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The Power of Ideas: The Ideational Shaping of the Structural Power of Business
Author(s): Stephen Bell

Source: International Studies Quarterly , December 2012, Vol. 56, No. 4 (December 2012),
pp. 661-673
Published by: Wiley on behalf of The International Studies Association
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International Studies Quarterly (2012) 56, 661-673
The Power of Ideas: The Ideational Shaping of the Structural

Power of Business
Stephen Bell
University of Queensland
It is now widely accepted that the classic arguments regarding the "structural power" of business are
alist." Subsequent research has focused on a widening array of independent variables that shape the
such power. This paper extends this research tradition, arguing that structural power theory has giv
attention to governmental actors, typically the targets of such power. The paper argues that idea
tional processes through which government and state leaders construct threat perceptions regard
power can be important in mediating such power. The literature on power typically argues that pow
and disciplines target subjects. This paper revises this logic by arguing that the ideas of target su
shape power. The paper's arguments then are essentially constructivist, but the paper extends such a
insisting on a greater role for agency than is often found in constructivist reasoning.
icyof
In the last few decades, the hyper-mobility discretion
foot- of national governments amidst the
loose business investment in an age of "globaliza-
scramble to secure investment by promoting business-
tion," the explosive growth of the financial sector,
friendly policies (Ohmae 1995; Strange 1996). A coun-
terin
the experience of "too big to fail" banks response,
the since the late 1990s, has argued that
midst of the most recent financial meltdown, and the states in fact still have considerable policy discretion
opening up and marketization of former communist and that the alleged dominance of mobile business
economies are all shifts that have highlighted the interests had been exaggerated (Garrett 1998; Weiss
power and influence of business and financial inter-1998; Mosley 2003; Bell 2005). This detour into the
ests. Ironically, over this same period, detailed schol- realm of globalization, however, tended to focus on
arly studies specifically focused on business power the structure of the world economy and the capacities
have not been as plentiful as might be assumed. Theof national states, with less attention to the precise
earlier high point of research in this area, led by dynamics of business power.
Marxists and radical pluralists, was back in the 1970s Accordingly, this paper seeks to encourage a
(for example, Miliband 1973; Block 1977; Lindblom renewed focus on the power of business interests and,
1977). From the 1980s, as Hacker and Pierson to this end, it explores the "structural" power of busi-
(2002:277) suggest, "with the growing interest in ness.
'the This is the form of power most implicated in the
debates above about globalization and it is perhaps
state' and institutions, the debate over business power
essentially ended." Culpepper (2011:185) has recently
the most distinctive though in some ways most elusive
attribute of business power. "The notion of structural
noted that "the study of business power is currently
more neglected than it has been for the last half power,"
cen- as Konings (2009:70) usefully puts it, "is
tury." In international relations, there have been meant
sim- as a shift away from the conventional focus on
ilar claims about such neglect, with Fuchs (2005) the direct dimensions and empirically observable quali-
ties of power relations: it expresses the idea that power
suggesting that attention to questions about business
power has been "utterly deficient." Dowding also operates in a more indirect and diffuse way, for
(2008:32) goes even further, claiming that "main- instance, through shaping preferences and influencing
stream political science has left power studies the structural conditions under which other actors
behind." make decisions." In relation to business interests, for
These claims are mostly but not fully correct example, it is widely accepted that because they con-
because debates about business power in recent dec- trol critical economic resources and much of the
ades did not wholly end but were deflected into wider investment process in liberal capitalist systems, busi-
debates about "globalization" and related arguments ness leaders are potentially well placed to influenc
about how the structures of global capitalism shape government policy. This effect is increased by capita
the capacities, resources, and even the ideologies of mobility and competition between states for mobil
actors, especially state leaders (Gill and Law 1989; Gill investment. In the classic argument, business interests
2003). Here, a widespread view emerged that capital have structural power because governments and th
mobility had radically increased the power of business wider society depend on the investment decisions
and financial interests and markedly reduced the pol- and other activities of business to sustain a healthy
Bell, Stephen. (2012) The Power of Ideas: The Ideational Shaping of the Structural Power of Business. International Studies Quarterly, doi: 10.1111/j.l468-2478.2012
© 2012 International Studies Association

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
662 The Power of Ideas
economy, jobs (2001:398)

growth, refer to "ideational structures of
government domina- revenu
tax
Hence, a generalizedtion"
loss of of"business
and the notion confid
ideas as being "tightly linked
something that governments typically
to relations of material power." This approach is also seek
(Block 1977; Lindblom 1977).
found in Gramsci' s well-known arguments about hege-
A well-known criticism
mony and the of structural
way in which power
ideas propagated by elites
shape perceptions
ments, however, is that they aboutare
the "mutuality
tooof'interest"
'structu
implying a world of between
limited options
rulers and the and overw
ruled. Latter-day Gramscians
notions of business like supremacy.
Cox (1987) and Gill (2003) also To be
use this sure,
approach
cases, governments to areexplain placed under
contemporary hegemony, enormo
while a somewhat
sure by wider business related notioncontingencies,
is Mann's (1984) concept of "infra- for e
the recent pressures for
structural" massive
power, which relies on thebank
processes ofbailo
range of countries. Yet, hegemoniceven socialization here, governmen
through institutionalized net-
a degree of discretion workin exactly
relations how
to help embed state authority. they
Similarly, res
such pressures. Also, instructural international relations, Nyepower
(2004) emphasizes argume
idea-
not explain why governments tional structures of "soft power." Finally, Konings stand
sometimes
business pressures. More (2009:72) argues generally, a critica
that power "does not just operate by
ciency in such structuralist setting the parameters accounts
and constraints for is
other their
peo- l
focus on agency , especially ple's agency, but is bound onup withthe part of
the very constitu-
ments. After all, it is tion governments
of their interests, identities and desires."
and Or as state l
who must confront, Fuchs interpret,
and Lederer (2007:8) put and
it, "powerreact
shapes per- to bu
pressures. ceptions and identities and fosters the interpretation
A key argument of this paper is that the agency ofof situations."
governments and state leaders matters a great deal in According to these approaches, ideas have a causal
such structural power contexts. The paper shows howforce in the service of power. For example, in recent
by exploring sophisticated contemporary understand-strands of constructivist political economy, scholars
ings of agent-structure interaction in this context. The have explored how government leaders confronting
paper argues that structural power is not about the either real or perceived threats from globalization,
imposition of power from above but is instead best seen such as capital flight, are potentially capable of con-
as the outcome of a relationship between actors with dif- structing their own policy straightjackets, reflecting
fering attributes and capacities. In unpacking agency in prevailing discourses about the impacts of globaliza-
this manner, the focus will be on how state actors oper- tion (see, for example, Rosamond 1999; Hay and Rosa-
ate with a degree of discretion in such settings, bothmond 2002; Watson and Hay 2003; Hay 2006a, b).
shaping and being shaped by wider structural environ-Hence, if policymakers believe their tax rates or labor
ments over time. In exploring such dialectical inter- standards are internationally "uncompetitive," they
plays, we also need to further unpack agency by may act to effect pre-emptive change, irrespective of
exploring the way in which state leaders use ideas and any real or immediate impacts from globalization. In
inter-subjective understandings to appraise and navi- this sense, ideas can have real effects and the impacts
gate the environments they confront. Here, contempo- of globalization become almost a self-fulfilling reflex.
rary constructivist approaches are helpful. Indeed,If policymakers believe a "golden straightjacket"
structural power arguments say very little about how tar-exists, then, in effect, it exists. The argument from
get governments and state leaders perceive and inter-these constructivists is that ideas mediate and can
pret business power challenges. This is a big gap indeed magnify the power of capital, a view that is con-
because perceptions about power on the part of target sistent with wider constructivist arguments about the
agents and the changing ideas and contexts that informideational shaping of agents and the ideational con-
such perceptions actually matter in shaping such struction of reality (Onuf 1989; Adler 1997; Ruggie
power. 1998; Abdelal, Blyth, and Parsons 2010).
Most accounts of the relationship between power This paper too is consistent with constructivist think-
and ideas argue that power shapes ideas and helps ing and endorses the approach of the constructivist
constitute forms of domination. In this view, power globalization scholars above in suggesting that ideas
holders use ideas and shape discourses to influence can mediate power. However, the paper attempts to
the cognitions, identities, preferences, and ultimately advance the arguments above in a number of ways.
the behavior of target subjects. This approach is typical First, most of the views above emphasize forms of top-
of Lukes' (1974) arguments about the "third face" ofdown, hegemonic domination, verging on a "structur-
power and the way in which power is exercised alist" interpretation of power. As Risse (2007:136) puts
through preference shaping. Similarly, Gaventa it, "power is understood here as a social structure
(1980:16) explains the political quiescence of rather than an interactive relationship." In contrast,
oppressed groups as a result of processes through
this paper gives greater emphasis to agency and shows
which "power alters political conceptions." Foucault
how ideas can help constitute relationships of power.
(1979) also makes arguments about "disciplinary This approach allows us to revise and perhaps reverse
power" and how this shapes the conceptions and iden- the theoretical logics outlined above: instead of power
shaping ideas, it is ideas that shape power. This
tities of individuals, rendering them fit to be governed.
In summarizing the work of "critical constructivists" ideational shaping is quite consistent with constructiv-
such as Giddens and Foucault, Finnemore and Sikkink ist thinking, but it has been underexplored in the

