The Fed's Modernity: Monetary Government and the Quest for Embedded Autonomy

Onur Ozgode, Harvard Kennedy School
Julian Jürgenmeyer, Columbia University

Why have central banks in liberal democracies been facing a legitimacy crisis ever since they rose to the commanding heights of their economies in the 1970s? In this paper, we challenge the conventional wisdom which attributes this crisis to two related factors: central banks’ capture by finance and their lack of political accountability. We argue that neither can explain the crisis because they ignore the socio-technical assemblages central banks rely on to manage the economy. Focusing on the Federal Reserve, the prototypical modern, expert-run central bank, we show that its legitimacy crisis is endogenously produced by the mode of governmentality it has been pursuing since the mid-1960s. This mode, which we call ‘monetary government,’ rests on a hybrid governance architecture that entangles monetary authorities with banks and other financial actors to achieve desired policy outcomes. Defying our modern expectations of what it means to be a public (or private) institution, it is this hybridity that fuels central banks’ legitimacy crisis. In response to it and to bolster their autonomy, central banks engage in purification practices that represent them as firmly located within the state, as an ontological zone distinct from the economy, while also building linkages with political and academic actors. To account for the multipronged pressures central banks need to navigate and the strategies they deploy, we develop a theory of interstitial government that conceptualizes this space between the economic, political, and academic fields as the locus of “embedded autonomy.” This allows us to reconstruct central bankers’ quest for embedded autonomy by tracing the networks of expertise they assembled across three governmental apparatuses at the center of modern central banking: monetary policy, emergency mitigation, and emergency preparedness. In this way, our paper contributes a new understanding of both the unparalleled power and the protracted crisis of expert-run central banks.

No extended abstract or paper available

 Presented in Session 103. Expertise: Bureaucracy, Field, State