Depoliticizing money: how the International Monetary Fund transformed central banking

Abstract

After the 2008 Global Financial Crisis, the politics of money and central banking came to the forefront. Calls for repoliticizing central banking towards social goals such as inequality, poverty, and climate change have gathered much traction. Economists and political scientists have called for revisiting the long-lost developmental mandates of central banks and for understanding them as social institutions and as terrains of overlapping contestations. Yet, the role of law in framing the discourse on money and monetary policy has been less explored. In this paper, I argue that international law, especially the International Monetary Fund (IMF/Fund), played a crucial role in the depoliticization of money in the 1970s and 1980s. Legal instruments of the Fund, including conditionality and surveillance, were operationalized to transpose ‘price stability’ and ‘central bank independence’ into the legal mandate of central banks worldwide. From a distinctly political enterprise, central banking became ‘technocratic’ endeavour operating strictly under the paradigm of rationality and neutrality. If, as this paper shows, the law has played a crucial role in depoliticizing money, the law can also be a tool in reorienting central banking towards progressive ends such as tackling poverty or inequality. This would require a careful re-evaluation of the legal institutions of global money, beginning with the Fund itself.