The Guardian view on Trump and the Fed: independence is no substitute for accountability | Editorial

"Donald Trump's attempt to sack the Federal Reserve governor, Lisa Cook, is the familiar authoritarian trick of bending institutions to serve the leader's immediate ends. The widespread condemnation is deserved. This is not some daring experiment in popular control of monetary policy. Yet what should follow censure is reflection. For the furore over Ms Cook has revealed a peculiar reflex: to defend the Fed's independence as though it were synonymous with democracy itself. But is independence of the Fed, or central banks generally, really that?"

"The historian Adam Tooze says that argument misses the point. The Fed, he says, is not a neutral technocracy: its regional boards give business elites formal seats at the table, while labour and consumers are marginal or absent. Independence is not independence from politics; it is independence from electoral accountability. To defend this arrangement as democracy's bulwark, Prof Tooze maintains, is to confuse professional consensus with popular legitimacy."

"The leftwing economist Michael Roberts goes further. In his blog this week he argues that central bank independence was never really about technocratic efficiency at all. It blossomed in the neoliberal era because it suited finance. He notes that the 1980s and 90s saw a sharp rise in central bank independence while inflation fell. The correlation has been taken as proof of causation."

Donald Trump's attempt to sack the Federal Reserve governor exemplifies an authoritarian effort to bend institutions for short-term political ends and prompted wide condemnation. The episode exposed a reflexive defense of central-bank independence as if it were synonymous with democracy. Some defenders argue that independence constrains politicians from manipulating monetary policy for electoral gain, with Congress retaining goal-setting authority. Critics counter that independence concentrates policy power among business-aligned regional boards, marginalizing labour and consumers, and functions as insulation from electoral accountability. Other critics contend that central-bank independence emerged to serve finance during neoliberalism, and that falling inflation reflected broader global forces rather than superior central-bank performance.

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