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Moral suasion is a persuasion technique that appeals to ethics and morality to influence entities to adhere to specific policies or procedures, often used by governments to influence financial institutions. It can take various forms, including private meetings, inspections, and public appeals, but can also involve veiled threats. While it can be abused, it can also be useful in ensuring organizations operate within the law and the best interests of the general population.
Moral suasion is a strategy that involves the use of various persuasion techniques to motivate entities to adhere to a specific policy or procedure. Attempts to influence outcomes based on this type of persuasion include an appeal to ethics and morality, often identifying specific actions as the right thing to do for everyone involved. While this particular approach to persuasion is often used as a strategy by government authorities to influence the function and business activities of banks and other financial institutions, the concept of moral suasion can be used in a number of other situations.
In terms of using moral suasion to motivate adherence to government policies, a number of different approaches can be used. One approach is to hold private meetings with bank directors and other key officials associated with the institution, using the discussion as a means to influence the directives issued by those officials. In some cases, moral suasion may take the form of more frequent and comprehensive inspections of bank records or other documents that have to do with the general business operation. At other times, the process may take the form of appealing to the general public, with the appeal made by a government official who is viewed as knowledgeable and trustworthy by the public. In its worst forms, moral suasion can come in the form of veiled threats that are worded in a way that does not directly threaten, but leaves little doubt as to the intent.
Moral suasion is known by many different names around the world. The technique is sometimes called a window guide in parts of Asia. In the United States, this approach has sometimes been referred to as jawboning, based on the fact that moral suasion relies on the use of carefully worded arguments rather than the implementation of additional laws to achieve the desired result.
While moral suasion may be abused, the technique can also be useful in ensuring that financial institutions and other types of organizations operate within the confines of the law and the best interests of the general population. For example, a politician may use moral suasion if he suspects that a bank or group of banks is considering changes in the way they approve mortgages that could have a cumulative detrimental effect on the broader economy. When that’s the case, methods common to jawboning can be invoked as a way to motivate banks to reconsider the move, in light of what it could mean for a broader national economy.
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