After the global financial crisis of 2008, central bankers ceased to be the conservative heroes that they had become since the late twentieth century. In the 1980s, conservatives praised Paul Volcker’s Federal Reserve for its unwavering focus on fighting inflation, while the orthodox German Bundesbank was held as a model for the future European Central Bank (ECB). At the turn of the twenty-first century, Alan Greenspan, the then-chair of the Fed and once a follower of libertarian guru Ayn Rand, was widely acclaimed as the “maestro” of America’s economic stability and prosperity. Meanwhile, Jean-Claude Trichet, the head of the young ECB, vaunted the merits of low inflation, balanced budgets, and structural reforms. Less than a decade later, Tea Party protesters and their Republican allies called to “end the Fed” and to “tar and feather” Greenspan’s successor Ben Bernanke. In Germany, the new right-wing party AfD gained visibility by demanding more austerity in the European Union’s periphery, and a tabloid caricatured Trichet’s successor Mario Draghi as a “Count Draghila” sucking on the blood of German savers. In a strange role reversal, new grassroots protest movements now demanded tight money and market discipline against central bankers who favored accommodative policies. Central bankers apparently no longer conformed to their long-standing image of conservative technocrats fending off spendthrift politicians.

Conservative cheers and later assaults on central banks exposed crucial but largely submersed changes in the politics of money. Based on a machine-assisted analysis of central bank archives, I demonstrate that Fed and ECB policymakers not only navigate but also powerfully shape three arenas traversed by latent contests – their own internal monetary policy committees; the economics profession; and the broader public arena. Thus, American and European central bankers were at the forefront of important changes in monetary and economic governance during the late twentieth century, and again after the global financial crisis of 2008. As I argue, central bankers are economic technocrats who were key players in both the waxing and the waning of what I call technocratic neoliberalism. That broad economic governance regime first waxed in the 1980s, then waned after the global financial crisis of 2008. In both cases, central bankers entered new alliances that cut across different organizational, professional, and public arenas. In the 1980s, central bankers’ turn to tight-money policies accelerated political change within each of these arenas, which caused the waxing of technocratic neoliberalism. In the 2010s, however, the alliances that had long supported neoliberal policies unraveled. At that point, the Fed’s and the ECB’s turn to monetary easing led to the waning of technocratic neoliberalism. Thus, both in the 1980s and in the 2010s, the changing politics of money produced broad watersheds in monetary and political-economic regimes.

This argument challenges the ways in which central bankers are usually portrayed in political economy or economics. Scholars of political economy in various academic disciplines typically see central bankers as stewards of financialization. For example, political scientists Lawrence Jacobs and Desmond King indict the US Federal Reserve for wielding its power in such a way that “finance wins.”Footnote ¹ In such readings, central banks cater to an increasingly finance-driven economy, itself fueled by mutually reinforcing trends – the rise of neoliberal ideology and market-friendly policies in the 1980s, the structural shift of advanced capitalist democracies from manufacturing to services, and the decline of the Left’s old manufacturing working-class base. The strident post-2008 attacks on the Fed and the ECB thus appear as a broad populist backlash against bankers and finance. By contrast, mainstream scholars of economics who discuss central banks and monetary policy generally avoid bringing up financialization or neoliberalism. Instead, they underscore central bankers’ responses to strictly economic problems, such as the “Great Inflation” of the 1970s or the “Great Recession” of the 2010s. As Princeton economist (and former Fed vice chair) Alan Blinder puts it, central bankers are “technocrats, mostly economists” who act on “economic considerations.”Footnote ² They are primarily focused on managing the money supply in response to a changing economy, unlike politicians whose motivations are primarily political. In this reading, denunciations of central bankers are usually misguided but understandably ideological.

While such broad or focused interpretations make sense in their own terms, they are often so strangely truncated that the role of central bankers remains opaque. Although central bankers are anything but anti-establishment rebels, they cultivate their aura as independent public servants and seek to avoid the charge that they serve privileged interests. Neither are they merely economists who can afford to be attentive only to the economy and to economic theories. As technocrats, central bankers always maneuver in different arenas at the same time. Their role in multidimensional contests about money is therefore not well captured by typical disciplinary portrayals.

