In 1997, one of the first actions of the New Labour government, was to make the Bank of England independent. Until then, the Bank of England carried out monetary policy under the direction of the government of the day. The argument for making the Bank of England independent, as with other central banks, such as the ECB, or Federal Reserve, has been that, precisely because government's take short-term decisions, designed to enhance their popularity with voters, particularly prior to elections, it leads to bad and damaging monetary policy. Central bank independence, gives greater confidence to global financial markets that governments can't play ducks and drakes with monetary policy, and so lowers the borrowing costs of the government.
The matter has become current, again, with the second Trump Presidency, because Trump argues that he knows best about monetary policy, as with everything else, including, as he proposed in his first Presidency, injecting people with bleach to kill COVID, and so on. He has repeatedly attacked Federal Reserve Chair, Jerome Powell, who he appointed, in his first term, for not cutting its policy rates. He wants to sack Powell, which, currently, he can't do, due to the Fed's independence, and will certainly ensure someone more to his taste when Powell's term ends next year. In the meantime, as with his approach to The Supreme Court, he is using every opportunity to remove members of the Federal Reserve Open Market Committee (FOMC), and replace them with people more likely to do his bidding. The attempts to sack Fed Governor Lisa Cook, are the latest manifestation.
So, isn't the idea of central bank independence vindicated by the actions of Trump, and his supporters? No. Just because Bonapartists like Trump, or Farage, or Starmer seek to impose their bad policies and find that, to do so, they have to overcome resistance from the capitalist state, is no reason why socialists, or even consistent democrats, should defend the right of that state, and its unelected officials to frustrate the policies of elected governments. After all, at some point, a socialist government might be elected, and the resistance to its policies would be even greater than that being presented to the reactionary, petty-bourgeois policies of Trump or as seen with Brexit, the ephemeral Truss government, or, today, that of Starmer.
If the Federal Reserve was not independent, then Trump would not have any excuse, as he does now, for the disaster that is unfolding for the US economy, as a result of his economic policies. He would have to bear direct responsibility for them, and the main, and most immediate victims of those policies would be, precisely, that constituency of MAGA that voted for him, the immiserated petty-bourgeois, and its periphery of poorly educated, precariously employed sections of society, just as Brexit has most adversely affected those same elements in Britain who, likewise, were conned into being its main backers prior to the referendum.
Illustrating the point, as soon as the disastrous reality of Brexit became rapidly apparent, even many of those that voted for it quickly realised they had made a mistake. The large majority in Britain now seek to rejoin the EU, and, in the US, even in just a few short months, as the reality and idiocy of Trump's economic policies are revealed, his support, even among those that voted for him, is plummeting, even faster than during his first term. Yes, the consequence of these reactionary, idiotic policies is not only to hit the living standards of tens of millions of people, mostly those that voted for them, but that is no reason to argue against removing democratic control over those institutions, or indeed to argue against the right of voters to make bad decisions at the ballot box.
If people vote for reactionary, moronic politicians, and end up wishing they hadn't done so, that is a consequence of the sham nature bourgeois-democracy, and what socialists should do is not to advocate even less democracy, but more of it. They should expose the sham nature of the bourgeois-democracy that results in such conditions, and argue the right of voters to quickly remedy the bad decisions they made, by having the right to have a recall of politicians, and new elections. Indeed, as the Chartists argued, there should be annual elections to parliaments, so that, voters can kick out the bums at the first opportunity, when they see they were conned. That would mean both Trump and Starmer being removed, and Brexit being reversed, preventing further damage.
Indeed, Marxists argue for replacing the sham bourgeois-democracy that infantilises the electorate, reducing them to ciphers whose only role is to place a cross on a ballot every few years. We argue for a direct, participatory democracy, in which everyone participates, every day, actively, not only making decisions, but implementing them, and so, testing them in practice, changing them immediately when required. The most obvious starting point for that is in the workplace itself. Every worker should take part in exercising democratic control of the workplace. They are, after all the ones doing the work, the best place to understand what is required, and it is their company, and their future livelihood at stake!
Again, why should central banks be given a privileged position in that regard? Monetary policy is only one leg of economic policy, the other being fiscal policy. Trump in his first term, much as with Reagan, continued the path of bankrupting the US, just by their control of fiscal policy. Reagan slashed taxes, which blew out the US budget deficit and sucked in huge amounts of imports without creating any of the promised explosion of US capital investment from a large US petty-bourgeoisie, liberated from a supposed crushing burden of taxation. The same arguments have continued across the globe, based on the small business myth, that confuses the large numerical size of the petty-bourgeoisie, with its economic significance, compared to the dominance of large-scale, socialised capital, on which the former depends, and is subordinated to.
If monetary policy should be controlled by an independent central bank to avoid politicians taking bad decision to bolster their immediate popularity, then why not apply the same to fiscal policy? Why not have an independent Treasury department controlling fiscal policy? After all, its not unknown to have politicians make big tax handouts, or spending proposals, just prior to elections, for that purpose, or, as with Truss, Reagan and Trump, even just in pursuit of an idiotic, ideological conviction of the dynamic role of the unbridled petty-bourgeoisie, and free competition. The same is true, in relation to borrowing. Why not an independent Debt Management Office, to avoid politicians from getting around constraints on monetary and fiscal policy, by simply borrowing more? Come to that, politicians often make idiotic decisions on many other areas of policy, driven by a desire to boost their popularity.
Had, the response to COVID been in the hands of expert virologists and epidemiologists, for example, its unlikely that the “year the world went mad”, as Professor Woolhouse described it would have happened. Indeed, the government's scientific advisors had initially, recognised as Woolhouse and others did that, absent a vaccine, the best way of dealing with COVID was via the rapid development of a natural “herd immunity”, given that the vast majority of the population, at least 80%, were at no serious risk from it, and most of them would have it without even knowing. That would enable resources to be focused on isolating and protecting the 20% of the population, nearly all of whom were elderly or chronically sick people, who were at risk. But, the fact that politicians were the ones making decisions, and who were placed under the glare of sensationalist media, and opportunist opposition politicians, meant that they caved in to what was a badly informed, and idiotic moral panic that claimed that everyone was equally at risk, and required a crazy lockdown of the economy! So, why not take those decisions out of the hands of politicians, too?
In the end, the logic of central bank independence, as with the independence of other bodies and institutions, such as the judiciary, the police, the armed forces and so on, is to deny democracy itself, and to just have the state, comprised of its permanent bureaucracy of professionals left to get on with it free from the inconvenience of democratically elected politicians.
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