Importance of Communication in Understanding Economic Crisis
On February 24th, 2009, President Obama gave an address to the nation about its ailing economy. While acknowledging the grim reality of America's current financial situation, Obama's speech was surprisingly optimistic. Stating that “we will rebuild, we will recover, and the United States of America will emerge stronger than before,” Obama's language stood in stark contrast to the catastrophic scenarios he discussed only weeks prior when advocating for his American Recovery and Reinvestment Act. Apparently, Obama had developed an appreciation for a fact that Allen Greenspan had been espousing for years and that Bill Clinton had chided him about only weeks earlier, namely the way we talk about the economy has a profound impact on how the economy actually performs.
During the U.S. housing bubble of 2000 to 2005, commentary in the media played a large role in igniting the irrational exuberance characterizing the boom. Chief Economist of the National Association of Realtors, David Lereah, prophesized “home prices double in value every 10 years.” And, in 2004, George Bush posited that home ownership “brings security and dignity and independence.” Public figures had positively glowing things to say about these unsustainable rates of home appreciation. Such discourses fueled a frenzy that brought U.S. home prices to their highest levels in history.
Even as the housing bubble began to lose momentum in 2005, and it became increasingly clear that housing appreciation could not continue at its current rate, most policy makers and pundits remained optimistic in their forecasts. While economists such as Paul Krugman would occasionally warn that “we're starting to hear a hissing sound, as the air begins to leak out of the bubble,” most economists, especially those within the Bush Administration, used their public communication to suggest that the economy would continue to grow. For example, in a 2005 speech to Congress' Joint Economic Committee, soon-to-be Federal Reserve Chairman Ben Bernanke proclaimed that "a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year." Similarly, Goldman Sachs' CEO Henry Paulson, later to become Treasury Secretary, stated that "the economic outlook continues to be favorable."
The rhetorical optimism continued throughout 2006 and 2007, leading Bush to begin his 2007 State of the Union address by declaring “a future of hope and opportunity begins with a growing economy, and that is what we have.” As the year progressed, however, the economy was continuously shaken by one gloomy economic statistic after another (from rising food and gas prices to large declines in home values). These developments led even traditionally buoyant soothsayers such as Ben Stein to make comments like, “there will obviously be an economic slowdown, and possibly even a shallow recession.”
Stein, whose economic values embody the tenets of neoliberalism, reflected a change in how even the most zealous free market proponents began to discuss the economy. No longer was it possible to talk about the economy in strictly positive terms; to convey a sense of congruence with the actual economy, such pundits had to acknowledge the undeniably negative market conditions. As a result, we begin to see the re-introduction of the phrase “recession” into the American imaginary. Having resisted this term as long as possible, hoping positive talk about the economy would create a self-fulfilling prophecy, the idea of a recession had to be unleashed into the public. What appeared to be the tactic for maintaining a sense of optimism even at this point, however, was to use the word recession in a hypothetical fashion. Since the definition of recession was contested by economists, it was possible to toss around the idea of a recession without declaring it a fact. Hence we saw numerous articles with titles such as “Unexpected Loss of Jobs Raises Risk of Recession,” and “Recession? What Recession?”
While describing the economy's performance in terms of a hypothetical recession worked for several months going into 2008, by the latter part of the year a series of events had made it increasingly difficult to deny the reality that America was indeed in a recession. Whether it was the collapse of investment banking giant Bear Stearns, the April 2008 statistics that jobs had been cut consecutively for the past three months, or the September 2008 collapse of banking giants AIG and Lehman Brothers, it was no longer possible to deny America's growing economic instability. Not surprisingly, then, only days later George Bush gave a special address on the American economy, finally declaring “our country could experience a long and painful recession.” While Bush tried to maintain a sense of optimism, in this speech he acknowledged the severity of the crisis for the first time.
As the economy continues to worsen, the most recent persuasive tactic has been to toss around the phrase “depression” hypothetically. This is why, instead of continuing to see articles proposing the idea of a recession, we now see articles with headlines such as “Downturn sinking into depression?” Furthermore, even when we don't hear pundits using the termdepression outright, we have become used to hearing the economy described in decidedly sobering ways. For example, in his February 10, 2009 press release, current Treasury Secretary Timothy Geithner labeled America's current financial situation “the worst economic crisis in generations.”
When looking at the way communication has been used to discuss the economy over the past decade, we can note a number of interesting phenomena. This analysis seems to reveal a tension between the economy's actual performance and the communication used to describe it. While there remains an impulse to describe the economy in the most flattering terms, economic performance ultimately limits the language public officials and media pundits use to describe the situation.
Is there a more productive way to talk about the economy? For example, our public communication about the economy has not thwarted the economic crisis. Do we need to encourage a more forthright analysis of the economy by pundits and policy makers? Would that be preferable? One thing is certain: In an economy whose GDP is increasingly a product of consumer confidence, public communication plays a powerful role in the economy's actual performance.