There's only so much a central bank can do alone

Yesterday Holger Steltzner of the Frankfurter Allgemeine made clear (link in German) how he felt about

• Mario Draghi,
• Angela Merkel for allowing Mr Draghi to become president of the ECB,
• Ms Merkel for declining to insist that Jens Weidmann become the next president of the ECB,
• Anyone who believes that Italy should have a veto on the next president of the ECB, and
• Anyone who believes that Germany should have to offer something in return for its choice of the next president of the ECB.

Mr Steltzner does not approve of any of these people. Together, their actions have allowed the ECB to drop its policy rates below zero, reducing the value of savings and inflating a property bubble. He has a point. All of these things happened, and he's right to point out the limitations of pursuing economic growth through monetary policy. What Mr Steltzner misses, however, is that this all happened when regulatory and fiscal policies in the eurozone were a tangled, contractionary mess. Mr Draghi did what he did not to punish German savers, but because no other actor at any level of the EU or its member states had both the will and the power to do anything else.

That is: there is only so much central bankers can do. The limited ability to raise or lower the price of debt is a battle axe. It is neither clean nor accurate. It's just the tool that central banks happen to have. And for the last decade, as the Fed, the ECB and the Bank of Japan have whacked at the problems of low growth and financial instability, they have done so only because politicians, who have better tools for detailed work, have been reluctant to use them.

We may just be grumpy with Mr Steltzner because Alphaville spent the month of July passing around samizdat early copies of Crashed, Adam Tooze's rather excellent, comprehensive and damning account of the last ten years of crisis. In the book, German austerity, German regulatory intransigence and German disdain for expansionary monetary policy do not come off well.

But also, the day Mr Steltzner published his complaint, the world's central bankers were returning home from the Kansas City Fed's Economic Policy Symposium at the Jackson Lake Lodge in Wyoming. They'd just spent two days asking each whether market concentration — not enough companies competing to offer a better product at a lower price — is warping basic macroeconomic relationships, and what they, the central bankers, could do about it. The answers, in this order: it is, and not much.

A good place to start, in the literature from this year's symposium, is a primer by Thomas Philippon of NYU, summarising the evidence on whether industry concentration has been discouraging companies from investing in new plants and equipment. There's also a more readable speech by Princeton's Alan Krueger, a labor economist who worked in the Obama White House. Mr Krueger argues, essentially, that a lack of competition encourages abusive employee contracts and outright collusion among companies, keeping wages growth down.

But for his audience — the world's most powerful central bankers — Mr Krueger didn't have much advice. He conceded that the best way to keep lack of competition among companies from driving down wages is to prevent a lack of competition. This isn't really something central bankers do. The Fed can't tell the Department of Justice's Antitrust Division what to do, it just has to hope that the division pursues its mission with zeal and care. What the people at Jackson Hole could do, he said, is run the economy hot, to make credit so cheap and the expansion so enduring that companies become so desperate for workers that they're willing to cut a better deal.

Swing the battle axe, is what he is saying. It is not the perfect tool, but it is the tool we have, and we're willing to swing it. This is the unique and perverse curse of central banking. They are the best places to find research in applied economics, because they do actually have to understand what is happening to make policy. Once they understand, however, they are often powerless.

You could hear Ben Bernanke make this case in a speech in 2012, where he begged European and American politicians for any kind of expansionary fiscal policy. That's not what Mr Bernanke got. Instead, he had to continue to ease credit in the United States, and watch as Mr Draghi eased credit in the eurozone, to the disappointment of Holger Steltzner of the Frankfurter Allgemeine. There's only so much that monetary policy can do.

(Also, Mr Tooze: your book is very large. It's heavy, is what we're saying, and we are not saying that metaphorically. Your book is inconvenient to carry in a backpack for the length of time it takes to read it. We are not complaining. We are offering an observation, in anticipation of your next and no doubt extraordinary book.)