To make sense of central bankers’ puzzling rise and fall as conservative heroes from the 1980s to the 2010s, we must examine the changing positions that they adopted in various arenas. Once we do this, their crucial role in building and later partially dismantling a technocratic form of neoliberal status quo also becomes clearer. The support of central bankers was key to Reagan’s conservative revolution as well as to the European Union’s integration around a single market and the euro, and thus to the emergence of a transatlantic neoliberal governance regime. That regime then waned after the financial crisis of 2008 when central bankers on both sides of the ocean retreated from it. Beyond the central bankers’ rise in favor and later fall from grace among conservatives, this book’s examination of their role in a changing politics of money therefore illuminates the waxing and waning of technocratic neoliberalism over several decades.

1.1 When Unorthodox Central Banking Becomes Orthodox

The main turning points of central banking history in the late twentieth and early twenty-first centuries are well-known and relatively uncontroversial. In the decade that followed the oil shocks of the 1970s, central bankers in the United States and in Europe increasingly turned to what was then an unorthodox approach. In the turmoil of persistent inflation, “monetarist” policies had gained traction, especially after University of Chicago economist Milton Friedman received the Nobel Prize in 1976. In the 1980s, however, central bankers became increasingly wary of the damaging effects of monetarist policies on growth and employment. They therefore moved away from strict monetarism, while continuing to advocate fiscal discipline and market liberalization to keep inflation at bay. The 2008 global financial crisis ushered in another period of turmoil. Once again, central bankers adopted unorthodox policies, such as quantitative easing, this time to restore financial stability and to spur growth. Central bankers progressively incorporated these new tools into their policy toolbox, before quickly rolling them out in the face of a global pandemic.

Twice over four decades, therefore, new and previously unorthodox monetary policies became orthodox. Not coincidentally, a technocratic form of neoliberal regime initially became prevalent, and later declined. As this book will show, the waxing and waning of technocratic neoliberalism were the outcomes of multidimensional contests across different organizational, professional, and public arenas. To explain these outcomes, I will zoom in on the world’s two leading independent central banks in times of drastic monetary policy regime changes, first in the 1980s and then in the 2010s. I mobilize a large body of primary sources – above all, the troves of monetary policy committee records released by central banks. These publicly available, easily accessible archives of internal deliberations and communications form relatively homogenous datasets of texts. I leverage a machine-assisted detection of contentious speech patterns in these texts, at the service of a qualitative analysis of central bankers’ disagreements and conflicts about money.Footnote ³ In addition to central bank transcripts and minutes, I also rely on policymakers’ memoirs, interviews, hearings, and other primary and secondary sources.

Based on a historical comparison of the Federal Reserve and the ECB, I demonstrate how central banks first overtly supported and later increasingly resisted neoliberal policies. Far from being bound by a stable orthodox doctrine, central banking was remarkably syncretic and evolved considerably over time. In the 2010s, conservatives were reacting to a departure from the orthodox kind of central banking to which they had become accustomed since the late twentieth century. And if we go back to the 1980s, we can see that criticisms coming from the Left were a reaction to central bankers’ break with the status quo ante, in which central bankers often deferred to politicians’ concerns about employment. In each case, how central bankers started to view previously unorthodox policies as orthodox is not a simple story. As technocratic organizations, central banks strive to apply state-of-the-art economic knowledge and, at the same time, they operate in a political environment. Economic ideas and the broader political context do not evolve in lockstep, however. The actions of central bankers change in ways that are not well captured by linear narratives of shifts in macroeconomic paradigms or in the political-economic status quo.

