The Political Economy of Central Banking: Contested Control and the Power of Finance

Central banks are among the most powerful government economic institutions in the world. This volume of essays, written by PERI Co-Director Gerald Epstein and co-authors, 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, 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.


'In sum, the historical, theoretical, and empirical research that Epstein presents in this book provides a heterodox alternative to the orthodox refrain that the Federal Reserve is motivated by a desire to manipulate short-term interest rates in order to maintain price stability in the short run and maximum employment in the long run. ... Epstein has developed a theory of the determinants of the Federal Reserve’s behavior that should be required reading for anyone interested in heterodox monetary economics.’

– Edwin Dickens, Professor and Chair, Department of Economics and Finance, Saint Peter’s University (Review published in Challenge magazine)

'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