While I was sitting here juggling between past and future (for an upcoming blog post) the present came to my rescue.
— CNBC (@CNBC) 16. April 2015
Yesterday, as Mario Draghi was beginning his press conference after the meeting of the Governing Council of the European Central Bank, a woman protestor jumped on the desk in front of him and proceeded to throw paper pages, and then confetti, at him. During the brief seconds that it took for her to be grabbed and expelled from the room by the security staff, she apparently shouted ‘End ECB dictatorship!’ – although, actually, she was wearing a t-shirt featuring a similar sounding phrase: ‘End the ECB dick-tatorship!’ Apparently the attacker was one Josephine Witt, an ex-member of the feminist organisation FEMEN, so this was an attack on either autocracy or phallocracy.
In any case, the question we have to ask is: is she right?
Central banking may be considered dictatorial by some or independent by the mainstream. In the case of European central banking, however, I believe that there is a more adequate political metaphor: enlightened despotism.
Enlightened despotism is the doctrine of benevolent absolute power of the monarch that was prevalent in the 18th century, although it has its roots in the platonic idea of the philosopher-king. From Frederick the Great to Catherine of Russia, from Austria’s Maria Theresa to Portugal’s Pombal, enlightened despots once ruled Europe. They were the precursors to modernity, in a positive sense because, while being benevolent, they had sown enlightened ideas and in a negative sense because, being despotic, they ended up reaping revolution.
The main feature of enlightened despotism was indivisibility: there was no separation of powers, which Montesquieu theorised on at the time, but only became a new mode of government after the American and French revolutions. For enlightened absolutism, as Frederick the Great himself wrote:
‘The sovereign is attached by indissoluble ties to the body of the state, hence it follows that he, by repercussion, is sensible of all the ills which affect his subjects; and the people, in like manner, suffer from the misfortunes which affect their sovereign. There is but one general good, which is that of the state.’
A second essential feature is the goodness of outcomes. If the monarch governs only out of self-interest, he (or she) will be an egotistical and a cruel tyrant. Enlightenment, however, is expressed by the fact that the government of the benevolent despot is oriented towards the greater good. Herein lies the legitimacy of the regime, which on its own is based upon a very detailed governing technique:
‘The prince is to the nation he governs what the head is to the man; it is his duty to see, think, and act for the whole community, that he may procure it every advantage of which it is capable… He ought to procure exact and circumstantial information of the strength and weakness of his country, as well relative to pecuniary resources as to population, finance, trade, laws, and the genius of the nation whom he is appointed to govern.’
You see, the head was not democratically elected to be on the top of the body; it was thus appointed, and its function is not to have doubts about this appointment, but to do its duty and perform the sufficient operations of governance: calculations, statistics, legal ordinances, and so forth.
How relevant is enlightened despotism to us today? I would say a lot, and crucially so. The theory of benevolent absolutism has made quite a comeback to Europe and nowhere is this more evident than in the role the European Central Bank has increasingly been playing during this crisis. This role may be alleviating or irritating, depending on which side are you on. When the ECB is cutting liquidity to Greece, ‘austeritarians’ will praise the strictness of its guidance and ‘solidarists’ will decry it; when the ECB is pursuing quantitative easing, Keynesians will cheer and ordoliberals will tear their clothes and cover their heads with ashes. But what is amazing, from no matter which perspective, is that the ECB does all this with an easiness of conduct that is the envy of no matter which government in Europe, either national or supranational.
Governments nowadays tend to be rarefied things, limited by treaties, pacts, fiscal compacts, and the European semester. For the ECB, which extols itself on being a rules-based institution, this state of things is liberating due to four reasons:
First of all, there is no separation of powers for the ECB. In monetary terms, it rules alone. As central banks go, this is not unusual. But in the EU there is no other institution at the same level and scale which has the same leeway as the ECB. There is no treasury, no real economic governance to speak of, no implementer of industrial policy at a continental scale, no common treasury and no democratically elected executive. The ECB stands almost alone.
Secondly, there is a crisis going on. Enlightened despots used to thrive during crises, from Peter the Great when the floods hit Saint Petersburg, to Pombal when the Great Earthquake destroyed Lisbon. During a crisis, people will tend to ask for the absolute ruler to exert its benevolence, and to do it as absolutely as he can. Even longstanding critics of the ECB have demanded that it act to stop the crisis; more than that, they have asked that it act unconventionally.
Thirdly, the ECB is effective. With one sentence (‘we will do whatever it takes to save the euro and, believe, it will be enough’) Mario Draghi has contained the acute phase of the eurozone crisis. With OMT, he has assured the effectiveness of this promise, by actually not spending a single euro. With quantitative easing he is flooding the markets with liquidity. And the markets listen – wouldn’t they? – and in a way that is beyond comparison to what they do with the governments of member states to the institution which sets the interest rate, controls the monetary mass and is not shy about massively funding the banking system.
Fourthly – and most importantly – the ECB actually has a doctrine of benevolent despotism. Its main theorist is not Mario Draghi, but Vítor Constâncio, the vice-president of the ECB, and the man whom we could see in the corner of some of the photos of yesterday’s attack. In a November 2012 speech, Vítor Constâncio has distinguished two separate kinds of democracy. The first one he has called ‘input legitimacy’ or ‘government by the people’, which would mean, in the present context, ‘increasing citizens’ participation in European decisions.’ The second one is ‘output legitimacy’, or ‘government for the people’, i.e. ‘the effectiveness of the system in ensuring the continuous improvement of the citizens´ quality of life.’
There is a simpler way to refer to these two notions. The first one (‘government by the people’) is, put very simply, democracy. The second one, government for the people, is benevolent absolutism. ‘Input legitimacy’ is, indeed, nothing else than democratic legitimacy. ‘Output legitimacy’ may be effective or may even be good, but that does not necessarily make it legitimate.
It is rather astonishing, actually, that in the 21st century, after 300 years of the rise of modernity, monetary policy makers will resort to such obfuscation in order to justify what they do. If there is a crisis, justify your policies by your results, if you must, but trying to convince the public that your rule is already democratic only risks alienating the European public even more .
Those are the limits of enlightened despotism, then and now. Benevolent absolute rulers may fail, and they will have no backstop. As they tend to not be bound by other powers of comparable nature or scale, they will have no one to compensate these mistakes. And, ultimately, good outcomes do not guarantee legitimacy. People may accept independent supranational institutions, but they need to choose the head of the political body.
If ‘government for the people’ is all that you have to offer to your citizenry, while completely avoiding ‘government by the people’, you should count yourself lucky if the public only responds with confetti showers.
Because, at the end of the day, people tend to be absolutely not benevolent to benevolent absolutism.
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