1.1 Introduction: Why We Need a Different Perspective on Accountability in the EMU

The Economic and Monetary Union (EMU) is a major achievement of European integration but also one of its major democratic accountability challenges. No other policy area of the European Union (EU) is as clear about ‘who gets what, when, how’Footnote ¹ as the EMU. No other policy area has laid bare the necessity of controls – political, legal and administrative – over the exercise of power at the EU level as much as the EMU did during the euro crisis.Footnote ² And yet the academic and political debate about democratic accountability in this policy field has reached a stalemate. On the one hand, it is widely acknowledged that the EMU suffers from structural flaws determined by a multi-level system that blurs conventional accountability lines between those who hold political authority in a representative democracy (the citizens) and those who make decisions on their behalf (in this case EU institutions).Footnote ³ With respect to economic policy coordination, it remains difficult to disentangle the individual responsibility of finance ministers acting collectively in the Eurogroup and the Economic and Financial Affairs Council (ECOFIN), although their members are technically accountable to their respective national parliaments and electorates.Footnote ⁴ The same problem exists when considering decisions made by heads of state and government in the European Council – an institution which has taken a clear leadership role during the euro crisis.Footnote ⁵ The European Parliament (EP) has virtually no control over the intergovernmental institutions, while its legislative oversight of the European Commission in economic governance remains weak.Footnote ⁶ In parallel, the Commission saw its powers expanded during the euro crisis by assuming key responsibilities for the coordination of national budgets through the newly introduced European Semester.Footnote ⁷

On the monetary union side, the European Central Bank (ECB) has always faced criticism from an accountability perspective because its establishment effectively took monetary policy decisions away from Eurozone Member States and entrusted them to a technocratic institution, which, by several accounts, is the most independent central bank in the world.Footnote ⁸ The expansion of the ECB mandate during the euro crisis has further complicated the situation, adding new accountability deficits with respect to unconventional monetary policies, financial assistance programmes and banking supervision.Footnote ⁹ Last but not least, the Eurozone Member States established in 2012 an intergovernmental organization – the European Stability Mechanism (ESM) – designed to provide financial assistance to countries experiencing sovereign debt problems. Given its status outside EU Treaties, the ESM is subject only to a limited extent to scrutiny by national parliaments and not at all to scrutiny by the EP.Footnote ¹⁰ To sum up, the EMU institutional structure illustrates in many ways the ‘impossible accountability thesis’ in the EU, according to which democratic accountability is simply incompatible with the EU’s multi-level governance model.Footnote ¹¹

On the other hand, scholars have emphasized the need to improve EMU’s democratic accountability since its inception.Footnote ¹² Demands to make the EMU more accountable follow the standard discourse on accountability in modern governance: at the basic level, accountability requires public officials – whether elected or not – to justify their conduct in front of a higher authority;Footnote ¹³ at the next level, accountability ensures the possibility to punish those officials found lacking or allow them to make amends for past failures.Footnote ¹⁴ An accountability relationship thus involves two parties: an account-giver – henceforth ‘the actor’ – who can be a person (member of a legislature, executive, bureaucracy) or a public institution, and an account-holder – henceforth ‘the forum’ – who can also be an individual (a direct superior, a minister, a parliamentarian) or an institution (parliaments, courts, ombudsmen, audit offices).Footnote ¹⁵ In the policy discourse on accountability, the concept has multiple positive connotations, holding (1) the promise of democracy (by ensuring the answerability and responsiveness of elected officials), (2) the promise of control (through mechanisms designed to oversee executive and administrative action), (3) the promise of justice (through judicial and administrative review of government decisions), and (4) the promise of performance (through target-setting and incentivization of public officials).Footnote ¹⁶

The problem, however, is that the institutional set-up of the EMU reduces the potential of such promises significantly. For example, in order to address the structural weaknesses of the EP in the EU political system, there is a proposal to institutionalize a subcommittee for Eurozone oversight that would call executive actors to account for their decisions.Footnote ¹⁷ It is doubtful, however, that such a committee would deliver on the ‘promise of democracy’, given the well-known disconnect between citizens and EP elections – despite the institutional empowerment of the EP in recent years.Footnote ¹⁸ In a similar vein, since the ECB mandate can only be altered through a cumbersome treaty change, there is pressure for the institution to narrow the mandate on its own – for instance, by excluding itself from financial assistance conditionality, limiting the purchase of government bonds to avoid redistribution or setting more specific objectives to measure the effectiveness of its banking supervision.Footnote ¹⁹ To put it differently, given the constraints of the ECB legal framework, the ‘promise of control’ present in accountability discourse is largely a voluntary exercise – dependent on the ECB’s ‘willingness for control’ by oversight bodies like the EP and national parliaments, the European Ombudsman, the European Court of Auditors (ECA) or the European Anti-Fraud Office.

The mismatch between the structural flaws of EMU accountability and the incremental proposals put forth to reform the system suggests that academic thinking about accountability on the topic is at a stalemate. There is a gap between what is seen as necessary and what is feasible in the EMU governance framework – given the complications of multi-level decision-making within a hybrid institutional constellation of intergovernmental and supranational actors. In this chapter, we identify the cause of the stalemate in the parallel development of deductive and inductive approaches to accountability in the EU. Most deductive approaches typically apply national accountability benchmarks on EMU and subsequently find numerous shortcomings in their institutionalization at the EU level – especially when it comes to the role of parliaments. In contrast, inductive approaches start from the EU’s Treaty framework on EMU and subsequently infer standards of accountable behaviour for different EU institutions. The problem is that the EU cannot meet national benchmarks for accountability, while the principles set in the EU Treaties are too narrow and hence decoupled from generally applicable accountability standards.

To break the stalemate, we propose a new deductive framework for studying accountability more suitable to EMU and the EU setting – which can be applied and drawn upon in subsequent theoretical and empirical chapters within this collection. Drawing on public administration literature, legal scholarship, and liberal and republican thinking in political theory, we develop a normative conceptualization of accountability that seeks to answer a basic question: ‘what is accountability good for?’ Accordingly, we identify four normative ‘goods’ of accountability: openness, non-arbitrariness, effectiveness and publicness. We show that existing mechanisms of accountability can address the normative ‘goods’ in two ways: one centred on the processes through which actors take decisions (procedural accountability) and the other focused on the merit of the decisions themselves (substantive accountability).Footnote ²⁰ We argue that there are both pay-offs and trade-offs in choosing one alternative over the other. While procedural accountability brings clarity and predictability for the people involved in the process, it tends to detract from the underlying goals of accountability’s four normative goods because it draws public attention away from the policies public officials pursue and their effects to the procedures by which they do so. In contrast, substantive accountability is more complex and costly to achieve but has the merit of maintaining the normative ethos of the concept. After analysing various aspects of EMU accountability, we conclude that procedural accountability dominates: a finding that we encourage our authors to critically explore.

The chapter is structured as follows. We begin by explaining the stalemate of the EMU accountability literature, caught between deductive approaches focused on national benchmarks of democratic accountability and inductive approaches emphasizing contrasting interpretations of different principles set by EU Treaties. We show the need for a deductive, normative perspective that is applicable to the EMU without being specific to it. The second section introduces the four normative goods of accountability and describes the possibilities to enforce them in a procedural or substantive way. The third section applies the new conceptualization to examples across the EMU in order to show how political and legal institutions deliver the normative goods of accountability procedurally and substantively – with an emphasis on the former. The fourth section highlights the limits of procedural accountability, making an argument against its prevalence in the EMU governance structure. We conclude with a call for both our authors and other scholars to apply the distinction between procedural and substantive accountability to different policy fields and institutions within EMU.

1.2 The Stalemate of Accountability Research on EMU: Between Deductive and Inductive Approaches

To make sense of the accountability literature on EMU, we propose a distinction between deductive and inductive approaches to accountability. The basis of the classification is the reasoning behind accountability assessments: how do scholars judge whether an actor has acted accountably in the EMU? Do they start from general definitions and seek to apply them to specific institutions like the ECB? Or alternatively, do they first examine a given institutional setting, for example, the legal framework of the ECB, and then derive general accountability standards applicable thereof? The distinction between deductive and inductive methods is well known in scientific inquiry. From Aristotle to Francis Bacon to William Whewell, philosophers have discussed two directions of the scientific method: the first begins with general and fundamental principles that are then applied to specific cases (deduction), while the second starts with the specific of what is observed and then moves to general and fundamental principles (induction).Footnote ²¹ Although this chapter focuses on the EMU, the distinction between deductive and inductive approaches applies to accountability research more generally.

In fact, accountability research benefits from the new classification in two ways. First, the distinction between deductive and inductive approaches transcends regular disciplinary boundaries dividing the study of accountabilityFootnote ²² – especially visible between political scientists and legal scholars. Browsing through the relevant academic literature, we can identify deductive and inductive studies which examine all the classic institutional mechanisms of accountability, regardless if they are political (elections, parliamentary scrutiny of the executive), legal (judicial review), administrative (investigations by ombudsmen, auditing and anti-fraud offices) or managerial (hierarchy in a bureaucratic organization).Footnote ²³ Second, the deductive/inductive dichotomy encompasses definitions of accountability that are either normative or descriptive, as distinguished by Mark Bovens.Footnote ²⁴ From a normative standpoint, what matters are standards for accountable behaviour, which can be either general (deductive) or specific to a situation (inductive). From a descriptive perspective, the interest is in [the appropriate] institutional mechanisms of accountability, which can be borrowed from other contexts in a comparativist effort (deduction) or inferred on an ad hoc basis from the experience of selected actors (induction). Consequently, deductive or inductive studies can have an explicit normative focus on the accountable behaviour of actors or a more analytical focus on the institutional arrangements of accountability.

In the EMU accountability literature, deductive approaches revolve around two general standards of accountability: ensuring democratic control and preventing abuses of power.Footnote ²⁵ This is visible among authors who underline the accumulation of executive power in economic governance after the euro crisis and the necessity to increase the role of parliaments as a countervailing power.Footnote ²⁶ While the EP had been marginally involved in economic governance prior to the crisis, national parliaments actually saw their budgetary and fiscal monitoring powers reduced since the institutionalization of the European Semester.Footnote ²⁷ The importance of parliaments for democratic accountability is grounded in an understanding of the concept as the counterpart to delegation in the ubiquitous principal–agent model. The logic is straightforward: if ‘A is obliged to act in some way on behalf of B’, then ‘B is empowered … to sanction or reward A for her activities or performance in this capacity’.Footnote ²⁸ Transposed to the EU level, what is required is to (re-)build the democratic accountability chain from voters to elected representatives but especially from elected representatives to executive actors.Footnote ²⁹ Parliaments are thus crucial in closing the gap between citizens as the ultimate principals of economic decisions and various executive agents such as the European Council, the Council or the Commission. Accordingly, scholars argue that the EMU could improve its democratic accountability credentials by empowering the EPFootnote ³⁰ and national parliamentsFootnote ³¹ in terms of both decision-making and legislative oversight of executive actors. Despite having different analytical foci, these studies share an implicit normative assumption that parliamentary involvement in economic governance can help Member States – and hence the EU – ‘meet their legitimacy obligations to their own publics’.Footnote ³²

In monetary affairs, deductive studies focus on ‘preventing the development of concentrations of power’ and ensuring an appropriate system of checks and balances of the ECB.Footnote ³³ The emphasis here is different because the ECB is a non-majoritarian institution whose need for independence from electoral competition has been one of the cornerstones of the EMU since its creation (Article 130 TFEU). The EP is thus often cited as an ‘accountability forum’ and not the principal of the ECB in monetary policy and banking supervision; consequently, the ECB ‘owes’ the EP transparency and justification of decisions but not obedience or even political responsiveness.Footnote ³⁴ Conversely, the importance of preventing abuses of power is much stronger in the area of legal accountability, that is, judicial review of ECB decisions by national and EU courts.Footnote ³⁵ In legal accountability, deductive and inductive approaches are sometimes intertwined, as courts apply the general standard of ‘curtailing the abuse of executive power’ in reference to existing regulations.Footnote ³⁶ A combination of deductive and inductive approaches can be found for instance in the work of Markakis, who examines the accountability of the ECB in relation to the price stability objective prescribed in Article 127(1) TFEU.Footnote ³⁷

