Institutional metamorphosis

The predominance of technocracy and preference for institutional independence that was key to the market-state relationship since the end of the cold-war is being challenged by renewed calls for re-politicisation from across the political spectrum. The prime examples in developed economies are President Trump in the USA and the Labour Party leadership under Jeremy Corbyn in Britain. Re-politicisation points to a different, state-centric, model of accountability and legitimacy for the operation of institutions. This paper examines calls for a return to political-institutional environments long extinct in the west, and (up until recently) in retreat in the developing world. The paper argues that the contemporary critique of central bank independence has nothing to do with the literature on empowerment and greater accountability that was developed at the time of (and since) the financial crisis; and reflects on a metamorphosis of debates towards undemocratic, capricious, populist and state-centric directions. This phenomenon has profound implications for emerging economies where efforts to build a pro-market institutional and legal framework have long focused on the promotion of independent institutions, like central banks. The paper argues that these developments in the political centres of the west directly undermine modernising efforts in emerging economies.