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The Political Economy of Central Banking

Contested Control and the Power of Finance, Selected Essays of Gerald Epstein Gerald Epstein, Professor of Economics and Co-Director, Political Economy Research Institute (PERI), University of Massachusetts-Amherst, US
Central banks are among the most powerful government economic institutions in the world. This volume explores the economic and political contours of the struggle for influence over the policies of central banks such as the Federal Reserve, and the implications of this struggle for economic performance and the distribution of wealth and power in society.
Extent: c 576 pp
Hardback Price: $200.00 Web: $180.00
Publication Date: 2019
ISBN: 978 1 78897 840 8
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  • Economics and Finance
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  • Political Economy
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Central banks are among the most powerful government economic institutions in the world. This volume explores the economic and political contours of the struggle for influence over the policies of central banks such as the Federal Reserve, and the implications of this struggle for economic performance and the distribution of wealth and power in society.

Written over several decades by Gerald Epstein and co-authors, these works explore why central banks do what they do, and how they could better operate. Epstein shows that central banks are a contested terrain over which major economic and political groups fight for control; and demonstrates that though in the US and most other countries, private bankers have the upper-hand in this political struggle, they don’t always win.

Graduate students, faculty and advanced undergraduates in economics, political science and sociology who are interested in central banking and finance as well as specialists who focus on central banking will find greater understanding of central banks through The Political Economy of Central Banking.
‘Monetary policy is not just a matter of optimal stabilization policy; it is also fundamentally a matter of politics. But while this observation is commonplace, it is not adequately incorporated into economists' reasoning and analysis. Gerald Epstein's work represents perhaps the most prominent exception to this last rule. Reading him provides a salutary reminder that we need to pay closer attention to this political aspect when thinking about central banks and what they do.’
– Barry Eichengreen, University of California, Berkeley, US

‘For decades Jerry Epstein has been shattering myths around central banking and forcing us to think differently about this institution. This invaluable collection brings together his path breaking work on the subject. A careful reading of the book makes it impossible to sustain the argument that central banks stand above politics and that they have served the public good through a single minded focus on inflation. The book arrives at precisely the right time, i.e., when we desperately need new ideas about how to remake our economic institutions so that they work for all.’
– Ilene Grabel, University of Denver, US and author of When things don’t fall apart: Global Financial Governance and Developmental Finance in an Age of Productive Incoherence

‘Central Bankers, and the Federal Reserve in particular, has been portrayed as a group of technocrats working to serve in the public interest. Through insightful analytical and empirical analyses, Jerry Epstein shows that in reality the Fed can act like a Wizard of Oz. Epstein’s hard work pulls back the curtain for us all to see how Central Banking really works, and proposes concrete reform regarding how it can be the engine of an economy that promotes stability, growth and prosperity.’
– Kevin P. Gallagher, Boston University, US

‘Professor Gerald Epstein has been a pioneer in extending political and class conflict considerations to the analysis of central banks and monetary policy. With regard to macroeconomics, he was one of the first to introduce the critical distinction between industrial and financial capital. With regard to monetary policy, he has been a leader in framing central banking as a politically contested space. That frame makes a mockery of mainstream claims that central banks can be politically neutral. Instead, they are riddled with the preferences and beliefs of those in control. This collection of his papers is both a tribute to Professor Epstein and an essential reference.’
– Thomas Palley, independent economist
Contents:

Introduction Gerald Epstein
PART I FINANCE, MACROECONOMIC POLICY AND CENTRAL BANKING: FROM VOLCKER TO TRUMP
1 ‘Domestic Stagflation and Monetary Policy: The Federal Reserve and the Hidden Election’, in Thomas Ferguson and Joel Rogers (eds), The Hidden Election: Politics and Economics in the 1980 Presidential Campaign , New York, NY, USA: Pantheon Books, 1981, 141–95

2 ‘Federal Reserve Behavior and the Limits of Monetary Policy in the Current Economic Crisis’, in Robert Cherry, Christine D’Onofrio, Cigdem Kurdas, Thomas R. Michl, Fred Moseley and Michele I. Naples (eds), The Imperiled Economy: Book I: Macroeconomics from a Left Perspective , Chapter 23, New York, NY, USA: The Union for Radical Political Economics, 1987, 247–55, references

3 ‘Trumponomics: Should We Just Say “No”?’, Challenge , 60 (2), 2017, 104–21

PART II CAPITALISTS, WORKERS AND WALL STREET: THE FIGHT FOR THE FEDERAL RESERVE
4 ‘Federal Reserve Politics and Monetary Instability’, in Alan Stone and Edward J. Harpham (eds), The Political Economy of Public Policy , Chapter 9, Beverly Hills, CA, USA: Sage Publications, 1982, 211–40