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Stephen Bell 663
literature, ism, especially through a focus on "situated

especially in agency,"
rel
the power ofcanbusiness
shed useful light on the old chestnut of the struc-
interes
We can thus adapt the conception of power tural power of business. An analysis that focuses on sit-
employed by Barnett and Duvall (2005:46) but furtheruated agents, on their ideational processes and how
emphasize its constructivist elements: "Power is thethese are shaped by wider contexts, also allows us to
production, in and through social relations [including tease out important connections between power and
inter-subjective and discursive relations] of effects onideas.
actors that shape their capacity to control their fate." The paper first briefly reviews relevant debates about
In the case study examined in this paper, it is argued the structural power of business and how these lack a
that the ideas held by state leaders shaped their capac- detailed account of agency. Then, it is shown how
ity to control their fate and indeed reduced or moderated insights from contemporary constructivist research and
the power of business in a specific context. The paperagency/structure debates can help deepen our under-
thus argues that constructivism could usefully shift standing of how state leaders respond to the structural
focus somewhat, from a preoccupation with ideationalpower of business. This approach is then illustrated
structures to a sharper focus on how agents developusing empirical evidence from Australia, particularly in
and use ideas. Hence, the focus is on "situated agents" terms of the relations between policymakers and inter-
operating in mutually shaping or dialectical relations national currency markets in the 1980s and 1990s.
with wider institutional, structural, and ideational con-
texts. Crucially also, it is these changing contexts which
Structural Power Arguments
helped shape the ideas and agendas of key agents.
This approach allows us to better answer a key ques-Probably, the clearest original arguments about the
tion not often posed by cons true tivists: where do ideasstructural power of business have come from the Marx-
come from? Constructivist arguments often have diffi-ist/Weberian scholar, Fred Block (1977, 1980), and
culty in explaining the origins of agency and ideas, a from the radical pluralists such as Charles Lindblom
problem that has so far largely escaped sustained criti-(1977), the latter of whom argued that business inter-
cism. The contribution this article seeks to make to ests have a "privileged position" in politics and that
the market
the constructivist debate is in its conceptualization of system was akin to a "prison" radically lim-
the dialectical interaction between agents, ideas,iting the policy options available to governments. The
insti-
tutions, and structures. Many constructivists concede
strength of such arguments is that they highlighted the
state's broad dependence on the aggregate results of
that agency is important for enacting ideas and norms,
capitalist economic activity. Important decisions about
but thus far, there has only been limited understand-
ing of how to operationalize this interaction. innovation, the allocation of resources, investment,
Empirical evidence is also used in this paper andtoemployment are all largely in the hands of busi-
make a contribution to the business power literatureness leaders in a capitalist economy. The clear implica-
by showing that the structural power of business tion of such a division of responsibilities between
in lib-
eral capitalist settings is not automatic. Instead, government
it can and business is that governments will face
be shaped and mediated by the ideas and conceptions strong incentives to adopt business-friendly policies
held by key agents, such as state leaders. As arguedand/or to keep policies distasteful to business off the
below, this process partly depended on how state political
lead- agenda (Crenson 1971). Disinvestment, capital
flight, and a faltering economy are a high price to pay
ers sized up the relative costs and benefits of particular
relations with business and how such relations were for policies that undermine business confidence. The
interpreted and assessed. This process shaped the
structural power instrument is distinctive in that it does
structural power (or indeed relative powerlessness)not
of necessarily require overt political activism on the
part of business to be effective. As Hacker and Pierson
business interests, suggesting the need for a greater
(2002:281) point out, "This power is structural because
focus on agency than most accounts of business power
currently feature. The ideas and mindsets of state the
lead-pressure to protect business interests is generated
ers were in turn shaped by the contexts, especiallyautomatically
the and apolitically. It results from private,
individual investment decisions taken by thousands of
changing institutional and structural contexts in which
they operated. Hence, an important though somewhat enterprises, rather than from any organized effort to
influence policymakers." As Hall (1986:274) explains:
neglected issue in current research is the ideational
mediation of the structural power of business. This is
an approach which can also help further explain how The conjunction of a liberal democratic polity and a
and why such power varies (Vogel 1983; Hacker andcapitalist economy confers an unusual degree of sys-
temic power on capital. Their power is systemic in the
Pierson 2002). Arguably, insights from contemporary sense that capitalists need not take concerted action to
agency/structure debates, as well as contemporary actualize it. Timely reminders from the spokesman for
approaches drawing on but also refining constructiv- business are never amiss, but structural incentives,
already apparent to politicians, tend to discourage
1 Some scholars have hinted at this connection. For example, Finnemore them from pursuing policies that might endanger
and Sikkink (2001:398) argue that "constructions of reality reflect, enact, and investment, even in the absence of collective action on
reify relations of power." This ideational "enactment" of power is consistent the part of capital.
with the arguments of this article, although Finnemore and Sikkink do not
pursue this line of reasoning. Similarly, Vogel (1983:41) argues that "critical
to both these shifts in the relative political power of business was a change in
While useful, arguments about the structural power
public perception about the strength of the American economy." Again, the of business have typically been pitched at a high level
role of ideeis is invoked, but not analyzed in detail in this context. of abstraction and have often had little to say about the