Conversely, studies that are ‘purely’ inductive use the EMU legal and institutional architecture as the starting point for evaluating accountability. A clear example is offered by case-law analyses of ECB or ESM instruments. In this category, scholars do not apply an overarching accountability definition in order to evaluate judicial decisions; conversely, they selectively employ the Treaty framework in order to identify specific features, for example, the independence of the ECB, which are then connected to different headings and degrees of judicial review, for example, the duty to state reasons as displayed in Gauweiler.Footnote ³⁸ As a result, there is room for contrasting interpretations of the stringency with which the Court of Justice of the European Union (CJEU) should uphold different Treaty principles. For instance, with respect to the ECB, the introduction of the first unconventional monetary instrument – the Outright Monetary Transactions (OMT, 2012) – divided lawyers on the question of the violation of the Treaty’s ‘no-bailout’ clauseFootnote ³⁹ and the extent to which national courts and the CJEU should intervene to hold the ECB accountable for potentially acting ultra vires.Footnote ⁴⁰ The ‘no-bailout’ clause had also featured in PringleFootnote ⁴¹ in relation to the establishment of the ESM, which similarly divided scholars on whether courts should interpret Treaty articles in light of background teleological expectations about current political circumstances.Footnote ⁴² In this context, several scholars emphasized the deferential approach of the CJEU towards EMU executive actors, as judicial decisions failed to question if austerity was indeed demanded by ‘the logic of the market’,Footnote ⁴³ or whether the instruments adopted during the euro crisis were substantively justified by ‘a logic of emergency’.Footnote ⁴⁴ Regardless of whether studies criticize or endorse court decisions on the EMU, the inductive approach to evaluating accountability is obvious – as the benchmarks for accountable behaviour are derived from specific features of the EU Treaties.

Another variant of inductive studies examines the normative peculiarities of EMU governance. In a recent article further developed in this volume, Steinbach argued that the ‘normative choice for accountability’ in the EMU need not be democratic in the principal–agent sense of empowering political institutions (especially parliaments); conversely, EU economic governance has created an accountability regime of its own, subject to the judgement of the market.Footnote ⁴⁵ According to Steinbach, the orientation towards the market is institutionalized in the EU Treaties, which highlight the Union’s commitment to create ‘an open market economy with free competition’.Footnote ⁴⁶ Moreover, the emphasis on the ‘free market’ is seen as a constitutional norm which ‘implies the absence of state intervention in the market-based price determination process’.Footnote ⁴⁷ Accordingly, states and private actors in the EMU are/should be accountable to markets rather than attempt to create a political accountability regime in a flawed democratic system. In fact, Steinbach sees current criticism of EMU accountability as the result of attempting to substitute economic accountability with political accountability, for example, in financial assistance when creditor states and EU institutions have taken over the position of accountability forum from the market.Footnote ⁴⁸ The issue is whether accountability to the market is normatively justifiable in a democratic system; after all, the belief that the market will hold actors accountable ‘just the right amount’ is rooted in ordoliberal assumptions of political economy that have been seriously challenged since the crisis.Footnote ⁴⁹ As a recent study by the ECB acknowledges in relation to fiscal requirements for price stability, a certain paradigm of political economy ‘became constitutional law in Europe before the economics profession could even prove [its] value’.Footnote ⁵⁰

Overall, the point of this review is to show that there are problems with both deductive and inductive approaches to EMU accountability. First, deductive studies drawing on principal–agent theory are stuck in a vision of accountability designed for the nation-state that is simply unattainable in the specific institutional setting of EMU governance. National parliaments and the EP are important accountability forums, but they cannot be expected to deliver in the same way as legislatures within national democratic systems of government. In the EMU, the delegation chain from voters to elected representatives to executive actors is either short-circuited (in the case of the EP) or too tortuous to function properly (in the case of national parliaments). In contrast, inductive studies display different problems, namely the replacement of general accountability standards with situation-specific benchmarks assessing the performance of an actor in a given setting. In EMU, the EU Treaties constitutionalize certain principles (like the ‘no-bailout clause’ or the ‘free-market orientation’) that remain open to political contestation and ordinary decision-making domestically.Footnote ⁵¹ One of the difficulties of this constitutionalization is that EU institutions can be held accountable for the extent to which their decisions comply with Treaty principles but not for the principles themselves. Political accountability, however, may concern the overall principles governing EMU (a level of contestation that inductive studies – as they are oriented by these principles themselves – cannot capture). Normative standards of accountability should be broader than policy-specific benchmarks for holding actors accountable in a particular context. We introduce such an approach in the next section in relation to the EU setting.

1.3 The Four Normative Goods of Accountability in Modern Governance

The objective to conceptualize accountability beyond the nation-state is usually associated with global politics.Footnote ⁵² In this context, Michael Goodhart has observed that all approaches to global accountability share a similar understanding of the term, namely the ‘question of making those who wield power answerable to the appropriate people’.Footnote ⁵³ In his view, this standard definition is based on a Westphalian notion of the state that is unworkable in world politics. In the EU, the absence of a European demos and the resilience of national demoiFootnote ⁵⁴ implies that accountability cannot be organized around the ‘appropriate’ forum because this is simply not feasible in a large-scale political unit where citizens have few opportunities to influence governing decisions.Footnote ⁵⁵ In this context, Goodhart proposes to shift our thinking about accountability ‘from who is entitled to hold power to account to the reasons why accountability is justified in democratic theory’.Footnote ⁵⁶ His interest is in the nexus between democracy and human rights, linking accountability to emancipatory human rights norms that ‘constrain the exercise of power and enable meaningful political agency’ in the global arena.Footnote ⁵⁷ We agree with Goodhart that the conceptualization of accountability beyond the nation-state must include normative standards for holding power to account. However, we believe that focusing on human rights reduces accountability to the role of an instrument necessary to achieve other democratic objectives rather than giving it credit as a democratic goal in itself. Accordingly, we hold that any meaningful conception of accountability must begin with an understanding of the normative goods to which accountability is aimed. Drawing on liberal and republican thinking from political theory and the broader public administration literature, we distinguish between four such goods.Footnote ⁵⁸

The first good is openness. Liberal thinkers from Bentham onwards have long argued that public confidence in official action is likely to be increased where public policy is conducted under the public gaze (what he termed ‘publicity’).Footnote ⁵⁹ The openness of public policy has thus been linked to a number of public goods, such as the avoidance of corruption,Footnote ⁶⁰ the improvement of public knowledge and the republican demand that free citizens should enjoy ‘non-domination’ through the ability to question and contest official action.Footnote ⁶¹ We might therefore want accountability because we see it as a device to ensure that public action is open, transparent and contestable.

The second such good is non-arbitrariness. There is a deep tradition in accountability research of tying accountability to notions of principal–agent theory in which accountability is a device for (political) principles to control (administrative) agents to whom they have delegated powers.Footnote ⁶² This is a narrower instance of a broader accountability good, namely that those who wield public power should do so in a limited manner and that they should exercise coercion only to the degree necessary to achieve their goals.Footnote ⁶³ Non-arbitrariness is also therefore linked to more general limits on public action such as human rights or due process guarantees that seek to regulate the relationship between the individual and the state.Footnote ⁶⁴ Accountability – by making officials answer for conduct – provides a means by which arbitrary distinctions or applications of power can be identified and later remedied.

The third good which accountability seeks to render concerns effectiveness. While openness and non-arbitrariness seem highly normative values, accountability may be sought for more utilitarian reasons, namely that accountable officials are more likely to deliver high-quality services. From this perspective, accountability holds the promise of performance.Footnote ⁶⁵ By making an official answer for their conduct, and by offering the possibility to correct potential errors, accountability is a mechanism to improve the efficacy and responsiveness of public policy.Footnote ⁶⁶ Here, the premise is that the need to justify and even correct conduct will likely improve, and encourage reflection upon, the design of policy-making or implementation.

The final such good is one of publicness or that official action should be oriented towards the common good (and therefore justified by public or universal reasons).Footnote ⁶⁷ This involves demonstrating both that officials were not personally enriched and that their decisions are fairly balanced, taking into account different societal interests and perspectives. Once again, accountability is a key device for ensuring the publicness of official action in this sense – when parliamentarians scrutinize government agencies, or courts conduct judicial review, a key demand is that actors show how their activities forwarded the national or collective interest (with different accountability forums likely to disagree on what a fair balancing of societal interests would entail).Footnote ⁶⁸ Accountability is thus a device to advance the normative good of public policy grounded in the public interest.

Having established the normative goods of accountability, the question is how they can be delivered in practice. Our proposal is to distinguish between procedural and substantive ways of providing the four normative goods of accountability. To put it simply, actors are procedurally accountable if they can demonstrate that the processes or steps they followed in performing their tasks were open, limited (non-arbitrary), effective and/or public. By contrast, actors are substantively accountable if they can demonstrate that the decisions themselves or the outcomes to which they led were open, limited, effective and public. We further explain the distinction below.

1.4 Providing Accountability Goods: Procedural versus Substantive Ways

How can accountability be procedural, and how can it be substantive? The simplest way of understanding the distinction is through the categories of public law.Footnote ⁶⁹ In this context, judges often distinguish between reviewing parliamentary acts on procedural or on substantive grounds.Footnote ⁷⁰ When conducting a procedural review, a judge will enquire into the robustness of the process through which a parliamentary act was adopted.Footnote ⁷¹ When conducting a substantive review, what is important is not the process of adopting an act but its substantive provisions per se and their likely impact. To give an example, if a Court is enquiring whether a statute setting out minimum requirements for religious schools infringes the right to freedom of religion, it might assess the infringement either procedurally (did Parliament consider the impact of the bill on freedom of religion, or incorporate the views of religious minorities, when adopting it?) or substantively (is the statute likely to infringe religious freedom, or is it in fact neutral vis-à-vis different systems of belief?).

If we transport this distinction to the world of accountability, procedural accountability suggests an accountability relation oriented around the process by which a particular decision was rendered. If we are holding an actor to account procedurally, we are calling them to account for, and justify, the procedural steps they undertook in forming or executing a policy decision. If we are holding an actor to account substantively, by contrast, we are calling them to account for and justify the substantive worth of the policy decision itself. Thus, a parliamentary committee examining the implementation of the bill above might also seek to hold a school inspectorate either procedurally or substantively accountable. Procedurally, they might ask how often religious schools had been inspected or how parents of religious minorities had been consulted in drawing up guidelines for inspection. By asking such procedural questions, the committee is not calling into question the substantive worth of the inspectorate’s decisions but confining itself to examining the steps the inspectorate took to fulfil its mandate.

Parliamentarians might also seek, however, to hold the inspectorate substantively accountable – did the implementation of the statute achieve the goals (e.g. of improving school standards) it originally sought, or why did the inspectorate choose to prioritize the inspection of one set of schools or one aspect of the school curriculum over another? In the latter case, what is at issue is not the form of decision-making but its substance, that is, did the actor being held accountable make substantively worthwhile, just or efficient decisions? The official is thus being held accountable against a substantive rather than procedural benchmark: they are being asked to explain and justify the worth of their action.

From a conceptual perspective, process is either unimportant or instrumental in this case – the inspectorate could be judged by parliamentarians to have implemented the statute justly or effectively even in circumstances where the procedure by which they had done so was inadequate just as the inspectorate could demonstrate a robust, transparent and inclusive procedure yet still be seen by parliamentarians as substantively failing to adequately explain the correctness or efficacy of their decisions. In simple terms, the two ‘forms’ of accountability carry different lenses through which to understand whether accountability has been adequately rendered.

