a blog on the social studies of finance
This is a recording of a talk that Daniel Beunza gave at the Goodenough College earlier this week and here are the slides from the talk.
Dear prof Beunza. Thank you for posting the podcast of your recent talk on the blog.
After listening to your excellent talk, I was hoping to be able to ask you a question about it:
I agree with you that government communication with investors is very different from communication with voters. My issue with your talk is however that I would argue that it is relatively more seldom that governments have the benefit of being able to talk directly or solely to ‘the market’ (as in your case when representatives of the Spanish government talk with the FT and arrange a conference in the City to advertize their road maps). In my view, general government statements about the economy, and political reform of such, stemming from a prime minister, minister of finance or head of central bank, will a lot of the time will be a communication reaching both voters and investors/financial markets, and at the same time. I would furthermore argue that this represents a challenge for governments in their communication, given the difference you identify. What a government would want to say to investors in order for them to have the confidence to keep lending to the state at low rates, is not necessarily the same thing it would want to say to its electorate in order to stay in office.
My question to you is then how you perceive governments as dealing with this dilemma in their general communication (whether for Spain or if you have some more general observations)? Do governments now choose to speak to financial markets at the risk of angering their voters? Are they choosing to speak to voters ‘in public’ and then going through other channels to calm the investors? Are they trying to speak to both at the same time, and if so does this seem to be working or are they failing to communicate to both recipients?* Is the Cameron-government perhaps an example of a successful communication to both, as it appears (so far!) to have gotten voters on board with the inevitability of the reform program that investors/markets require?
Ingrid — great question. That communication often reaches multiple audiences is a problem I had not so far explored. But it is absolutely true that it does. Indeed, I was struck to read a comment by the current head of the European Banking Authority (our European-SEC-in-the-making) on the same issue.
Commenting on the perceived failure of last year’s stress tests, Andrea Enria said explained that “Last year the exercise was not done to talk to markets; it was done to talk to supervisors. Now we know that this exercise has to talk to markets. It has to convey clear messages.”
How to combine audiences? It is of course easier if your voters think like bond holders — as in the case of British Tories. But in general the point is that the “message spillover” effect into other audiences may force the politicians to be more transparent and less ambiguous… even when they are addressing voters directly.
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