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Unelected Power: the quest for legitimacy in central banking and the regulatory state

We are pleased to host the presentation of Paul Tucker's latest book.


audio & video recordings


Presentation by Paul Tucker


Central bankers have emerged from the financial crisis as the third great pillar of unelected power alongside the judiciary and the military. They pull the regulatory and financial levers of our economic well-being, yet unlike democratically elected leaders, their power does not come directly from the people.

In this event, we hosted Paul Tucker who presented his latest book about unelected power and how it lays out the principles needed to ensure that central bankers, technocrats, regulators, and other agents of the administrative state remain stewards of the common good and do not become overmighty citizens.

During the Great Financial Crisis, the accumulation of powers within the Central Banks was reflected in the blurring of lines between fiscal and monetary policies and in the enhanced supervisory and regulatory powers. Prudential supervision, where accountability via oversight is impossible until failure, is an example of this “black box”.

How should we delegate power to independent agencies which are insulated from the daily politics of elected government? It was proposed that decisions should have a clear objective guided by public debate and that can be monitored and should be taken by one person one voter after deliberation to disperse power and to reveal disagreements.

Joanne Kellermann drew from her professional experience as a central banker, supervisor and founding member of the Single Resolution Board to reflect on the legitimacy of Central Banks’ action during the crisis. While the first priority back then was to act quickly, ex-post questions were raised not only by technocrats but also by civil society. Kellermann suggested that the setting up of the Banking Union and its two pillars could be set up against the book’s principles. It was noted that the current cross-border financial system and the shift from bailing-out to bailing-in is taking place precludes national control. Adding to this, resolution authorities are only visibly active to the public in times of crisis.

Jean-Pisani Ferry commented on the growing separation between policy and politics, which nowadays raises questions such as: “have we done enough?” and “have we done it in a carelessly?”. Current examples of WTO and Trump and even in Italy, where the constitutional and political spheres are separated, illustrate possible design flaws.

There are good reasons to delegate power – elected governments can fail and technocrats can follow their own agenda. The imperfect information problem is a constant. The question of “how” to delegate becomes more delicate, and there history tells us that we may have been careless so far. An exception is the way how the independence of the Bank of England was introduced. It was an elaborate reflection of how an independent agency can work and still be accountable and transparent, with the ultimate responsibility lying with the government. On the contrary, looking at European institutions, we see for instance that the Commission is partially accountable to the Parliament but has some independent powers, in what regards for instance competition policy.

The way we think about monetary policy has changed over the last decade. For example, policymakers are much more conscious of its distributional consequences. The relationship of savers with Central Banks has changed too – while in the past they were overall protected by the savers given the price stability mandate, nowadays the persistently low inflation rates negatively affect the Central Banks’ popularity. This political economy question will shape the future design of future institutions.