SPEAKER 1: It is a great pleasure and distinct honor to formally welcome and introduce Professor Annelise Riles to the School of Criticism and Theory for this afternoon's public lecture. Annelise Riles holds the Jack G. Clarke '52 chair in Far Eastern Legal Studies. She is professor of anthropology and the director of the Clarke Program in East Asian Law and Culture here at Cornell University. Professor Riles completed her studies with distinction-- or, as we say, cum laude, at Princeton, the London School of Economics, Harvard Law School, and the University of Cambridge, where she defended a PhD tree in social anthropology in 1996. She subsequently taught at Northwestern University from 1997 until 2002 before joining the Cornell faculty with, as indicated, joint positions in the Department of Anthropology and the School of Law.
In addition to this distinguished career path, Professor vales Riles numerous prestigious visiting professorships, notably at the London School of Economics Law School, the University of Tokyo Institute of Social Science in the faculty of law, the Department of Anthropology at Keio University in Japan, Manchester University, the University of Lancaster, Yale Law School, in addition to being invited as a research affiliate at the Institute for Monetary and Economic Studies at the Bank of Japan and at the American Bar Association. She was the recipient of research grants from the American Council of Learned Societies, the Social Science Research Council, the Japan Foundation, and the National Endowment for the Humanities.
As I have typically done in this context, I would like to highlight two of her books that I was fortunate to be able to read these last few months, and each of which have greatly impressed me, not only because of their mastery of scholarly detail, but also because of their capacity for conceptual innovation and their overall import. And they're also just truly beautifully written. First, I would like to mention the book The Network: Inside Out, published by the University of Michigan press in 2001, and the recipient of the Certificate of Merit of the American Society of International Law in that same year. Since the sociologist Manuel Castells launched his trilogy about the so-called information age and network society, much attention has been paid to the new forms of so-called late modern sociality. In
Her book, which goes back to research first done for her dissertation, Professor Riles maps out an original field of study-- namely that of the ethnography of legality-- that pays minute attention to the detailed aspects and, indeed, aesthetics of a whole set of what she calls artifacts of institutional life-- instrument and tools that have become virtually ubiquitous in the present day and age. She mentions documents, funding proposals, newsletters or organizational charts, all of which make up the contemporary archive and apparatus of late or global capitalism, and the international frameworks within which or through which it operates.
Professor Riles' book thus partakes in a significant shift in social studies, more in particular within anthropology, as it rethinks its premises and methods, confronted with what she calls new circumstances of fieldwork, and in so doing, develops new novel objects of study here, in this particular book, by investigating international human rights networks and the operation of the United Nations Conference system. What we are witnessing today, Professor Riles argues, are unprecedented analytical forms through which knowledge is originated, shaped, and reified. And the book has been praised, rightly so, I think, as a classic in the cultural study of law.
The tour de force of Professor Riles' work, in her own words, I think, is here to make, quote, "the ending points of legal knowledge-- the puzzles, frustrations, facts and commitments, and the theory and practice of law entailed, the beginning points for anthropological reflection, and vice versa. This means to jettison the fixation on so-called interdisciplinary research, presumably always navigating between a postulated gulf between legal and anthropological knowledge, and to move decisively beyond the explicit topics of law and of culture to other subjects, which will have residence for lawyers and anthropologists alike," albeit, as she says, in somewhat different ways.
Taking as her scope not a society nor even a community, but a world of bureaucratic practice in international non-governmental organizations or NGOs and of Pacific governments, notably in this study, that of Fiji, preparing the Fourth World Conference on Women in Beijing in 1995, Professor Riles studies the fragmentary residencies construed over electronic mail networks or satellite connections between some of the world's old and new capitals. Indeed, she understands the flurry of activities leading up to the conference as, quote, "an effect of a certain aesthetic of information, of which the world of NGOs, nation-states, international institutions, and networks is only one instantiation." In so doing, Professor Riles offers an experiment, in the graphic observation, description, and critical reflection on analytical phenomena for which we lack tools of description, and yet that are often all too familiar. "Such phenomenons," she continues, quote, "direct our attention to a problem of anthropological analysis that does not inhere our encounter with knowledge practices outside our own, but rather is endemic to the inside of modern institutional and academic analysis." End of quote.
Second, I would like to mention briefly the book entitled Collateral Knowledge: Legal Reasoning in the Global Financial Markets, published by the University of Chicago Press in 2011. In this book, Professor Riles makes the provocative claim that existing legal and technical practices, in her words, quote, "what remains standing in financial governance when all else collapses," end of quote, may offer far more guidance in rebuilding things after economic crises than the all-too-simple and often uninformed appeals to either state regulation or market deregulation as an abstract general rule of economic policy and public finance. In strikingly original ways, Professor Riles here expands to precisely circumscribed legal term of the collateral into an almost generic category, insisting that many of those involved in the workings of global markets, interestingly, tend to operate with a, quote, "two-mindedness," end of quote, that straddles individual work with its singular localized interventions with significant implications that affect the wider world.
And yet, technicalities of law, she suggests, up until quite recently, have formed, quote, "the black hole of legal theory," end of quote. Quote, "it's self-consciously lowbrow and mundane everydayness out of which a strange but decisive pool on the world system as a whole emerges in unexpected cumulative, now incremental, then again exponential steps and leaps of growth and progress." Importantly, such practices regulate and mitigate conflicts and contradictions, quote, "within and without the state," end of quote. In that sense, she argues, they are neither public nor private, and call for new categories of thought and of practice as a, quote, "world of norms," end of quote.
