ARENA Tuesday Seminar: Mark Dawson
At the ARENA Tuesday Seminar on 16 October 2018, Mark Dawson will present his paper 'Procedural Accountability for Central Banks, and its Limits'.
Mark Dawson, Hertie School of Governance
Literature surrounding central banks is oriented around a central paradox. On the one hand, the independence of institutions like central banks is central to their institutional design. On the other hand, central banks exercise a level of regulatory authority that is simply inconsistent with basic principles of democratic accountability under conditions of operational independence. Central banks themselves have often responded to this dilemma by simply denying its existence. Independence and accountability are frequently said to be ‘two sides of the same coin’. This paper explores the academic support for this view, namely the role of academics in advancing a procedural conception of the accountability of central banks. This conception anchors accountability not in the need for Banks to account for their decisions but their need to account for how decisions have been reached. Four aspects of this procedural conception are discussed – mandate control, transparency, judicial review and horizontal accountability.
The purpose of this paper is less to lay-out this procedural vision than to articulate its limits, unpacking the main claims of those who advocate for procedural forms of accountability. Procedural accountability mechanisms may achieve far less than their proponents claim, often acting either as a ‘paper tiger’ or undermining the very purposes for which they are advanced. The preference for narrow mandates may, for example, rather than narrow the discretion of central banks, force them to engage in a convoluted form of policy-making that obscures the nature of their activities, thereby rendering political scrutiny more difficult. While transparency may be a pre-condition for substantive contestation of policies, it is unlikely to be an effective accountability mechanism when operating independently from the possibility of sanction. Finally, neither judicial review nor multiplying accountability channels have, thus far, acted as serious mechanisms for challenging the acts of central banks. Procedural accountability in this sense may be a mirage, either amounting to an administrative exercise or collapsing into a form of substantive contestation of policies. It is simply unable to manage the impasse between independence and accountability, requiring new models to take its place.