La escucha activa

As recently noted by a group of Dutch central bank economists in an ECB working paper, “the academic literature has mostly equated the outside world with financial market participants” (van der Cruijsen et al. 2010: 5). This is problematic because this ‘outside world’ is populated by monetary outsiders who lack even a basic understand- ing of the monetary system. As noted by Otmar Issing, “you have never seen anyone in the tramway reading the monthly bulletin of the ECB” (CB Interview Issing). Yet one does not have to rely on anecdotal evidence to support this observation.137_{A grow-}

136._{The structure of this chapter is outlined at the end of section 5.1.}

137._{Anecdotal evidence from the author’s personal experience strongly supports the monetary illiter-} acy hypothesis. The difference between Deutsche Bank and the Bundesbank, for instance, is lost on a significant number of even highly educated people.

ing literature on ‘financial literacy’ documents generally low levels of such literacy among the population (Braunstein/Welch 2002; Willis 2011; Lusardi/Mitchell 2014). Relating more specifically to monetaryliteracy, there is ample empirical evidence on the inaccuracy not only of people’s inflation expectations (Blanchflower/MacCoille 2009; de Bruin et al. 2010), but even of theirperceptionsof current rates of inflation, especially in the euro area (Ranyard et al. 2005, 2007; Del Giovane et al. 2008; Duffy/ Lunn 2009; Lamla/Lein 2014). Yet in spite of this empirical support for the ‘monetary illiteracy hypothesis’, virtually nothing is known about its implications for monetary governance.138 _{A group of ECB economists are putting it mildly when they call the} communication between monetary outsiders and the central bank “a very under-re- searched field” (Ehrmann et al. 2013: 798).139

It is on the basis of this ‘monetary illiteracy hypothesis’ that the present chapter aims to make a positive contribution to the understanding of central bank agency in relation to the governability challenge of creating and sustaining monetary trust among the public at large. Far from being economically irrelevant, outsiders’ percep- tions of money and central banking pose challenges in terms of monetary governabili- ty that are fundamentally different from the governability challenges posed by insid- ers.140 _{Unfortunately, the study of those challenges requires a serious engagement not} only with monetary trust, but also with the institution of money itself – an area where

138._{Monetary economists have attempted to formalise and model less-than-perfect monetary under-} standing and its policy implications as ‘rational inattention’. See Sims (2010) for an overview.

139._{Although one can only speculate about the reasons for the lack of research one the interaction} between central banks and the uninformed majority, the explanation may be as simple and profane as the “data limitations” cited by Ehrmann et al. (2013: 798).

140._{By studying the ‘sources of monetary trust’ through the prism of monetary outsiders, the analyt-} ical orientation of this chapter resembles that in Seabrooke’s(2006)study of the “social sources of financial power”.

both political science and economics fall short. Generally speaking, the existing litera- ture reduces the question of monetary trust to a question of trust in the ECB as a bu- reaucratic organisation, while ignoring the social institution of money. Political sci- entists have mostly treated the question of trust in or support for the ECB as a question of identity. From this perspective, all that is required for the “effective func- tioning of the euro” is “a sufficient level of Europeanness” (Kaelberer 2004: 162, cf. Risse et al. 1999; Risse 2003).141_{Economists’ take on the question of monetary trust,} on the other hand, is limited by their methodological dependence on quantitative data. Almost all available studies use statistical analysis to make sense of the results from a single Eurobarometer question that asks respondents if they tend to trust or distrust the ECB (Wälti 2012; Bursian/Faia 2013; Ehrmann et al. 2013; Roth et al. 2014). To put it briefly, neither of these literatures has much to say on the role of the central bank in the (re-)production of money as a social institution. While the economic analysis is prevented by its “problem-solving” approach – as opposed to a “critical” one (Cox 1981: 128-129) – from looking beyond the various layers of ideology sur- rounding this reproduction, the political science analysis is hampered primarily by its disregard for the social and economic complexities of money.

In order to be able to ask interesting – that is, ideology-piercing – questions about central bank agency in relation to monetary outsiders, this chapter will dedicate con- siderable space and effort to coming to grips with the ‘nature’ of money. It does so by drawing on what is best called the ‘social studies of money’ literature. In fact, this lit- erature is better referred to as the ‘new social studies of money’, so as to set it apart

141._{The inverse question of the potential consequences of the common European currency for a com-} mon European identity is raised in Helleiner (2002) and Hymans (2004).

from a tradition in the sociology of money that, in line with the Parsonian division of labour with economics, has mostly contented itself with the study of the “social meanings of money” (Zelizer 1994), rather than moving on to the more ambitious goal of formulating a positive theory of money as a socioeconomic institution (Ing- ham 2004: 9-10; Polillo 2013: 2).142_{The very nature of money as both a social institu-} tion and a financial claim makes the formulation of such a theory an inherently inter- disciplinary undertaking – hence the pluralistic label ‘social studies of money’.143 Inspired, in one way or another, by Georg Simmel’s (2011)Philosophy of Money and by Mitchell Innes’ (1913, 1914) credit theory of money, this interdisciplinary litera- ture spans sociology (Carruthers/Babb 1996; Ingham 2004; Polillo 2013), Post-Key- nesian economics (Moore 1988; Bell 2001), history (Valenze 2006), political econo- my (Hall 2008; Knafo 2013), literary studies (Poovey 2008), and anthropology (Graeber 2011).

To make the case that an understanding of the institution of money is pivotal to the understanding of central bank agency, section 5.2 briefly reviews the (institutional) economics of money and central banking, while also identifying the shortcomings of a purely economic approach. Answering to those shortcomings, sections 5.3 - 5.5 devel- op a performative theory of money and monetary trust. Building on Ingham’s (2004) conceptualisation of money as the performative effect of a process of “ideological nat- uralisation”, I argue that this process is driven by an ‘ideological apparatus’ that in-

142._{Whether or not they follow Parson’s (1963) conceptualisation of money as the “symbolically} generalized medium of communication”, most sociologists – including Parson-critics such as Haber- mas and Luhmann – have shown less interest in money itself than in its potential to convey general ideas about the nature of social systems and the communication within and between those systems (Ganßmann 1988).

cludes not only the central bank, but also economic theories about money and central banking. Section 5.6 proceeds to applying this framework to the empirical analysis of specific monetary systems. In order to show that central banks’ performances in the enactment of monetary trust may vary depending on the structural situation of the monetary system, the analysis of the performance of the Duisenberg and Trichet ECB during the Great Moderation is flanked by brief discussions of the Volcker Fed and of the Bank of England under Mark Carney. These cases serve to bring into sharp relief how the pre-crisis performance of the ECB actively nurtured a ‘fiction of exogenous money’. According to this fiction, money created by the banking system (M1 or high- er) is determined by central bank money (M0), over which the central bank is said to exert discretionary control – whereas in reality, both M3 and M0 are endogenous to the economic process. However, although actively nurtured by central banks during times of low and stable inflation, the fiction of exogenous money has recently become problematic, as unconventional monetary policies have resulted in stark increases in M0, sparking inflationary fears among monetary outsiders.