(p. A15) The promise of the modern central bank is that it will make its corner of the economic-policy world technocratic and academic–in a word, boring.
The lesson of the past decade is that this promise is a lie. The developed world’s four major central banks–the Fed, the Banks of England and Japan, and the European Central Bank–have executed a series of extraordinary policy maneuvers to rescue us from the 2008 financial panic, with debatable success. These include ultralow or negative interest rates; the purchase of sovereign debt in mind-boggling quantities; forays into commercial debt, equity and real-estate markets; and ventures into mortgages, small-business loans and other similar instruments. Central banks have also taken on vast new supervisory powers over the financial system. Each of these measures has had profound effects on our economies: debtors win, savers lose; large, bond-issuing companies get credit, smaller firms don’t; owners of assets accumulate wealth, wage earners see their salaries endangered by inflation. Such distributional choices are normally left to elected leaders, but no one elects a central bank.
Mr. Tucker reminds us how this happened. He places the development of modern central banking firmly within the wider story of administrative governance in the 20th century and its expansion at the expense of electoral accountability. “Central banks might well be the current epitome of unelected power,” he writes, “but they are part of broader forces that have been reshaping the structure of modern governance.” His brief account of the Fed’s history starts not at the usual spot–the 1907 panic and its aftermath–but with the creation of the Interstate Commerce Commission, in 1887, taken by some as the first step in the development of America’s modern bureaucracy.
For the full review, see:
Joseph C. Sternberg. “BOOKSHELF; ‘Unelected Power’ Review: Monetary Mavericks; The question is not whether recent interventions by central banks were effective, but whether they were legitimate.” The Wall Street Journal (Thursday, June 28, 2018): A15.
(Note: the online version of the review has the date June 27, 2018, and has the title “BOOKSHELF; ‘Unelected Power’ Review: Monetary Mavericks; The question is not whether recent interventions by central banks were effective, but whether they were legitimate.”)
The book under review, is:
Tucker, Paul. Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State. Princeton, NJ: Princeton University Press, 2018.