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
details of interactions between structures and relevant

retaliate against government by reducing investment is
agents. This is an important lacuna because, as argued
clearly influenced by a range of factors, particularly
more fully below and illustrated empirically, structural
the state of the economy and demand dynamics.
power relations are always mediated and actualized by
Arguments about the historical variability of business
power
agents. On the business side of this relationship, there have also been explored in the work of David
Vogel (1983, 1987, 1989). In a research program
has been important recent work by several scholars
who have probed key dimensions of agency. Forexplicitly exam- designed to challenge "static" conceptions
ple, Mosley (2003) argues that in assessing developedof business power (such as Lindblom's), Vogel sets out
economies, financial market decision makers do not to explain the political ascendency of American social
factor a wide range of parameters into their calcula-reformism in the late 1960s and early 1970s in the face
tions and focus mainly on two issues: inflation levels
of widespread business opposition. A key explanation,
and government deficit/GDP ratios as indicatorsVogel of argues, involved the organizational weakness of
4 'sound finance" or government's willingness to pro-business during this period, as well as the way in which
tect monetary values and ensure debt repayment. As prosperous national economic conditions reduced
public and policymakers' concerns about levels of busi-
Mosley argues, market actors forcefully demand partic-
ular values on only a few key variables, implying that
ness investment. As Vogel (1983:42) states in a key pas-
the structural power of financial markets in relationsage:
to
government policy is thus "somewhat strong, but also
somewhat narrow" (Mosley 2000:745). Further work on Seen from this perspective, Lindblom is partially cor-
such lines has been done by Hardie (2006), who stud- rect; business is in a uniquely privileged position to
ied bond market reactions to the Brazilian election of persuade the public that the satisfaction of its
2002 and found scope for government policy discre- demands is essential if high growth rates are to be
tion, provided certain policy parameters (relating to restored. But there is nothing automatic about this
business confidence weapon ... it is apt to have lim-
sound fiscal policy, etc.) were observed. These types of
ited political significance in a relatively prosperous
findings thus provide useful first-hand data on how period.
business participants perceive and operate within a con-
text of structural power engagements. A further refinement is to connect detailed institu-
On the government side of the relationship, it can
tionalist analysis to arguments about structural power.
be argued that Lindblom's generalized claim that the
For example, Hacker and Pierson (2002) argue that
capitalist market amounts to a policy prison cannot
the structural shifts wrought by the Depression of the
fully explain the comparative diversity of business-gov-
1930s helped the consolidation of the state at the
ernment relations under different types of capitalist
national level in the United States. The shift from a
systems, a research agenda now embodied in the decentralized
Vari- state to a more centralized one reduced
eties of Capitalism approach (Hall and Soskice 2001).
the structural power of business interests that had
Nor can Lindblom's approach explain how govern- hitherto exploited a key resource, capital mobility, or
ments periodically triumph over business opposition.
the ability to play off state governments against each
This question has occasioned responses mainly other
fromin their efforts to attract footloose business
Weberian "statist" scholars who were keen to show
investment. As these scholars show, the "structural
that the state's authority and institutional capacities
power of business will increase in decentralized federal
could potentially counter or mediate the power of (Hacker and Pierson 2002:282).
systems"
business interests. Skocpol's (1980) analysis of the
Further refinements to structural power arguments
bold policy making in the American New Deal in the
are possible if we shift to a sectoral focus. At this level,
face of widespread business opposition is a good case
abstract theories of the state's structural dependence
in point. Marxists influenced by Weberian ideas have
on business may be a poor guide to how governments
also offered more nuanced analyses, with Fred Block
relate to particular sectors of business. Some sectors of
(1977, 1980) suggesting that a key problem with struc-
business may be more privileged than others at partic-
tural power arguments was that they were too ahistori-
ular points in time, an outcome that reflects the gov-
cal, failing especially to analyze the changing dynamics
ernment's overall strategy for economic growth and
of business power over time. In an analysis echoing
national development. The Australian government's
exogenous shock theories of institutional change (for
drive to drastically reduce tariff protection for manu-
example, Krasner 1984), Block explained why business
facturing and to boost the trade-exposed resources sec-
interests could sometimes lose important political bat-
tor during the 1980s and 1990s is a case in point
tles by suggesting that the structural power weapon
(Capling and Galligan 1992; Bell 1993). This focus on
could be weakened during certain historical junctures,
state strategy points to the importance of how states
such as wars, depressions, or periods of post-war recon-
can structure and mediate the structural power rela-
struction. During wars, for example, Block argued that
tionship. Institutional incentives can also be important
business confidence becomes less important in because
this regard. Smith's (1999, 2000) evidence from the
of restrictions on international capital flows, because
United States suggests that institutional incentives,
the economy is geared up in virtually a command
such as electoral pressures on governments in high
mode for military production, and because "in the
stakes contests, can override the need to secure busi-
general patriotic climate, it would be dangerous for
ness investment, even during economic downturns.
the business community to disrupt the economy
The business world can also remain opaque to govern-
through negative actions" (Block 1977:24-25).ment
Such decision makers, and in such a situation, as
contingencies suggest that the capacity of business to

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Stephen Bell 665
Crouch (1979:43) argues,