The notions of procedural and substantive accountability overlap to a certain extent with the distinction between process and outcome accountability found in social psychology.Footnote ⁷² The interest there is in the micro-behaviour of individuals and how they respond to different types of evaluation standards set by accountability forums, which can focus on processes or outcomes. In contrast, we take a macro-level approach and discuss the abstract forms (procedural or substantive) through which the normative goods of accountability can be delivered in practice. Our concept of accountability is therefore not relative to a specific accountability forum, but it is centred on general democratic ‘goods’ considered inherent in the term. For the purposes of illustration, these are applied to the EMU context in the next section. The purpose of the edited collection is to expand and apply these goods in a manner more comprehensive than this schematic overview can provide.

1.5 Procedural and Substantive Accountability in the EMU

The four normative goods of accountability can be identified across the EMU governance architecture. The examples below focus on diverse cases that are ‘representative in the minimal sense of representing the full variation of the population’.Footnote ⁷³ The purpose is to show the predominance of procedural ways of providing the normative goods of accountability in the EMU.

Let us start with the first good – openness. Transparency has been for decades a key concern of accountability research.Footnote ⁷⁴ Most importantly, however, transparency seems a good that can be fulfilled without a demand for substantive justification. An official can therefore satisfy the demand for openness procedurally by providing the public with information and documents on a regular basis. In this scenario, the task of accountability forums, such as parliaments, auditors or courts, is to enquire into the procedures by which citizens can access official information and to demand reform if these procedures are found wanting. Many accountability requests in the field of EU economic governance are of this nature. To take a specific example from banking supervision, the largest number of questions asked by Members of the European Parliament (MEPs) to the ECB are requests for information, seeking to address information asymmetries between the two institutions.Footnote ⁷⁵ Keeping in mind that ‘transparency is a necessary but insufficient condition for accountability’,Footnote ⁷⁶ it would make sense for MEPs to first ask for information before acting on it substantively. But when political accountability does not move beyond transparency requests, the value of openness remains procedural.

The value of openness can also, however, be met substantively. The test of substantive openness is not the de jure but the de facto openness of official action. To be substantively open, an official must not simply provide information, or demonstrate transparent procedures, but provide information in a sufficiently relevant and timely way that it is likely to be used by accountability forums, such as parliaments, courts or citizens.Footnote ⁷⁷ The test of substantive accountability is thus one of whether official action is in fact regularly probed and contested. This establishes an obligation on accountability forums too, namely that they utilize their information rights to understand policy decisions and to make clear to the public the substantive choices, including the achievements and errors, of public actors. To return to the example above, the key difficulty in the parliamentary accountability of the ECB is not only the availability of information but its volume and complexity.Footnote ⁷⁸ MEPs simply do not have the expertise to identify the most relevant or salient questions that would allow them to substantively challenge ECB decisions.Footnote ⁷⁹ Substantive openness often requires additional resources, raising difficult questions about who should bear its costs.

The second good – non-arbitrariness – also carries procedural and substantive elements. Procedurally, public actors are commonly bound by statutes or other rules which specify their substantive mission. When adopting legislation, or making specific decisions, officials are commonly under a duty to explain why particular decisions are necessary to fulfil their mandate (which may be subject to judicial review).Footnote ⁸⁰ Similarly, public institutions may adopt procedures to ‘mainstream’ rights-based limitations into their policy-making, that is, to conduct impact assessments or other exercises by which officials may demonstrate that human rights have been taken into account.Footnote ⁸¹ Here, arbitrariness is limited procedurally in the sense that public actors bind themselves via process-based limits on their action; subsequently, accountability forums such as courts and parliaments are able to verify these limits; for example, was a rights-based impact assessment conducted? To provide an example from the EMU, the Commission committed, as part of the Juncker Commission’s promise to improve the EMU’s social dimension, to produce social impact assessments to assess and minimize detrimental social rights implications of future EU financial assistance. Such an assessment was conducted in relation to the third Greek bailout.Footnote ⁸²

Substantively, however, non-arbitrariness carries a higher bar. As with openness, the important element is whether public action was de facto limited and non-arbitrary. This would require not only that actors are bound by limits but that they demonstrate how limits constrained their activities. Non-arbitrariness also concerns whether a given policy arbitrarily discriminates against a given group in society or infringes an individual’s rights. From the perspective of an accountability forum, the key question would be whether a particular group in society or (for a judge) a core autonomy right is disadvantaged by virtue of how a policy has been designed. To return to the definition of the procedural/substantive distinction of the previous section, the existence of a procedure to mainstream human rights considerations within an institution would not fulfil this requirement if the outcome of such mainstreaming violated a core right. To continue the example of financial assistance, while the Commission indeed conducted a social impact assessment for the third Greek bailout, academic commentary on this assessment has been highly critical.Footnote ⁸³ These criticisms range from the inadequacy of the assessment to the question of how it actually fed into policy-making (with no indication that it led to any meaningful changes in how the stability programme for Greece was designed or implemented). The key test for substantive accountability as non-arbitrariness is thus whether policy choices in EMU plausibly aimed for and achieved non-arbitrary results.

The third accountability good, effectiveness, would seem to be inherently substantive in nature – as it concerns whether planned policies resulted in particular outcomes. Nevertheless, the ‘explosion’ of auditing in the 1990s as a means to control the government suggests that effectiveness can also be implemented in a limited procedural way.Footnote ⁸⁴ In 2016, the ECA evaluated the operational performance of the Single Supervisory Mechanism (SSM) and the role of the ECB thereof.Footnote ⁸⁵ The evaluation report included a section on the ‘difficulty in obtaining audit evidence’, as the ECA officially complained that the ECB provided the auditing team ‘very little’ of the information required.Footnote ⁸⁶ The ECB was given the chance to respond to the report, emphasizing its different understanding of ‘sufficient information’ for auditing purposes. Specifically, the ECB claimed that ‘all audit evidence covered by the Court’s mandate to audit the “operational efficiency of the management of the ECB” had been provided’ and that any exception concerned documents that were not related to the SSM’s operational efficiency.Footnote ⁸⁷

The problem here concerns the legal limits imposed on auditing the ECB’s substantive effectiveness by the ECA. According to EU primary law, the ECA has ‘full power to examine all books and accounts of the ECB’ but only with respect to examining the ‘operational efficiency of the management of the ECB’ (Article 27, Protocol no. 4 TFEU). The conflict between the two institutions regarding the SSM report reflects the different interpretations of ‘operational efficiency’ and the substantive need for information to make such an assessment. In the absence of said information, the ECA’s report was reduced to evaluating procedural aspects such as staffing, for example, whether on-site inspections of banks should be run by ECB staff as opposed to representatives of national supervisors.Footnote ⁸⁸ Despite these legal limitations, the ECA clearly understood the value of substantive effectiveness, as the report recommended that the ECB develops a public and formal performance framework to assess the effectiveness of its supervisory activities.Footnote ⁸⁹

Lastly, the final accountability good of publicness can also be rendered procedurally or substantively. In both cases, publicness requires that public officials demonstrate the orientation of their conduct towards the common good. In the EU context, this may take on a specific meaning, namely the duty of EU actors to demonstrate that their policies (such as in EMU, country-specific recommendations) take the interests of the EU as a whole into account (and not just of selected industries or states). A common mechanism to achieve accountability as publicness concerns establishing procedures for public participation in government action from notice and comment procedures to more intensive forms of citizen participation.Footnote ⁹⁰ An accountability forum may therefore assess whether a robust process of consultation existed when adopting public policies. This can also include proportionality review in the sense that such review commonly requires, in order for limitations on rights to be justified, that officials demonstrate that their policies restricted rights in pursuit of a ‘legitimate aim’.

In the context of EMU, examples of both can be found. In the 2015 ‘Five Presidents Report’, the leaders of the EU’s main institutions committed to greater involvement of the social partners in fiscal coordination processes such as the European Semester, with some commentators arguing that this has led to a gradual ‘socialization’ or re-balancing of the Semester’s policy priorities.Footnote ⁹¹ Elsewhere, several ECB programmes – most notably the OMT, the Asset Purchase Programme (APP) and the Public Sector Purchase Programme (PSPP) – have been subject to judicial challenge, with the CJEU asked to rule on whether their effects on national economic competencies were adequately grounded in the ECB’s mandate of producing stable prices for the Eurozone as a whole.Footnote ⁹²

Substantively, publicness concerns not just the existence but the effects of participation and reason-giving. With respect to participatory governance, many studies of the phenomenon in different national and transnational settings complain of its elitist, or perfunctory character, questioning whether participation actually leads to policy change.Footnote ⁹³ Substantive accountability regarding publicness would therefore concern the question of how participation affects outcomes, or how the knowledge garnered via participation was utilized in the policy process. In respect to proportionality review, substantive accountability would not merely require officials to posit the aim to which their policies were directed but would allow scrutiny of the suitability and necessity of those policies, given those negatively affected by them (such as those whose fundamental rights were infringed).

Once again, demands for substantive accountability as publicness can also be found in the EMU context. To return to the examples above, while the participation of civil society actors in the European Semester may be an end in itself, the tying of this participation to a debate about the Semester’s policy priorities illustrates the weakness of accountability in this policy context. The real question is whether the involvement of civil society in the Semester matters or is simply another abstract commitment boldly stated in policy documents only to be safely disregarded when substantive decisions about EU fiscal policy are made. Similarly, those analysing proportionality review of the ECB have repeatedly questioned whether such review in the area of monetary policy is meaningful or whether the standard of review provides the ECB with such a margin of discretion as to make judicial review practically meaningless (or ‘incomprehensible’ as provocatively put by the German Constitutional Court).Footnote ⁹⁴ In this sense, what matters for accountability as publicness is not the mere provision of reasons for action relating to the common good but whether these reasons meaningfully orient the conduct of economic policy-makers.

With all four categories, the guiding distinction between procedural and substantive accountability is between process and merit. For the former, the connecting point between actor and forum is the steps taken to make public action accountable; for the latter, the basis for interaction is the merit of official action vis-à-vis alternatives. This leaves a crucial question: from an institutional design perspective, why would anyone choose an accountability regime focused on one form of accountability, rather than the other? This is the subject of the next section.

1.6 Procedural Accountability – and Its Limits

There are good reasons why institutions may favour procedural accountability. The main reason concerns the clarity and predictability of the standards used to orient accountability. Under the substantive reading, a potentially broad set of standards are at play, with the actor under a heavy and potentially limitless justificatory burden. To take one of the four categories discussed above, requirements of publicness in public policy are complex and may be subject to significant disagreement.Footnote ⁹⁵ This diversity in interpretation applies to both actors and accountability forums. Assuming that officials may be accountable – in a complex and ‘networked’ modern polity – to multiple accountability forums, representing an array of interests, finding an appropriate balance able to satisfy these interests can be an overwhelming task.Footnote ⁹⁶ In the EMU context, the ECB’s bond-buying programme was of such volume and complexity to have potentially limitless consequences on a wide variety of societal interests; under the circumstances, how could the ECB adequately demonstrate that this policy was non-arbitrary, effective and oriented towards the common good? Substantive accountability widens the set of standards orienting the conduct of the actor, potentially confusing both public officials themselves and the accountability forums that must scrutinize them.

In this regard, procedural accountability seems to be much more straightforward. Here, the primary duty of the actor is to follow an established process (under the assumption that, if followed, this process will lead to open, non-arbitrary and effective outcomes oriented towards the common good). The job of the forum is then to verify that the correct process has been implemented. As a result, a significant burden – of calculating and adjusting conduct according to its concrete effects – is lifted and externalized. This may be particularly important in a judicial context, where judges may lack both the knowledge and legitimacy to interfere in complex economic debates. In social psychology, experimental research has demonstrated that procedural (or process) accountability is linked to situations when actors lack knowledge about the specific outcomes they are expected to achieve; consequently, they shift their focus to the quality of the decision-making process.Footnote ⁹⁷ This suggests that procedural accountability can easily become decoupled from substantive outcomes.