1.2 The Politics of Money

It is possible to historically document the politics of money, both within and outside central banks. How money is governed constitutes the focus of contests not only in the conventional sphere of “politics” – that is, among elected officials or in the public – but also within central banks and within the economics profession. Within the monetary policy committees of central banks, policymakers of different backgrounds and opinions coexist. Often labeled as “hawks” or “doves,” these central bankers deliberate and debate, form coalitions and voting blocs, and compete for policy leadership. Within the economics profession, different subfields and schools of thought are also in competition. Some are more successful than others in securing positions in academe and in satellite organizations, including central banks themselves. The economics profession is thus sociologically characterized by a “hierarchical” social structure, “expert interventions,” and distinctive “ways of thinking.”Footnote ⁴ Last but not least, central bankers act within a public arena traversed by political cleavages that are the bread and butter of political science. Through the dynamics of appointments, parliamentary testimonies, and other public venues, central bankers are immersed in everyday contests within and between governments, parties, and interest groups. Although central bankers must preserve an aura of neutrality to protect their independence, they also cannot completely ignore these public contests.

Organizational, professional, and public contests over monetary governance are worth studying together because they are tectonic forces that drive change in monetary regimes but also, more broadly, in political-economic regimes. Not all monetary regime changes lead to broader political-economic regime changes; but some do, and they are the focus of this book. Actors who navigate several interacting arenas can engage in “creative action” and produce “emergent” institutional constellations.Footnote ⁵ While the emergence of such multidimensional institutional regimes is impossible to predict, it can be explained after the fact through a close historical analysis of these interactions.

As I will show, central bankers exert considerable agency in regime change by carefully positioning themselves in contests over monetary governance across different arenas. Within the organizational arena of central banks, contestation is real but structurally limited, which enables central bankers to present a relatively united front. The internal hierarchy of central banks, along with their ethos of collegiality and deliberation, tends to mute internal dissent. Within the professional arena of economists, central bankers typically side with the most high-status (“mainstream,” or “orthodox”) economists. Thus, central bankers marginalize their critics among economists and contribute to reinforce and, in fact, to define the mainstream. Finally, within the broader public arena, central bankers typically aim for middle-of-the-road positions with respect to the main cleavages – between Republicans and Democrats in the United States, or between member governments in the European Union. Although such centrist positioning does not deter all political detractors, it often succeeds in making their criticisms appear as immoderate, and thus in discounting them as “partisan,” “extreme,” or “populist.”

1.3 The Waxing and Waning of Technocratic Neoliberalism

An examination of central bankers’ actions across these three different arenas casts light on long-standing objects of scholarly debate, namely, “neoliberalism” and “regimes.” After the global financial crisis of 2008, there has been renewed interest in neoliberalism as a broad form of political order.Footnote ⁶ Historians and political theorists have often conceptualized neoliberalism as an essentially technocratic project originally carried by elite circles around the Mont Pelerin Society and its key figures, including Friedrich Hayek and Milton Friedman. In this reading, advocates of neoliberalism wanted to safeguard capitalism at the international level, and they allied with conservative as well as center-left politicians.Footnote ⁷ Instead of studying neoliberalism as a normative project, other social scientists have often focused on economic governance regimes supported by policy communities and political coalitions. The concept of regime has a distinguished pedigree in political economy.Footnote ⁸ It has often been applied to money, but also to taxes, production, welfare, inequality, or, most recently, growth.Footnote ⁹

Rather than choosing one approach or the other, the concept of technocratic neoliberalism is intended as a bridge between them. Technocratic neoliberalism, as I define it, is a broad regime of political economy centered around a new monetary governance regime of low inflation administered by independent central banks. Although that political-economic regime emerged in the late twentieth century context at a time when the neoliberal project was ideologically prominent, its changing fortunes cannot be simply explained by normative shifts or electoral realignments. Technocratic neoliberalism is a complex assemblage with deep and tangled roots, whose consolidation required durable political support from cross-cutting alliances. To explain the waxing and later the waning of technocratic neoliberalism, this book starts from an archive-based analysis of contests among central bankers. As we will see, contests within the organizational arena of central banks are related, but cannot be reduced, to contests in the professional arena of economics or in the broader public arena.

