Jawboning refers to the use of public persuasion, intimidation, or pressure by individuals in high office to influence the actions and decisions of others. This term is most commonly applied within the context of economic policy, where government officials, often from federal administrations, publicly criticize or appeal to private entities or industry groups to control or moderate their activities. Examples include appeals to limit wage increases, control prices, or curb inflation without resorting to formal legal or regulatory actions.
Historical Context
The term “jawboning” gained popularity during the administration of U.S. President Lyndon B. Johnson in the 1960s. Faced with rising inflation and attempting to avoid imposing direct wage and price controls, President Johnson and other officials began to use their influence to publicly appeal to unions and businesses to voluntarily restrict wage and price increases. This method relied on the moral and authoritative weight of the presidency rather than legislative power.
Notable Examples
- President Lyndon B. Johnson (1960s): Frequently used jawboning in an attempt to control inflation by urging businesses and labor unions to exercise restraint in their wage and price demands.
- Federal Reserve Chairpersons: Have occasionally employed jawboning to influence market expectations regarding interest rates and inflation through public statements.
Mechanisms of Jawboning
Public Criticism
Government officials may publicly criticize certain actions or policies of private entities or sectors. For example, federal administrations may target excessive wage demands by labor unions or rapidly increasing prices by businesses, arguing that such behavior is economically detrimental.
Appeals for Moderation
Officials may appeal directly to industry leaders, urging them to moderate their actions for the public good. This can include speeches, press conferences, or open letters aiming to sway public opinion and, thereby, indirectly influence the behavior of the targeted entities.
Applicability in Modern Economics
Jawboning remains a relevant tactic in contemporary economic policy. It can be particularly useful when formal regulatory measures are either politically unfeasible or too slow to implement. For instance, central banks and finance ministries often use jawboning to steer market expectations or address economic imbalances without immediate intervention.
Comparison with Other Economic Tools
Jawboning vs. Regulation
Jawboning:
- Relies on moral authority and public influence.
- No formal, legally binding power.
- Often quicker and less bureaucratic.
Regulation:
- Carries legal and binding force.
- Requires legislative or administrative action.
- Typically slower but more enforceable.
Jawboning vs. Monetary Policy
Jawboning:
- Uses public persuasion to influence behavior.
- Indirect impact on economic variables.
Monetary Policy:
- Direct intervention in money supply or interest rates.
- Statistically measurable impacts on inflation, unemployment, and economic growth.
Related Terms
- Moral Suasion: Similar to jawboning, this refers to the influence exerted by authorities to persuade and lead others to voluntarily follow a desired behavior.
- Central Bank Forward Guidance: A form of jawboning where central banks indicate future monetary policy directions to influence market expectations.
Frequently Asked Questions (FAQs)
What are some limitations of jawboning?
Jawboning is limited by its non-coercive nature. Its effectiveness hinges on the credibility and influence of the person or office. Entities may choose to ignore such appeals if they conflict with their economic interests or if they doubt the authority’s future actions.
Can jawboning backfire?
Yes, jawboning can backfire if it leads to a loss of credibility or if it is perceived as ineffective. It may also erode public confidence if the urged actions do not materialize or fail to produce the intended economic outcomes.
Is jawboning ethical?
The ethics of jawboning depend on its context and execution. While it can be a non-coercive way to steer economic behaviour, it may be considered ethically questionable if it involves undue pressure or manipulative tactics.
References
- Blinder, Alan S. “Economic policy and the great stagflation.” Academic Press, 1979.
- Bernanke, Ben S. “The Federal Reserve and the Financial Crisis.” Princeton University Press, 2013.
Summary
Jawboning is a strategic tool used by high-office bearers to influence the economic actions of others through persuasion and public pressure. Emerging as a significant method during the 1960s, it allows governments to address economic issues such as inflation and wage increases without resorting to coercive measures. While it can be effective, the success of jawboning often depends on the credibility and authority of the influencing party. Understanding its limitations and historical application can provide valuable insights into contemporary economic policy strategies.
