Suggestion from Catholic Social Services Australia: Central Bank Boards have a ‘representative of the poor’…

Couple of months ago, this blog had pointed how Proctor of South Africa wanted their central bank to have wider goals. Later we learnt that this plea was dismissed.

Now Catholic Social Services Australia gets into action and have made a report:  An Economy That Works for All. One of their suggestion is:

create a new position on the RBA Board:  Appoint a preeminent Australian who has knowledge of and experience of the consequences of monetary policy on the poor and marginalised to reinforce the inter-connectedness of economic and social policy and acknowledge the role the RBA can play in using monetary policy to improve the lives of the poorest and most marginalised in our society.

Usman Chohan of Univ of New South Wales responds  (who also points to all these developments) saying central banks can no more ignore inequality. Central bank policies have hit the poor disproportionately. But whether we should have a representative of the poor?

In arguing for a “seat for the poor” there are several elements that need to be unpacked.

The first is the question of central bank accountability. Having a seat for the poor means that there would be a person on the board constantly questioning and challenging the other members. This is known as horizontal accountability because it is a type of oversight among equals.

As central banking involves involves deliberation among policymakers of equal rank, horizontal accountability can be an effective way for them to regularly check one another’s actions. If an “ambassador of the poor” regularly questions other board members it could keep them on their toes even if it doesn’t always sway their decisions.

The next question is around the tools and metrics that a board member representing the poor would use to present dissenting views. If the board member draws on the usual metrics that central bankers monitor, such as labor market figures and general price levels, they might arrive at similar viewpoints to their peers.

On the other hand, if this board member used metrics centered on inequality, it could be extremely beneficial to the deliberations and help to realign policy. These metrics could include income distribution, savings behaviour, welfare dependency, and socioeconomic variables – including healthcare and education outcomes.

How would we pick a representative of the poor? How would this person display and maintain their professional credibility? How would they juggle broader macroeconomic concerns with their own ideological inclinations?

The idea that a person appointed by the church should intercede in deliberations over monetary policy is antiquated at best. So the mechanisms for appointing such a person need to be carefully addressed.

He says best bet is fiscal policy:

The past few years have shown that central bank policy has a large impact on inequality. If anything, in Western countries it has made inequality much worse, as the benefits of stimulus programs have disproportionately gone to the very richest.

But it is actually fiscal policy (otherwise known as government taxation and spending), and not central bank policy, that is the best tool for addressing inequality.

This is because decisions on taxation and payments are a more direct method for addressing inequality. Progressive programs such as basic incomes, universal healthcare and public education directly impact peoples’ lived experience.

If anything, it is fiscal policy that most needs a “representative of the poor”. Fiscal policy is so abjectly political and so deeply entrenched that a “depoliticized” fiscal regime only exists in the fantasies of academics (my own included).

Nevertheless, if we want to make a real dent in inequality, it is only possible when fiscal policy is fully committed as well.

Hmm…

This debate between fiscal and monetary policy goals is age old and will continue. What is more interesting is how religious organisations are beginning to figure a body called central bank which makes so called monetary policy. And how this monetary policy is being seen as one of the key sources of people’s troubles…

One Response to “Suggestion from Catholic Social Services Australia: Central Bank Boards have a ‘representative of the poor’…”

  1. vikramml Says:

    It is a lost cause pointing out the obvious moronic arguments. Sigh.

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