In other words, and I quote again, "we can see governance as mediated through the technical legal knowledge that is both literally and figuratively collateral to the market," end of quote. More specifically, she says, there is a way of doing legal knowledge that offers insights and tools that so far have remained largely uncharted, and that should allow us to differentiate between two different modalities: namely, that of technocracy on the one hand and that of genuine techniques on the other. Collateral knowledge, thus defined, comprises all those elements of expertise that betray skill, art, aesthetics, and bricolage, to cite Claude Levi-Strauss' term. Indeed, the satisfaction, as she puts it, "of rehearsing and perhaps innovating upon or adding to a set of moves and postures, one has observed, apprenticed, debated, with other initiates," end of quote, global private lawyers and other agents in this field, then, are everything but naive formalists. They are, rather, sophisticated epistemologists who know that interpretive contexts and language are not constraints upon legal reasoning and effective policy per se, or more precisely still, who can take two positions at once: appreciating the craft of legal form, which has a certain degree of agency of its own, and the procedural aspects that remain an integral part of just governance, but perhaps also just that.
Professor Riles' book also demonstrates something that should make us at once humble, cautious, and slightly more hopeful about the work we are doing as scholars. Namely, the perhaps surprising fact that academic concepts and arguments have indisputable practical, concrete effects in the real world, as they are often adopted and invoked by agents and actors in the financial global markets to either justify their past transactions or to prepare new ones, future ones. This, she explains, puts even greater responsibilities and challenges on the shoulders of theoreticians, not least those among us who are interested in understanding and conceptualizing the down-to-earth quotidian practices of social, economic, and financial parties in existing and emerging markets around the world.
Two other edited volumes perhaps briefly deserve mentioning here as well. First, Rethinking the Masters of Comparative Law, published by Hart Publishing in 2001, and Documents, with the subtitle, Artifacts of Modern Knowledge, published by Michigan University Press in 2006, and yet another monograph entitled Professionalism for the Future, co-authored with Hirokazu Miyazaki and Yu Genda is forthcoming from NTT Press. I have been, and we should all be, in awe as to the sheer stamina and courage with which Professor Riles has given so much of her energies to her seminar on Theorizing the Gift: Law Markets and Love in the last few weeks, in spite of some worries and adversities that she certainly had not bargained for at this time. I am all the more grateful, therefore, to give her the floor this afternoon. The title of her lecture is Exchanging Expectations: Finance, Neofascism, and Relationality in Post-Fukushima Japan. Please join me in welcoming Professor Annelise Riles.
ANNELISE RILES: Wow. Well, thank you so much. Oh, that's quite loud. Thank you so much. Yeah. We've had a running joke in my seminar about the potlatch quality of the introductions at these seminars, in which each speaker seems more dazzling than the next. And I have to say, as I sit here today, what dazzles me is the tremendous care you put into the description of those texts and the work that went into the performance of making me look dazzling. So thank you very much for that.
I want to thank the staff, first of all, here: Mary and Alice. Where is Alice? This could not be more of a command performance in terms of the execution of this. And of course, Hent, for, as he did just now, setting just the right tone for us, among many other things. Thank you.
So I chose to present this paper among other papers, because it's very much key to the kinds of things we've been talking about in my seminar. So I hope that this will be fun and useful for at least those of you who in my seminar. And I do want to say one last word of thanks to the members of my seminar. It has been, for me, just a tremendous conversation-- a rich and sophisticated one. And there's been a generosity to the discussion that has stunned me. I've been around this business long enough to know it doesn't have to be that way, and so I'm truly grateful for that.
Now, this paper is co-authored with Hiro Miyazaki. And so Hiro is also an anthropologist who works in a field parallel to mine-- or at least, we make use of the fiction that our informants have, that these are two separate fields. The field of financial traders is the space in which he works, whereas I work with regulators, lawyers-- people who think of themselves on the outside, building a beautiful playpen for the traders to work in. And we maintain that distinction mainly because we're incapable of working together. We wrote one paper together about 12 years ago and nearly killed each other.
But in recent years, of course, things have become very complicated in Japan, if anyone here knows a bit about it. The political situation is shifting in some quite disturbing directions. And so this was really a paper that sort of had a therapeutic function for us. We've been very disturbed by developments and not quite sure how to get a handle on them, so we wrote this to sort of cure ourselves, so to speak.
So in December 2012, the Japanese people elected conservative prime minister Shinzo Abe and returned his right-wing party to government in a popular landslide victory. Abe, himself the son of former minister of finance, Shintaro Abe, and the grandson of former prime minister, Nobusuke Kishi, a politician decried by some as a class-A war criminal, is widely known for his right-wing approach to the growth of Japan's military power, his commitment to constitutional reform to eliminate the famous peace clause of the Constitution barring Japan from military conflict, and his interest in repudiating official apologies for Japanese atrocities during World War II. This is his campaign poster. [SPEAKS JAPANESE] Let's take back Japan.
Yet what most gripped the public was something different: Abenomics. The name Abenomics first appeared in the financial press during the campaign for a set of proposed inflation-targeting monetary policies-- essentially, policies that inject money into the economy in order to drive prices up and the value of the currency down-- that Abe promised to force the Bank of Japan, Japan's central bank, to undertake. The goal was to spur the Japanese economy to overcome a decade-long stagnation and deflationary spiral with devastating consequences for Japan's stature in the world and for the well-being and hopefulness of its citizenry.
