What’s the problem?
If you have ever heard central bankers or financial regulators speak there’s a good chance you thought “they sound just like bankers!”. It’s no surprise; many people who work in financial regulation have also worked for banks, and vice versa. The baffling jargon, strange abbreviations and bizarre names probably leave you cold. Do you know how to get involved in making financial laws in your country or in Europe? Did you know that even your MPs and MEPs don’t have much influence over regulators and central bankers, who these days have been made “independent” of political control.
What’s so bad about that?
If policymakers, national and international, are not answerable to parliament and civil society and are not democratic in other ways then they are very unlikely to make the right choices to make finance serve society as a whole. The drift towards technocratic, “independent” policymakers means there is now a chronic lack of representation for citizens in financial rulemaking. Just as women’s interests became better protected after women won the vote, citizens’ interests will be overlooked unless they are represented in financial rule-making. Without representation for citizens, special interests will work day and night so that financial rules are weak, watered down, or even withdrawn. A lack of representation is also a problem at international level, where 18 countries plus the EU (together, the G20) dominate the setting of international monetary and financial policies on behalf of the whole world, and where the Basel Committee of the Bank for International Settlements sets vital standards for capital requirements around the world but has little or no democratic representation at all.
What’s the alternative?
The alternative is to dramatically improve the representation of all citizens in policymaking at national and international level. This should include better parliamentary accountability and stronger democratic oversight of central bankers, financial regulators and supervisors.
How will it help?
If citizens are properly represented in the way financial regulations are made, the rules are much more likely to favour the public interest.
What steps could we take to get started?
- Simplify regulation – reverse the vicious cycle of de-regulation supported by ever more rules!
- Dramatically increase the democratic accountability of regulators and supervisors especially by increasing the role of parliaments in scrutinising financial policy, regulation and supervision.
- Bring an end to central bank independence, making them democratic, representative and accountable e.g. “Central banks should be 100% public, that their governing bodies should be composed of stakeholders from all sectors of society and that their mandate should come directly from the sovereign—in analogy that parliaments are elected directly by the citizens.”
- Reform the international financial architecture. Including: Promote democratic reform of the Bank of International Settlements and the Bretton Woods Organisations; Expand the G20; Create a new Bretton Woods system so that countries can manage international capital flows.
- Implement on-going and accountable debt audits, which involve citizens to assess the legitimacy of debt. This would lead, where necessary, to the cancellation of illegitimate debts. Enable debt relief for over-indebted countries via a UN-based multilateral or sovereign debt workout mechanism.
- Ensure that trade agreements do not restrain governments from enforcing financial regulations.