The Rise of Central Banks: State Power in Financial Capitalism

Leon Wansleben

MPIfG Book

The Rise of Central Banks: State Power in Financial Capitalism

Cambridge, MA: Harvard University Press, 2023
352 pages
ISBN 978-0-674-27051-0 (hardcover)

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Abstract

While central banks have gained remarkable influence over the past fifty years, promising more stability, global finance has gone from crisis to crisis. How do we explain this development? Drawing on original sources ignored in previous research, The Rise of Central Banks offers a groundbreaking account of the origins and consequences of central banks’ increasing clout over economic policy.

Many commentators argue that ideas drove change, indicating a shift in the 1970s from Keynesianism to monetarism, concerned with controlling inflation. Others point to the stagflation crises, which put capitalists and workers at loggerheads. Capitalists won, the story goes, then pushed deregulation and disinflation by redistributing power from elected governments to markets and central banks. Both approaches are helpful, but they share a weakness. Abstracting from the evolving practices of central banking, they provide inaccurate accounts of recent policy changes and fail to explain how we arrived at the current era of easy money and excessive finance.

By comparing developments in the United States, the United Kingdom, Germany, and Switzerland, Leon Wansleben finds that central bankers’ own policy innovations were an important ingredient of change. These innovations allowed central bankers to use privileged relationships with expanding financial markets to govern the economy. But by relying on markets, central banks fostered excessive credit growth and cultivated an unsustainable version of capitalism. Through extensive archival work and numerous interviews, Wansleben sheds new light on the agency of bureaucrats and calls upon society and elected leaders to direct these actors’ efforts to more progressive goals.


Contents

Preface

Introduction

1             Neoliberalism and the Rise of Central Banks

2             Monetarism and the Invention of Monetary Policy

3             Hegemonizing Financial Market Expectations

4             Money Markets as Infrastructures of Global Finance and Central Banks

5             The Organization of Ignorance: How Central Bankers Abandoned Regulation

6             Plumbing Financialization in Vain: Central Banking after 2008

Conclusion

Appendix


Author

Leon Wansleben

Leon Wansleben is a research group leader at the Max Planck Institute for the Study of Societies, Cologne, Germany.

Reviews

“The Rise of Central Banks is a smart, well-researched book about central banks and their prominent role in economic governance during the recent era of financialized capitalism. Wansleben does a fine job weaving together many events, episodes, and details into a coherent story. Audiences interested in the Fed, central banking, economic policy, and financialization will certainly want to read this book.”
Bruce G. Carruthers, Northwestern University

“This is an impressive work that adds substantially to our scholarly understanding of modern central banks and why they have come to have such a dominant impact on our everyday lives.”
Kathleen R. McNamara, Georgetown University

“Today’s economies are profoundly shaped by what central banks do, the decisions they take, and their blindspots. Wansleben’s superb book brings new depth, scholarship, and sophistication to the study of these hugely important organizations.”
Donald MacKenzie, University of Edinburgh

“Ambitious and well-researched. Wansleben dissects the growing operational entanglements between monetarist governing techniques, the expansion of financial markets, and neoliberal economic policies in a world where central banks have become more powerful than ever. The outcome is a bloated financial sphere that is dangerously reliant on central banks’ actions to preserve its explosive power. A chilling, but incredibly important, account.”
Marion Fourcade, author of Economists and Societies: Discipline and Profession in the United States, Britain, and France, 1890s to 1990s

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