5 ‘The Federal Reserve–Treasury Accord and the Construction of the Postwar Monetary Regime in the United States’, with Juliet B. Schor, Social Concept , 7 (1), July, 1995, 7–48

6 ‘Monetary Policy, Loan Liquidation, and Industrial Conflict: The Federal Reserve and the Open Market Operations of 1932’, with Thomas Ferguson,
Journal of Economic History , XLIV (4), December, 1984, 957–83

7 ‘Corporate Profitability as a Determinant of Restrictive Monetary Policy: Estimates for the Postwar United States’, with Juliet B. Schor, in Thomas Mayer (ed.), The Political Economy of American Monetary Policy , Chapter 4, New York, NY, USA: Cambridge University Press, 1990, 51–63

PART III THE POLITICAL ECONOMY OF CENTRAL BANKING: ANALYTICAL AND EMPIRICAL PERSPECTIVES
8 ‘Contested Terrain’, in Louis-Philippe Rochon and Sergio Rossi (eds), The Encyclopedia of Central Banking , Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing Ltd, 2015, 105–7

9 ‘Macropolicy in the Rise and Fall of the Golden Age’, with Juliet B. Schor, in Stephen A. Marglin and Juliet B. Schor (eds), The Golden Age of Capitalism: Reinterpreting the Postwar Experience , Chapter 3, Oxford, UK: Clarendon Press, 1990, 126–52, references

10 ‘Political Economy and Comparative Central Banking’, Review of Radical Political Economics , 24 (1), March, 1992, 1–30

11 ‘A Political Economy Model of Comparative Central Banking’, in Gary Dymski and Robert Pollin (eds), New Perspectives in Monetary Macroeconomics: Explorations in the Tradition of Hyman P. Minsky , Chapter 9, Ann Arbor, MI, USA: The University of Michigan Press, 1994, 231–77

12 ‘Profit Squeeze, Rentier Squeeze and Macroeconomic Policy Under Fixed and Flexible Exchange Rates’, Economies et Sociétés , 25 (3), November/December, 1991, 219–57

13 ‘The Rise of Rentier Incomes in OECD Countries: Financialization, Central Bank Policy and Labor Solidarity’, with Arjun Jayadev, in Gerald A. Epstein (ed.), Financialization and the World Economy , Chapter 3, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing Ltd, 2005, 46–74

PART IV INFLATION TARGETING VS. DEVELOPMENTAL CENTRAL BANKING
14 ‘Financialization, Rentier Interests and Central Bank Policy’, 2002, 1–43

15 ‘Central Banks as Agents of Economic Development’, in Ha-Joon Chang (ed.), Institutional Change and Economic Development , Chapter 6, New York, NY, USA: United Nations University Press and London, UK: Anthem Press, 2007, 95–113

16 ‘Developmental Central Banking: Winning the Future by Updating a Page from the Past’, Review of Keynesian Economics , 1 (3), Autumn, 2013, 273–87

17 ‘Achieving Coherence Between Macroeconomic and Development Objectives’, in Joseph E. Stiglitz and Martin Guzman (eds), Contemporary Issues in Macroeconomics: Lessons from The Crisis and Beyond , IEA Conference Volume 155-II , Chapter 11, Basingstoke, UK and New York, NY, USA, Palgrave Macmillan, 2016, 148–59

PART V THE FEDERAL RESERVE AND THE GREAT FINANCIAL CRISIS OF 2007–2008
18 ‘Have Large Scale Asset Purchases Increased Bank Profits?’, with Juan Antonio Montecino, Institute for New Economic Thinking (INET) Working Paper No. 5 , December, 2014, 1–25

19 ‘The Political Economy of QE and the Fed: Who Gained, Who Lost and Why Did it End?’, with Juan Antonio Montecino, Political Economy Research Institute (PERI) Working Paper Number 408 , November, 2015, 1–25

20 ‘The Impact of Quantitative Easing on Income Inequality in the United States’, November, 2018

PART VI REFORMING THE FEDERAL RESERVE
21 ‘Statement on Monetary Policy’, Testimony Prepared for the House Committee on Banking, Finance, and Urban Affairs , July 19th, 1983, 1–11

22 ‘A Debate with Robert Pollin: Should Congress Control the Federal Reserve?’, with Robert Pollin, Dollars & Sense , 136 , May, 1988, 12–17, 22

23 ‘Reforming the Federal Reserve for the 21st Century’, 2018

Index