Description
Political economists have stressed the role of the state when exploring the rise of financialisation in the 1970s. In this reading, state actors learned that finance could enhance their economic steering capacity, or solve a social, economic and legitimation crisis in a world of declining productivity. However, the process of financial deregulation was not pursued equally across all Western advanced economies. This article argues that in order to explain differential financial deregulation across cases we have to look into dynamics within the state and consider the local, institutional and experience-driven, political learning of central bankers. Archival material and process-tracing on two paradigmatic cases, Germany, and the UK (1965-1985), show that the Bundesbank and the Bank of England experienced the 1960’s rise of the Eurodollar markets differently with important consequences for future ability and willingness to innovate in the realm of financial regulation. Due to its high level of institutional capacity and ability to enforce deflationary polices, the Bundesbank experienced the 1960s as a period of stability and harmony with the government, inferring that the subsequent 1970s crisis could be resolved through an act of “plugging the holes” of a mostly functioning system. The weak Bank of England, on the other hand, had experienced the 1960s as a highly unstable, crisis-ridden and politically conflictual period. As a result, it came to support radical financial deregulation in the 1970s as a way to assert its power through markets, effectively “sidestepping” the government.