So in December 2012-- this Nikkei stock index. So in December 2012, the Japanese stock market rallied-- this would be right here. You can see this is flat for years and years, and suddenly things start moving-- rallied, even before the election, in anticipation of this victory. Abe himself fondly noted that Abenomics was a term, quote, "coined by the market, not by him." In March of 2013, Abe nominated former governor of the Asian Development Bank, Haruhiko Kuroda, a lawyer-diplomat, not an economist, interestingly, and a long-standing proponent of inflation-targeting policy, to head the bank of Japan. What followed cascaded into one of the greatest dramas the financial world has seen in recent years.
When the technicalities of monetary policy sweep a far-right government to power under the banner of strong and beautiful Japan, and the prospect of a far-right government spurs the greatest stockmarket rally in recent decades, the politics of finance is explicit. This is significant both for the history of critical approaches to financial markets and for the history of mainstream economic policy. Earlier cultural approaches to financial markets focused on unpacking the black box of finance and revealing that the seemingly un-political machine was, in fact, riveted with politics. Politics, from this point of view, could be found within the toolkit of finance, and in the way [INAUDIBLE] Foucault that this toolkit participated in the making of neoliberal subjects. This represented a significant critical intervention because of the neoliberal view of markets as politically neutral, governed by scientific rationality, and hence is inherently legitimate in contrast to the inherent political illegitimacy of state intervention in markets. Yet where the politics is on the surface, celebrated for all to see, the unmasking of politics behind finance becomes superfluous.
Contemporary events in Japan also trouble a narrative present both among market insiders and critical theories that has emphasized the role of finance as a bulwark against fascism. Political scientist Jonathan Kirshner, to name one of many, has emphasized how financial integration impedes nationalist tendencies towards war. And the anthropologist Douglas Holmes has argued that financial bureaucrats' enrollment of an ever-expanding public in the project of European financial integration provides a counter-narrative to rising populist fascism in Europe.
Now, Holmes, working from the standpoint of performativity theory, focuses on how in the aftermath of an epistemological shift in which a scientists' scientific view of markets has been replaced with a far less foundationalist and far more recursive understanding of market movement. Central banks produce narratives that enroll allies and create expectations. His analysis innovates on central bankers own, where he points out that as the scope of economic agents expands, as central bankers come to recognize that consumers' expectations also matter, for example, then central banking becomes an, quote, "evolving relationship with the public," end quote, and hence, monetary policy and central bank communication takes on a dimension of citizenship. One way of rephrasing Holmes' intervention in this debate might be as follows. One of the political features of the post-democratic moment is that the openness we associate with democracy has to be created in other ways.
Perhaps such a faith that progressive financial policy is ultimately the enemy, not the handmaiden, of fascism explains this photograph. This is economist Joseph Stiglitz, who among many others-- other progressive economists-- rushed to Tokyo to embrace Abenomics as a model for the world. I hope he will someday come to regret this photograph. The comment we heard again and again from leading economist, central bankers, and financiers we spoke to in the aftermath of Abe's election was, quote, "I don't agree with his politics, but his economic policy is textbook Tobinism," meaning that other was finally giving the progressive economic theory advocating state intervention in markets a staging ground.
But we're going to argue today that other Abenomics signals something more significant than a swing of the pendulum from Hayek to Keynes a transformation in our view of neoliberalism into something quite different, something that cannot adequately be captured by existing critical tools. Our task, then, is to begin to provide a language of political description, something we will attempt today through a close analysis of Abenomics as event.
Now, one prefatory comment. What we will describe is not entirely specific to Japan. We can think of Japan as simply a manifestation of a now global economy, and indeed the coexistence of financialization with new nationalism is appearing in many places, including in this country. Yet from another point of view, currency crises around the world each have their own specific histories and politics. The crisis of the euro-- the Political Crisis of the Euro-- is different from the crisis of the renminbi, or the dollar.
Japan's regime change and associated shift in financial policy occurred in the context of a widespread sentiment of multi-valent crisis in the wake the 2011 triple disasters of the earthquake, tsunami, and nuclear crisis at Fukushima, and the dissatisfaction the public with the center-left Democratic party's post-nuclear policy. The election also took place in the context of rekindled territorial disputes with China and Korea, and with rising populist anti-expert sentiment among young people and the underemployed. As we will show, the fact that both of these perspectives are possible-- that market insiders can see one global market or specific national, political and economic contexts-- enables one of the key tricks, the movement between these possibilities.
Now, the Bank of Japan controls the supply of money by buying and selling government bonds, and it can impact the value of the Japanese yen by buying and selling Japanese and foreign currencies. It also has regulatory authority over banks in Japan. On the legendarily secretive top floor of the ornate Meiji-era building in downtown Tokyo, built in the shape of the Japanese character for yen-- so you see here this is the character for yen-- the Bank of Japan's policy committee meets and decides how to intervene in the economy by buying and selling government bonds, foreign currencies, and other debt instruments. Since 1998, when the central bank became independent of the government, the policy committee has acted without intervention from politicians or the Ministry of Finance.
