A new conversation on the sociology of the sovereign debt crisis
July 12, 2011
A panel at the recent SASE academic conference in Madrid planted the seeds of a new topic for sociological study. The current sovereign debt crisis, I believe, poses key questions at the intersection of markets and politics that only sociologists are prepared to address. The discussion focused on Spain – the host country for the conference – and tackled three different angles to the phenomenon:
1. Ideology: Jose Luis Alvarez first addressed the macro political background. How did Spain’s socialists, one of the extreme leftist governments in Europe, adopt the reforms that investors demanded? The answer, according to Alvarez, lies in ideology. The crisis left the government ideologically disoriented (leading to flawed Keynesian policies), and then ideologically withdrawn (leading to the reform). I did not hear the entire talk because of a computer problem (as his projector broke and I was in charge to fix it), but I am attaching his PowerPoint presentation The Sovereignty of the Economic Realm versus polities in Spain_A.Alvarez.
2. Narratives: David Martin analyzed a related political issue. How are people on the street making sense of the crisis? Everyone, it turns out, needs a theory for why the crisis happened — regardless of one’s own command of macroeconomics or finance. These accounts are fundamental, because they address a related question that investors are now asking: how far will people tolerate so-called economic and financial imperatives? Martin hit the bars of Madrid and recorded a remarkable set of accounts and explanations: Household Narratives is his presentation.
3. Framing: My own presentation examined a critical problem for sovereign countries in our financialized world economy: how to persuade investors? Building on sociological theories of financial valuation and on interviews with key decision-makers, my presentation examined a set of key policy reversals by the Spanish government — and especially a critical change in the communication strategy pursued by it. It concluded by outlining the principles for an effective financial communication in business as well as politics. See: 110621 Daniel Beunza – persuading the markets.
4. Interdependencies: In a lucid discussion, Bruce Carruthers raised a set of issues that should ground any sociological conversation on sovereign debt. The role of reputation — since an investor cannot make a sovereign country pay back debt. Fixing a national debt problem entails redistribution, but how far this can be done is unclear. Also, the role of the rating agencies, which in some way administer reputation but lost their own in the credit crisis. And finally, the financial interdependencies between the various European countries: French and German banks owning most of Greek and other European debt. See Carruthers – European debt network 2010 attached.