Wesley Widmaier has produced an outstanding and original book in Economic Ideas in Political Time, drawing together and extending upon several branches of political economy and social psychology. His signature contribution is to combine constructivist and institutionalist approaches and augment them with Daniel Kahneman’s highly influential research on thinking ‘fast’ and ‘slow’ to produce a systematic explanation for the rise and fall of economic orders.
Minsky famously claimed that stability breeds instability. Widmaier agrees, but whereas Minsky focused on the emergence of ‘bubbles’, Widmaier instead provides a social psychological and political explanation. In moments of economic crisis, leaders turn to affective ‘fast thinking’, making principled arguments in favour of adopting new economic ideas, thus constructing new economic orders. Following the initial moment of order construction, policy elites, academics and technocrats, exercising ‘slow thinking’, depoliticise these ideas, converting them into economic models. Although these models appear to reduce uncertainty and provide institutional and intellectual stability, they also breed complacency and serve to obscure the causes of impending new crises. Policy agents place great faith in their preferred economic models such that they repress incongruent information. For a time, technocratic tinkering appears to work, but when a genuine crisis erupts prevailing models and their associated policy levers fail, because they do not suit the new reality. This opens up space for principled efforts to construct new economic orders, restarting the cycle.
In a brief introductory chapter, Widmaier achieves considerable theory-building, upturning conventional constructivism and the new institutionalism in political economy. Notwithstanding recent innovative works in both fields, on which he builds, constructivism and the new institutionalism are typically strongest when explaining stable ideational or institutional structures producing self-sustaining interests in agents. These approaches implicitly view only external shocks as capable of undermining stable structures. Widmaier, however, sees ideas and institutions as potentially self-reinforcing their own collapse. His ‘social psychological institutionalism’ emphasises that principled, ‘fast thinking’ ideas shape agents’ interests, thus explaining institutional transformations and hence economic orders. On the other hand, agents tend to reinforce or repress ideas in ways that over time may serve to undermine institutions and the collapse of economic orders.
Widmaier’s highly agent-centric account, although opening up very fruitful explorations of ideational and institutional change, is also perhaps the book’s main weakness. Primarily, the analysis’ social ontology is too narrow, focusing on the ideas and actions of a small band of leaders and policy elites. Widmaier mentions other groups in the case study chapters, but his theoretical framework does not systematically account for their role in the rise and fall of economic orders. Broadening the social ontology to include, for example, organised social forces and their interrelations, would support better explanations for the political sources and effects of both ‘fast’ and ‘slow’ thinking. At stake for me is not just explaining how society reacts to leaders’ principled agency and technocrats’ tinkering. It is also explaining: why society came to be organised in particular ways; what the nature of state-society relations is; why particular leaders and technocrats came to occupy their positions in the first place; and why their ideas, and not others’, came to dominate.
Adopting a wider social ontology does not detract from Widmaier’s core insight – that people do not always act in ways that promote the long-term sustainability of their preferred institutions and orders. However, it does give greater sense of what bounds the possible in political action, specifically in the context of constructing and maintaining economic orders.
It is easier to see why a wider social ontology is important if we try to use the book’s framework to examine the transformation of economic orders outside the US. In the US case – the book’s only empirical focus – focusing on a small number of agents and taking for granted the conversion of ideas into technocrat-led models appears possible without inflicting grievous bodily harm on empirical fact. In many other cases, however, it is much harder to identify a pattern of order construction, conversion and crisis. This is because many societies have experienced far greater social conflict, manifesting in deeper and harder to resolve struggles over economic ideas, policies and institutions, and recurring economic and political crises. Consequently, the degree of autonomy experts enjoy differs greatly across countries and issue-areas. One would struggle to identify the pattern the book describes in Greece or Argentina, where political and economic crises have recurred at an alarming regularity.
To give another example, in China senior leaders and leading technocrats have long argued that securing China’s economic growth requires shifting the economy away from reliance on investment towards increasing household consumption. They have also made several public statements to this effect over the past decade or so. Yet, investment’s share of GDP in China has actually remained consistently high at around 45 percent. Meanwhile, private consumption’s share of GDP has only climbed modestly in the past five years and remains below 40 percent. Recent actions, including heavy spending on infrastructure within China and transnationally in the Belt and Road Initiative, indicate more of the same. In fact, the cheap credit that funds these investments is partly available through the taxing of household savings, which are funnelled into state banks where they receive very low rates of return, thus effectively subsidising corporate expansion. We cannot explain this dissonance between public statements and actions via Widmaier’s notion of intellectual conversion. It only makes sense if we understand the important political role of state capital in sustaining Communist Party rule at various levels of government – national, provincial and local – and the party leadership’s determination to support it, whatever the economists say and whatever the economic costs.
Even in the US, we are now potentially witnessing the emergence of a genuine challenge, not just to dominant economic ideas, but to the very role of experts and technocrats in economic governance. We can only explain Trump’s political success, where others with similar ideas have previously failed, against the wider social backdrop of wide-ranging and sustained economic decline in large parts of the US, along with the absence of organised alternatives, especially on the left.
Related to this is the book’s implicit assumption that fast thinking is necessarily associated with the construction of new orders. Is it not equally possible that affective action will aim to maintain existing orders? Policymakers may act swiftly, with their ‘gut instincts’, to protect the social hierarchies they see as crucial. For example, is the unprecedented bailout of financial institutions following the global financial crisis not an example of fast thinking? Why did post-crisis fast thinking not lead to the bailout of homeowners instead?
Finally, drawing a distinction between ‘principled’ and ‘pragmatic’ political action is difficult in practice, since for so-called principled action to succeed it needs to be sufficiently politically pragmatic to sway enough important constituencies. This, again, cannot be understood in isolation from wider power relations in state and society. For example, that post-GFC policy responses focused on protecting financial capital is at least partly due to the weakness of countervailing organised social forces, itself a legacy of the neoliberal period.
These critical comments notwithstanding, I congratulate Wesley Widmaier on producing such an innovative, thought-provoking book and I look forward to reading and discussing his future works.