Yet on other floors, and in other branch offices around the country, hundreds of faceless bureaucrats-- the best graduates of the very most elite universities in Japan-- the bank's legions intervene in the market in a myriad of other ways: through microeconomic research, to day-to-day conversations with their counterparts in banks, and in every sector of the economy by monitoring market participants' accounts, by extending or taking away credit, and much more. Now, the governor sits somewhat aloof at the top of this anthill of departments, committees, branches. Traditionally, he is a relatively faceless leader. Market participants encounter the Bank of Japan rather through particular bureaucrats with specific concerns or institutional connections.
A central bank bureaucrat three years out of the University of Tokyo would be assigned to keep tabs on his former classmate who is also three years out of college at Tokyo Mitsubishi Bank, for example, and they would talk on the phone daily and go drinking together regularly. And the self-effacing style of the previous governor of the Bank of Japan had perfectly performed the commonsense understanding of the internal complexity of this institution. For its part, the public looks upon individual bureaucrats with a mix of respect for technocratic expertise, envy of privilege, and scorn for the way they serve their own class interests without understanding of the world outside their elite bubble.
The context for Abenomics is an economic policy debate in recent years about whether it might be possible for the central bank to stimulate economic growth not through the traditional method of injecting cash into the economy, but through communicative practices that, in themselves, change expectations-- Jedi mind tricks, as some financial market commentators call them. The term expectations, kitai, has been a keyword in Abenomics. Classical economic theory is predicated on the theory of rational expectations. Market participants make decisions in the present based on their expectations about the future. Although the future is unknown, in the aggregate, expectations are rational, because those who correctly anticipate the future are rewarded through the institution of price.
The rational expectation theory was powerfully challenged by Keynes's argument that expectations are always socially produced and hence recursive. Investors do not make decisions based on their future expectations about the market, but rather based on their present expectations about what others future expectations of the market are. Since Keynes then, monetary policy has turned on a theory about how to manage expectations-- how to ensure price stability by cooling market euphoria when it gets too hot and stoking market enthusiasm some when it's too cold. In the words of one economist, quote, "monetary policy is ineffective if it cannot stir expectations."
The goal is to trigger self-fulfilling expectations. If investors are convinced that real estate rates will remain low and growth will pick up, they will invest more in stocks, for example, driving up stock prices and thus validating their own expectations. This sociological understanding of expectations as socially and recursively created in turn leads central bankers to pay attention to how their own communications might shape investors' expectations. If the goal of central banks is to stabilize prices, and prices are in turn shaped by market participants' expectations, then communication that shapes market participants' expectations becomes a tool of central bank policy.
The key is thought to be a credible communication strategy. As the high price of these ideas, Columbia professor Michael Woodford, puts it, quote, "make them believe by making them understand." The idea is that central banks should clearly articulate their goals and explain the analysis behind their actions-- the basis of their forecast, how they think that their actions will produce intended objectives. Yet as any anthropologist of institutions would immediately predict, in practice, this is simply impossible. A massive institution such as the central bank does not have one goal or one reasoning. It's not a person in that way, but a myriad of units, committees, different forms of expertise, different political visions, conflicting individual ambitions. And so central banks continually fall short on their promises to be transparent.
Now, under Kuroda's predecessor as governor, Masaaki Shirakawa, the Bank of Japan bureaucrats had digested the lessons of the Keynesian literature about expectations and had attempted to intervene in the market in this way with words and injections of cash. Yet each intervention found itself negatively engulfed by the market, as traders took counterpositions to the Bank of Japan's. Quote, "the problem for the BOJ is that they continue to fail to get ahead of the markets," Jeremy Stretch, a currency strategist at CIBC in London, had put it in November of 2002. The question mark is if they can get ahead of the market's expectations.
Given these private failures, Abe's call for the central bank to intervene more decisively in the financial markets had raised a broad spectrum of concerns. Some pointed out that the policy of inflation targeting was destined to have far-reaching unintended consequences. For example, it might produce price increases in certain sectors of the economy, such as energy or food prices that would burden certain kinds of consumers or citizens more than others because of the sensitivity of certain sectors to currency fluctuation, but also because as central banks expand their asset purchases beyond government bonds-- because there just aren't enough bonds for them to buy and keep injecting money into the economy-- they lose their impartiality and begin to take bets on particular sectors at the expense of others. Others raised concerns that central banks simply could not manage expectations in this way, and hence, Abenomics was setting the market for profound disappointment, leading to further losses.
BOJ's James outgoing governor, Shirakawa, pointedly criticized Kuroda's approach to monetary policy at his last press conference on March 19th. And I'm always interested in the iconography of Japanese newspaper photographs. And this is the standard photograph for when you have to resign in disgrace. And he's not resigning in disgrace. It's the end of his term. But it shows what the mood was at that time. So here's what he said, which if you hang out with central bankers, as I do, this is just such a scandal. It's almost unthinkable that he said this. "If Kuroda's does idea of making expectations do the work suggests his understanding of a central bank's capacity to freely manipulate the market with words, I find his approach to the market and to monetary policy dangerous."
Others raised concerns of an entirely different order. 80-year-old former finance minister, Hirohisa Fujii, indignantly commented that the debate about the central bank independence reminded him of the run up to World War II. Quote, "the central bank underwrote the government's war machine, allowing the government to fight foolish wars," he reminded the public, adding that, quote, "revising the BOJ law to allow greater political intervention would mean a revival of the 1942 legislation." Also just an unbelievable thing for someone to say.
