"The Federal Reserve Bank is a mutant institution of government," political scientists Lawrence R. Jacobs and Desmond King write in the third paragraph of their new book, Fed Power: How Finance Wins (Oxford University Press, 2016). Yet just four paragraphs later, they note that their book's central goal is not to "end the Fed" (per Ron Paul's book), but instead to "design an American central bank that is simultaneously effective in financial management and democratically accountable." These two introductory statements echo a longstanding dichotomy in American populism--one within which this important book occupies a layered but ultimately clear and compelling position.
American populism has taken many strains and forms, but when it comes to federal financial policy there have been two predominant factions. On one side have been those populists who distrust any such federal power and seek to dismantle it whenever possible. These small government populists are often called Jacksonians, in honor of President Andrew Jackson and his successful opposition to the Second National Bank in 1832. William Jennings Bryan's oft-repeated 1896 "Cross of Gold" speech also served as an early template for wedding populist arguments to fears of centralized financial entities and power.
At the same moment that Bryan was delivering his speech for the first time, however, the emerging Progressive movement offered a very different populist perspective. For the Progressives, it was precisely by using the federal government and its policies that the nation could move toward a more democratic financial system. Many of their signature reforms, from the creation of a progressive income tax to the development of a federal regulatory system, exemplified such uses of federal power for financial democracy. And a few decades later, in response to the nation's worst economic crisis, Franklin Roosevelt's New Deal programs extended such federal financial populism into nearly every sector of society.
We see 21st century iterations of both strains of financial populism in the two striking figures at the heart of this year's presidential campaign. GOP front-runner Donald Trump's economic proposals including drastic tax cuts (especially for corporations and the top brackets), the elimination of numerous government departments and programs, and other efforts to weaken federal financial power. While populist Democratic candidate Bernie Sanders has made somewhat similar critiques of the current alliance between the federal government and moneyed interests, his proposals fall much more toward the Progressive end of the spectrum: raising taxes, strengthening regulations, expanding support for public education, and generally making the federal government work more effectively for all Americans.
Yet per their groundbreaking book, Jacobs and King would argue that Bernie is not directing his progressive populist proposals at the best target: the Federal Reserve. As Jacobs and King convincingly lay out, the Fed has evolved over the century since its 1916 founding (as part of that Progressive moment, naturally) to become both the most powerful and the least public and democratic of our federal economic institutions.
Moreover, they argue that the popular understanding of the Fed as leading the response to the 2008 financial crisis is quite backwards. Unlike the New Deal programs, according to Fed Power's compelling historical analysis, the Fed's policies helped usher in the crisis far more than they counteracted or ameliorated it.
At times, as in the analogy that "appearances are deceiving, and the Fed and its allies have constructed a seductive but misleading Kabuki theater," Jacobs and King's descriptions of the Federal Reserve can tend toward the current strain of anti-government populism, an extreme and often paranoid perspective on power with which Sanders and his followers likewise flirt. Yet such sentiments are mostly reserved for the book's introductory chapter, and they are tempered and counter-balanced by the remaining chapters' progressive populism, their thorough, nuanced, and convincing arguments for constructing a more democratic federal financial power, one "that is rooted in [America's] founding values and the proven track record of other countries."
The more we can be aware of the longstanding historical contexts for both those forms of financial populisms, the clearer Jacobs and King's application of them to our contemporary moment becomes. Grounded in populist concerns about undemocratic and elitist federal power, their book weds those understandable fears to a potently progressive set of reforms in both that federal institution and our financial system. Fed Power represents a vibrant form of 21st century financial populism and a vital intervention in our political and social debates.