The potential ‘replacement effect’ of procedures for substance therefore represents the first major limitation of procedural accountability. Indeed, there are important implications to ‘lifting the burden of substantive justification’ for actors. Jane Mansbridge has famously discussed the interplay of material and moral incentives in the process of delegation.Footnote ⁹⁸ As she argues, the introduction of material incentives may destroy moral incentives by making what was once a duty (to act in the right way) a material question (is this action in my interest?). A similar risk applies in relation to procedural accountability. As discussed above, procedural accountability is based on the assumption that, if actors follow the correct procedures, they will then orient their activities towards correct substantive outcomes. The risk is that the opposite applies – that if actors begin to care only about procedures at the expense of the substantive goods, those procedures are designed to secure (and without reflecting on their adequacy). According to Roy Heidelberg, this logic reflects a technical conception of accountability that ‘allows for an actor to dismiss criticism of a policy or action by appealing to an obedience to procedural rules or, at worst, to justify doing the wrong thing in the right way’.Footnote ⁹⁹

In the EMU, the substitution effect of procedural for substantive accountability is significant. As we have argued elsewhere, ECB accountability in particular is grounded in procedural devices such as transparency, which are seen as better suited to the institution’s operational independence.Footnote ¹⁰⁰ Nevertheless, transparency obligations tend to carry the functional mission of the ECB to the outer limit, as accountability debates become hijacked by discussions over the secrecy regime of the ECB.Footnote ¹⁰¹ As a result, the focus on transparency limits the substantive contestation of the actual merit and distributive implications of ECB decisions. While accountability forums like the EP are thus permitted and even encouraged to ask questions of ECB officials, their ability to contest and seek to influence the direction of monetary and supervisory policy is minimal.Footnote ¹⁰² Accountability in substance seems needed but is also excluded a priori by the EMU institutional structure.

Second, procedural accountability is limiting from the perspective of accountability forums. As indicated by the classic accountability literature, one challenge faced by accountability forums is information asymmetry, or the difficulty of holding accountable actors with greater knowledge of a specific topic. In principal–agent theory, agents are expected to ‘shirk’ their obligations before principals either by hiding information before they are appointed (adverse selection) or by hiding their behaviour while on the job (moral hazard).Footnote ¹⁰³ Procedural accountability extends these problems, as explained by Heidelberg:

The discussion about the exceptions to the application of the Stability and Growth Pact (SGP) by the Commission is a clear example of an actor exploiting the rule-based system introduced by the excessive deficit and macroeconomic imbalance procedures. In fact, the Commission’s past record of sanctioning some Member States but not others for budgetary or macroeconomic transgressions has raised important accountability questions of arbitrariness and equal treatment.Footnote ¹⁰⁵ MEPs have regularly accused the Commission of unfair treatment of a few Member States, for example, for the failure to take action against France’s excessive deficit in 2014 or Germany’s macroeconomic imbalances in 2015.Footnote ¹⁰⁶ The problem is that the relevant legislation – the Two-Pack and the Six-Pack – gives the Commission ample discretion to calculate budget deficits by deciding which expenditures, fluctuations and one-off investments are taken into account and which are excluded.Footnote ¹⁰⁷ This has two important implications. On the one hand, the Commission benefits from information asymmetries in fiscal governance, as it is the only institution with the [expert] knowledge to navigate the ‘maze of alternative or even-conflicting rules, part legislative, part non-legislative, which few understand’.Footnote ¹⁰⁸ On the other hand, the Commission can make strategic use of these rules in order to explain away decisions not to sanction some Member States, as shown by the justification given for the French and German decisions to MEPs during hearings in 2014 and 2015.Footnote ¹⁰⁹ Overall, procedural accountability seems to favour the actor at the forum’s expense.

To sum up, of the two forms of accountability, which is more suitable for the EMU? The argument of this section was not that procedural accountability is of limited value universally. In fact, there are advantages to procedural accountability, namely its clarity and predictability, which make it an important avenue for providing the normative goods of accountability in the EMU. This may be particularly important in an EMU constitutional settlement that gives particular institutions – namely the ECB – high operational independence. But without a substantive component, the normative goods of accountability remain focused on processes of decision-making, which are insufficient for evaluating decisions in a policy field that decides ‘who gets what, when, how’Footnote ¹¹⁰ as much as EMU.

Substantive accountability can be more complex and costly to achieve; for instance, in order to balance information asymmetries between forums and actors, the former would need to acquire expertise in many fields, which requires additional resources. In some cases, this might be infeasible – no matter how desirable or demanded substantive accountability becomes. Under the circumstances, political architects of EMU accountability will have to decide if the costs of substantive accountability are worth the payoffs or, alternatively, if they are willing to accept the trade-offs between substantive and procedural accountability which the EMU’s institutional set-up currently entails.

1.7 Conclusion

In this chapter, we introduced a new normative framework for analysing accountability in the EMU. The framework has been determined deductively by surveying the relevant literature in political theory, law and public administration in order to identify four goods that accountability is supposed to ensure: openness, non-arbitrariness, effectiveness and publicness. All of these can be achieved in a procedural or substantive way, but the latter imposes higher standards of accountable behaviour for actors – as they have to demonstrate the merit of their decisions rather than defend the process through which those decisions have been reached. Different types of accountability forums can examine an actor’s conduct in line with the four goods: parliaments through legislative oversight, courts through judicial review, ombudsmen and court of auditors through administrative review. When transposed to the EMU, there seems to be a predominance of procedural accountability that remains limited because of the ‘replacement effect’ of procedures for substance and the weak position of accountability forums vis-à-vis actors with expert knowledge of the policy area. Our argument is that there is a clear need for more substantive accountability in the EMU across different mechanisms of accountability – political, legal and administrative: a claim that we invite our authors to question, probe and elaborate in the chapters that follow.

We have sought through the chapter to add to the academic literature on EMU accountability by constructing an approach that is deductive without being rooted in a nation-state view of the concept and which identifies normative standards of accountability that are not inductively derived from the EU Treaties alone. The benefit of the approach is that accountability is evaluated on the basis of norms, rather than owed to a specific principal – part of a would-be democratic chain of delegation. Acknowledging that the term is often used interchangeably with ‘answerability’ or ‘responsiveness’,Footnote ¹¹¹ we argue in favour of a change of analytical optics: instead of obsessing about the appropriate forum to whom actors should answer or respond, scholars should focus on the question ‘what should actors be accountable for?’ This is particularly applicable at the EU level, where the distance between the ultimate democratic principal (the citizens) and their supposed agent (EU institutions) remains great. We thus call on other authors to break the stalemate of EMU accountability research by researching the extent to which national and EU institutions provide the four normative goods of accountability, and subsequently, by showing how account-giving by EU institutions can be made more substantive in the future. We hope to have provided useful conceptual tools for the more empirical papers that follow this chapter.

2.1 Introduction

One of the more curious developments of twentieth-century modern political thought is the laudatory treatment of accountability. Despite frequent debates over accountability, the general sense is that it is something to be preserved and improved for the sake of democracy.Footnote ¹ Accountability has long been connected to democracy in the sense of representation, a feature that dates to JS Mill. But the modern notion of accountability is different in substance from the liberal idea, which is tied to representation. Accountability in its modern guise trends away from ideas of representation towards matters of technology and design. What I mean by this is that accountability is a derivative value that functions at the level of instrumentation. What makes accountability good is its use in achieving a goal. Accountability is still regarded as and spoken about as a political good, but this is generally a remnant of the liberal idea of accountability tied to representation. As Mill put it, perfecting accountability, in the sense that he meant it, depended on aligning the interests of rulers with that of the people.Footnote ² Mill, however, did not have the insight into what accountability looks like in a modern bureaucratic state, which is the modern version upon which I will focus here.

The approbation of accountability derives from a sense that accountability is a promotional good of democracy. In other words, accountability has been framed over the past century as a feature of modern government that is essential to the broad success of realizing democratic government, which has lately been transformed into an idea of participatory governance. Achieving accountability entails success in both realizing the increasingly complex objectives of the modern state and satisfying the values of democracy. As such, many regard promoting accountability as de rigueur of democracy. The idea carries a normative force that appears essential to addressing imbalances of power that favor experts against the public. As Dawson and Maricut-Akbik describe in their introductory chapter to this volume, the normative goods of accountability can help guide frameworks to address the nongovernmental, extra-nation-state institutions developed and developing alongside the increasingly complex demands of modern governance. They propose four normative goods: openness, nonarbitrariness (procedural limits on discretion), effectiveness through measured performance, and ensuring that actions are in the public interest (publicness). These goods underscore both the procedural and substantive qualities of accountability. Procedural accountability ensures that activities are done correctly (open, public, nonarbitrary) and lead to appropriate outcomes (effective). Substantive accountability places higher demands on the institutional setting, as Dawson and Maricut-Akbik describe, by requiring an explanation of the decisions behind the activities.

It is unusual not to be swept along in the laudation of accountability. I myself have described accountability in two previous essays, one in which I attempt to deepen the connection between accountability and democracy by incorporating practices of contestation and nondomination into its conceptual fold.Footnote ³ I see such matters slightly differently now, especially considering some of the distinctions I will address in this essay, namely the distinction between responsibility and accountability and the ways in which accountability serves bureaucracy and not democracy. I focus upon the concept as it applies to public administration and the political formations associated with it (i.e. the administrative state). The administrative idea of accountability is tied to design and performance, evident in the procedural sense of accountability, making accountability a concept that deepens technological systems of control. I also identify problems on the substantive side of accountability where actors are required to tell a story (give an account) of their decisions. The account itself is plagued by the dual problem that, first, it is the account itself that is subjected to procedural accountability through design and, second, that accountability as a practice does not permit a meaningful discourse between experts and the public. Ultimately, accountability is a practice that formalizes expertise into governing, an idea contrary to the prevailing notion of it as a value that ensures democratic control.

I doubt the integrity of ideas that connect modern accountability to democracy and see the rethinking of accountability against democracy as an important political problem of our time. Accountability is not an idea that promotes democracy. Contra democracy, the notion of accountability is found in strengthening bureaucracy, and it does so without explicit regard for ideas of democracy. Viewing accountability not as an institutional good but as a concept with relational consequences achieved through technology brings into question this largely uncriticized connection between democracy and accountability. In this essay, I question “the good” of accountability and identify how the concept of accountability in both the procedural and substantive sense reinforces the power of experts above the public.

2.2 Responsibility and Accountability

I begin by distinguishing between accountability and the more common notion of responsibility. Responsibility partly entails giving an account of one’s actions, meaning an explanation for what one did, why one did it, and what reasonable expectations were behind doing it. This does not mean that responsibility is the account itself. Responsibility is something that one can have in the sense of “my responsibility.” We can speak of responsibility in a way that gives it a sense of character and connection with an individual.

On the other hand, accountability takes that element of the account as everything. For accountability, the details of the account prevail, so much so that in its reductive sense, accountability renders pointless the thinking and decision that lies behind the human act itself. One cannot speak of “my accountability.” It is meaningless. Being accountable means being held accountable. This contrasts sharply with the quality of responsibility, which does not require an other to act upon me. One does not need another to make one responsible. The other can play a role in one’s sense of responsibility, but it does not serve to make my actions objective to a preconceived principle, as a principal does in the sense of accountability.

