Paul Tucker is the author of Unelected Power and Global Discord, a Fellow at the Harvard Kennedy School, and a former central banker.


Central banking for a post-crisis world

The ancient history of Athens provides a point of departure for my remarks today.   From the top of the hotel in which this conference is being held, one can see two hills central to the foundations of western civilization – of liberal democracy. They carry powerful messages down the centuries.

Some thoughts on Independence, Democracy and Legitimacy

Paul Tucker, Harvard Kennedy School and Harvard Business School

Click here to read full text

On one hill, the Pynx, the Assembly met sometimes: the inspiration for democracy.  On the other hill stands the Temple of Athena, where one of the great stories making us who we are played out. In Aeschylus’ Oresteia, there is an absolute catalogue of disasters – contingent disasters and moral disasters. Towards the end of the tragedy, the protagonists travel to the Temple of Athena seeking resolution, chased there by the Furies, who want and urge revenge.  But the Furies are dispatched, because revenge and vengeance are no solution to anything. Instead, the answer is reason and justice.  That remains as inspiring today as I expect it was to the Athenians 2,500 years ago.

That’s worth hanging onto as this continent grapples with perhaps its most serious economic crisis since the Second World War, especially as the roots lie in ambition (to build a monetary union) and timidity (reluctance to complete the steps necessary to make that monetary union robust). It’s worth hanging onto because as countries — citizens, elected politicians and officials — have confronted the crises of the past seven years, the anchors to which they have needed to hold are democracy, justice and reason.

If that seems like a rather high falutin way to open some remarks on a subject as prosaic as central banking and monetary policy, I do so for two reasons. First, the citizens of Continental Europe, and nowhere more than here in Greece, have had to call on reserves of fortitude, patience and adaptability that no modern generation of democratic policymakers had remotely conceived of. But also, second, because, like it or not, it has been central bankers — powerful, independent and unelected — who have been centre stage. s, that jeopardize the efficient allocation of resources in the economy but do not materially threaten stability itself. Of course, in practice that distinction involves difficult judgments, but the power of central banks needs to stop somewhere if they are to enjoy substantive legitimacy (as opposed to solely the procedural legitimacy conferred by a legislative act). This is a field where some boundaries are definitely needed.