The Bundesbank was deliberately designed to crowd out Keynesian deficit spending.
Evidence
Consequently, when the German Social Democratic Party came to power in 1966 with a pro-Keynesian agenda in response to faltering growth rates, it found little receptivity to these ideas in either the bureaucracy or the academy. Locally, Keynes was “crowded out” in theory. Amplifying this exclusion, the monetary authority, “the fiercely independent Bundesbank … placed strict monetary limits on deficit financing,” thus locally crowding out Keynesianism in practice. This is hardly a surprise when one considers that the Freiburg ordoliberals had foreseen such a role for the monetary authority, arguing that “a strong central bank [would be] the guardian against any misuse of power by the political authorities.” In ordoliberal terms, spending equals misuse, and the central bank was specifically designed to prevent such misuse. — Mark Blyth, Austerity, 372
Categorization
- XREF: Directly relevant to Mattei and the current European austerity debate over the ECB/Bundesbank’s role. — connects to: Central bank independence was designed to insulate deflationary policy from democratic opposition. — Clara E. Mattei, Escape from Capitalism: An Intervention, 374; Independent central banks originated as a way to dodge democratic pressure. — Clara E. Mattei, Escape from Capitalism, 374
- SEED: Angle: how the ordoliberal ‘guardian central bank’ design prefigured and legitimized post-2008 European austerity.
Broader Connections
- Independent central banks originated as a way to dodge democratic pressure.
#expands(0.85) — Clara E. Mattei, Escape from Capitalism, 374 - Central bank independence was designed to insulate deflationary policy from democratic opposition.
#expands(0.80) — Clara E. Mattei, Escape from Capitalism, 374