With Economy of Words, Douglas Holmes presents the conclusions of a long-lasting empirical investigation concerning the revolution by which central bankers have recently moved to a refined linguistic modeling of economic reality in their daily practice. Based on a survey which began at the Federal Reserve Bank of New York, where he lived in 2001, leading him to Frankfurt (at the Bundesbank and the European Central Bank), going through London (at the Bank of England), Sweden (Sveriges Riksbank) and New Zealand (Federal Reserve of New Zealand (frnz)), this book analyses the foundations and modalities of “inflation targeting” practices, and what they mean in contemporary central banks.
In the first chapter the author presents the main features of a new monetary regime, which is defined by the centrality of communicative imperatives. In this regime, of which central bankers are the architects, inflation targeting has come to play a prominent role, albeit one that was put into some question with the financial crisis of 2007. This book is clearly centered on the pre-crisis changes and the way they were discussed and modified during the crisis.
The second chapter develops the theoretical anchorage of the analysis: it is clearly based on recent socio-anthropological developments by Muniesa, Callon or McKenzie about the performativity of economic discourse: it is of particular relevance in the case of central banks, which aim at shaping economic reality by a discursive action on the sentiments and expectations of a larger public.
In the third chapter, the idea that markets are a function of language is situated in a long-time reflection on economic dynamics by economists like Keynes, where uncertainty and expectations are seen as central. This line of thought leads to the idea that linguistically modeling the economy (especially through anecdotes, wordings, qualifications, etc.) is a primary component of economic action, especially the action of central bankers who constantly deal with expectations. What is particularly interesting here is the assumption that contemporary central bankers are fully aware of this framework, and that their action is highly reflexive especially as regards the linguistic embeddedness of economic reality.
In a fourth chapter, the author moves to a more empirical analysis of debates at the Federal Open Market Committee, in December 2000, showing the importance of anecdotal evidence of change in the rhythm of growth before any decisions are made. It shows the in-depth reflection of committee members on their own communication, which is now part of their activity. Analyses of adjectives are of particular interest.
Chapter five is a presentation of the “Kultur” of stability at the Deutsche Bundesbank (db), especially since it began to set monetary targets in 1974 and entered a regime of “transparency” with respect to its monetary objectives and results––a shift that was also a way to deal with influential monetarist analyses of the efficiency of monetary policy. The author sees this move as the basis of the German public’s strong confidence in the institution. This culture has been incorporated in the “ecb habitus” and appears close to the experiments undergone in New Zealand, in the sense of a large linguistic and cultural reshaping of monetary theory and action, in relation to a larger public.
The sixth chapter is precisely devoted to the radical experiments in New Zealand. In the new monetary regime, the reference to the public is central. As in Germany, this experiment modifies the role of the central banker, now much more independent and connected to the public space than ever before.
In a seventh chapter, the author analyses an even more radical experiment, namely the creation of a new public currency in Europe. He insists on the influence of the db and the frnz, but also on the specific tasks of promoting forecasting tools and communicative practices in these institutions.
Chapter 8, beginning with a description of Philip’s machine modelling of the British economy in the 1970s, is an analysis of debates and “storytelling” at the rfnz in 2007 and 2008, and the come-back of inflationary pressures. It also discusses the legacy of Philips.
Chapter 9 takes the case of the Sweriges Riksbank as an illustration of communicative strategies in the situation of a potential “liquidity trap,” that is of monetary policy losing its efficiency when facing negative price and income expectations. In this case, the issue becomes how to support prices in order to avoid deflation, but the communicative conditions remain structurally unchanged, or even more critical.
Chapter 10 continues with the in-depth analysis of discursive management at the Riksbank, analyzing the particular context of April 2009, when intense interpretative stakes occurred, and when persuasive conversation from the members of the board became of particular relevance. The author follows the actors in their attempt to manage the bank’s credibility.
Chapter 11 describes the network of “intelligence” behind the production of discourse and decisions in the case of the committee of the Bank of England (“Monetary Policy Committee” or mpc), stressing its efficiency, as demonstrated for example by its ability to rapidly inform the bank of the monetary consequences of China’s emergence in the 1990s. Contacts between mpc members and actors through this network are part of the new regime.
Chapter 12 begins with the account of a conference by an mpc member, Mr. Miles, in 2011, who described the post-crisis situation as particularly unusual and frightening for central bankers. It is followed by an analysis of a pre-mpc meeting and the discussions it raised around communicative issues, where the author heavily insists on the structuring role of interactions with business actors in the genesis of discourse by members of the Committee.
Chapter 13 comes back to Mario Draghi and the ecb, but in a very critical situation in July 2012, allowing the author to analyse the particular form of representational labor Draghi puts into motion at this occasion. That paves the way for a more systematic promotion of “public currencies” (implying transparency and discussions around money), as the author labels them.
Chapter 14 provides a brief conclusion that summarizes the book’s main arguments of the book around the centrality of “us, the public”, as receptacles of central bankers’ new communicative operations and at the heart of a new social order, again coined as “public currency.”
The book offers a large variety of examples of interactional situations showing, in diverse occasions and around diverse stakes, the centrality of communicative practices in the daily functioning of central banks. At the same time, it provides a stimulating narrative account of changes in monetary policy since the 1970s, which have led to the situation of “public currency,” through a the rising role of communication and reflexivity on the way “words” command markets.
The precise object of the book, “inflation targeting,” consequently appears as a pretext for a rather free “walk” in various communicative situations where central banks can be seen as places of open discussion and interpretative rivalry. Going from the changes inside the Bundesbank in 1974 to recent position-takings by Mario Draghi at the ecb, the book covers a large period of time and goes through very different institutional and monetary contexts, which are brought together as various moments of the general story of a unified “communicative revolution.”
The general thesis of the book, showing the growing centrality of language and communication in central banking and monetary regimes, is hardly debatable. However, some parallel and implicit dimensions of the analysis remain questionable. Is this communicative and linguistic shift not very general both in public policy and in the world of finance? In this case, there is a danger that the specificity of the central banks is overestimated or would at least need to be explained, including from a linguistic point of view (which is absent here). It is obvious when the author describes the complex system of “intelligence” underlying the production of committee members’ discourses: is not this interactional background a general feature of our economic (in particular financial) system? Grounding his analysis on economic authors in the Keynesian tradition (more than on economic sociologists), the author highlights the specificity of currency management and the particular nature of money. One could argue that communication during wars or political crises shares very similar features. There may be a certain risk in overly isolating the central banks from broader social dynamics, such as the rise of communication in the economic field, especially finance, and in public policy, especially economic policy in a broader sense.
Finally, the author seems to be endorsing the central bankers’ views to a very large extent. Central bankers, with whom the author has had regular discussions through interviews, and whom he has observed and followed in more formal situations, appear both efficient and reflexive most of the time, as demonstrated in could show an analysis of the adjectives he uses to describe them, their actions and their thoughts. “Inflation targeting”, and moreover the communicative shift it expresses, is described as a way of building a new economic order, where the public is eventually held for mature and rational, and where the central bankers essentially debate on the way to improve the collective management of currency. In the epistemological tension between “distantiation” (or “objectivation”), and “immersion” or “acculturation” in anthropology, the author has clearly chosen the second option. He gives us what one could coin as a “view from inside,” very close to the representations expressed by the actors themselves, or by close journalists or witnesses, and very interesting as such. A more critical analysis would show the numerous contradictions between monetary communication and policy one side, democracy and justice on the other. But that would involve telling a different story.