The relationship between the holder and the one held that makes accountability – let us refer to them as principal and agent for the sake of simplicity – is entirely bound by an instrumental scheme. The principal wants beneficial actions done by the agent, who serves as a means to achievement. This arrangement of expectations is the core of the relationship between the principal and the agent. The principal is a principal insofar as she has expectations for an agent. The agent is an agent insofar as he acts under the oversight of the principal. This is a relationship in only a superficial sense. Each party does what serves himself/herself under the constraint of what the other desires or wants. There is no expectation of sincere consideration for the other in this relational schema, the absence of which minimizes, even eliminates, the relational sense of it. In other words, the moral or custom is dictated by a fully inward consideration of one’s objectives. This collapses any real sense of morality, a feature that frequently plagues institutions and organizations premised on impersonal relationships.

What do I mean by an impersonal relationship? Simply put, it is one that is dictated by formal rules. The rules are not suggestions. They are prescriptions, stipulations on a course of action. The challenge for the principal is not to express the rules of action; the challenge for the principal is guaranteeing that the rules are followed. The agent can have been prescribed how to act, can be fully aware of the rules. But even then, the agent may not perform. It is at this point that accountability is thought to function. Accountability is imposed on the agent. It is an instrument of the principal. In other words, it is an instrument of power over another where formal rules determine how another must act. The starting point of any accountability relationship, then, is the objective of the principal. A perfect accountability scheme (we will revisit this idea of “perfect” below) requires that the agent perform a prescribed role. To the greatest extent possible, the complications involved in performing this prescribed role have been addressed through the formal rule scheme.

One way of thinking through this impersonal relationship is by seeing it as a contest over the decision. The agent is in a position through which his decision will have ramifications for the principal. The principal, meanwhile, wants to minimize the decision-making scope of the agent and enforce arrangements that accord with her decision (of what is to be done). A perfection of accountability is a condition of nondecision for the agent. This is one reason why substantive accountability is conceptually convoluted: procedural accountability designs away the substance of the decision itself.

The condition of nondecision is one facet of accountability. It is the condition that Dubnick and Frederickson refer to as pre factum accountability, or accountability before the deed.Footnote ⁴ They contrast this facet of accountability with post factum accountability, which places focus upon consequences as a facet of the principal–agent relationship. It is reasonable to see the necessity of consequences as made by a failure of control. When the condition of nondecision in pre factum accountability fails, the force of consequence in post factum accountability arises.

2.3 Reconsidering Per Factum Accountability

In a previous essay,Footnote ⁵ I added to the dual concepts of pre factum and post factum accountability the idea of per factum, which I described as during or through the deed itself. Viewed through administrative logic, in particular the solutionism of technics, per factum accountability is better thought of in the sense of “thoroughly done,” the sense bearing a connotation of perfection. Achieving the condition of nondecision through thorough design is perfect accountability. But the political consideration eschews perfection in that sense. The focus must be on the deed itself, the ongoing process of any activity that is supported by authority and involves power. In this respect, the per factum accountability should be viewed as ongoing, as being “through” the deed, in the same sense that “permeate” means to go through and “permit” means to send through. This meaning of per factum does not correlate with a sense of perfection, though, because of the contestable practices intrinsic to politics. Simply put, the administrative logic of accountability begins and ideally ends with pre factum, meaning a properly and thoroughly designed system or institution that minimizes the concern over the execution of the deed (per factum) and the possibility of incompletion (post factum). While this may itself appear impossible, it is the basis of accountability design: a system that functions impersonally does so without judgment or thought of its performing elements (in an organization’s case, people are the elements). In other words, perfection renders moot the question of performance, and thus the per factum and post factum concerns are irrelevant.

We should not be distracted by the challenge and the fact that such design is not possible in many cases. Particularities will always make such “perfection” inconsistent with practice. But inconsistency is not inconceivability, and the point is that every error in the system is perceived as an opportunity for improving the pre factum system that is behind it. This is an ethos of technology. The question should never be posed in terms of a given state, a fixed condition, because at issue is the condition of perfectibility, not the state of perfection. The administrative sense that is behind solutionism is supported by a belief in a perfectible state or institution.Footnote ⁶ This belief is not hindered by the evidence of imperfection since that is considered evidence for what can be improved. Such is the logic of technics, and it is thus that accountability is realized as a concept of technology.

The idea that accountability is possible “during” the deed, as I imply with the sense of per factum, is conceptually inconsistent with how accountability is generally conceived within administrative logics. In other words, opening the deed is a direct challenge to accountability and exposes the problems with it. These problems are largely the result of accountability being a concept of and for technology, a concept in diametrical opposition to responsibility.

It is worth returning to the question of responsibility to clarify the claim that accountability is in both concept and practice against responsibility. The distinction hinges primarily on how accountability is premised on impersonal structures and institutions to facilitate preconceived actions. Responsibility, however, operates within ambiguity and uncertainty, conditions that require judgment about how to act in particular circumstances. As already mentioned, it is understandable to speak of “my responsibility” because one must take possession of the decision that corresponds with the action directed towards the particular concern. However, the grammar of accountability does not allow us to speak of “my accountability.” This phrase is senseless. I can say, for example, “Raising my children is my responsibility.” This connotes a relational understanding of my role, what we can call a caretaker, and its meaning is built upon this relationship. The actions that correspond with “raising my children” are not preconceived, even if I hold firmly to certain standards, morals, customs, or even principles. The point is that my responsibility may require me to act in a particular case against such standards and then to answer for doing so (hence the account within the concept of responsibility).

I am unable to say “Raising my children is my accountability” and to convey a sensible meaning. The reason is that accountability produces an object relationship so that the “I” that speaks cannot express something about the “I” through accountability, but only about the tasks and expected behaviors. To speak in this way of accountability requires me to say “I am accountable for raising my children,” a remark that connotes a person or structure that “holds” me accountable and “possesses” my condition of accountability. The “I” then turns to the tasks necessary to fulfill the accountability relationship. What accountability enables above responsibility is an objective view on what is necessary to be done, objective to the extent that another party is charged with determining the appropriateness of the act based upon established standards. It is this last qualification that distinguishes “being held accountable” from “my responsibility,” and this distinction is further clarified by the difference between action and tasks.

2.4 Tasks and Design

Consider what is connoted by task: a duty, a chore, an assignment, a charge. A task is something given to you based upon what is expected of you. It is often generalized by the expected conditions that demand activity. I want to contrast this with the idea of action, which I believe connotes a greater degree of ambiguity sufficient to support the judgment of the actor. A task is itself an idea that eschews judgment, while action demands it. The distinction is clarified by Arendt’s description of action as being the conditio per quam (the condition by means) of political life, a category she contrasted with work (the category of artificial worldliness) and labor (the category of life in the sense of the biological).Footnote ⁷ What is specific to action is what Arendt called natality. Action is the condition by which a person can start something new, can bring about a beginning, and it is partly for this that action is a condition of freedom itself. Natality is first realized in the fact of our birth, that every birth is a new beginning, and our capacity to create something new is what makes us free.

Arendt’s conception of action is diametrically opposed to the conditions that are fostered through the bureaucratic apparatus through which accountability functions. The actualization of freedom through action is the capacity to do the unexpected, which is how a new beginning is brought about. “It is in the nature of beginning that something new is started which cannot be expected from whatever may have happened before.”Footnote ⁸ Routine, standards, and procedure all work against the conditions of action precisely so that expectations are realized, so that the unexpected does not happen.

But accountability and the associated administrative logics are not to be found in the other “human conditions” that Arendt discusses. There is no biological need for accountability, so it is not present in labor. Work, according to Arendt, is judged based upon the production of a world suitable for human use. It is associated primarily with the production of the material world, the kind of artifice that we associate with the Promethean violence against nature,Footnote ⁹ wresting from it the materials for our needs and goals. Work characterizes the condition of making the material world accommodate human life. Accountability is about task, not work. It is not premised on human use but on the use of humans. Accountability is complicit in the bureaucratic arrangement that prioritizes artificial production above human use, the quality of dehumanization that is especially associated with bureaucracy.

It does not have to be this way. There was a sense of accountability that was associated with representation and a liberal sense of government, an understanding that derived accountability from responsibility. But that idea no longer prevails in the meaning of accountability. The modern idea of accountability rests on notions of control over the administrative apparatus to ensure execution. It is a concept that follows the growth of bureaucracy and administration to such an extent that responsibility is conditioned by accountability. Action, as Arendt described it, is consistent with responsibility but not accountability. Accountability is a political concept only to the extent that it domesticates the components of politics to the point of erasure. What is done through accountability is not a space of contestation where the possibility of action might produce the unexpected; rather, what is done is a restricted space of behavior, where ultimately an algorithmic expression is possible, thus erasing action and responsibility. Behavior is the antithesis of action. It is produced by design, and behavior is to act in a way consistent with expectations.Footnote ¹⁰ Design implies expectation, and accountability is a concept of design insofar as the agent is given the procedures and the incentives to do as the design dictates. Actors properly embedded within an accountable institution do not act where their tasks are not prescribed, which is a way of saying that action is conceptually inconsistent with accountability itself. Prescription is the arena of behavior and the act of constraining action; or, more concisely, prescription erases action. Therefore, one can never say “my accountability”; the prescription of one’s actions removes any ownership over the act itself.

The early debates over accountability were focused on what was called “administrative responsibility.” The sense of administrative responsibility was eventually abandoned in favor of talking about accountability, and I argue elsewhere that this shift in language testifies to a changing idea of the meaning of “responsible government.”Footnote ¹¹ Carl Friedrich, who appeared to take the side of administrative discretion and deference to expertise, stated that

Friedrich’s apparent defense of discretion in fact opened the door for design. He goes on to say immediately after this remark that a realistic consideration of the electorate and its representatives shows that, as principals, they are inadequate to the task of reaching such an agreement over administrative tasks. They are unable to bring about what Friedrich calls “responsible conduct of public affairs,” by which he meant the alignment of required actions and defined ends, with one qualification: “unless elaborate techniques make explicit what purposes and activities are involved in all the many different phases of public policy.” Indeed, the qualities associated with modern accountability – performance measurement, transparency, incentives of various sorts, rules, and procedures – are the elaborate techniques that fulfill this qualification. These techniques render moot the story from the “responsible person” since they address the problem from a design perspective, meaning the “many different phases of public policy” are considered in dictating how an agent acts under relevant conditions.

A fair rejoinder would point to the way that Friedrich himself defined responsible: one who is answerable for his acts to some other person or body, who must give an account of his doings. He cited the Oxford English Dictionary. The current version (OED Third Edition, March 2010; most recently modified version published online June 2021) offers the following as the first definition of responsible: “Capable of fulfilling an obligation or duty; reliable, trustworthy, sensible.” The third, fourth, fifth, and sixth definitions under the adjectival use refer to some variation of answering a charge (even using “accountable for” and “to be held as”). There is no dispute here that responsibility includes some facet of account-giving, but the distinction between accountability and responsibility is the extent to which the account remains a story communicated between two people about what happened. Modern accountability takes the story as a component of control, as though the story must be written beforehand. Responsibility entails an account about why one decided to act as one did, which in some respect is the arena of “substantive accountability.” In perfect form, though, accountability takes the account and makes it an ex ante concern that determines what is to be done. At issue is how accountability takes the component of the account and magnifies it. In responsibility, I may feel obligated to explain to someone why I did what I did. With accountability, that account is transformed so that I act as you intend, making the story itself not one that the account-giver tells but rather a story to be followed.

The emphasis on the account that coincides with modern accountability is not about the act of explaining one’s action; the emphasis is on controlling the account itself, on dictating the story. To refer to accountability is not to refer to a human quality but to a technological quality in which systems are designed to guarantee outcomes. The “ability” in accountability is a quality of the institution or system, not the person. When we refer to an accountable actor, we refer not to a person capable of action and responsibility but instead to an agent performing within a designed institution or system. The perfection is aimed at the task, and the person is an instrument within a perfectible system. One could say that accountability seeks to solve the problem of responsibility by perfecting it. Responsibility conceptually retains the possibility that a person might act on their own discretion and judgment, and accountability removes this by and through design. It is not that accountability is different from responsibility. Rather, it is an extreme form of it expressed through the administrative logics of solution and technology. Referring back to the definition of responsibility above (capable of fulfilling an obligation or duty; reliable, trustworthy, sensible), the -able of accountability erases the uncertainty of the second part of the definition. The design approach seeks to exclude the variable effect of reliability, trustworthiness, and sensibility. The one holding the agent accountable is an institution.

