To date, research on Latin American central banks in the interwar years has focused on their loss of autonomy due to the slump and subsequent implementation of innovative, countercyclical monetary policies. These policies, although fostering economic recovery, led to higher rates of inflation and exchange-rate volatility. The chapter shows that these policies resulted from more than loss of autonomy and subordination of central banks to governments. In fact, the need for countercyclical monetary policies had been foreseen by foreign advisors to newly established central bank before and during the crisis, but Latin American central bankers had been reluctant to implement them for fear of damaging the credibility of the gold-standard regime. This finally changed with the collapse of the gold exchange standard. In the 1930s, central banks had become effective actors, channeling credit to the real economy and supporting the emergence of state institutions that would promote the development of local industry.

In the 1920s, the Bank of England promoted central banking to preserve London’s control over Indian financial policies and insulate those policies from political changes sweeping the colony. This chapter traces India’s deepening distrust of London in the monetary sphere, and the role envisaged by the Bank of England for an Indian central bank operating under its tutelage. After the failure of efforts to create a central bank in the 1920s, the Bank of England and Whitehall insisted on a privately owned, ‘independent’ central bank as a precondition for Indian constitutional reform. In the end, notions of an independent central bank did not stand up to the vicissitudes of colonial bureaucratic politics. Efforts of the colonial government and the Bank of England to curb the independence of the Reserve Bank of India offer important insights into the early history of central banking in India, but also shed new light on the role central banks in economies undergoing the transition from colonialism to independence.

This chapter examines John Rawls’s uncritical acceptance of “sound” finance, how it reflects his use of his constructive method, his influences in neo-classical economics, and the regrettable consequences. It also suggests how we can unlearn deference to neo-classical thinking, using Rawls’s method, in view of Abba Lerner’s functional finance and an egalitarian form of central banking.

This chapter demonstrates that, in addition to his well-known experiments with paper money, John Law’s System was a project for creating a politically independent central bank. His arguments, and those of his defender Nicolas Dutot, tried to establish a legitimate role for autonomous monetary policy, while his detractors in the 1730s and 1740s like Richard Cantillon and Joseph Pâris-Duverney argued that central banks constituted conspiracies among cosmopolitan elites, not virtuous governance. This neglected episode in the history of economic thought established the data, rhetorical practices, and concepts for later theories over whether the monetary system can or should be within the scope of human agency. Participants in the debate developed the conceptual foundations of self-ordering economic systems, pioneered the use of calculative reasoning in public debate, and tried to theorize the constitutional relationship between government, money, and commerce. These authors were trying to use an emergent episode in their understanding of economic history to uncover the principles of justice, legitimacy, and agency in the newly formed cosmopolitan dominium of commerce and finance.

The year 1720 witnessed the world’s first international financial crisis. Instead of retelling the standard narrative that focuses on John Law and his System, this chapter uses the records of the stock speculator James Brydges during the Mississippi and South Sea Bubbles to illustrate the different capacity for impunity in the 1720 crisis. Changes in impunity were due to the expansion in the complexity of finance, and the fraught process of trying to establish central banks as the main institutional form of immune actors in that new complex financial world. The financial bubbles of 1720 were connected by flows of capital, information, and personnel, which were beyond the capacity of either the French or the British government to regulate. For the first time, financial instruments and techniques existed, which were beyond the understanding of the educated amateur and were powerful enough to provoke wide-ranging economic disorder.

Between 1797 and 1815, Britain and France each developed modern central banks, albeit in very different forms. The Bank of England’s powers expanded enormously after the suspension of gold convertibility in 1797, and it also developed a vast system of investigation and prosecution of forgery and counterfeiting, whose records form the evidentiary core of the chapter. The Bank used its powers to protect itself, but also to aid in broader English governance, helping to produce a modern money-using financial public. As with the aftermath of 1720, the Bank’s powers produced widespread political condemnation, especially accusations of illegitimate elite conspiracy. In France, the brief chaos of free banking was replaced by the centralized Bank of France, mostly under government control and with limited policy discretion. In both cases, impunity was institutionalized as a function of governance, delegated to a private bank with political obligations. These new institutions, exercising new forms of monetary policy, would reconstitute the operation of international financial system after 1815.

With the rise of global governance, the concept of authority has become central to capture the power of non-state actors to shape the everyday making of world politics. Such power draws on intersubjective schemes that make non-state actors be perceived as being in authority or an authority. The chapter argues that the association of practice and authority moves the boundaries of the field. Unlike the Weberian conception of authority that pre-defines various sources from which actors can draw, scholars working from a practice perspective have tackled the process of authority. They thus have substituted a substantialist ontology with a relational one. The chapter details three main contributions of this scholarship. First, scholars working from a Bourdieusian perspective have investigated the claims to authority, which sheds light on the social struggles underpinning the construction of hierarchy in international relations. Drawing on the sociology of knowledge, a second trend of scholars has looked at the construction of the object of authority, which allows to understand the historical construction of expertise. Finally, a third trend of research, inspired by governmentalities studies, has opened up the new empirical field of authoritative practices, which changed the analytical focus from institutions to the making of governance.

Orthodox monetary policy scholarship assumes that central bankers act to maximize the public welfare. If imperfect incentives enter the model, it is on the part of the public. We challenge this assumption. Monetary policymakers are just as prone to incentive problems, which cause them to act according to their own self-interest. Furthermore, the self-interest of policymakers is not always the same thing as the public welfare. The two diverge frequently, in fact. We survey the history of the Federal Reserve and show the numerous ways discretionary central bankers have been compromised. These incentive problems are an inherent feature of discretion. They can only be eliminated by embracing true monetary rules.