Behind this entire debate about the efficacy of communication, then, is another conversation about political legitimacy-- how to reconcile the need for expert knowledge with a fundamentally undemocratic nature of expert authority. Central banks operate more or less independently of political influence in setting monetary policy. Although the heads of central banks are chosen by elected leaders and confirmed by legislatures, central bank decisions are not subject to review by courts, and at least until recently, it was deemed inappropriate for politicians to interfere.
This independence of the central bank, and with it, this enormous and unconstrained power over the economy, is justified on grounds that monetary policy is more akin to science and to politics. At the same time, the independence of the central bank, the rule of the market by a handful of experts, represents a major technocratic lacuna in any democracy. And the decisions of these technocrats have profound distributive consequences that, in turn, raise questions about the justice of technocratic rule.
Here again, communication, or, "quote, central bank transparency," is the mainstream answer. Communication also addresses the problem of the central bank's political legitimacy by treating its authority as delegated from the public. As Princeton professor and former vice chair of the Federal Reserve, Alan Blinder, puts it, quote, "in exchange for its broad grant of authority, the central bank owes the public transparency and accountability." End quote. For Abe, of course, the answer was far simpler. He had been elected by a popular landslide. The central bank independence was a smokescreen for technocratic privilege. He had the authority and the legitimacy to simply tell the central bank what to do.
Yet to some commentators, Abenomics smelled of a post-democratic political usurpation of the authority of the central bank by politicians who seeked to use that authority to intervene in the market, so so-called monetary policy, in ways that could the politician could not legitimately do otherwise without legislature approval, and hence, public debate-- so-called fiscal policy-- the usurpation of the electorate's power by usurping the central bank's power in the ironic name of populism. It's in this context that Kuroda, the incoming governor chosen by other made his move, first with words.
In his first official press conference following his confirmation as the new governor of the Bank of Japan, he stated, quote, "Under the zero interest rate condition in which there is little room for further interest rate cuts, it's important for the Bank of Japan to act on and change the market's expectations by demonstrating the bank's determination to implement monetary easing and a sustained matter." This explicit statement that it is the expectations, not the actions, of central bankers that must do the work, in itself responded to the market and the public's high expectations for a bold statement. The Bank of Japan's periodic survey of consumer expectations conducted on April 1st, just before Kuroda's announcement, had found that over 70% of consumers surveyed predicted that prices would rise. In other words, that he would be successful within a year.
These expectations had already resulted in the rise in Japan's stock market, as well as the weakening of the yen. And hence, Abenomics had already significantly benefited Japan's export-dependent manufacturing sector before Kuroda even said a word. One could say that Abenomics came with expectations built in. Kuroda's job was to catch the wave. The confidence Kuroda demonstrated through his distinctive hand gestures, speaking style, and smiles for the cameras dramatized the economy of expectations he invoked as already all around him.
On April 4th, Kuroda followed words with money. The first meeting of the BOJ's monetary policy committee since his appointment officially adopted a target of a 2% rate of inflation to be achieved in two years. The committee also announced a package of extraordinary quantitative easing measures-- measures that would double the bank's holding of government debt, the banks own debts, and hence double the supply of money in the economy-- double the supply of money in the economy. All of this was simply in the service of expectations Kuroda emphasized at the April 4th press conference. He described a three-step process for revitalizing the economy.
Since short-term interest rates was already at 0%-- so you couldn't go any lower-- BOJ purchases of government bonds targeted the long-term interest rate and price of assets. So [SPEAKS JAPANESE] and aimed to make it go down even further. This would encourage more lending and also more investment in riskier assets. Finally, he said all of this would in turn boost expectations, kitai. So you can see the word expectations.
I also love these Japanese charts. It's kind of this old school image. Like, if you watch NHK TV, it's always these posters made by hand, even though they have the technology. So these kind of handmade posters. And here, you've got the word expectations in red and bold right in the middle of the chart.
So this would all boost expectations of-- let's see what I've got going on here-- markets and economics subjects. So [SPEAKING JAPANESE] The word the market and economic subjects is the key term here, not the usual term, market participants-- [SPEAKS JAPANESE] but the market and economics subjects. Now, this hardly looks like the stuff of high drama. After all, the quantitative easing package Kuroda proposed was only different in scale and magnitude from earlier central bank monetary policy, and the shift from fashioning policies aimed at motivating expectations to explicitly talking about the power of expectations is merely a matter of making the implicit explicit. Indeed, we might have missed the epistemologically and politically radical nature of the move had it not been for the very dramatic and extreme response this move provoked in the market.
The boldness of Kuroda's announcement stunned market analysts, policymakers, and financial journalists. News stories, photographs, official and unofficial commentary poured out-- and not just in Japan. It was all that you heard about in the US as well, as people could not stop talking about this dramatic event. The media repeatedly declared that Kuroda's announcement had exceeded the market's expectation, so they dubbed it Kuroda's big bazooka, and quantitative easing of, quote, "a different dimension." [SPEAKS JAPANESE]
Analysts at securities firms could hardly contain their excitement. "Gloves off from Kuroda and everyone is very excited," the FT blogged breathlessly. Quote, "Last week's announcement by Kuroda was the most credible attack on deflation that Japan has seen in a very long time. There's prospect for Japan to exit its liquidity trap and get its domestic economy back on its feet," Kathy Matsui, chief Japan strategist at the US investment firm Goldman Sachs said on CNBC on April 5th, next day.