2.5 Perfecting Bureaucracy

Let us return to the question of perfection in accountability. The perfection of accountability rests in the same ideal condition of perfection identified more than a century ago in the bureaucratic system of order described by Weber: in dehumanization.Footnote ¹³ He defined this quality of the bureaucratic apparatus as being composed of agents acting sine ira et studio, a phrase he might have borrowed from Tacitus, meaning without anger or bias. Tacitus meant by this that a story of historical occurrence (an account) might be presented to an audience based solely on facts of what happened and without any flourishing from the speaker. In this way, an orator is restrained from attempting to influence the audience. In essence, Tacitus refers to what we might consider an “objective viewpoint” and used this formulation in his early history of the Roman Empire. Weber’s meaning is slightly different. His meaning refers to the acts of agents in a bureaucratic system. It is the deed, not the story, that concerns Weber’s notion of objectivity behind sine ira et studio. Nevertheless, both Tacitus and Weber refer to a condition that is restricted by a conception of objectivity. Both sought to introduce a condition through which fact (that which is done) supersedes truth to such an extent that fact itself becomes truth. But Weber’s description did something that Tacitus’s did not. Tacitus’s conception of an objective account allowed interpretation by the listener. A story can be told “faithful to the facts” but the meaning can remain open to the audience. Tacitus’s sine ira et studio meant that the account must be given according to what was done. There thus remained some political element concerning how what was done could be relevant to current matters of action and deed. The sine ira et studio expressed by Weber is not concerned with what was done but rather what is to be done. Meaning, interpretation, and understanding are expressly removed from the question of fact, understood to mean deed or that which is done. The agent of the Weberian sine ira et studio is foremost an instrument of the design. This is the meaning of dehumanization: a prescription to ensure that design becomes fact. This quality is of utmost importance to bureaucracy and administration. Weber called it the special virtue in his description of the ideal-type bureaucracy.

Weber answered the issue of what is to be done by upholding the function of calculability in the deed itself. Here is how Weber expressed it:

Perfection (fully developed or thoroughly done) requires dehumanization. This is the mode through which the bureaucratic apparatus exerts control, and it is precisely the condition of modern accountability. What is to be done is predetermined so that actors behave according to tasks. The story is told beforehand. This is markedly different from the sense of responsibility, which retains some sense of moral conduct by the individual, a conduct that depends upon the exercise of the faculty of judgment. Accountability operates where judgment is made obsolete.

Accountability is the moral expression of amoral conduct that marries the conditions of perfection in bureaucracy: dehumanization and calculability. How can one claim accountability to be a moral expression of amorality? The simple answer to this is that a moral expression is concerned with the central principles of right and wrong as pertains to right conduct; amoral conduct is carried out without regard to right or wrong. This is precisely the condition of calculability (morality as determined by calculable rules of conduct) and dehumanization (disregard for personal considerations of right and wrong). How does accountability marry these conditions together? A necessary premise of accountability is that the actor behaves in accordance with established rules and procedures and not according to their own judgment of appropriate conduct. In other words, “Objective discharge of business primarily means a discharge of business according to calculable rules and ‘without regard for persons.’”Footnote ¹⁵

2.6 Contestation Is Not a Fix

Modern accountability differs from responsibility. The key distinction is that accountability is conceptually linked to the use of humans as part of an instrumental institutional apparatus, which makes it an extreme version of certain components of responsibility. The apparatus, which in modern parlance is called bureaucracy, puts primary emphasis on the tasks and procedures for achieving defined goals. We may speak of an accountable person, but in effect we are describing the system in which the person operates. Persons cannot have accountability because in being accountable they relinquish action to the operations of tasks and thus to a power that holds them accountable. Accountability operates as a condition of perfectibility for bureaucracy.

Accountability cannot be political insofar as it is premised on the erasure of politics from the discharge of state operations. Conceiving of accountability as political has sparked interest among many scholars (the present author included), who hold that accountability is an essential precondition for democracy and that there is the possibility of democratic accountability in the modern sense of government. But there is not. Rather, accountability operates against democracy in the important sense that it perfects bureaucracy, not democracy. What I previously identified as per factum accountability – something between pre factum and post factum that took place during the deed – suffers the same problem as post factum accountability: everything depends on the perfection before the deed. Accountability operates against the unexpected; its functions seek fulfillment of expected outcomes through increasingly optimal designs. The unexpected of today becomes a bit of new information for the greater perfection of the system. That is what a thoroughly done (per factum) bureaucratic system is in practice. Accountability is a concept of and for technology and design, not a concept for human use but, at the risk of repetition, it is a concept for the use of humans. While it is the case that in its early stages humans (principals) use humans (agents), the logic persists in such a way that rules and algorithms ultimately prevail. In other words, the design is intended so that eventually the tasks of the agent are compelled by evidence.

This logic is one of the reasons that rethinking accountability by embedding contestation or by emphasizing a substantive orientation of account-giving fixes nothing. Modern accountability entails practices that absorb what was not used where and when it is useful to do so. The shift in focus that occurred with modern accountability was not a move away from representation but rather a step further into the direction set by representation where the state addresses the increasingly complicated and specialized conditions of modern culture that derive from the interests of the people. Accountability is its own solution. When things go wrong in modern mass society, the calls for accountability ring out almost immediately. Sometimes this means punishing the wrongdoers, but it is also a call for preventing it from happening again. What this ultimately looks like is no surprise: refinement of rules and procedures. Contestation is a value similar to transparency that can easily be normalized under the broader goals of accountability. This is in practice quite common. Public participation and transparency are both facets of modern accountability arrangements. The point is not that they are present in the arrangement. The important point is that they are subsumed under accountability itself.

The problem in accountability has always been who is in control. This is apparent from the earliest stages of the debate. It is at the very heart of the dispute between Carl Friedrich and Herman Finer: is a responsible administration better guided by experts or public representatives? The entry of “the public” into this debate is not a progressive step, nor is it necessarily a normative good.Footnote ¹⁶ Increasing the publicness of an accountability regime or arrangement does not address the issue of control. What it does, however, is to highlight that the control falls to nobody. The public is not a somebody but a calculated political entity designated by its generality. It fits the essence of calculability (in, e.g. “public opinion”), the quality that provides bureaucracy its technical superiority: decisions are based on measurable criteria and not left to somebody. The decision must be for the “public benefit.” The decision is what accountability addresses, and the modern form of it eschews representation in favor of objectivity, an objectivity that is realized in nobody deciding. Questions about the exception and the unexpected, the questions that constitute political concerns, are erased by design.Footnote ¹⁷

An agent under an accountability regime asked to justify or defend a decision presents two problems. The first is that it is not the agent’s decision. This is not meant in the banal sense that the agent is simply following orders from a principal because it is rarely so simple, although this is an issue of substantive accountability and is the source of perversions of accountability, such as scapegoating. More critically, though, the decision is increasingly determined by the measurable components of the substantive policy arena. The orders come from nobody. They can be based possibly on evidence, data or information. The second issue is to whom the decision must be defended or justified. The defense here must balance a finely tuned distinction between justification and manipulation through what can only be properly called propaganda.

For example, let us imagine an official in a national health department, such as a leading infectious disease expert. This expert identifies a highly infectious virus that leads to greater than average mortality. She briefs government officials and explains that certain difficult measures must be implemented in order to stem the spread of the disease. Cities shut down commerce, schools close, and only essential services are allowed to continue operating. The expert is then scheduled to speak on dozens of news programs to explain what she sees in the data and to exert her expertise in defending the judgment to take such drastic measures. She explains that this will save lives and that the sacrifices are necessary to stem the spread of the virus. She explains the decision with admirable clarity and cites data and evidence. But most people cannot understand the evidence and cannot interpret the data. They express doubt. They contradict the expert with their own data and evidence. They question the integrity of the expert. At some point, the attention turns from justification to winning the argument. The expert is joined by other experts to spread a message and to counter “home remedies” and “alternative facts.” Her status as an expert is questioned by her opponents, who claim that she is nothing but an opposition bully trying to undermine the people and destabilize society. Meanwhile, commercials and billboards and public service announcements encourage people to take the steps necessary to stem the spread of the virus: avoid socializing, wear a mask, and wash your hands.

One could tell a similar story about a monetary expert who faces a potential catastrophic financial collapse. During the 2008 financial crisis, the US Fed began a policy of quantitative easing, a monetary policy that had to that point been scarcely used in a few countries, including Japan in the early 2000s. The experts in the Federal Reserve Bank faced the challenge of explaining a complex purchasing practice that was intended to encourage banks to protect their balance sheets enough that they could make loans and, thus, send money into the economy. To nonexperts, this looked like the equivalent of printing money, which sparked fears of inflation, but the experts had to make nuanced arguments on the differences between money printing and quantitative easing. A little more than a decade later, facing another potential financial crisis from a global pandemic, the US Fed began purchasing Treasury bills again, but this time the leader of the Fed was adamant that the practice was not quantitative easing. Instead, the practice was framed as a way for the Fed to create reserves. They purchased short-term rather than long-term bills and were not making the purchases with the goal of increasing liquidity. As then Fed Chairman Jerome Powell said, “This is not QE. In no sense is this QE.”Footnote ¹⁸

Both descriptions of experts at work highlight the disparity of knowledge between the experts and the public at large. The expert health official case could be seen as an example of contestation, and it could be viewed as an example of substantive accountability. The expert is put in a position of justifying the activities (policies) that she deems necessary based on the evidence. On its face, this would seem to be an exercise of accountability. But, I think that it actually exemplifies a failure of accountability as I understand it. The example displays the justification of accountability as necessitated by the increasingly complicated conditions of modern government. To grasp the failure, consider the way that Mill described accountability:

Mill alluded to the ingredients necessary for going from representation to administration. Perfection approaches the point when the people could do without government, by which he seemed to mean the use of force and penalty. There will always be the need, one infers, for guidance and organization. The perfection of accountability in the liberal sense makes the purpose and function of representation unnecessary. If the interest of the representatives approximates the interests that identify the people, then the people do not need representation. This only works, though, to the extent (in proportion with) the enlightenment of the people. Mill’s liberalism depended upon expertise and leadership of those who were knowledgeable, as he made clear in his advocacy for weighing voting rights based on education. For Mill, this was a solution to the problem of aristocratic power. He believed that knowledgeable voters would improve upon the political decisions made by property owners. By the early twentieth century (and into the twenty-first), this same argument of giving more political power to those who know would be used to tame democracy (which of course was the original target of this argument, dating back to ancient Greece). The perfection that Mill described in the nineteenth century had a different nuance by the middle of the twentieth century. The person who is accountable is not a representative but an administrator. They are not supposed to have interests (sine ira et studio) and are supposed to act according to calculability (measurable, evidence-based reasoning). The point at which an administrator must explain to the public the reasons for a policy decision is a failure of accountability precisely because the decision is under question. This activity is aimed at bringing the interests of the public into line with what the expert has deemed appropriate based upon evidence and data. As Mill himself described it, the perfection of accountability entails improving the wisdom of the public (since, ab definitio, the expert knows). When the public displays an ignorance about the issue at hand, we witness the imperfection of accountability.

