Central banks are now an almost universal feature of developed and emerging markets, yet the history of central banking has tended to focus on the histories of central banks in developed economies, especially Western Europe and the US. As a group of leading financial historians show in the new volume, The Spread of the Modern Central Bank and Global Cooperation, 1919–1939, during the tumultuous years between World War I and II, emerging market countries across the globe established central banks to manage their domestic money supplies and mediate their positions within in the global economic order. After the Great Depression destroyed the recently revived international gold standard, these new central banks struggled to adapt, first by clinging to monetary orthodoxy and then often breaking with it, with many becoming vehicles for national economic management. By examining the formative period of institutional emergence of central banks, this volume documents the varied experiences of these new institutions as they navigated the postwar recovery and subsequent depression. It also encourages scholars to rethink key ideological commitments of central banking, such as political independence, which motivated the creation of new banks in the past and continue to act as a counterweight to democratic policymaking in the present.

The volume begins with four survey essays, which provide a global overview of the spread of central banking in the interwar years (Ch. 1) and then document the strategic roles played by established central bankers (Ch. 2), the League of Nations (Ch. 3), and the Bank for International Settlements (Ch. 4). The remaining ten chapters present case studies focused on specific countries and colonies, e.g., Austria (Ch. 5), Bulgaria (Ch. 10), Turkey (Ch. 11), and India (Ch. 14), as well as more expansive essays on Latin America (Ch. 12) and the British Dominions (Ch. 13).

The First World War was a major catalyst for the spread of modern central banking. Where institutions were already established, central bankers sought freedom from wartime political control and a return to prewar economic liberalism. Figures such as Bank of England Governor Montagu Norman and Federal Reserve Bank of New York Governor Benjamin Strong supported Wilsonian plans for a rules-based global order anchored in international cooperation; they also remained in the background until after the US Congress rejected the Treaty of Versailles and with it, participation in the League of Nations. At the Brussels Conference in 1920, bankers moved to the fore, pushing the re-establishment of the international gold standard to the top of the League’s economic agenda. The League then became a fulcrum for economic reconstruction in Eastern Europe, requiring the creation of central banks as a condition of stabilization and lending programs. When the League sought to investigate the inequitable operation of the gold standard in 1928, antagonized bankers shifted their institutional locus of central bank planning and cooperation to the newly established Bank for International Settlements. Meanwhile, and further afield, money doctors such as Princeton economist Edwin Kemmerer and Bank of England official Otto Niemeyer spread monetary orthodoxy to Latin America and the British empire, offering access to US and UK capital markets conditional on the creation of independent central banks.

Thus, emerging market countries adopted central banking as a condition of postwar stabilization plans, as a means of accessing international capital markets, and—importantly—as an institutional bulwark against rising mass democracy. An independent central bank, Norman observed, “can divorce economics from politics to an extent which is usually impossible” (pp. 47–48). He was writing about Germany, but the lesson was universal.

The Great Depression shattered these experiments. At first, new central banks sought to defend the gold standard and keep international capital flowing, often at significant cost to their domestic economies. However, as global lending markets dried up, central bank policies became more diverse and politically contested. The cascade in 1931 of the Creditanstalt crisis, the German banking and financial crisis, and the Bank of England’s departure from the gold standard opened the door to experimentation. Some countries pursued devaluation, while others, still scarred by the 1920s hyperinflation, adopted protectionism and capital controls to directly manage foreign exchange rates and domestic prices. Of special interest is Juan Flores Zendejas and Gianandrea Nodari’s discussion of Latin America, where they show Kemmerer as an early proponent of countercyclical central bank lending, only to be overruled by local elites who feared that experimentation would endanger their access to global capital markets. In all, central banks, created as a conservative response to postwar inflation, proved too cautious in the face of global deflation.

This story, in outline, will be familiar to financial historians. In addition to the technical analysis of specific central banks’ responses to the Depression, the most significant contribution of this volume is its emphasis on the ways bankers and other elites sought to use central banks as fortifications against mass democracy. “One way or another,” the volume’s editors observe, “the new institutions were designed to remove management of monetary affairs from the domestic political arena at the very time when the latter was becoming more representative” (p. 15). G. Balachandran’s chapter on colonial India provides a striking example, where the Bank of England and the India Office fought a pitched battle over control of the colonial economy—including over the design of the Reserve Bank of India—while collectively seeking to exclude colonial subjects from financial policymaking.

Ultimately, elite efforts to manage an independent international monetary system came to naught. Yet in the wake of World War II, the central banks created in the interwar years remained active institutions ready for refashioning. In the wake of depression and global war, central banks became agents of democratic countermovements and politically-directed economic management. As Belgian economist Robert Triffin observed in 1944, the central bank models inherited from (and imposed by) the developed center could “often be rightly regarded by less developed countries as impracticable or even irrelevant to their problems” (p. 344). Freed from their golden fetters, central bankers in emerging markets could repurpose their institutions in creative ways to address these problems—and they still can.