Goldman Sachs now officially predicted a growth rate of 20% in the Japanese stock market in the coming year. And during this period, our informants in the financial markets were sending us text messages. It's a buy, buy, buy. So Christine Lagarde, head of IMF, along with finance ministers around the world, issued statements in praise of the move. The Princeton economist and New York Times columnist Paul Krugman took credit for the whole thing.
The financial market's response was equally dramatic. On the day of the announcement of the new policy, the long-term interest rate sank to a historic low of 0.3%. The value of the yen dropped to 95 yen to the dollar, which is incredible. The Nikkei 225 rose to 12800. So here you see-- Let's see if I got this. April 4th, you see this. Right there. All this excitement, in turn, unleashed other responses as well.
References to Kuroda's bazooka, an already phallic militaristic image first invoked by US Treasuries Secretary Hank Paulson in his celebrated comment in the time of the US financial crisis, quote, "I have a bazooka in my pocket and I plan to use it," end quote, metamorphosed in the press into, quote, "Kuroda's bazooka hits Korea"-- so this is a popular press and it's got that story-- a gleeful reference to the fact that the policy was negatively impacting the Korean stock market as Korean investors anticipated that a weaker yen would mean stronger Japanese exports at the expense of Korean exports. And you see that idea got picked up in the foreign press as well. The raw-blooded nationalist enthusiasm in the phrase recast the monetary policy in relationship to a wider current of nationalism and increased hostility between Japan and Korea and implicitly evoked images of war.
So what happened? What made the event? The global financial media focused on the size of Kuroda's intervention compared to Federal Reserve interventions after 2008, and even going back to the 1970s. But while the size of the intervention was incrementally larger relative to the size of the Japanese economy than the actions of the Fed in the past, we do not believe that this accounts for all the excitement-- or rather, as we will explain in a moment, scale and scale change played a different kind of role.
Another possible analysis included Kuroda's intervention might focus on its new degree of explicitness. In the past, central bankers had tried to shape expectations, but they have rarely talked explicitly or so directly about expectations. Perhaps we might see this as just the purest instantiation of the mantra, make them believe by making them understand. Yet this, too, seems inadequate as an explanation, for there were as many elements of surprise and hiding to this event as there were elements of transparency.
Financial commentators repeatedly said that the market did not expect any action at the first monetary policy meeting that Kuroda convened. Quote, "most everyone has underestimated what the bank would do," said one stock trader. Market participants were taken by surprise. Perhaps Kuroda purposely created that expectation-- that he would do nothing-- in order to flip it with a dramatic policy announcement. In any case, he was surely aware that by negating the expectation of no action, he would produce surprise, and surprise would produce expectations.
Before the April 4th press conference, Kuroda noted that the goal of the new policy was to, quote, bolster [SPEAKS JAPANESE] the market's high expectation. At the press conference, Kuroda added, quote, "it is the market that should evaluate the new policy," end quote. He explicitly called for and stated that he awaited some kind of market response. Kuroda also emphasized that he would, in turn, respond to that response-- that if the market's response suggested a need for further easing, he would respond, quote, "without hesitation."
In one sense, this talk of market response seems to represent the simple apotheosis of the classic neoliberal claim of market agency. Kuroda recognized the agency of the market as a voice, a partner of its own, just as Abe had emphasized that Abenomics was not his word, but a word coined by the market itself. This acknowledgment of the political authority of the market voice as a source of political legitimacy independent of others' own electoral mandate might evoke, for example, for Foucault's claim that neoliberalism is premised on the idea of the market as a regime of truth, a verification mechanism, as opposed to politics as a regime of justice.
But there is more going on here than the mere acknowledgment of market authority as a source of power beyond politics. Indeed, what was jarring about Kuroda's calling out to the market as an agent and a partner was that the notion that there was such a thing as a market had long ago been displaced by a far more sociological and Keynesian view of markets, as composed of individual decision makers within institutions whose expectations were different from one another, but socially produced. The very institutional structure of the Bank of Japan in which bureaucrats at different levels of seniority kept in regular touch with particular corresponding individuals at similarly different levels of seniority within each regulated bank was premised on the clear understanding that not only was there no singular market, but there was not even such a thing as a singular financial institution with one position-- that institutions and markets are composed of people with differing expertise, competing visions, conflicting views.
Indeed, the person closest to the neoclassical economic view of markets in this set of events, the outgoing governor, Shirakawa, clearly recognized quoted us action as assault on the neoclassical view. For if this policy was not economic managerialism, it did not assume the market as a field of intervention, but as a voice-- as one to be expected. Neither was it neoliberal reform-- Thatcherism, Reaganomics, et cetera-- which were always about institutional reforms of one kind or another, reforms which, as many critics have pointed out, actually require quite a lot of institutional governance. Liberal reform was premised on a far more confident, totalizing knowledge of the market. It was Utopianism grounded in a faith in the scientific facts.
Kuroda's move was premised on an appreciation of the critical point that, as Foucault argues, the market could not be an object of governance. In Kuroda's personification, the Bank of Japan does not pretend to govern here. What Foucault captures as the failure of market governance tools-- the market cannot be governed-- becomes, for Kuroda, the very engine of a new relational possibility.