This standpoint is clearer in the context of administrative accountability because, as described above, the – able of accountability rests in the institution, not an individual. At issue is the story about what is to be done, as in telling the story ahead of time. In other words, the ability of accountability situates power into the nobody of administration (public administration), and the expert is the remnant agency of this nobody. That the public is insufficient for the task of governing is a key premise of public administration. Woodrow Wilson regarded public opinion as being meddlesome and considered it the role of the reformer to “persuade [his fellow-citizens] to want the particular change he [the reformer] wants.”Footnote ²⁰ Walter Lippmann said that “the false ideal of democracy can lead only to disillusionment and to meddlesome tyranny.… The public must be put in its place, so that it may exercise its own powers.”Footnote ²¹ Finally, consider Carl Friedrich, in his explication of what he called administrative responsibility:

What Friedrich, Wilson, and Lippmann are describing is the arrangement for a technical civilization that, while being sensitive to public opinion or sentiment, also must, as Wilson put it, “make public opinion efficient without suffering it to be meddlesome.”Footnote ²³ And as Friedrich argued, this new kind of responsibility, which I have argued is modern accountability, must serve the double standard of adhering to technical knowledge and remaining sensitive to public opinion. These are the requirements that Friedrich described as a novel type of responsibility for the permanent administrator that we now call accountability.Footnote ²⁴

So how does this story about the health administrator indicate a failure of accountability rather than an exercise of it? The short answer is that it only fulfilled one of the two standards: it failed on the popular sentiment front. The example illustrates also how accountability operates ideally as a pre factum course of action: the tasks must be seen as necessary according to the evidence and information, or according to the technical details of the issue. Accountability is an operation that is primarily concerned with the decision, and in its perfect state, the decision is preordained by necessity. Popular sentiment must be “accounted for” in the decision itself. If it reaches the point of persuasion (force), then it is imperfect. Thus, a key part of public accountability is constructing what Mill called the identity of the people.

For Mill, this perfection of accountability centered upon the public sentiment merging with representative interests. The new sense of responsibility arising in the twentieth century that Friedrich remarked upon is not representative in nature but rather centered upon expertise and public sentiment. The difference is not negligible since, assuming the expert acts in good faith to her profession (a key proviso in Friedrich’s model), the contest will inevitably favor the expert. Contestation in this regard contradicts the premise of expertise. Mill’s notion of perfect accountability fits the administrative conception of accountability to the extent that the perfection of accountability requires an alignment of what is to be done with the enlightenment of the people – in other words, the people are in no position to dispute the necessity of evidence. The substantive accountability in which justification is required is an act of persuasion, but it may as well be an act of manipulation. The expert knows. The public doesn’t. The expert has to convince the public. This is the justification. If the public disputes the expert, then the very premise of the expert’s position flounders. Thus, contestation is not a way of improving or fixing accountability. It is an act of destruction. The contest calls into question the very legitimacy of the institutional arrangement by putting into question the premise of expertise. The Millian standpoint retains an element of the public sentiment that Friedrich mentioned, but the administrative concept of accountability incorporates public sentiment as another component of perfection, a problem to be solved. To contest the decision within an accountability framework is a destructive act, but as fits the logic of technology, destruction is constructive. There is the ongoing possibility of subsuming the content of the contest for the sake of improving accountability, to the extent that the contest reveals improvement or the possibility thereof. The accountable institution can incorporate the values or ideas into the accountability framework, whether that be through formalizing contestation in public participation or transparency or by using the problems raised in the contest to improve the impersonal operations of the accountable institution. Herein lies the perfection of accountability, a thoroughly done task achieved by design that will further alienate the nonexpert from the decision itself. The realization of per factum components of accountability deepens bureaucracy.

3.1 Introduction

By upsetting traditional interdependencies between financial actors, the European sovereign debt crisis has engendered a range of accountability concerns. Prior to the crisis, treaty-based arrangements in the EU subjected both public and private entities to the discipline of market forces. Specifically, governments and financial institutions relied on liquidity furnished by private counterparties, and Member States met their financing needs without central bank intervention or assistance from other EU countries. However, the collapse of financial markets significantly reshaped relations between creditors and debtors. Indeed, a new regime now prevails in which central banks act as pivotal market makers and in which sovereign states backstop other sovereigns. For many years now, the European Central Bank (ECB) has been injecting massive liquidity into markets, which has had strong redistributive effects between EU states while also distorting private-sector competition.Footnote ¹ As a result, bond rates have been effectively unmoored from practical realities, and the principle of strict national responsibility for public debt has been all but invalidated. In this way, market forces no longer determine the allocation of debt capital; this role is now performed by EU creditor states and the ECB. In exchange for financial assistance, EU creditors have imposed a range of obligations on debtor states in order to encourage their fiscal consolidation.

This shift has been associated with a ‘derogation’ of democratic governance, according to various legal and political scholars.Footnote ² To be sure, the current structural arrangements did not arrive all at once but rather on a piecemeal basis as part of numerous macroeconomic adjustment programmes, granular memoranda of understanding, and unconventional monetary policy measures, many of which are viewed by commentators as hostile to the democratic principle that parliament should be the progenitor of policy decisions – particularly when it comes to weighty matters of public interest. ‘Intergovernmentalism’, ‘non-majoritarianism’ and ‘executivism’ are just some of the terms that have been deployed in discussing this shift away from standard notions of democratic accountability.Footnote ³ However, rather than focus on assessing such developments from the perspective of democratic representation, an examination of how underlying accountability relationships have been transformed would appear to be a more fruitful line of inquiry. Since time immemorial states have been obligated to raise money to fulfil various functions, from waging war to providing infrastructure. Here, a distinction is illuminating, for there have traditionally been two main sources of public financing: specifically, direct taxation of domestic entities over which the state enjoys sovereign authority, and, alternatively, procurement of funding from other states or foreign organisations.Footnote ⁴ The second mode of financing is typically governed by market mechanisms, as states normally enter into a competitive market in which bond rates are free to rise or fall in line with demand and perceived risk. Accordingly, when states raise finance internationally, accountability is typically structured through market arrangements. By contrast, under the non-market model of domestic finance, the entities providing tax revenues exercise a disciplinary effect through political representation.

Notably, the foregoing distinction regarding forms of accountability coincides with the difference typically drawn between the ‘tax state’ (Steuerstaat) and ‘debt state’ (Schuldenstaat). The former term was coined by Schumpeter to draw attention to the crucial role played by taxation in enabling the activities of the state.Footnote ⁵ By contrast, the latter term emphasises the tendency of states to amass large public debts. While states have accrued enormous debt loads in past eras – British national debt, for example, stood at 200 per cent of GDP at the end of the Napoleonic wars – Streeck argues that 1970 was a transitional moment, as the enormous post-war increases in the size of the public sector in all Western states heralded a new stage in the relationship between capitalism and democracy.Footnote ⁶ In Streeck’s view, the growing dependence of governments on large-scale debt issuance entailed growing susceptibility to political influence by financiers. Streeck also undertakes a division between the tax and debt state, positing that under the former model, governments are predominantly accountable to their citizenry, or Staatsvolk, who enjoy political representation. Under the debt state model, by contrast, citizens have to compete with bondholders, or Marktvolk, who demand reliable debt service.Footnote ⁷ The accountability concept introduced previously reflects this point of distinction between the debt and tax state, while also situating them in wider categories. In particular, the tax state is one type of financing regime based on public relationships – that is, between the taxpayer and sovereign, but public relationships are also at stake in financing between states (e.g. bilateral lending between EU states through the European Financial Stability Facility, or EFSF) or between states and other public institutions (e.g. the International Monetary Fund (IMF) or European Stability Mechanism or, indirectly, the ECB when it purchases government debt). This wider notion of the relationship between public entities and political accountability in the domain of state financing transcends Streeck’s notion of the tax state. At the same time, the notion of market accountability goes beyond concern with the debt state’s dependence on tax revenues (thus creating accountability to Marktvolk) by also encompassing the private relationships of market participants who enter into lending and borrowing transactions without the involvement of the state (e.g. on credit markets or interbank markets). The notion of the tax state versus debt state thus differentiates between sources of government revenue (taxpayers versus market actors), while market versus non-market-based accountability attends to the conditions under which such financing is provided.

One key contribution of this chapter is to elaborate an alternative notion of accountability that furnishes a theoretical underpinning for how economic governance has evolved in the post-crisis setting. The theoretical framework that is developed here builds on the observation that states have the option of raising financing through relationships that depend on market accountability or political accountability, respectively, and that one can be substituted with the other. Furthermore, market accountability as a dominant mode of raising financing has been steadily supplanted in the EU by political accountability in the relationship between debtor states, on the one hand, and creditor states and the ECB, on the other, thus engendering the democratic tensions widely cited in the literature. My central claim is that this shift offers an explanation for the seemingly undemocratic evolution of EU economic governance that has been described by various scholars.Footnote ⁸ Consequently, it follows logically that one way of solving the widely maligned ‘democratic deficits’ within the Economic and Monetary Union (EMU) would be to restore the market accountability enshrined in the Treaties, as evident in part on the ban on monetary financing, bailouts and state aid. As part of a gradual return to market discipline, it would of course be necessary to enact institutional safeguards that limit the risk of excessive and destabilising market fluctuations. In this regard, with the European Stability Mechanism (ESM) effectively in place, the European Banking Union moving towards completion, and financial market regulations continuously being updated, important safeguards have been established to prevent a return to market accountability from triggering excessive turbulence.

A second contribution of this chapter is to relate the notion of accountability presented here with the accountability concept developed in the introductory chapter of this volume. While the distinction between market and political accountability primarily focuses on whether accountability relationships can be organised through market- or non-market-based arrangements, the introductory chapter focuses on how accountability standards can be determined and how political accountability should be designed. Specifically, Dawson and Maricut-Akbik develop a compelling subdivision between four normative goods of accountability in modern governance – namely: openness, non-arbitrariness, effectiveness and publicness. By reference to their accountability concept, my contribution shows how market accountability – as substitute for political accountability – meets all four of these standards.

3.2 The EU’s Economic Accountability Regime and Its Dissolution during the Crisis

Accountability can be defined as a ‘liability to reveal, to explain and to justify what one does’.Footnote ⁹ Bovens offers a general understanding of accountability as a relationship between an actor and a forum – the actor has an obligation to explain and to justify his or her conduct, while the forum can pose questions and pass judgement, and the actor may face consequences.Footnote ¹⁰ Furthermore, this relationship is founded on three elements: information captures the actor’s duty to provide information to the forum about his or her conduct. Justification expresses the forum’s authority to demand that the actor justify his or her actions. And consequences denotes the forum’s power to impose sanctions or offer rewards.Footnote ¹¹

The three elements of accountability – information, justification, consequences – are readily apparent in the normal exercise of public authority. The government in power (the actor) is accountable to the parliament (the forum); the government informs parliament about its actions and policies (information), which are subjected to open debate in parliamentary sessions and special committees (justification). On this basis, parliament may impose punishments or rewards (consequences).Footnote ¹²

At this conceptual level, accountability is not limited to the exercise of public power. Rather, accountability more generally encompasses the notion of normative dependencies, which can be established in a formal or informal manner, through social norms or laws. In other words, the legal order may stipulate multiple checks and balances or supervisory mechanisms, which can be understood as normative dependencies. Recalling the above differentiation between market- and non-market-based methods of financing a sovereign state, we can infer that accountability as a normative dependency can be established through either market or political relationships.

3.3 The Normative, Procedural and Substantive Dimensions of Market Accountability

In the introductory chapter, Dawson and Maricut-Akbik develop a standard of accountability with two-fold applicability: on the one hand, it can serve as analytical benchmark for assessing the degree and scope of accountability; and, on the other, it can serve as a normative standard for ensuring a high level of democratic accountability. This section engages in greater detail with the accountability concept presented in the introductory chapter. Specifically, I argue that market accountability can serve as a conceptual vehicle for ‘four normative goods’ doctrine developed by Dawson and Maricut-Akbik, not least because it also accommodates the procedural and substantive dimensions of this typology. Accordingly, market accountability is useful not only as an analytical category but also as a conceptual tool for framing an accountability regime grounded in normative ethics, one that supports subjecting public policy to the allocative wisdom of the market. I argue that, when properly regulated, market accountability promotes openness, incentivises impartiality among policy officials, augments the effectiveness of policy measures, and support decisions oriented to the common good. Yet this does not mean to elevate market accountability to the status of universal applicability at the expense of democratic accountability norms – market considerations should not trump democratic legitimacy where core matters of public interest are concerned.Footnote ³⁶ However, market exposure would appear decidedly preferable to political accountability when multiple levels of governance confound clear lines of democratic control, as in the case of European sovereign debt financing.