ested in maximizing their power, prestige and wealth."
can increaseClearly,
the it would be useful to understand more about
discretion
how state policymakers actually appraise and interpret
The state in a the
capitalist society
structural power of business in particular contexts w
to the interests of
and what impactscapital, but
this might have, a process that it
degrees of precision and
implies that constructivist insights might bevary
useful in i
capital's interpretation of its own
understanding government preferences and agendas in
may always be the case that gove
such contexts.
edge capital's concern about the
els on the incentive to invest, bu
of acquiring firm knowledge of
Constructivism and the Question of Agency
involved, there is always an are
extent to The points mentioned
which governmentsabove about strategy and discre- t
complaints tion regarding
(my state leaders and the degree of credibil-
emphasis).
ity they give to structural power threats all underline
Similar points
the importance about
of agency and of actor agenc
interpretation.
and the potential discretio
As Blyth (2003) usefully puts it in a critique of rational
ers have also been made by Hacker and Pierson choice theory: "structures do not come with an
(2002:282) when they argue that government fears instruction sheet," implying that the meaning and
about potential disinvestment, ''will depend on howramifications of structural dynamics need to be worked
credible policymakers believe the threat to be" (see also out "on the ground" by the agents in question. Struc-
Smith 1999:861; Barry 2002:179). These studies all hint tures are thus "underdetermining": structurally
that agency matters and that the ideas and attitudes of derived notions of interests or preferences are always
government policymakers are a potentially important incomplete. As Hacker and Pierson (2002:282) sug-
factor in mediating the structural power of capital, a gest, "structural power is a signaling device: by itself it
view consistent with Dowding's general claim that does not indicate policy choices." Hence, what govern-
"structural explanations generally leave room for agent ment policymakers actually think and the inter-subjec-
discretion." Thus far, however, and especially in relative contexts in which they operate is a crucial part of
tion to structural power arguments, such agency-based the equation.
dynamics have not been pursued in sufficient depth. Based on such reasoning, we can define the struc-
A good example is Garrett's (1998) study on the tural power of business as working through the real or
policy discretion available to social democratic regimes potential benefits or costs of real or threatened busi-
in the face of "globalization." Citing a range of bene- ness activities in relation to state actors who must per-
fits to the economy and to capital holders, including ceive such benefits, costs, or threats as significant and
corporatist wage moderation, public infrastructuremeaningful. To understand their interests and the
investment, and socially stabilizing social policies, Gar- meaning of things, agents rely on ideas, interpretation,
rett (1998:6) declares "there is no good reason to and inter-subjective understandings. Hence, power is
believe that in the global economy, capital flight will not just an objective condition but is shaped subjec-
be the knee-jerk response of mobile asset holders totively and inter-subjectively; it is a relational artifact,
policies of social democratic corporatism." Garrett's produced and mediated through social and ideational
overall conclusion is that we need to be wary of highly realms.
"structuralist" versions of business power arguments. This type of analysis resonates with Barnett and Duv-
What Garrett does not explain however is exactly how all's (2005) account of power in international rela-
business interests come to potentially appreciate ortions. These scholars have analyzed forms of power
accept such social democratic policies, and, more to operating though "social relations of interaction"
the point here, how governments wishing to promote (essentially a "power over" conception) and have con-
such policies appraise the potential investor reactiontrasted this with a notion of power as "social relations
and navigate this type of structural power terrain. In of constitution" (essentially a "power to" conception).
other words, exactly what ideas and conceptions about In this latter constitutive conception, "power works
their own agency and policy discretion helped embol- through the actions of specific actors in shaping the
den social democratic governments in such cases? ways and extent to which other actors exercise control
Largely implicit or at least underdeveloped in the over their fate" (2005:46). We can add a constructivist
accounts above is a rounded account of agency, espe-dimension to this by also emphasizing how the subjec-
cially on the part of governments and state leaders. Rel-tive and inter-subjective ideas held by given actors also
atively crude or aggregated notions of the structural shape the " extent to which other actors exercise con-
power of business tend to black-box the state or in trol over their fate." Barnett and Duvall also argue
some cases resemble rational choice approaches by sug-that "structural" forms of power "that distribute asym-
gesting that government policymakers will respond to metric privileges also affect the interests of actors,
structural power threats in routine, institutionally often leaving them willing to accept their role in the
defined ways aimed at protecting the interests of the existing order of things." But, as argued in this paper,
government or in ways that largely assume away the agents might constructively use ideas and not end up
issue of nuanced agential interpretation. Following thinking in such a submissive way and, in so doing,
something akin to a rational choice line, Block perhaps partly reshape power relations and exercise a
(1980:229), for example, simply assumes "state manag- degree of control over their fate. This latter process
ers collectively are self-interested maximizers, inter- points to another category of power analyzed by

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Barnett and Duvall - 'which ideas mediate the relationshippower"

'productive between agents or the
stitution of all social and
objects
material reality andwith various
where the latter is accepted as social
through systems of"real" or efficacious. Here, ideas or and
knowledge "collective under-
discursi
tices" (2005:55; see also
standings,Wendt
such as norms, endow 1999:97).
physical objects with Barn
Duvall argue that structural
meaning or purposeand productive
and therefore help constitute real- pow
both concerned with ity" how 4 (my
(Adler 1997:324) 4 emphasis).
the In social
other words, capa
actors are socially produced" there is "a real world out there" that matters (Adler But B
(2005:55).
and Duvall do not explore 1997:324), albeit onein that isany
interpreteddetail
using ideas. how
forms of power might This isinteract.
essentially the type of constructivist
This is stance
a gap th
attempts to fill. As argued adopted in this paper.
empirically below, t
ductive or constitutive power
Constructivists ofwish
also typically ideas not
to engage with the only
acts with structural forms
structure-agency of
debate, power
endorsing a dialectical but c
reshape or mediate such approach,power.
arguing that "agents and structures
The elaboration of are contemporary
mutually constituted" (Price and Reus-Smit construc
approaches in international 1998:267; Finnemore and Sikkink 2001:393).and
relations It is ofteninter
political economy, especially the case, however, that in the in
the structures United
question are Sta
arisen partly as a critical seen as ideational structures (Finnemore
reaction toandthe Sikkink mate
and/or rationalism found in major theoretical 2001:395), such as norms or culture; a situation where
approaches such as Marxism, realism, and neoliberal "inter-subjective meanings have structural attributes"
institutionalism. Constructivists have instead high- and are seen as "conditioning agents" (Adler
lighted the "social" and the subjective and inter-sub- 1997:327). Some constructivists also insist on focusing
jective 4 'ideational" realms as key drivers of identities, on holism and "social wholes . . . rather than individu-
interests, purpose, and action in politics. Furthermore, als," thus setting up either/or distinctions between
in contrast to rationalist approaches, where situations agents and structures (Fearon and Wendt 2002:58).
or contexts are largely seen as shaping agents,2 con-Yet, there are two problems raised by these moves.
structivism reverses this logic and sees agents and their First, a predominantly ideational view of structures
ideas as shaping situations (Dessler and Owen closes off wider consideration of material or indeed
2005:598). The most fundamental claims made by con-institutional structures. Second, the tendency within
structivists are thus ontological. Social reality is largely
constructivism to focus heavily on ideational structures
or wholly assumed to be an ideational artifact based (or on social wholes) breeds its own kind of "structur-
on things that are said to exist via the perceptions andalism," a move somewhat analogous to the norm-
agreement of relevant agents (Finnemore and Sikkinkbound, "over-socialized" (Wrong 1961; Meyer 2010)
2001:393). Actors use ideas and mental constructs of conceptions of agency often found in sociological
various kinds to interpret and construct their situation,institutionalism. In fact, many constructivists find inspi-
both individually and collectively, and in turn derive ration in such sociological reasoning (Finnemore
their interests and preferences from such construction. 1966). Yet for Fligstein (2001:110), "the critique of
"Ideas" (to use the somewhat crude short-hand) are both the sociological and rational choice perspectives
thus "constitutive." This is illustrated in phrases like that I want to make suggests that neither opens up the
Wendťs (1992) "anarchy is what states make of it," or problem of action and gives real people much leeway
Onufs (1989) "world of our making," or Berger and in creating their social worlds." Hence, in its "socio-
Luckman's (1966) "social construction of reality." logical" guise, constructivism comes close to the struc-
Constructivists thus make the following claims. First, tural reasoning it originally criticized in rationalism.
ideas shape or constitute the situation or context of action. As Checkel (1998:342) argues, "it is ironic that con-
Second, ideas also shape or constitute agents themselves , structivists therefore find themselves in a predicament
especially their interests, preferences, and identities. all too familiar to rational choice scholars: their ontol-
Contra rationalism, interests, and preferences are thus ogy has led them to neglect key issues." In particular,
formed endogenously. as Checkel (1998:341) continues, "agency has fallen
Constructivism varies. There are postmodern through the ontological cracks for constructivists." In
approaches, which argue that ideas fully constitute the other words, the main focus within constructivism is
situation or context of action and also fully constitute not on agents per se but on wider ideational structures
agents themselves. This is an approach in which ideas that are said to condition or constitute agents.
and inter-subjective meanings are fully primitive. Alter- To escape these problems, we need to develop a
natively, there is a "modern" constructivist approach more robust or rounded account of agency. We need
in which ideas are not fully primitive and where the to get down to a level where we can examine how
external material world is assumed to exist in some agents deal with and are embedded within an idea-
"real" manner. Adler (1997) calls this the "middle tional realm. We also need to show how such agents
ground" between rationalism and the fully interpretiv-shape and in turn are shaped by wider institutional
ist position of postmodernism. It is an approach inand structural environments, thus the concept of "sit-
uated agents." As Price and Reus-Smit (1998:266)
2 Despite the putative methodological individualism of rationalistargue, "systems of meaning define how actors inter-
approaches, the logic of explanation relies on placing agents with given
pret their material environment." Ideas and inter-sub-
(assumed) preferences into institutional contexts which then shape behavior
jective understandings play a central role in mediating
through structured incentives. This is verging on a structuralist account or at
least what Hay and Wincott (1998: 952) term a "calculating automatons"reality (social or material) and as mediating between
approach. agents and the world "out there," a world that has