What happened on April 4th in our view was nothing less than the transformation of the market as a target of intervention into the market as a partner of exchange. Let's begin with the odd vision of Kuroda's own agency projected in the set of speeches and actions. Kuroda emerged as a person-- a personality, even-- the personification of a central bank imagined by insiders and outsiders alike as a set of divisions of policy committee. In sum, a complex institution. But in a flash, Kuroda had backbounded all that by taking the stage, focusing the attention, standing in for the central bank. Kuroda, fashioning himself as an agent, the concrete personification of the many committees and units of the central bank, one man composed of many men rather than retreating behind the agency of the faceless institution he directs, and to respond to the market's expectations, and in so doing, transform the market into an author of expectation. By his words and actions, Kuroda entered into an anticipatory relationship with the market. What was staged on April 4th, then, was the bringing into existence of two agents and the beginning of an exchange of their mutual anticipated responses.
The anthropological canon teaches us that exchange is always both closed and open, its directions and unfolding both knowable and unknowable. It is open and unpredictable to the extent that the outcome of exchange is never given, and it is predicated on the [INAUDIBLE] of agency-- that is, an acknowledgment of the limitations of words and objects as techniques. Kuroda's acknowledgment of the limitations of central bankers' techniques for controlling expectations opened up other potentialities by offering expectations themselves as both words and objects of exchange. If, as Foucault suggests, the neoliberal era heralds a shift from a regime of justice to a regime of truth, then the relationship to the market as exchange partners is indeed significantly different, for in all exchange relations the location of power and truth is continually shifting in that particular way. Unlike both the planned and neoliberal markets, one's exchange partner is always simultaneously known and unknown, knowable in certain ways but unknowable in other ways. And this is precisely what makes exchange possible.
This of course, did not just happen with the utterance of magical words. There were many causes and preconditions. First, an epistemological shift away from a notion of scientific truth in markets and the mainstreaming of a Keynesian economic theory of market recursively demanded that all involved-- central bankers, traders alike-- make it their business to anticipate the viewpoints of others and act with those perspectives in mind. Second, Abe had risen to power by expanding a term of current economic theory-- expectations-- to talk about political expectations for a new national economic agenda-- national economic growth-- in contrast to the neoliberal focus on global financial liquidity in which the nation-state and the national economy is of little concern.
Abe had done this, of course, to generate expectations about and for himself as a political leader. And he had succeeded in this. So the term expectation had already been taken out of its pure theoretical context, so to speak-- extended. And it was as Abe had fanned out a deck of cards showing all the valences of the now proliferated expectations side by side. Consider Abe's intervention through his representative, sent as an observer, to the April 4th policy committee meeting, as reported in the official minutes of that meeting.
So here's the official minutes. The representative from the cabinet office-- in other words, from Prime Minister Abe-- made the following remarks. One, the government expected Governor Haruhiko Kuroda, Deputy Governor Iwata, and Deputy Governor Nazukaso, who had taken office on March 20th, to exert leadership by showing a firm resolve to overcome deflation and by drawing on their diverse experiences and accomplishments, and respond to expectations, both at home and abroad. So there is a personal expectation on you three men. And it's not clear if it's political or economic, but it's personal.
Two, as for the economic outlook, weaknesses would remain in some areas for some time being, but the economy was expected to resume its recovery gradually. However, households' inflation expectations continue to rise, and firms' business conditions outlooks were for improvement. So here we have the economic theory of expectations. And then, four: the government strongly expected the bank to pursue bold monetary easing in order to achieve the price stability target of 2%. The government expected the bank to clearly envisage a course toward achieving the target, and to fulfill its accountability to the public. The government expected the bank, under its new leadership, to aim at achieving price stability and so on. So here, we have a political theory of expectations-- political obligations. So the cards are fanned out-- all the valences of expectations on the table.
In this final point the location of the central bank within the democratic policy was reframed itself as a matter of expectations, and hence added to the fortuitous resonance between economic expectations and nationalist expectations. The multiplicity of expectations of different orders, different kinds, different scales with different targets, in other words, is precisely what cannot be appreciated from the point of view of mainstream analysis and central bank communication. That is, although these take analyses take a sociological view of expectations. It's for one still narrow and instrumental reason: expectations determine price. It follows that the only expectations that matter from this perspective are expectations about prices.
Although framed as a critique of the neoclassical economic view, the Keynesian sociological approach still operates within a vision of the world as divided into separate spheres-- economic, political, et cetera-- and of agents and institutions as self-evident givens. Nor can the Keynesian focus on communication make much sense of the way expectations produce economic agents-- markets, economics subjects, Kuroda, the central bank, and so on-- as much as they are the properties of such agents.
Abe's expansion of expectations, in turn, set the stage for Kuroda to gather together and refocus all the valences of the term to generate expectations for the markets. Kuroda, as a kind of insider-outsider to economic theory-- remember, he's trained as a lawyer, not an economist-- familiar with the economic debates, but not wedded to them, prodded by Abe, fashion not a new meaning for the term expectations, but a new usage of economic theory. What was so new that it stunned insiders, in our view, was the deployment of economic theory itself-- no longer an application to the market as an instantiation of that theory, but a redeployment of that theory as a technique of engagement. What only an insider-outsider could appreciate, let alone perform, then, was that the constraint of economic theory allowed the phenomena of different registers, different orders, to fall together, and not simply to proliferate, as Abe had done.
This is, in fact, central to the workings of exchange. Exchange gathers everything that has already happened together and represents it as a concentrated bounded now one that is always loosely of course loosely analogically related to the wider political landscape. It was as if once everyone had seen the cards, Kuroda folded the deck and flipped it forward.