3.4 Conclusion

With the outbreak of sovereign debt crisis, there was a gradual shift in European state financing from market-based accountability relationships to a political accountability regime. From the perspective of democratic accountability, there is a significant difference between, on the one hand, raising financing from financial markets, with bond rates determined by a dispassionate assessment of default risk, and, on the other hand, from accepting financing on conditions set by sovereign foreign or supranational entities, which, by virtue of their creditor position, can directly impinge upon the state’s sovereignty. As part of the massive market interventions undertaken since the outbreak of the crisis, the ECB and EU lending facilities such as the ESM have extended financing to debtor nations at favourable rates unmoored from economic fundamentals while simultaneously imposing various forms of political conditionality, thus engendering numerous tensions related to democratic representation and legitimacy.Footnote ⁴⁷ Specifically, the public authorities empowered to intervene in the affairs of debtor nations are not subject to the accountability controls normally ascribed to democratic systems. This situation is directly attributable to the regime shift from market accountability to (anaemic) political accountability, a shift that occurred in the absence of robust public discussion or debate.Footnote ⁴⁸

As shown in this chapter, market-based accountability exhibits strong congruence with other accountability regimes. Market accountability features both an actor and a forum, and relationships are structured based on information, justification and consequences. Our analysis suggests that market accountability may also undergird the supply of normative goods by promoting openness, non-arbitrariness, effectiveness and publicness. Markets exercise behavioural pressure on debtor states, encouraging transparency, fiscal stability and inclusive growth. Of course, there are strong limitations on the ability of international financial markets to encourage states to respect individual rights and the general welfare.Footnote ⁴⁹ However, given the role ascribed to the market-based allocation of financial resources in the EU Treaties in tandem with ongoing concerns about the democratic deficits exhibited by alternative arrangements, reinvigorating market forces may in fact represent a solution for encouraging a more impartial and broadly accepted governance architecture in the EU.

While this discussion by no means aims to assert that market accountability should generally prevail over political accountability regimes, the major contribution of this chapter is to highlight that market accountability has theoretical underpinnings that are congruent with traditional accountability systems rooted in public law or political theory. At the same time, market-based modes of accountability are less intrusive and less susceptible to control by narrow interests than the EU economic governance regime that has emerged in the wake of the crisis.Footnote ⁵⁰ Hence, in order to avoid economic and social policy in debtor states from being subjugated by the fiat decisions of creditor nations or supranational governance bodies, there is a need for an eventual retreat from political accountability as an organising principle in the domain of European sovereign debt financing. A return should be sought to the EU Treaties’ choice of free market rules that subject the financing needs of private actors and states to the judgement of markets, rather than political actors.

As it stands, current trends indicate there could be a further weakening of market accountability in favour of an even greater role for EU institutions in the area of public-sector financing. Since the outbreak of the COVID-19 pandemic, the ECB has been purchasing sovereign debt on an expanded scale, and there has been an attendant growth in political conditionalities. More generally, Member State reliance on EU-based financing is slated to expand dramatically in the coming years as part of the general proliferation of lending facilities. This will increase the EU’s exposure to market accountability while also increasing the political accountability of Member States to EU institutions.

Finally, drawing on the difference between market and political accountability, our analysis relates back to Streeck’s critical view on the gradual shift from the tax state to the debt state. For Streeck, the shift from the publicly dominated tax state to the privately dominated dependence on markets is undemocratic, since the emergence of private creditors as a second constituency alongside national citizens requires public officials to balance between maintaining the loyalty of their citizens while at the same time preserving the confidence of private investors.Footnote ⁵¹ This contrasts with the finding of this study: starting from the vast body of literature that has spotlighted the democratic issues emerging from abandoning market exposure in sovereign debt financing,Footnote ⁵² this study argued that market accountability poses fewer issues from a democratic perspective, for it avoids the inevitable intrusions into national sovereignty that result from borrowing at preferred terms from EU bodies or other Member States. Clearly, market accountability comes with its own specific risks, which is why it is necessary to adopt an institutional framework that contains and combats the risks of market irrationality or Black Swan events. Ultimately, when properly managed, markets thus appear to be more compatible with responsible accountability and policy founded on a chain of legitimacy and stems from the citizenry.

4.1 Introduction

One remarkable, widespread trend in the European economic constitution since the financial crisis has been the rise of discretionary powers on the part of independent government agencies, specifically, the European Central Bank (ECB). The shift to unorthodox monetary policy, and in particular quantitative easing, has increased, or rather, brought to light the discretionary powers of the ECB within the four corners of its stability mandate.Footnote ¹ Moreover, the competencies assigned to the Single Supervisory Mechanism (SSM) imply enormous leeway for the ECB in assessing the financial situation of banks throughout the European Union.Footnote ² In times of radical uncertainty, it seems difficult to imagine carrying out monetary policy or supervisory functions without ample discretion at hand.Footnote ³

Yet, many observers frown upon these powers as they undermine the technocratic narrative that has served as a justification for ECB independence so far.Footnote ⁴ A first boiling point was reached in the Landesbank case. According to the Court of Justice of the European Union (CJEU), the SSM enjoys wide discretion to cede its supervisory competence over less significant institutions to national supervisory authorities.Footnote ⁵ This judgment provoked backlash not only in academiaFootnote ⁶ but also at the German Constitutional Court (BVerfG). While ultimately accepting the CJEU judgment, it clearly drew a red line, pointing out that the CJEU narrowly missed an ultra vires verdict from Karlsruhe.Footnote ⁷ Moreover, members of domestic parliaments sense a loss of influence and are skeptical of the concentration of powers in the hands of the ECB, even though Article 21 SSM Regulation stipulates ample consultation rights for them.Footnote ⁸ On the other hand, nobody has come forward with a proposal to dismantle the ECB and shift its powers to the European Commission or, worse, the Council. Apart from well-known time-inconsistency problems, the ideas of expertise and reliability favor delegation to authorities enjoying some degree of autonomy.Footnote ⁹ Some therefore suggest that one should assign supervisory competencies to the European Banking Authority (EBA) instead of the ECB.Footnote ¹⁰

This chapter argues that the accountability of the SSM may be better than the current debate suggests. While judicial and parliamentary modes of accountability – the focus of the present debate – do have certain limits, a set of intra-executive accountability mechanisms is often overlooked. It is adequate for politically salient decisions like the discretionary powers exercised by the SSM.

The chapter proceeds as follows. An overview of the breadth and depth of discretionary powers exercised by the SSM debunks any attempt to base the legitimacy of the SSM on a technocratic rationale (B.I.). Instead, the chapter argues that the legitimacy of independent institutions like the SSM is effectively a question of a level of accountability commensurate to the institutional position of the SSM and the authority exercised by it (B.II.). The specific authority exercised by the SSM requires judicial, parliamentary, and intra-executive accountability (B.III.).

The chapter then reviews the current framework of checks and balances applicable to the SSM. While judicial review is an effective accountability mechanism for standard administrative decisions that implement legal requirements, it has a limited function in respect of the highly policy-relevant, quasi-governmental powers of the SSM (C.I.). Parliamentary accountability is generally capable of dealing with politically salient issues that might require changes in the law or of keeping budgetary side effects of financial regulation under control. However, the control exercised by the parliament is rather general in nature and cannot address individual regulatory decisions. This impedes the review of policy-heavy, discretionary decisions addressing individual cases (C.II.). This turns the focus to intra-executive accountability mechanisms. These mechanisms comprise the review of individual, discretionary decisions with potentially far-reaching consequences. As the independence of the ECB prohibits the issuance of binding directives like in ordinary administrative review proceedings, the Commission and the European Court of Auditors (ECA) yield a nonbinding type of authority by reviewing the work of the SSM. Fortunately, obstacles initially preventing the work of ECA have been eliminated. Taken together with parliamentary accountability and judicial review, it does not appear that the SSM is suffering from a severe accountability gap (C.III.).

The chapter concludes by reviewing suggestions for strengthening intra-executive accountability. They range from reassigning the SSM to EBA, to increasing the Commission’s powers of control. In fact, the latter scenario seems most advantageous. It is even possible to reconcile it with the treaty-guaranteed independence of the ECB. Despite the positive assessment of the present level of SSM accountability, increasing the powers of the Commission over the SSM might be in the ECB’s best long-term interest (D.).

4.2 The Legitimacy of Independent Institutions

4.3 Accountability of the SSM

4.4 Options for Improving the Accountability of the SSM

While the overall level of accountability of the SSM appears satisfactory in light of the intra-executive accountability relations, one might ask for institutional alternatives that might deploy intra-executive accountability even better.

The option to reassign supervisory tasks to the EBA does not appear to be beneficial. While this would defeat the sometimes hegemonic position of ECB towards EBA, it would simply create a new hegemon – one that would combine the formal power to make rules with the power to implement them, and thereby remove an important dimension of intra-executive checks and balances. Apart from the fact that such a shift would possibly require a treaty change, it does not seem advantageous from an accountability perspective.

Another option might consist of integrating the SSM into the hierarchical structure of the Commission. This would correspond to the model of European administration envisaged by Article 17 TEU. However, this would require major shifts in the organizational setup of the SSM as it seems difficult to imagine the representatives of NCAs to be involved in decision-making in the frame of the Commission. From the perspective of the subsidiarity principle, the present constellation therefore appears as advantageous. It involves a certain amount of intra-federal checks and balances. Given that financial markets are heterogeneous across the EU, this should be an asset.

As a third option, one might give the Commission the right to review, modify, or discard decisions by the SSM, or give directions to the SSM to act accordingly. This option would create a host of constitutional problems, as the ECB Governing Council has to take ultimate responsibility for the decisions of the ECB, including those of the SSM, pursuant to Article 282(2) TFEU. By way of a treaty amendment, an exception from this rule would have to be introduced for the SSM should it be subject to the Commission’s direction. Moreover, this option would strip the SSM effectively of its independence. Whether this step would be economically advantageous or not,Footnote ¹¹⁸ as a matter of treaty law, it is not unthinkable. While it is argued that the level of independence enjoyed by the SSM under Article 19 SSM Regulation is equivalent to that of the ECB under Article 130 TFEU,Footnote ¹¹⁹ the latter does not require granting independence to the SSM, as independence was only intended to protect monetary policy. Independent supervisory agencies are a much more recent and much rarer phenomenon.Footnote ¹²⁰ As a novelty in European administrative law at the time, Article 130 TFEU deserves a narrow reading. Nevertheless, the question is whether such a power of review would be advantageous. As the SSM would remain part of the ECB, the Commission would lack the requisite expertise to intervene in individual cases. By comparison, the present framework gives the Commission ample opportunity already by virtue of its right to initiate legislative amendments and adopt regulations.

On the whole, the present state of the SSM appears as advantageous from an accountability perspective. While the present arrangement owes its emergence to the contingency of a specific historical situation and might appear as a constitutional anomaly, it enables a reasonable level of checks and balances. Specifically, it offers a whole network of mutually interconnected accountability mechanisms that extend beyond the much-debated issue of parliamentary accountability. In this regard, intra-executive accountability appears as particularly relevant. Should stakeholders wish to strengthen the accountability of the SSM, this trajectory of accountability might bear some potential. For example, one could complement the periodic reports of the Commission with ongoing mechanisms of supervision and information exchange, or harmonize the cycles of the Banking Dialogue with the review exercised by the Commission or the ECA. But given the present state of the SSM, these improvements appear as options, rather than as stringent constitutional requirements.