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Stephen Bell 667
ramificationsdialectical
for interactionhuman
between agents and institutions.
acti
can change Institutions
in ways are shaped by agents,
that but institutions help
also
pretations. confront agents with sets of what Searle (1995:28) calls
"constitutive rules" and with other constraining and
enabling conditions that can become, as Adler
Institutions, Structures, Age
(1997:322) puts it, "diffused and consolidated" over
Agency is time and that shapeby
shaped behavior. It institut
may be possible
sions of "new institutionalism
under extraordinary (say revolutionary) conditions for
torical, and sociological instit
agents to collectively overturn or deny institutions, but
agents as highly more ordinarily, institutions confront agents in the
constrained b
ronments, again here and now verging
as embedded, already structuredon ter- a
a major strand rains. Institutions
of arehistoricalthus ontologically prior to the i
ple, institutions individuals who populate
are them attypically
any given time. The
and resistant temporal
to dimension
change is important here. Institutions
or ar
tial, path-dependent have properties that help structure thought patter
and behav-
2000; Pierson 2000a:490,b). This has occasioned con- ior at one remove from the immediacy of thought or
siderable criticism of late, with Olsen (2009:3) arguingaction by agents at any given point in time. Institutions
the approach is "overly structuralist and does notcan thus shape or even impose behavior. This is what
grant purposeful actors a proper role" (see also gives institutions causal properties and why at bottom
Crouch 2005; Peters and King 2005). we pursue "institutional" analysis. By essentially
Fortunately, there are not one but two versions of eschewing a meaningful institutional analysis, recent
historical institutionalism. There is also a more "flexi- constructivist institutionalists place almost all explana-
ble" approach within historical institutionalismtory thatweight onto agency and lose sight of institutions
(Bell 2011). In a parallel critique of the postmodern
emphasizes agency and the dialectical interaction
between agents, institutions, and wider structuresinstitutional
(Bell interpretivism of Bevir and Rhodes
2011). As Steinmo and Thelen (1992:17) originally (2003), 3 McAnulla (2006:122) argues that such a move
argued, we need to unpack the institutional black"leaves
box us with an implausibly narrow view of how
and focus on "strategic actors" and how they are individual
capa- beliefs and actions are generated."
ble of acting on "openings" provided by shiftingUltimately,
or however, in a more dynamic historical
sense, the approach here does not give primacy to
evolving contexts (see also Cortell and Peterson 1999;
Campbell 2004). Institutions and structures matter agents, institutions, structures, or ideas, but instead
because of the ways they reflect, refract, restrain,holds
and each to be mutually constitutive in a dialectic
manner (Marsh 2009). Agents thus confront institu-
enable human behavior, while in turn, it is the behav-
tions, for example, as a "distinct strata of reality"
ior of agents that reproduces or transforms institutions
and structures over time. Moreover, as argued above,(Archer 2003:2), that must be dealt with as entities in
the
actors are interpretive, partly constructing the experi- here and now and perhaps changed over time. In
other
ence of their institutional situation using cognitive and words, institutions are more than just real-time
normative frameworks. This approach recognizes ideational
that artifacts and are more like inherited sets of
rules and behavioral expectations. Moreover, ideas do
ideas, language, and discourse provide crucial building
not operate in a vacuum but are instead "embedded
blocks for establishing meaning and understanding
in a historical context and need institutional support
and thus of purposeful action in politics and institu-
tional life. Also, institutions and structures define to be effective" (Guzzini 2000:148). The missing ele-
roles
and incentives, not final behaviors, and roles and ment from recent discursive constructivist institutional-
ist accounts is a recognition that the impact of such
incentives always need to be interpreted and appraised
prior to action. Agents thus have a degree of institutional (or indeed wider structural) environments
"bounded discretion" within environments in which means that agents' choices are not made on a tabula
they operate, implying maneuverability and a degree rasa. Agents and environments interact and mutually
of "agential space." shape one another over time. Hence, at one level,
This agent-centered strand of historical institutional- institutional or structural environments are analytically
ism is quite compatible with "modern" constructivism distinguishable from agents and are "out there" to
(Bell 2011). Nevertheless, a tendency is sometimes the extent that they are not just constituted by real-
evi-
dent within constructivist literature to collapse institu- time subjective ideational construction. Institutional or
tional dimensions into the ideational realm, seeing structural environments can exert real (though always
"rules" and "norms" largely as ideational constructs interpreted) effects by imposing costs or benefits on
and not as defining elements of institutions, as most agents, by shaping actor interpretations and prefer-
institutional analysts would see them. This move to ences,
con-the scope of "bounded discretion" of agents in
flate institutions with ideas is characteristic of the new institutional life, and the resources and opportunities
constructivist or discursive ins ti nationalists (Hay that are available to actors.
2006a, b; Schmidt 2008). It is also consistent with Institutions and structures are often conflated by ana-
Searle's (1995) definition of "Institutional facts" as lysts. However, it is useful to distinguish among agents,
those things which exist only through collective agree- institutions, and structures. Institutions can be defined
ment about "what stands for an institution" (Searle as rules, norms, or operating procedures that shape
1995:13). The problem with this formulation, however,
is that it perceives only one dimension of the two-way 3 See also Bevir and Rhodes (2010).

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
agents' behavior while

accounts structures
of situated agency. For Adler can be def
(1997:322),
wider economic, social, or
constructivist political
insights illuminate the way forces
in which the th
"the material world shapes
both agents and institutions. For and is shaped by human
example, Aus
changing terms actioncan
of
trade and interaction,"
be thoughtand how this in turn
of isin such
tural terms and below itbyis
shaped shown
"dynamic how
normative and this
epistemic interpre-sha
behavior of agents within institutions,
tations of the material such
world." Here, the inevitability
Reserve Bank of of interpretive
Australia (RBA) understandings
. of the world is
Structures operate inaccepted,
a 4but so too is the notion that the "material
'strategically selective
ner, establishing incentives
world shapes and is or
shaped disincentives
by human action" - a dia- or
lectical approach
rationales that may lead agents in which the
to material
favor world is certai
opments or choices over others
granted a degree of efficacy. (Jessop 1990).
structural factors are typically the result of em
historical processes, they arguably form a b
Australian Economic Policy and the Power of Financial
background context in which Markets specific institutio
ate.
The case study in this section empirically illustrates

