The Genesis and Transformation of Central Banking Practices
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Regulating International Finance: The Genesis and Transformation of Central Banking Practices by Joëlle Dumouchel A thesis submitted in conformity with the requirements for the degree of Doctor of Philosophy Department of Political Science University of Toronto © Joëlle Dumouchel, 2016 Regulating International Finance: The Genesis and Transformation of Central Banking Practices Joelle Dumouchel Doctor of Philosophy Department of Political Science University of Toronto 2016 Abstract This dissertation investigates the development of financial regulation since the nineteenth century through central banks’ governing practices in industrial countries. Since central banks adopted the lender-of-last-resort function in the 1870s, they have been continuously contributing to the stabilization of financial markets. However, the nature of their governing practices has transformed. This dissertation addresses the sociological and historical underpinnings of central banks’ authority. By combining theoretical insights from interactionist sociology (e.g., Pierre Bourdieu, Norbert Elias, and Etienne Wenger) and from the philosophy of modernity (e.g., Hannah Arendt, Michel Foucault, and Jürgen Habermas), it looks into the crucial role of knowledge for financial governance in general and central banks’ authority in particular. Knowledge shapes governance in two ways. It structurally creates the conditions of possibility for certain practices to develop and it cognitively represents reality. Such representations become incorporated into the background knowledge of the community of practice. The thesis highlights the importance of modern science for governance to occur. The rise of science in economics and finance has transformed legitimate representations of the financial environment and concepts of competence and credibility defining who is entitled to act. The dissertation details three practices of financial stabilization by central banks through time, each of which stem from a distinct ii market representation and cultural configuration of the community of practice. The practices I investigate are monetary-based, capital-flow-based, and standard-based practices of governance. iii Acknowledgments The PhD programme has been the most exciting yet challenging journey of my life. While dissertation-writer can feel like a reclusive hermit at times, the many people who have supported me have been essential to the completion of the project. I am extremely grateful to all of them. I would like first to thank both of my supervisors, Emanuel Adler and Louis Pauly. Their guidance established the conditions for this PhD to materialise. I am extremely grateful to Emanuel Adler who always believed in my project and gave me continuing support all through the process. His close reading and always to-the-point comments helped me both to push my reflections further and to clarify my thinking. I am also immensely thankful to have been able to count on Louis Pauly, who has always been there when needed. I appreciated very much his pragmatic advice and support, which was essential to carry on the project until the end. Both of them proved to be invaluable mentors and I feel honoured to have had the chance to work with them. They are passionate scholars who will continue to inspire me in the years to come. I am deeply indebted as well to the third member of my committee, Leonard Seabrooke, who has provided crucial support for this project. I cannot thank him enough for making me feel welcome in Copenhagen and helping me navigate the reality of fieldwork. I also benefited from Len’s wide knowledge of scholarship in political economy which helped me to think about my own contributions. I am also thankful to my external examiner, Stephen Bernstein and Kathleen McNamara, for their careful reading of the thesis and very pertinent comments. Thank you to Jacqueline Larson for incredibly helpful language revisions. A special mention to Frédéric Mérand, from whom I felt continuous support all along the academic journey since the day I approached him to be my master’s supervisor. He was the first to show me that unorthodox thinking has a place in international relations, and can speak to iv mainstream theory. Frédéric’s encouragement gave me strength to pursue my studies at the doctoral level. Finally, a very big thank you to him for providing me with an academic home in Montréal for the last two years of this degree. The PhD has been pursued from three different cities (Toronto, Montréal, and Copenhagen), and in each of theses cities I would like to pay tribute to the great people with whom I had the privilege to share the journey. At the University of Toronto, I was extremely lucky to be surrounded by