Both in the United States and in Europe, technocratic neoliberalism crystallized in the 1980s around a new politics of money, characterized by new alliances that cut across different arenas. Within the professional arena of economics as well as in the public arena, a new policy agenda became ubiquitous. While the Chicago School reached the peak of its influence among economists, Margaret Thatcher and Ronald Reagan led a transatlantic neoliberal crusade against inflation, high taxes, welfare spending, and government restrictions on markets. For both US and European central bankers, therefore, being mainstream and middle-of-the-road now meant something different than before. After they defeated inflation, central bankers increasingly attracted support not only on the right but also on the center left. Central bankers were now able not only to assert their independence as monetary policymakers, but also to set the tone for fiscal policy as well as many other government policies. In Europe as well as the United States, neoliberal policies became more entrenched. When European governments planned the euro, they tasked the ECB to fight inflation, but they also made a collective commitment to fiscal discipline.

By the 2010s, however, technocratic neoliberalism waned due to another complete turnaround in the politics of money. After the 2008 financial crisis, central bankers shifted to unorthodox policies that gained the support of most economists concerned about the “Keynesian” problem of unemployment and anemic growth. Yet they were also immersed in a public arena traversed by contradictory trends. While the global financial crisis dented the neoliberal faith in deregulated finance, the neoliberal political-economic regime that policymakers had assembled over decades was still standing. A new kind of populist attacks erupted, however, coming from conservatives committed to neoliberal ideology. In the United States, the Tea Party and their Republican allies blamed the Fed and the Obama administration for illegitimately interfering with markets. In Northern Europe, right-wing parties blamed the ECB, the European Union, and their own governments for bailing out banks and undeserving southerners.

In sum, the close identification of neoliberalism with technocracy was upended. An important rift opened in the 2010s between conservatives who favored austerity and central bankers who increasingly retreated from all-out neoliberal policies. Yet the evolution of cross-cutting alliances between central bankers, economists, and politicians has attracted little scholarly attention – perhaps because central banks, the economics profession, and partisan politics are the subjects of largely separate bodies of scholarship. While the advent of a new monetary regime did not go unnoticed, scholars of political economy have typically stressed the continuing “financialization” of the economy or the “strange non-death of neoliberalism” after the global financial crisis.Footnote ¹⁰ To be sure, the prevailing neoliberal regime of political economy did not suddenly collapse. But the regime that emerged in the 2010s sharply differed from late-twentieth century technocratic neoliberalism. Central bankers who conducted easy-money policies met virtually unprecedented conservative criticisms in the name of market discipline. At that point, the heyday of technocratic neoliberalism was over.

1.4 Regimes as Outcomes of Organizational, Professional, and Public Contests

The waxing and waning of technocratic neoliberalism reveal the importance of different but interrelated processes at play in the political economy of advanced capitalist democracies. Regimes of political economy generally encompass heterogenous elements – including epistemic elements – that constantly evolve and interact. Instead of assuming that these elements either cohere as a system or evolve independently from each other, we should follow the advice of science studies scholars and strive more agnostically to “reassemble” them.Footnote ¹¹ In the case of technocratic neoliberalism, changes in the professional arena of economics and in the organizational arena of central banks interacted with broader changes in the public arena. Although contests among central bankers and economists obviously did not take place in a political vacuum, they cannot be simply reduced to politics-as-usual.

In the late twentieth century, central bankers became the technocratic usherers of neoliberalism, when they asserted their independence from elected officials in the fight against inflation. Contests within central banks as well as within the economics profession interacted with political contests to produce this powerful emergence of central bankers in the public arena. After the global financial crisis of 2008, however, these different organizational, professional, and public arenas continued to evolve each according to its own logic. Central bankers continued to assert their independence, but this time to conduct easy-money policies to offset fiscal austerity. As a result of these different yet interacting processes, the long-standing association between central bankers and neoliberalism loosened considerably.