In dealing with the dialectical interactions between
agents, institutions, and structures, the approach here
these theoretical claims, particularly the way in which
follows the work of Archer (1995, 2003) and (i) structures
mod- and agents mutually interact, with agents
els agents, institutions, and structures as being analyti-
mediating and actualizing structures and with struc-
tures
cally distinct in the sense that each has properties thathelping to shape the ideas and the scope of
are not simply reducible to the other at anybounded
given discretion available to actors. The interven-
point in time; (ii) models agents as operating ining role of institutions in mediating such dialectics
insti-
tutional and structural contexts that are pre-given between
at agents and structures is also illustrated. Such
any given point in time; (iii) models agents, institu- an empirical illustration of the role of ideas in shaping
tions, and structures as operating in a dialectical, and being shaped by structural elements is central to a
mutually constitutive relationship over time; and dialectical
(iv) understanding of the relations between
sees institutional and structural effects as ultimately agents and structures. The arguments presented also
mediated and actualized by agency (for a fuller question discus- the widespread interpretation of power as
sion, see Bell 2011). something that simply shapes or conditions ideas and
The account being developed here thus has situated behavior as part of wider processes of domination or
agents as a key component of the analysis, hegemony albeit and instead shows how changing ideas and
agents who are dialectically engaged in shaping and
perceptions can also shape or constitute forms of
being shaped by their relevant contexts overpower, time. in this case the structural power of financial
Institutional or structural environments can exert markets. The account shows how changing structural
potentially important, though always agency-actualized, conditions in the Australian economy during the
effects. "Social facts," as Adler (2002:95) 1980s puts and it, 1990s, especially improving terms of trade,
4 'emerge from the interaction between knowledge and
encouraging policymakers to revise their perceptions
the material world." This focus on how agents are
of vulnerability regarding Australia's current account
shaped by changing external environments also deficit
helps (CAD). This in turn saw a revision of threat
address another lacuna in much of constructivism, perceptions regarding the possibility of a currency sell-
namely the question of where ideas come from and off, a major weapon wielded by financial markets. The
how and why they change. At present, within much net effect was that changing institutional and struc-
constructivist thinking, ideas are largely assumed to tural conditions in the economy helped change policy-
emerge out of other ideational processes, such as makers' perceptions about the structural power of
learning, emulation, or socialization. Constructivists financial markets, culminating in a showdown during
often seem intent on bracketing off other sources of the Asian financial crisis in 1998 when the Reserve
influence. Yet without a clearer view of situated agency, Bank and wider authorities weathered a currency sell-
the full gamut of factors and contexts that are likely to off and stood up to the financial markets.
shape ideas and interests are likely to remain obscure. Our story starts when the Australian dollar was
As Checkel (1998:339) argues, "without more sus- floated in late 1983 in the wake of sustained specula-
tained attention to agency, these [constructivist] schol- tive market pressures. In principle, the float implied a
ars will find themselves unable to explain where their more relaxed policy approach to the value of the dol-
powerful social structures [norms] come from in the lar on the part of policymakers, especially within the
first place and, equally importantly, why and how they federal government and the monetary authority, the
change over time." Interaction between agents and RBA. In the account that follows, we focus particularly
the contexts in which they operate can be important on policymakers within the RBA, partly to help sim-
in this respect. Finnemore and Sikkink (2001:407), for plify the account and partly because they were pivotal
example, argue that the acceptance or the "strength" agents.
of new ideas can be shaped by the way they become In the wake of the float, the markets would price the
"embodied in institutions" (see also Hall 1989). This dollar, factoring in views about relevant economic fun-
is a useful step in the direction being advocated here. damentals and sentiments about the soundness (or
It implies the need to maintain analytical distinctions otherwise) of official policy settings. The theory behind
between agents, institutions, and structures, thus plac- the float was also partly shaped by the view that shifts in
ing us in a better position to tease out more rounded the value of the dollar would shoulder the burden of

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Stephen Bell 669
economic adjustments.
itous soft landing in 1987, interest rates were raised I
theory suggested that
again to similar levels in 1989 a
amidst a surging post- fl
help deal with problems
financial deregulation asset price boom and further
equilibrating pressure on the CAD. In August 1990, Reserve Bank of
mechanism
ments) that Governor, had Bernie Fraser, devoted an entire speech to
historicall
makers in Australia. affirming the commitment to tackle the CAD, arguing
In practice, however, such sanguine outcomes did
that worsening current accounts and growing external
not occur, and after the float, the authorities debt made Australia excessively vulnerable to adverse
remained fixated on the level of the CAD, which wid- market reaction. "Confidence, as we all know, is a
ening substantially in the 1980s, doubling from earlier fragile thing," he warned: "Even countries without
averages to 4% of GDP to peak at 6% in 1986 and large foreign debts can be subject to adverse re-assess-
again in 1989. Both episodes constituted current ments by international markets" (Fraser 1990:13).
account "crises" in the eyes of policymakers. This fixa- In the intense policy debates that had led up to the
tion was primarily driven by the fear of a falling dollar float of the Australian dollar in the early 1980s, the
if financial markets lost confidence in domestic policy then head of the federal Treasury had argued that
settings and the management of the CAD. By 1985- relinquishing control over the exchange rate would be
1986, this scenario was unfolding as market reactions an excessive gift of power to the markets. And as we
produced a substantial depreciation of the dollar. have seen, in the 1980s, the policy authorities thought
Despite the fact that the institutional and policy and acted in a way that fully recognized and under-
regime had been altered fundamentally by the 1983 lined such market power. This is an object lesson in
float, the mindset of the policy authorities thus the way in which ideas and wider structures interacted,
remained locked in a prior era of fixation on activist shaping a policy mindset that was focused on the value
management of the current account and the value of of the dollar and fixated on market reactions even
the currency. This can partly be explained in terms of amidst a newly created floating rate regime. Hence
a learning or ideational lag, as the authorities slowly the ideas and mindsets of policymakers placed them
learned how to handle a floating rate regime. But per- in a situation where they were highly vulnerable to th
ceptions were also shaped by wider structural factors. sentiments of financial markets and their structural
For one, there was skepticism about the degree and power.
speed with which import/export price adjustments Crucially, however, this mindset changed substan-
under a floating rate regime would help stabilize the tially during the 1990s, providing us with answers to
current account. Compounding this were concerns important questions about where new ideas come
about Australia's declining terms of trade as well as from. In this case, the new ideas in question arose
about the structural weakness of the economy, espe- from conjunctures such as the early 1990s recession,
cially weakness on the export front and the economy's from new academic reasoning, and from the way in
high import propensities. A telling example of the level which changing institutional and structural conditions
of fear that gripped the authorities occurred in May in the economy also helped shape revisions in think-
1986 when Treasurer Paul Keating famously declared ing. First, the accidental policy-induced recession of
Australia could become a "banana republic" if solu- the early 1990s in the wake of the high interest rates
of the late 1980s was important. The recession was
tions were not found to the CAD, the dollar problems,
partly the result of a process of "ideational path
and underlying structural issues. By July, things got
worse: dependency," where previous experiences push cer-
tain ideas along a given path (Hay 2006a, b:65). The
highJuly
The currency crisis hit Australia on Monday, interest
28, rates of 1986 and the subsequent soft
when ministers were finalizing the budget. landing
Keatingofhad
1987 had conditioned policymakers to
his little Reuters screen on the Cabinet table and
expect kept
the same outcome after the high rates of 1989.
pointing to the falling $A rate. An exchange rate
Instead, theof
economy crashed into a deep recession.
US 60 cents was seen as a psychological barrier but on
Fighting the CAD with monetary policy had clearly
this day the dollar fell from around 63-57.2 cents. The
proved to be an uncertain and risky business with
slide was only arrested by Reserve Bank intervention.
The Cabinet was infiltrated with a distinct mood of huge downside risks. This had a sobering effect on
panic. Keating' s banana republic warning never policymakers and helped shape a policy rethink. Sec-
seemed so real ... It is doubtful if any budget meetingond, an important ideational intervention also
in the last 25 years has ever been subjected to suchoccurred around this time. An influential paper pub-
pressure (Kelly 1992:220). lished in 1989 by a senior economist, John Pitchford
(1989), had suggested that the authorities should sim-
To appease the markets, the federal government ply stop worrying about the CAD. Pitchford argued the
had announced binding rules around fiscal policy CAD was driven primarily by private external debt obli-
and
a tough corporatist wages policy early in its first gations
termthat were largely servicing productive domestic
investment and that the authorities should not be try-
in office. But a further key indicator was that monetary
policy, the key discretionary macroeconomicing policy
to second-guess such market outcomes or potential
instrument, was focused squarely on the CAD, market
withreactions to them. Pitchford's sanguine "con-
changes in official interest rates closely shadowing senting
the adults" view about external private debt and
CAD (Bell 2004:54). The current account crisis of the CAD also reflected the increasing salience of neo-
1986 thus saw a tough restrictionist policy stance withliberal views about markets and economic policy, views
that were becoming increasingly influential in the top
official interest rates jacked up to 19%. After a fortu-

