set the views crystallised in Lindblom’s ( 1977 )inXuential argument that
only polyarchy—competitive elitism—was possible given the organization of the
institutions of business in a market economy. Here, the characteristic institutions
of capitalism—legally instantiated private property and its concomitant privil-
eges—are seen as spiriting away from the democratic arena a wide range of key
decisions: for instance, over investment, and via investment over employment and
economic growth. A more immediate version of this, particularly pertinent in an
American setting, is the capacity of the biggest Wrms, with their enormous
resources, simply to use money to shape the democratic process: to buy inXuence
over voters through opinion shaping, and inXuence over parties and legislators by
campaign contributions and other donations (Jacobson 1980 ; Marchand 1998 ;
Silverstein 1998 ).
A crude summary of the view outlined above is that capitalist institutions are the
enemy of democratic government. Almost a mirror image of this is the view
that democratic government is a threat to the eVective working of capitalist
institutions. These hesitations about majoritarian democracy run through, for
instance, the work of Hayek. 6 Their full-blooded policy manifestation can be
found in the management of economic policy from the 1990 s onwards across the
advanced capitalist world, with the rise of non-majoritarian agencies of economic
management. The most important changes concerned the relations between
democratic government and one key institution—the central bank. Throughout
the decade, there was a consistent tendency to revise institutional/constitutional
arrangements, both to strengthen generally the independence of central banks
against democratic governments, and to give them power over, in particular, the
control of short-term interest rates: ‘‘More countries increased the independence of
their central banks during the 1990 s than in any other decade since World War II’’
(McNamara 2002 , 47 ). 7 In the same decade a new paradigm of central bank
independence was created for the whole euro-zone, displacing a variety of arrange-
ments within democratic national governments (Moran 2002 ). These changes
represented the rise of new policy paradigms, and the paradigmatic shift highlights
one of the opening themes of this chapter: that the division between an
‘‘economic’’ and a ‘‘political’’ institution is not settled, but is shaped precisely by
paradigmatic creations. Explaining the sources of the movement to bind the
discretionary power of democratic government by empowering institutions like
central banks raises large and perennial explanatory problems: it could indeed be
6 For instance Hayek 1960 , 105 – 9. I am indebted to Gamble 1996 , 91 – 7 for clariWcation of this
argument. Some of Hayek’s arguments go well beyond endowing central banks with discretionary
power to marketizing the whole central banking process. But I use him as an example here both
because of his rhetorical power and because he dramatizes the key point—the tension with democratic
control of the market economy.
7 The evidence that this had desired policy outcomes is another disputed matter: see Hall and
Franzese 1998.
156 michael moran