Neil Irwin, The Alchemists: Three Central Bankers and a World on Fire (New York: Penguin, 2013), 400 pp., $29.95.
WORSHIPPING AND lionizing central bankers is an increasingly popular activity. This veneration holds appeal not only for investors but also for politicians and the media. Indeed, a strong codependence exists between politicians and central bankers. Without the political class, a central banker like Ben Bernanke is just a college professor. At the same time, politicians often find central bankers to be useful foils for political rhetoric around election time.
Although the growing power of central bankers since the 1970s is largely a political phenomenon, it has been scantly discussed in political discourse. Outside the grim ghettos of financial media, the issue of central-bank accountability is not a hot topic. The global bureaucracy of central bankers operates across national boundaries, exercising huge authority over both fiscal and monetary policy while avoiding explicit political responsibility. The Fed is all-powerful, for example, yet largely unaccountable.
In his classic 1995 book Confidence Game, Steven Solomon described how economic change in the 1980s and 1990s created a political vacuum in terms of policy mechanisms to address global currency and capital flows—and how that void was effectively filled by central bankers. Global capital mobility caused governments’ sovereign control over national savings and national monetary policy to slip away—or, more specifically, to be pooled. According to Solomon, George Shultz characterizes the new era as one in which