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
policy circle in Canberra and

ward off potential at
imported the
inflation, RBA
and attempt to in Sy
(Pusey 1991; Bell 1997). In
appease the fact, the
markets by adopting RBA
higher led the p
interest rates,
to revise official thinking. but they choseAs not tothe
(Bell 2005). In contrast to the
Bank's then Dep
Governor put it, the ''mindset" more orthodox approachwithinof defending the currency
the Bank b
to change (Bell 2004:67). The
through higher interestRBA finally
rates, as adopted in New Zea- convi
Keating, who became Prime land (and which led to a domestic recession),
Minister inthe RBA
late 1991,
stop fixating on the CAD. held its nerve
The and essentially
impact defied the markets.
of In the rece
as well as these ideational interventions saw the fact, the Bank was well aware that a good deal of the
authorities stop anguishing about the CAD. Instead,
market making was the result of aggressive, speculative
monetary policy was shifted to give greater actionemphasis
by hedge funds that had already wreaked havoc
to fighting inflation, a move also more in in Eastwith
line Asia. The
the RBA's leaders were anxious not to see
institutional mandate and revised policy ideas within
this happen in Australia and were keen to stand up to
the RBA (Bell 2004:54). the hedge funds and their efforts at short-selling the
Third, by the mid-1990s, important structural dollar. As and
it eventuated, the RBA's views about the econ-
institutional shifts were also occurring in omy's strong fundamentals prevailed and the hedge
the Austral-
ian economy, which further helped entrench fundsthis new bets. Crucially, interest rates were not
lost their
mindset. Most importantly, there was a shift raised during
toward farthe crisis, and domestic growth and
stronger terms of trade for Australia as commodity
employment were protected. John Edwards, a well-
known Sydney-based economist, comments that the
exports (especially to a booming China) strengthened.
This was enough to reverse a process of declining
RBA's Governor Macfarlane did well: "A more easily
terms of trade that had been underway for decades
rattled in
Governor, someone with less monetary experi-
ence, that
Australia. It was a profound structural shift someone with more reliance on models and theo-
fur-
ther emboldened policymakers regarding the
ries and lessCAD
on accumulated wisdom, would quite easily
and was a further strong facilitator in helping toAustralia
have cost alter billions of dollars in lost output and
mindsets and the stance of economic policy. Indeed,
a hundred thousand jobs" (quoted in Burrell 1999).
even during episodes when the CAD rose to histori-
Hence, the Bank's responses cushioned the impact on
the domestic
cally high levels during the 1990s, the policy authori-economy and absorbed the short-term
ties remained sanguine, pointing out that mounting
shock on the exchange rate. This is exactly the flexible
debt servicing obligations could be handled by rising
response that a floating rate regime is supposed to facil-
export incomes and the new strength of Australia's
itate, but it had taken fifteen years since the dollar float
terms of trade. There were also a series offor this mindset
major insti- to be fully worked through and
tutional and associated structural changesexpressed
in the econ-
in policy behavior. Paul Keating has argued
omy that were also important. Institutionally,
that he there
helped reshape the RBA's perceptions about
were major reforms in tariff protection, the labor mar-
the exchange rate.
ket, and other areas of microeconomic reform that led
to structural economic changes, including increased They were always in the virility business [about the
productivity growth and greater flexibility in the econ- exchange rate]. And I take a large measure of the per-
omy, which also reduced the "pass through" effects of sonal responsibility for knocking that out of the Bank.
If Ian Macfarlane, at the time of the Asian crisis had
exchange rate changes on domestic inflation.
been left to the orthodoxy, Australia would have been
Together with the lower levels of inflation after the
pushed into recession . . . we'd actually made the Bank
early 1990s recession, these changes meant that the cross the Rubicon of its own where it knew that the
economy was in a far stronger position to flexibly exchange rate could take the slack, and take the hit,
absorb changes (even large changes) in the exchange and domestic demand could continue, (quoted in Bell
rate. These institutional and structural changes in turn 2004:92).
helped reshape mindsets about policy and embolden
policymakers. Crucially, the lowering of concerns This ideational exchange may well have been salient,
about the CAD during the 1990s placed the govern- but it is also important to highlight the more immedi-
ment and the authorities in a new and more authorita-
ate institutional contexts that shaped policymakers'
tive position in relation to the financial markets. perceptions and agendas and that helped mediate
Finally, after many years, the full ramifications of the
relations between agents and structures, especially
floating rate regime and new perceptions about within the the RBA. Here, the legislative mandate of the
CAD were filtering through, helping to alter the powerRBA is important, inscribed in brass letters against
landscape in which policymakers and the markets black marble in the Bank's foyer in Martin Place, Syd-
operated. ney. Unlike many central banks, the RBA has a dual
This new relationship was illustrated graphically dur- goal charter focused on fighting inflation and on sup-
ing the Asian financial crisis of 1997-1998, which in porting economic growth and full employment. As
effect proved to be a contest between the authorities noted above, the shift to a more concerted attack on
(especially at the RBA) and global currency markets. In inflation which occurred in the early 1990s was in
the context of the Asian crisis, the RBA's leaders devel- accord with the RBA's anti-inflation mandate. Never-
oped novel interpretations and exercised policy discre- theless, the RBA's leaders (under Bernie Fraser and
tion. Market concerns about the potential fallout of the subsequently under Ian Macfarlane) were serious
crisis in Australia, particularly on the export front, were about the employment mandate as well. This is
reflected in a rapidly depreciating currency. The Bank's illustrated in the innovative agency and somewhat
leaders could have attempted to defend the currency,

