Central bank capitalism

_ Erik Ahrens, editor-in-chief, konflikt Magazin. Frankfurt, 6 April 2022.

Joscha Wullweber (*1973) is a German political scientist and Heisenberg professor for political economy, transformation and sustainability at the University of Witten-Herdecke. In 2021 his book “Central Bank Capitalism – Transformations of the Global Financial System in Times of Crisis”[1] he analyzes the current state of the global financial system and particularly emphasizes the role of central banks.

Expert knowledge

The book is a rewritten and expanded edition of Wullweber’s habilitation thesis submitted in 2019. It is described extensively and in detail, but not particularly didactically structured. As a reader who is not deeply involved in the subject, one can understand a bit about how the international monetary system functions, but one has to look for it in the book and fill any gaps in understanding from other sources.

For example, far towards the end of the book there is a short and concise explanation of the creation of book money by banks – while long before that, in the sub-chapter “Money Creation, Central Bank Money and Bank Lending”, the same topic is discussed as if the reader already knew what was meant. Unfortunately, this deprives it of the recommendation quality for newcomers and complete laypeople.

For all other readers, however, “Central Bank Capitalism” is an exceptionally well-written and understandable work that certainly deserves its author habilitation status in questions of methodological stringency and argumentative clarity. The extensive annotations and the long bibliography – as well as the fact that Wullweber alone can cite and list 18 of his own publications – indicate the professionalism and thoroughness of the author. One notices that a proven expert is writing here, even if not a particularly good teacher.

Central bank and shadow banks

In terms of content, most of the book deals with the eponymous “central bank capitalism”, which, according to Wullweber, makes up the current economy in Western countries. This is based on the thesis that the neoliberal laissez-faire on the financial markets culminated in a series of crises that central banks absorbed and mitigated through unconventional monetary policies. According to Wullweber, they are doing this mainly because governments are not fulfilling their economic policy responsibilities, so that only central banks can plug the gap and delay and mitigate major crises.

But the whole thing has a catch: Because the central banks are central banks, they have to carry out their economic interventions using the methods of monetary policy. In addition to changing the key interest rate and bridging liquidity bottlenecks (the conventional methods), this has increasingly included approaches that were originally introduced as short-term emergency solutions, but are now part of the standard repertoire, especially since 2008. Above all, the provision of liquidity by buying up government bonds and other assets (quantitative easing) and interaction with the so-called shadow banking system should be mentioned.

The latter occupies a large part in the book; one could go so far as to call it “shadow bank capitalism” instead of “central bank capitalism”. Because Wullweber’s second core thesis boils down to the fact that the immense growth of the so-called shadow banks – as the author describes financial companies such as investment funds, which are not banks themselves and are therefore also subject to fewer regulations, but at the same time grant loans like banks etc. – is both the cause and the is also a consequence of the current central bank policy.

After the 2008 financial crisis, the US Federal Reserve decided to allow mutual funds and money managers access to central bank funds through certain “repo” transactions (repurchase agreements). In doing so, it established a security structure that was previously only conceivable for regular banks. Thus, the complete collapse of the international financial economy could be stopped, but only with the result that the “shadow banking system” grew massively again – this time in complete dependence on the central banks.

Transformation instead of crash

Wullweber does not see this development as fundamentally problematic; on the contrary, he even accuses the ECB of lagging behind the US Federal Reserve’s willingness to experiment. In fact, one notices a certain optimism in the author: when he describes how central banks get involved in the shadow banking system as “dealers of last resort” and conduct indirect economic policy with immense money movements. Wullweber, despite all his professorial objectivity, says that he believes he has found a key to solving our contemporary crises in the actions of the central banks. However, this key still has to pass from the hands of the central bankers to the hands of the democratic state.

This is particularly evident at one point where he associates central bank intervention in the crisis with Thomas Hobbes’ Leviathan. This is something that a political scientist doesn’t just casually slip out of without being aware of the implications. The Leviathan in Hobbes is “A Mortal God,” an almighty sovereign in the political sphere. Wullweber sees the current centre of this sovereignty in the ability of the central banks to ensure order and stability in the greatest financial crisis of mankind, which, however, still has to return to the sovereignty of the people.

After all, central bank capitalism must come to an end soon, if Wullweber has his way. He regards the actions of the central banks as the correct, but only transitionally suitable, form of “life support” for an international financial economy that has long since degenerated into a mere speculative bubble. Here central banks are forced to seize the reins where the democratic state has intentionally or unintentionally been lax. But because they can only achieve this by promoting the shadow banking system, they cushion the crisis and at the same time amplify the crisis factors. In that sense, they’re buying time for a system waiting for its own demise. In an interview, Wullweber said that everyone in the financial sector is expecting another collapse and everyone is just hoping to be the first to get out in time.

Statements by Wullweber show that there were already increasing signs of another financial crisis in 2019 (i.e. before the corona crisis). Both in the book and in interviews, he has already commented in this direction several times, but without going into the obvious conclusion that against this background the pandemic appeared as an opportune opportunity for politicians to bring about a mini-crash and to impose a transformation onto the real economy with excessive measures. As a left-leaning academic, he could not enter the dangerous waters of also considering the pandemic measures from a political-economic perspective without being immediately cancelled.