a wonderful and clever group of friends and colleagues. My colleagues in the IR core course provided me with the best social environment for my first year of the PhD programme. The social surrounding was also crucial in helping me achieve the various requirements of the programme, such as the comprehensive exam and proposal writing. A very special thanks to Larissa Atkinson, Alena Drieschova, Matthieu Mondou, Kiran Barnajee, Jamie Levin, Erick Lachapelle, Troy Lundblad, Abouzar Nasirzadeh, Craig Smith, Aarie Glas, Luke Melchiorre, David Houle, Luc Turgeon, Christopher Laroche, and Andrew McDougall. Special mention to the faculty members Ed Schatz, Richard Sandbrook, Lilach Gilady, and Stephen Clarkson, who provided me with helpful guidance at various points in the process. Finally, I would like to thank Carolynn Branton, Louis Tentsos, Joan Kallis, and Marie-Alice Bailey, who have been so helpful with administrative assistance. At the Université de Montréal, I would like to pay tribute to the wonderful team of PhD students and post-docs who are members of the CEPSI and the CERIUM. They provided me with an academic home and a support group which helped me survive the dissertation writing process. Je remercie , Amélie Forgest, Theo McLauchlin, Antoine Rayroux, Mélanie Cambrezy, Sarah Saublet, Kathleen Angers, Katrin Wittig, Chantal Lavallée, Olivier Schmitt, Florent Pouponneau, Catherine Hoeffler, Paul May, and Till Van Rahden. v In Copenhagen, at the Department of Business and Politics of Copenhagen Business School, I met wonderful people who have made feel a part of their department. They have created a very special environment, where people are keen to engage with each other’s work. I feel privileged to have had the chance to be part of this institution for some time. Mange tak to Lasse Folke Henriksen, Kasper Lindskow, Maj Lervad Grasten, Iver Kjar, John Campbell, Martin Carstensen, Christianne Stelling, Duncan Wigan, Mette Grue Nielsen, and Lonni Nielsen. And a very special thank you to Sara Dahlman, Lene Tolstrup Christensen, Eleni Tsingou, Liam Stanley, and Timo Walter. I am also indebted to all the professionals involved in central banks and financial regulation based in London, Paris, Basel, Frankfurt, and Copenhagen, who have been so generous with their time and accepted meetings with me. Moreover, I am extremely grateful to my new colleagues at the University of Copenhagen for having made me feel immediately welcome. I feel blessed to have the chance to continue my academic journey in such an intellectually stimulating environment. A special thank to the members of the Eurochallenge project whose support have been incredibly helpful for this transition. As Virginia Woolf once wrote: “One cannot think well, love well, sleep well, if one has not dined well.” To that effect, I would like to acknowledge the generous financial support provided by the Social Science and Humanities Research Council of Canada (SSHRC), the Fonds de Recherche Québecois Société et Culture (FRQSC), the Ontario Graduate Scholarship (OGS) programme, and finally, the School of Graduate Studies (SGS) and the Department of Political Science at the University of Toronto. A big thank you to my long-term friends and family for their love and support through the process. Thanks to my dearest friends, Charlotte Ménard, Marie-Ève Parenteau, Amélie Desrochers, and Anouk Godbout, who have stuck by my side even in the darkest times. Thanks vi also to my parents—Anne Brunet and Réjean Dumouchel—who gave me intellectual curiosity and a taste for critical thinking. Big love to my brothers Colin Dumouchel and Leo Dumouchel who have helped me to stay grounded. I would also like to acknowledge my chance to live at a time when it has been possible for me both as a woman and a child of the middle class to access the highest sphere of education as well as to attend some of the world’s most prestigious universities. My grandparents lived in a Québec where university’ studies were the privilege of a selected few. In coming from very large families, they had to quit school during their teenage years in order to help financially, despite being very gifted and skilled. My beloved grandparents—Jean-Paul Brunet and Denise Bourget—are amongst the most humble and openhearted people I know. They have always been a source of inspiration, and I want to share this dissertation with them. Finally, the last acknowledgment goes to the man, Mathieu Noury, who intimately shared my life for a decade. His companionship and love contributed to defining me both as an individual and as a scholar. I cannot thank him enough for having been there for me during the whole process. My academic work will always carry the mark of the many intellectual conversations that we had together. I dedicate this thesis to him. vii Table of Contents