Amalgams not Paradigms: Economic Ideas and Macroeconomic Policymaking Discourse in the Great Recession

The macroeconomic policymaking of advanced economies has evolved following the Great Recession in a composite manner: on the one hand, monetary policies, and to some degree fiscal policies, did not follow the pre-crisis logic of market-affirming intervention; on the other hand, depoliticized governance, prominently manifested in limiting the policymaking discretion of elected politicians and delegating policymaking authority to autonomous bodies like independent central banks, has further consolidated. We build on the discursive institutionalism and constructivist institutionalism approaches to explain this dynamic. We develop and utilize an analytical framework that presumes that policymaking discourses are shaped through the lens of complex ideational amalgams rather than fully coherent ideational paradigms. Under such an assumption, crises may destabilize the certain belief in some ideas within the prevailing policymaking discourse while leaving others intact. Such partial uncertainty is likely to produce partial but substantial ideational changes, which would be influenced by the ideas that survived the crisis. We argue that during the Great Recession it was the notion of "policy credibility" – according to which macroeconomic policy must preserve its long-term reliability – that survived the crisis and remained prominent and stable in the macroeconomic policymaking discourse. We explain why this notion supported both the change of macroeconomic policies and the stability of prevailing macroeconomic governance. We demonstrate this argument by comparing macroeconomic policymaking, and the political discourses in which it was embedded, in the UK and Israel in 2008–2010. These are "most different" cases in many relevant aspects – structure of the financial system, economic impact of the financial meltdown, position in the world economy and other basic political and economic characteristics. In spite of these profound differences, the macroeconomic policymaking discourse in the UK and Israel evolved in a very similar manner which matches our theoretical argument.