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Stephen Bell 671
unorthodoxinstitutions,
approach the
and structures can better explain political
Asian crisis phenomena
in and offer a more rounded account
standing up of the t
ing employment
structural dynamics of (Bell business power. By 200adopting
achieve such an approach, we can overcome the
employment so-called
outcom
tightening in the
agency-structure "divide."recession
On this basis, as Dowding
nor Fraser (2008:31) argues, "agent-centred
made it and structural
clear ho
tional mandates and
accounts can be translated from one into the their
other
shaping through the medium
behavior and of agent's resources
empow which are
reflecting on the
themselves pace
[partly] structurally defined."of in
the early 1990s, As this paperFraser stated
has argued, a key resource for agents
can be their ideas. As shown here, the ideas and percep-
We should have tions moved
of policymakers canfaster
be important in mediating
to c
a lot of resistance to the
and indeed in reducing moving
structural power of busi-ev
This is where the dual goals become important ness. In turn, it was argued that the ideas and percep-
because if we didn't have them and were stuck with
tions of policymakers were heavily shaped not just by
inflation as the sole objective, as in the New Zealand
particular ideational innovations but also by changing
or European model, it would have been easier for
those in the Bank who were uncomfortable about mov- institutional and structural contexts. By the late 1990s,
ing as rapidly or as often as we did to lower interest the mindsets of the policy authorities, in contrast to the
rates to point to such a single objective (that is, a low 1980s, had arrived at a point where their changing con-
inflation one). I was able all the time to counter with ceptions and attitudes to the CAD and the dollar had
the argument that we were also legally charged with aeffectively reshaped power relationships with financial
concern about growth and employment. Without themarkets, allowing a greater degree of "relative auton-
dual goals I don't have any doubt at all (particularlyomy" from market pressures. To be sure, Governor
given the media and political criticism of many of theMacfarlane (1992:16) had recognized that "the finan-
rate cuts) that it would have been very much harder to
cial markets set a corridor in which monetary policy can
make those rate reductions. I think it made an enor-
act," but it is still the case that policymakers were
mous difference to have those dual goals (quoted in
Bell 2004:77-78).
actively engaged in consciously pushing the discretion-
ary policy envelop, further illustrating the role of ideas
and agency in appraising and in navigating a path
A further important institutional factor that aided
through complex structural environments (Bell 2005).
key agents within the RBA to mediate structural pres-
Arguments about the structural power of business in
sures in innovative ways was the fact the Bank had
relation to state policymakers thus need to focus on
effectively achieved policy independence during the
the dynamics of a particular type of constitutive rela-
early 1990s. The transaction costs of this move were
tionship. Thus far, the relevant literature on this topic
reduced because the necessary legislation regarding
has been based on relatively underdeveloped notions
independence was already in place. This in fact dated
of agency. This is a considerable lacuna because struc-
from much earlier legislation, but had largely been
tural power works by inflicting real or perceived con-
ignored by the government in the post-war era. But
straints on governments or other policy authorities, yet
increasingly, especially in the wake of the damaging
ultimately it is up to policymakers to appraise such sit-
recession, federal politicians had a strong (institution-
uations using ideational resources and to establish
ally derived) political incentive to hand authority to
preferences and agendas in response to such pres-
the RBA, in part to help establish a political buffer
sures. This involves complex ideational processes
between themselves and the newly menacing chal-
whereby policymakers assemble and assess information
lenges of monetary policy. As a leading journalist put
and construct pictures of reality that ultimately help
it, "independence was a gift under duress from the
mediate and shape the power of business. As the case
politicians who felt, post recession, that distance from
above illustrated, the changing ideas held by policy-
the interest rate lever wasn't such a bad option" (Kelly
makers played an important role in increasing, then
2000). Overall, then, the institutional attributes of the
decreasing threat perceptions regarding the structural
RBA played an important role in mediating the rela-
power of financial markets in changing contexts.
tions between agents and structures, in helping to
In further developing this line of research, it would
empower the bank and, amidst the changing mindsets
be useful to examine a wider range of empirical cases
on the part of policymakers, in helping to moderate
that probe how changing mindsets on the part of gov-
the power of the financial markets at key moments.
ernment policymakers help shape structural power
dynamics. It is also useful to link the cognitive processes
Conclusion and mindsets of relevant policymakers more concretely
to their institutional locations and to develop a clearer
This paper has shown how a range of major political
picture of the potential differences in approach
theories, from sticky versions of historical institutional-
adopted by, say, politicians, senior bureaucrats, and
ism, to structural theories of business power, and even
central bankers, for example. The present paper has
certain forms of constructivism, all embrace overly
not done this in any detail, but institutionally shaped
"structuralist" forms of analysis, leaving little room for
differences in how different categories of policymakers
agency. The antidote, as argued, is to emphasize how
perceive and react to structural power dynamics would
a focus on activist notions of agency set within the dia-
be useful to explore.
lectical or mutually shaping relations between agents,

111.68.96.40 on Thu, 08 Jul 2021 09:12:26 UTC
Blyth, Mark. (2003) Structures

Finally, the analysis offered here Do Not Come
alsowith an Instruction
has implic
tions for how we understandSheet: Interests, Ideas
the and Progress in Political Science. Perspec-
relationship bet
tives in Politics 1 : 695-706.
the structural dimensions of business power
Burrell, Steve. (1999) Yes, He's the Gov. Sydney Morning Herald,
"instrumental" dimensions
November 27.
of such power; the l
involving a focus on overt political activism on the
Campbell, John L. (2004) Institutional Change and Globalization.
of business interests through,
Princeton: Princetonfor
University example,
Press. lobbyin
the activist role of business associations in politica
Capling, Ann, and Brian Galligan. (1992) Beyond the Protective
nas. Offe and Wiesenthal (1980:86)
State. Melbourne: Cambridge Universityhave
Press. argued
the structural power of business
Checkel, might
Jeffrey T. (1998) The Constructivist Turn be "explo
in Interna-
and fine-tuned by the tionaloperation of
Relations Theory. World Politics business ass
50: 324-348.
Cortell,
tions," and the insights Andrew, and Susan Peterson.
offered in this (1999) Alteredpaper
States: hel
understand why. If the Explaining
ideas Domestic
and Institutional Change. British Journal of
perceptions of g
Political Science 29: 177-203.
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Cox, Robert. (1987) Production, Power and World Order. New York:
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Columbia University Press.
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Non-Decision Making in the Cities. Baltimore: John Hopkins Uni-
b
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even amplifying the structural
Crouch, Colin. (1979) State power of business
and Economy in Contemporary Capitalism. i
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London: Croom Helm. On this basis, c
understandings of the 4 Crouch,
4 au Colin. (2005) Capitalist
tornatici ty"Diversity
of and Change.
the Oxford
struc
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The Power of Ideas: The Ideational Shaping of the Structural Power of Business

Author(s): Stephen Bell

Stable URL: https://www.jstor.org/stable/41804823

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The Power of Ideas: The Ideational Shaping of the Structural

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economy, jobs (2001:398)

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literature, ism, especially through a focus on "situated

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details of interactions between structures and relevant

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Crouch (1979:43) argues,

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Barnett and Duvall - 'which ideas mediate the relationshippower"

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agents' behavior while

The case study in this section empirically illustrates

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policy circle in Canberra and

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Blyth, Mark. (2003) Structures

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Hall, Peter A. Onuf, Nicholas. (1989)The

Peters, Jon Pierre, and Desmond S. King. (2005) The Politics of

Handbook of Public Policy , edited by Martin Rein, Michael Moran, 5-14.

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