Here, the aesthetics of economic theory were as important as their logic. To see this, consider again the moment of the bazooka at which nationalism bubbled out explicitly in media accounts. The moment of pleasure at inflicting harm to the Korean economy-- that was a moment at which something that never happened on Kuroda's charts and was never uttered in his press conferences, but was understood by all insiders, came to light-- the effects of quantitative easing on the devaluation of the yen, and the effects of this, in turn, on neighboring economies. The official reason for quantitative easing, like the textbook explanations put forward by proponents, such as Paul Krugman, was a purely national one to spur investment that would lead to economic growth.
Yet what everyone knew was that in a global economy in which currencies are fungible, an increase in the Japanese money supply makes the yen cheaper vis-a-vis other currencies, and hence makes Japanese exports, say, of Toyotas to the US, less expensive than, say, Korean exports of Hyundai cars to the US. Indeed, our friends in the financial market repeatedly emphasized this as the more important effect of Abenomics, pointing us to charts that demonstrated that the growth in the Japanese stock market was directly correlated with the depreciation of the yen, and when the former was adjusted to take account of the latter, there was no growth to speak of at all.
In one recent conversation with a progressive economist-- a very important figure in this story and this market-- one of us gingerly pointed this out in response to his adulatory account of the novelty of Abenomics. So we pointed out that-- wasn't this really all about currency depreciation? Very true. [SPEAKS JAPANESE] He said, casually, as if the contradiction did not undermine his prior position, but simply displaced it.
This is an important aesthetic of economic theory: the ability to see one position and then see another, something a humanist might imagine is a contradiction or counter-position, as what was foregrounded a moment ago now is backgrounded. Abenomics was about spurring domestic growth and adopting a Keynesian approach to market intervention if you looked at things in a national economic sense. Again, it was about evaluating the yen, trashing the Washington Consensus, and reasserting a vision of national economic supremacy at the expense of neighboring Asian nations if you looked at things in a global economic sense. The switch gives economic theory its infamous, Teflon-like impermeability to critique, and it was precisely in the switch, in the technique of the aesthetics of economic theory, that the bazooka, the convergence of fascism and finance, emerged.
Here's another example. Prior to this moment, the market could be imagined economically in terms of two scales. In the macro, economists saw the market as a collective and somewhat abstract agent. At the same time, the market was always open to being imagined as a space in which numerous actors were acting individually in the micro scale. Either view was possible. When Kuroda addressed the market, calling out his expectation for a response, it was with the appreciation that this exchange partner contained within itself both macro and micro scales, that it was open in this way.
Recall his crucially and carefully calibrated, yet very odd, phrase that the goal was transformation of the market and economics subjects' expectations. The flip of the cards consisted simply in putting side by side the unknowable abstract market and the more standard economics subjects. This created agentive resonance within the very conception of the market as an exchange partner. This resonance behind its agents or other agents is the crucial logic of exchange, and also helps to understand how what seems like a quite exotic move-- the sudden treatment of a target of governance as a relational partner-- is, in fact, but a retooling of prior economic knowledge.
This brings us to the status of Kuroda's intervention vis-a-vis Abe's invocation in other political moments of the national: beautiful Japan, strong Japan, et cetera. The post-democratic move from a politics of legitimacy, in which power rests in a theory of governance, to politics of efficacy, in which power derives from making something happen from staging the event. From Kuroda's point of view, Kuroda was not so much the initial cause of this drama, then, but rather simply a contributing agent, someone who moved the story along. It was Abe, after all, who had started the push for Abenomics, although from Abe's point of view, it was the press and the market, not he who had started it all, and on and on.
Kuroda found himself caught up in the fortuitous confluence of a popular rhetoric of nationalist expectations and the expert economic theory of expectations. Kuroda was merely responding to, dancing with, a political partner who was already in motion. Kuroda inherited expectations from Abe's politics, but, and, he transformed those expectations into something else: a relationship to the market as an exchange partner. And this was only possible because of the logic and aesthetics of economic theories of expectations in the hands of someone of Kuroda's position and skill, both empowered constrained by his office, caught up in a politics somewhat beyond his control. Nationalist sentiment and economic managerialism came together through, then, the specific mediation of economic theory.
Now, this event was clearly an example of the political usurpation of finance. But against the view that this is just self-evident nationalism in which finance is just a means to a political end on the one hand, and a resistance paradigm in which we might see Kuroda unwittingly painted into a corner in attempting to subvert the nationalist project from within, we emphasized that the political usurpation took a particular form. Abe was the cause, in Marilyn Strathern's terms, but Kuroda was the agent, working within the logics of economic theory. By concentrating the analogical power of expectations into the figure of the market as an exchange partner, Kuroda's retooling also reconfigured the already open and closed quality of the market and the political process. His own agency entailed gathering these together in a way that demanded a new entity-- the market-- and demanded of that market a response.
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Annelise Riles, Jack G. Clarke Professor of Far East Legal Studies and Professor of Anthropology, Cornell University, analyzes "Abenomics"--the financial policy of Japan's far right government--as an example of a new emerging economic and political régime. She asks, what comes after neoliberalism, and what challenges does it pose to critique? The paper is co-authored with Hirokazu Miyazaki, Professor of Anthropology, Cornell University.
Introduced by Hent de Vries, Russ Family Professor in the Humanities and Philosophy, Johns Hopkins University.