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September 16, 2011 10:25 pm
If you have a passion for perusing money supply data, I have great news for you. This weekend, the US Federal Reserve is launching a so-called “Fed App”, or portable download that you can plug into your iPad (or any other tablet).
Yes, you read that right: if you are bored with playing Angry Birds, you can now turn to the Fed app instead to ponder the latest thoughts of Ben Bernanke, chairman (along with other up-to-date Fed news). Presumably you can even do this in the bath, on a treadmill, during your commute, or anywhere else your tablet might go. Monetary policy has never felt so potentially intimate – and live.
Is this a good thing? It is a fascinating question to ask, and not just for central banks. In centuries past, complex societies have had a hierarchical vision of information flows. Bureaucracies handed out statements and orders, according to whatever timetable suited them best, and populations were expected to listen meekly.
But internet communication, as people such as Sheryl Sandberg, COO of Facebook, are fond of pointing out, is revolutionising this dynamic. Suddenly an entire generation is being conditioned to demand “democratic” information flows, at least in the sense of information being available, whenever they want, on a customised basis. Tools such as social media are not only uniting far-flung groups, but have also created a feeling – or perhaps illusion – of intimacy between leaders and those being led. As the CEO of one Silicon Valley company observed to me last week: “The amazing thing about social media is that an ordinary person can feel they have access to a president. They might never have that in real life.”
Some elites have already seized this shift. Most consumer companies, for example, already have “apps” and Facebook pages that aim to engage customers, via this sense of intimacy and connection. So do many politicians. A few days ago, for example, I described how the office of Michael Bloomberg, mayor of New York, had done an impressive job tweeting throughout hurricane Irene, and linking to the City’s slick website.
But the Fed – or any other central bank – now faces a subtle cultural dilemma. In decades past, central bankers assumed that the best way to command authority (and retain symbolic power, as an anthropologist might say) was to retain an aura of distance. Like Old Testament prophets or medieval priests, governors tossed out occasional solomonic statements, but did not try to communicate in too accessible a manner, for fear of being tarnished by mundane, grubby markets or politics. The former Fed chairman Alan Greenspan, for example, was (in)famous for his incomprehensible sermons. And governors of the Bank of England used to seem so inscrutable that bankers would jump at the mere twitch of their eyebrows, or so the legend goes.
In recent years, this aura has started to crack. Most western central banks now claim they are becoming more “transparent” and “accountable”. Some use public inflation targets. Most issue regular statements. Bernanke himself recently started holding regular press briefings.
Some Fed branches are starting to send out (rather dull) tweets or explore the use of Facebook. And while the new Fed app is the first tool that targets the public on mobile devices, the St Louis branch of the Fed recently created a so-called “FRED” app, which collates data for economists.
“Central banks are realising that they need to start communicating in a different way,” points out Catherine Bourke of the Chicago Fed, which developed the Fed app. “But our story is not one that lends itself to being put into soundbites or on to bumper stickers – it’s complex and that is the challenge.
But the $60bn question – and €60bn and £60bn dilemma too – is how much further should central bankers go? If they engage too directly with the public, will this erode their symbolic authority? Will “TMI” (Too Much Information) undercut their mystique and credibility? Do 21st-century cyber tools shatter the aura of timelessness? Or could some tweets from Bernanke – or Jean-Claude Trichet or Mervyn King – help shape inflation expectations or calm bank customers during a eurozone crisis?
Right now, nobody knows. But the issue is becoming more pertinent by the day. For one thing, it is no long self-evident that the tactic of staying aloof guarantees symbolic power, or that engaging undercuts it (even the Vatican has started tweeting). More importantly, the sheer scale of the current economic crisis means that the onus is now on central banks to spell out the challenges and choices that confront populations, in language and tools they understand. Otherwise there is a real democratic deficit, and potential for a backlash, something the world can ill afford – least of all when political tensions are rising. And, of course, social media also provides such handy new ways of fomenting unrest.
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