Thus, a new and understudied populist recombination of the neoliberal project became more visible. Scholars of neoliberalism who see it as inherently technocratic tend to ascribe the rise of all populist movements to a societal reaction against a neoliberal elite. Yet they often gloss over the increasingly important populist strand of neoliberalism, or they downplay the fact that technocrats considerably pulled back from neoliberal policy prescriptions over time. By contrast, conservative politicians doubled down on their support of neoliberalism by taking up the defense of fiscal austerity and sound money, and they increasingly accused central bankers of betraying the people. Thus, the apparent resilience of neoliberalism concealed its progressive transformation from a technocratic into a populist project.

By conceptualizing technocratic neoliberalism as a regime of political economy that waxed and waned, this book therefore contributes to our understanding of neoliberalism and of its association with different governance regimes. Regimes of political economy such as neoliberalism often wax and wane one element at a time – which can evidently produce an impression of fuzziness. Neoliberalism is, in this sense, similar to democracy or authoritarianism.Footnote ¹² Like these political-constitutional regimes, political-economic regimes rarely emerge or collapse all at once. More often, they wax and wane, or sometimes mutate over time – and their evolution is equally worth studying. As we will see, changes in alliances that cut across different arenas are central to the evolution of political-economic regimes. In the 2010s, central bankers renounced their late-twentieth century role at the core of a broad crusade against inflation, thus signaling their retreat from technocratic neoliberalism. Although neoliberalism persisted when its organizational and professional dimensions receded, that regime ceased to be evidently technocratic.

1.5 Book Outline

The next two chapters develop the book’s methodology and theoretical argument.Footnote ¹³ Chapter 2 shows the existence of a discrepancy between scholarly portrayals of central bankers as independent economists or as stewards of a financialized economy, and then it presents a methodology for resolving that discrepancy. Chapter 3 reflects on how central bankers seek allies in the face of economic and political turmoil and, more broadly, on the central role of money and its changing politics in the successive waxing and waning of technocratic neoliberalism. It highlights a changing politics of money not only in the public arena outside central banks – as many studies of the political economy of central banking have done – but also within central banks themselves, and within their main reference group, namely the economics profession.

The first empirical part of the book documents the waxing of technocratic neoliberalism in the late 1970s and 1980s. Chapter 4 analyzes the politics of the Volcker Shock and its aftermath. A Carter appointee, Paul Volcker sought support from Milton Friedman, an influential economist in Republican circles, and discovered ways to lead a divided Federal Open Market Committee (FOMC) while building bipartisan support. As a result, the Fed under Volcker became considerably more powerful, and better able to throw its weight behind fiscal as well as monetary conservatism. Chapter 5 highlights the paradoxical influence of the German Bundesbank’s anti-inflationary policies on other European states. In the context of recurring exchange rate crises, European leaders mandated a committee of central bankers, chaired by European Commission president Jacques Delors, to plan for an economic and monetary union. Despite important cleavages and heated debates, Europe’s central bankers produced the basic design for an inflation-focused ECB, which later became the staunchest advocate for neoliberal policies in the European Union.

The book’s second part then turns to the waning of technocratic neoliberalism in the 2010s. Chapter 6 shows how the Fed under Ben Bernanke and then Janet Yellen shifted to unorthodox crisis-time policies that were progressively incorporated into the Fed’s policy toolbox. This incorporation not only placed FOMC hawks in the position of permanent dissenters, but it also counteracted fiscal austerity in a way that antagonized conservative economists and politicians. Chapter 7 shows how the ECB under Jean-Claude Trichet and especially under Mario Draghi initially sided with and then increasingly alienated monetary and fiscal hawks. The ECB shifted to unconventional policies of monetary expansion that progressively marginalized hawkish – often German – central bankers, and it came to support fiscal accommodation despite the opposition of German political leaders.

The book’s third and last part considers how far the argument can be generalized, and what it says about the status of economic expertise in democracies today. Chapter 8 takes stock of the distance traveled since the 1980s by examining the Fed’s and the ECB’s responses to the pandemic in the early 2020s, and it reflects upon the parallel trajectories of technocratic neoliberalism at the IMF, the Bank of Japan, and the Bank of England. Chapter 9 concludes by addressing some questions of truth and power raised by the special status of economics and economists in contemporary economic governance, as well as the implications of technocratic power in a democracy.