In chapter 3, preparing for crisis, the narrative begins. It is told mainly chronologically and this chapter deals with the period between May 11 and May 19, but only after a brief focus on January 1931 where Harry Siepmann on the basis of the socalled Bagehot model considers what to do in case of a major financial crisis in Europe. The Bagehot model for a lender of last resort and its inadequacy in the face of an international crisis, is a theme that goes through the book’s narrative. On May 11 the Credit Anstalt failure is made known and the central bankers get ready to make sense of the information they get from Austria and elsewhere. The BIS sends Francis Rodd to Vienna and the chapter follows him closely as he communicates his findings back to the BIS and Bank of England. In a world where debt is abundant and credit scarce, Rodd presents a plan to the upcoming BIS board meeting.

The conclusion of Money, Value, and the State reflects on the rise of a neoliberal government of value. The architecture of political economy for postcolonial Kenya, Tanzania, and Uganda—their currency management, agrarian credit, export monopolies, and price controls—was similar to how many other nation-states managed capitalism, exerted sovereignty, and cultivated citizenship in the postwar decades. And like many other parts of the world, by the late-1970s, the government of value in East Africa was challenged by new models of determining worth. The neoliberal proviso to “get prices right” targeted the legitimacy of the moneychanger state: instead of controlling the conversion between currencies and managing exchange rates, central banks would delegate power to commercial firms. It was likewise a call to eliminate state monopolies on the valuation of export crops and other commodities in favor of merchants’ power to set prices. Yet, instead of merely being a project of marketisation, neoliberalism was always a theory of state power and the ethos of citizenship. As structural adjustment was imposed—haltingly, imperfectly—by international creditors and their East African partners, the problematic of price continued to imply far more than the value of a commodity. It was a call to revalue the relationship among people and between citizens and states. As a result, the state government of value has not disappeared--it has been disavowed by central banks and bureaucracies that dismiss popular claims-making in favor of serving the sovereignty of capital.

For many postcolonies, a national currency—like a constitution, flag, or passport—was a necessary accompaniment to independence. Money and credit were more than potent symbols of decolonization; they were means of constituting a new political order. This Introduction argues that the monetary regimes established in Kenya, Uganda, and Tanzania aimed to remake their independent societies, turning savings, loans, and other financial instruments into the infrastructure of citizenship and statecraft. These instruments tried to create a “government of value” in which personal interest and collective advance were aligned through mechanisms that were simultaneously ethical and economic, cultural and political. They did so because colonial subjects experienced empire as not only political domination but also a constraint on economic liberties. Yet, the ensuing decolonization was at best partial, not least because the value of national currencies depended on the accumulation of foreign money. Moreover, the independent political economy of East Africa created new inequalities and divisions. Struggles over money, credit, and commodities would animate a series of struggles between bankers and bureaucrats, farmers and smugglers in the coming decades. By detailing the notion of the “moneychanger state,” this chapter provides the conceptual frameworks to understand these conflicts in new ways.

To date, research on Latin American central banks in the interwar years has focused on their loss of autonomy due to the slump and subsequent implementation of innovative, countercyclical monetary policies. These policies, although fostering economic recovery, led to higher rates of inflation and exchange-rate volatility. The chapter shows that these policies resulted from more than loss of autonomy and subordination of central banks to governments. In fact, the need for countercyclical monetary policies had been foreseen by foreign advisors to newly established central bank before and during the crisis, but Latin American central bankers had been reluctant to implement them for fear of damaging the credibility of the gold-standard regime. This finally changed with the collapse of the gold exchange standard. In the 1930s, central banks had become effective actors, channeling credit to the real economy and supporting the emergence of state institutions that would promote the development of local industry.

In the 1920s, the Bank of England promoted central banking to preserve London’s control over Indian financial policies and insulate those policies from political changes sweeping the colony. This chapter traces India’s deepening distrust of London in the monetary sphere, and the role envisaged by the Bank of England for an Indian central bank operating under its tutelage. After the failure of efforts to create a central bank in the 1920s, the Bank of England and Whitehall insisted on a privately owned, ‘independent’ central bank as a precondition for Indian constitutional reform. In the end, notions of an independent central bank did not stand up to the vicissitudes of colonial bureaucratic politics. Efforts of the colonial government and the Bank of England to curb the independence of the Reserve Bank of India offer important insights into the early history of central banking in India, but also shed new light on the role central banks in economies undergoing the transition from colonialism to independence.

This chapter examines John Rawls’s uncritical acceptance of “sound” finance, how it reflects his use of his constructive method, his influences in neo-classical economics, and the regrettable consequences. It also suggests how we can unlearn deference to neo-classical thinking, using Rawls’s method, in view of Abba Lerner’s functional finance and an egalitarian form of central banking.

This chapter demonstrates that, in addition to his well-known experiments with paper money, John Law’s System was a project for creating a politically independent central bank. His arguments, and those of his defender Nicolas Dutot, tried to establish a legitimate role for autonomous monetary policy, while his detractors in the 1730s and 1740s like Richard Cantillon and Joseph Pâris-Duverney argued that central banks constituted conspiracies among cosmopolitan elites, not virtuous governance. This neglected episode in the history of economic thought established the data, rhetorical practices, and concepts for later theories over whether the monetary system can or should be within the scope of human agency. Participants in the debate developed the conceptual foundations of self-ordering economic systems, pioneered the use of calculative reasoning in public debate, and tried to theorize the constitutional relationship between government, money, and commerce. These authors were trying to use an emergent episode in their understanding of economic history to uncover the principles of justice, legitimacy, and agency in the newly formed cosmopolitan dominium of commerce and finance.

The year 1720 witnessed the world’s first international financial crisis. Instead of retelling the standard narrative that focuses on John Law and his System, this chapter uses the records of the stock speculator James Brydges during the Mississippi and South Sea Bubbles to illustrate the different capacity for impunity in the 1720 crisis. Changes in impunity were due to the expansion in the complexity of finance, and the fraught process of trying to establish central banks as the main institutional form of immune actors in that new complex financial world. The financial bubbles of 1720 were connected by flows of capital, information, and personnel, which were beyond the capacity of either the French or the British government to regulate. For the first time, financial instruments and techniques existed, which were beyond the understanding of the educated amateur and were powerful enough to provoke wide-ranging economic disorder.

Between 1797 and 1815, Britain and France each developed modern central banks, albeit in very different forms. The Bank of England’s powers expanded enormously after the suspension of gold convertibility in 1797, and it also developed a vast system of investigation and prosecution of forgery and counterfeiting, whose records form the evidentiary core of the chapter. The Bank used its powers to protect itself, but also to aid in broader English governance, helping to produce a modern money-using financial public. As with the aftermath of 1720, the Bank’s powers produced widespread political condemnation, especially accusations of illegitimate elite conspiracy. In France, the brief chaos of free banking was replaced by the centralized Bank of France, mostly under government control and with limited policy discretion. In both cases, impunity was institutionalized as a function of governance, delegated to a private bank with political obligations. These new institutions, exercising new forms of monetary policy, would reconstitute the operation of international financial system after 1815.