Financial Citizenship: Experts, Publics, and the Politics of Central Banking (Cornell Global Perspectives) by Annelise Riles

Chapter 1
The Legitimacy of Central Banking

Government bailouts. Negative interest rates and markets that do not 
behave as economic models tell us they should. New populist and nationalist 
movements that target central banks and central bankers as a source of 
popular malaise. New regional organizations and geopolitical alignments 
laying claim to authority over the global economy. Bitcoin, cell phone bank-

ing, and other new forms of money and payment systems that challenge the 
authority of national currencies. Low confidence in conventional currencies 
and the state institutions behind them. Households, consumers, and workers 
facing increasingly intolerable levels of inequality. New risks associated with 
the financial health of pension funds. Public skepticism about the “science” 
of monetary policy and suspicion that central bankers serve the interests of 
a few at the expense of the rest. Malaise and unease among central bankers 
themselves about the limits of their tools and the double binds that define 
their work.
These dramatic conditions seem to cry out for new ways of understanding 
the purposes, roles, and challenges of central banks and financial governance 

more generally. The problem is not just that dominant economic models 
have failed to anticipate the current predicament. The problem is also that 
existing frameworks are far too narrow to take into account the broader po-

litical, social, and cultural implications of the work of central bankers on 
local, national, regional, and global scales. The unfinished agenda of the post-

2008 reforms, arguably, is an intellectual one: how to understand the place of 
the state in the market and, in particular, the place of the central bank in rela-

tionship to politics—in all the senses of the term.
The problem is not just intellectual. It is also political. Over the past 
eight years, as central banks have grappled with financial crises and eco-

nomic uncertainty, they have assumed new powers and also new responsi-

bilities. This has opened up new legitimacy challenges. In many countries, 
central bankers are under attack from populist politicians who have come to 
power on the promise of bringing the central bank to heel. On the right and 
on the left, new civil society groups are challenging the idea that we should 
trust financial regulators because they are experts in governing the econ-

omy. They are challenging the notion—accepted by most for a generation—
that expertise confers legitimacy. Various groups with vastly differing agendas 
are asking questions like: Do central banks have the power that they do, as 
a matter of law? Should they have that power, as a matter of policy? What are 
the proper roles of experts, elected officials, market participants, and the 
citizenry at large in stewarding national and global economies?
Central banks serve many important purposes in our national and global 
markets. First, they act as a clearinghouse between private banks. When 
you cash a check, your bank clears that check with your counterpart’s bank 
through the central bank. This means that every bank has an account with 
the central bank. How much interest the central bank pays on funds in that 
account in turn affects how much interest banks can afford to pay their own 
depositors on their own accounts, or what interest rates banks will charge 
lenders. Second, central banks buy and sell government debt (and most re-

cently other assets too, from stocks to real estate trusts) in order to stabilize 
the amount of money that is available in the market. If central banks buy lots 
of government bonds or stocks from banks in exchange for money, for ex-

ample, the banks will have more cash on hand to loan to their customers. In 
theory, this should encourage banks to make more loans to more businesses, 
leading to more jobs.

Financial Citizenship: Experts, Publics, and the Politics of Central Banking (Cornell Global Perspectives) by Annelise Riles