Prosperity for all

To do this, however, he is venturing onto different terrain: it is clear to him that the state and society must make political decisions in order to design a new economic order for the post-central bank capitalism era. According to him, this requires massive regulation of the international financial markets, a fundamental reassessment of known economic categories (free market, neutrality of the central banks), the return of the financial system “to its actual function: the provision of credit and liquidity for the productive economy”, as well as a left progressive social reform:

“Monetary policy should become more inclusive. In addition, if monetary and fiscal policy went hand in hand, based on a democratically strengthened society, we could devote all our energy to the really important issues of our time and develop and finance social, ecological and sustainable answers to climate change and other societal challenges and implement it”, – he states.

Of course, the sovereign must not be represented by a nation state, but must appear in the form of an international, if not global, authority. One could thus describe Wullweber’s central bank capitalism as a transitional phase between the abdication of the national sovereign (approximately at the beginning of the wave of globalization in the 1970s and 1980s) and the (re)entry of the sovereign in supranational form. The perspective taken in the book, with its strong identifying reference to the ECB, suggests that the new sovereign should be European.

Political economy

In the process, climate change, both in the book and in the various interviews Wullweber has, sometimes still seems like a rather unmediated argument that is suddenly used to emphasize the need for society as a whole to set the political course. One might think that this is an interchangeable variable pointing to any grand political goal (see Marianna Mazzucato’s Mission Economy).[2] So instead of containing climate change, the preservation of European civilization could also stand here. However, in the current discourse, Wullweber has no choice but to repeatedly emphasize (e.g. in interviews) that climate change is the most pressing problem and that the economy must be restructured in the sense of a “green zero” (net-zero emissions).

This already gives an idea of ​​what shines through from many of Wullweber’s other statements: he is not an ideologue, he has not come up with a great idea of ​​his own accord with which the state should inspire the economy from now on. However, he wants this to happen. His interest is less in the question of which idea they should be subordinated to, and more in how this subordination takes place. Wullweber wants to politicize the field of economics and do away with the idea that economics is something non-political, detached from society. His emphasis on the incredible power of central banks translates very directly to a will to introduce political decision-making power into all matters affecting the economy.

The reader who is informed about the history of ideas will also quickly notice where the inspiration comes from. In the third chapter entitled “A Political Theory of Money”, the author introduces a monetary theory, some of which is taken directly from Marx’s “Capital” (Wullweber also speaks of the “money form” in interviews), and then discusses it with other monetary theories to develop a post-Marxist-left-liberal discourse theory of money (money as a “master signifier” and expression of a “social negotiation process”). Interestingly, although Wullweber’s theory of the form of money was taken over from Marx in its core, it was completely detached from the context of the so-called analysis of the form of value found in Capital, which ultimately leads to a revolution. Instead of Marx’s “Critique of Political Economy” (the subtitle of “Capital”), Wullweber advocates a constructive political economy aimed at transforming society. Equipped with this special knowledge, he is a valuable asset for any future green government.


The reception of “Central bank capitalism” is ambiguous. If one compares it with the habilitation thesis of any professor of political science, it was received extremely widely. If one compares it with left-wing progressive theory books, which come along with the same fundamental will to change, it was received rather thinly. That may be because Wullweber is more academic than pop theorist, and his book is more a scholarly look at the central banking system than just left-wing political writing. The book comes with a level of precision and depth that is likely to deter many left-wing activists, and a basic understanding of economics is required to read it profitably.

It can therefore be assumed that Wullweber’s book will be received primarily by left-leaning sociologists and political scientists who are interested in economics. A comprehensive and very detailed review of the book can be found by Leon Wansleben at Soziopolis; Wansleben explains the connections there both more concisely and more understandably.[3] Wullweber has also been interviewed on a number of podcasts, including the German leftist podcast “Wohlstand für Alle”[4] and the far-left podcast “Future Histories”.[5] Here the connection between academic mainstream and left-wing metapolitics is shown once more.


*Translated from the original publication on konflikt Magazin with the kind permission of the author.

[1] Wullweber J. (2021). Zentralbankkapitalismus. URL: https://antaios.de/detail/index/sArticle/144918

[2] Mazzucato M. (2021). Mission Economy. A Moonshot Guide to Changing Capitalism. Penguin.

[3] Wansleben L. (2022). Hüter des Schattengeldes. soziopolis. URL: https://www.soziopolis.de/hueter-des-schattengeldes.html

[4] Wohlstand für Alle (2021). Leben wir im Zentralbankkapitalismus? Joscha Wullweber im Gespräch – Spezial #18. URL: https://www.youtube.com/watch?v=s5FIr_eiUHg

[5] | Future Histories (2021). Joscha Wullweber zu Zentralbankkapitalismus | Future Histories S01E59. URL: https://www.youtube.com/watch?v=TrIhODWkFUE

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