Sovereign Debt Management and the Transformation from Keynesian to Neoliberal Monetary Governance in Britain

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Dutta, Sahil Jai. 2020. Sovereign Debt Management and the Transformation from Keynesian to Neoliberal Monetary Governance in Britain. New Political Economy, 25(4), pp. 675-690. ISSN 1356-3467 [Article]

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Official URL: https://doi.org/10.1080/13563467.2019.1680961

Abstract or Description

Private ﬁnancial markets are central to the implementation of monetary governance. This necessary integration of public and private ﬁnance means the way states govern must evolve with developments in ﬁnancial markets. This article examines how the rise of liability management underpinned a shift to market-based banking and transformed the operation of monetary policy in Britain. It assesses the period of reform between 1967 and 1981 and what this meant for monetary governance. Political economy literature depicts this period as a shift to depoliticised, deregulated governance with public authority giving way to market power. This paper challenges this perspective on the grounds that it misconstrues the problem policymakers faced. The shift from Keynesian to neoliberal monetary governance came in response to the change in banking practice with the rise of liability management and a parallel money market. This underpinned an explosion of credit creation that the old system of monetary policy, organised around the Base Rate and ‘primary’ discount market could not ﬁx. As a result, the monetary authorities had to render this new ﬁnancial environment governable. The period should therefore be reassessed in terms of the capacities the state attempted to construct to conduct monetary governance.

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Article

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https://doi.org/10.1080/13563467.2019.1680961