiveness, for instance, if successful, which is was to a degree as 100 billion was written off, so we have been told, involves a loss of money. It is inconceivable that the people in power will not pass on these costs to others down the chain. That is not how it works. The bankers and financiers are still ahead. They are ahead financially because they are ahead politically. They simply do not waste political capital by taking a financial or economic hit when they can pass it on. The facts have shown this over the years. Unless the people who are made to pay for international high finance shenanigans without being asked are told exactly who pays for what, one can be certain that any largesse shown to people/nation-states who borrow money and waste it, one can be certain these losses are passed on down, not borne by the parties responsible for irresponsible and, frankly, corrupt lending practices.

    It may be divulged, in due course, that non-performing loans that are written off are in fact paid for by an inner banking strategy of QE-like accounting. There is much about banking, I surmise, that the general public who pays for it is not allowed to know. It always puzzled me why people who bought on hire purchase and failed to pay could so easily have their debts wiped out and, after a cooling off period of perhaps 6 months, start buying on hire purchase big time again. The suppliers of furniture, tv and like apparatus would be queuing up on the day these people were let off the leash of financial hardship. Relative hardship, of course. Their rent would be paid, their electricity would be paid, up to a certain limit, they would have just enough to live on. Nowadays, due to austerity, the regime is a bit harder before debt to families and private individuals is wiped, but the businesses supplying feckless spenders still ply their trade.

    Again, one wonders who pays for this. Not the banks’ shareholders, not the people running the banks lending departments or the banking management and directors in charge. Does the government pick up the tab, or is the money lost by the banks simply made good by printing some more. There is some jiggery-pokery foing on here that is not divulged to the public, I’m sure.
    In the case of debt forgiveness for mendicant countries, well, the banking fraternity lending makes money no matter what, at the press of a computer key they print more. The countries which have their debts wholly or partly forgiven have the corruption entrenched even more. This is not like giving money to a drug addict who has a limit as to how much he or she can buy. This is like giving money to people who are stood over by a political mafia. The more they are given, the poorer they be, because they have to pass on the proceeds of their show of poverty to a crowd which grows as it is successful in fleecing the country they control and as for the amount of money such exploiters of political power can use, the sky is the limit. Worse, the more money these so-called elites collect by their nefarious ways, the more political, financial and economic control they can buy, within and without their primary field of operation.
    Of course, all this is well-known and well-understood by lobbyists and economists, even those who lobby on behalf of the poor in our world. It is business, big business. As for alternative economists, again, they cannot be too critical or too incisive in their analyses and conclusions. The powers-that-be have ways to cut down poppies which do not sway in unison, bend with the prevailing wind.
    Altogether, each lobbyist or economic commentator cannot turn the tide of utter corruption which now holds the balance of power in all of the western so-called democracies. It takes collective action on the part of electorates to make a difference. For that to happen, a change of consciousness is needed. This will only happen collectively if people are exposed to sudden shocks, as gradually increasing hardship does not cut the mustard-much like the frogs in water slowly brought to the boil. Somewhere, something will happen to set the ball rolling. The world is due for a revolution. It only takes a butterfly in the Amazone basin to cause a global financial and exonomic meltdown.

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