The making of US monetary policy: Central bank transparency and the neoliberal dilemma

This article explores the implications of the Federal Reserve’s shift to transparency for recent debates about neoliberalism and neoliberal policymaking. I argue that the evolution of US monetary policy represents a specific instance of what I term the “neoliberal dilemma.” In the context of generally deteriorating economic conditions, policymakers are anxious to escape responsibility for economic outcomes, and yet markets require regulation to function in capitalist economies (Polanyi 2001). How policymakers negotiate these contradictory imperatives involves a continual process of institutional innovation in which functions are transferred to markets, but under the close control of the state. Thus, under transparency, Federal Reserve officials discovered innovations in the policy process that enabled “markets to do the Fed’s work for it.” These innovations enlisted market mechanisms, but did not represent a retreat from the state’s active role in managing the economy.

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Greta R. KrippnerEmail:

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Greta Krippner   is Assistant Professor of Sociology at the University of Michigan. She is currently completing a book on the financialization of the American economy in the post-1970s period entitled The Fictitious Economy: The State, Financialization, and the Remaking of American Capitalism. New research examines the relationship between financialization and changing patterns of social conflict in US society from the late nineteenth century to the present.