IF I asked you to make a list of things that make democratic politics meaningful, what would you add? Most possible elections and education. Probably the NHS, or the Armed Forces, or the system of justice. I am guessing that interest rates did not come to mind, which is strange, because they are important to democracy. Last week, Donald Trump Dismissed a debate About who should be in charge of the financial system controlling the country’s interest rates. You may not agree with Trump on a lot of things, but it is not wrong to recognize this monetary policy – an article that may seem dim and terrifying technical – basically political, and we are about democracy Tells a lot.
Interest rates form everything. They affect whether you can buy a house, and how many houses are built. They affect which businesses spread, which new technologies emerge, and which cities Flower flowers or flossors. In the 1990s, the central bankers praised the “great moderation”, which is a low and stable prices period under the Central Bank’s independence. Then came the financial crisis, the euro zone crisis, and then pandemic disease. Following these events, the giant bailout was often described as “unconventional”. But perhaps they just exposed the fact that always existed – this monetary policy is not as irrational as some people would like to believe.
Recently, the old consensus has begun to break. Trump and that’s the same The people around him Recognized. And of course, in some way, we knew all this. When the Bank of England chooses to change interest rates, it makes it easier or difficult for people to access credit, making it winners and losers. If the bank increases rates, it usually makes credit more expensive. Although for the first time the buyer will be able to mortgage with a large deposit, a small deposit and no credit will be out of history. The intuitive nature of Trump’s claim, which is political, is the one that makes his message so powerful. These Echoes
This is not the news To the academic scholarsWho has been screaming about it for a while with the roofs of his ivory. What is the novel is Trump’s reaction? He wants to choose the political power of monetary policy for his use. In his previous term as president, Trump tried, and widely failed, For the appointment of loyalists To the Federal Open Market Committee (FOMC). It tried to force the Federal Reserve (and even failed) Reducing the rates on this order. But in his new period, he is getting more success. The feed has been withdrawn From the International Network of Greening the Financial System (which joined it immediately after the Biden was selected), and the Deputy Chair for Surveillance (which was trying to strengthen the bank regulation under Biden) Has resigned To avoid a fight with Trump.
Trump knows that financial policy is political, so he wants to conquer it. Democrats should be careful about how they respond. In the UK, where Liz Truses threw the idea of financial responsibility and challenged both the Bank of England and the Office for Budget (OBR), Labor’s response was Hug these technocratic bodies By formally and informally, as much as possible by increasing their power. Intended to remove itself from the poor economic election of the transit, the Labor Party feels that the enemy of their enemy should be their friend.
This is a lost opportunity. Recognizing that monetary policy is political, it does not mean that you have to adopt a tracey or Trump ideology about the method of governance. Instead of trying to conquer the central bank, or return to the comfortable consensus of the 1990s, why not be subject to these institutions Democratic Control? This would mean that central banks should make more like the rest of the state. Parliament can calculate its government employees, and it will have the ability to force the bank to prefer (or to prefer (or to prioritize (or to prioritize (or to prioritize (or to prefer some sectors or regions of the economy. Thus, the bank can make it easier for business to get credit when investing in the north of England or in the north of England, for example, or for people to buy a third or fourth home.
The idea of Democratic Central Banking frightens people. Should politicians really fix interest rates? Should “people” be in charge of fighting inflation? Certainly politicians, who just care about being re -elected, are not proper monetary policy caretakers, because in the short term that looks like good policy (such as lowering rates before elections) in a long time Bad policy can be made. The term is not even to mention the fact that this field is undoubtedly technical to understand politicians. It should be left to the experts.
But this is a strange reasoning. First, because it assumes that voters do not consider the long -term consequences of their decisions. Why do we think that this is a true monetary policy compared to immigration policy, investment policy or education policy? And still, we insist on it These The area is under control of elected officials. Second, this is the case with the “technical” nature of monetary policy. Do we really think that this is far more technical than a tax policy, defense policy or environmental policy? We employ experts in all these cases, but we do not insist that they should be conducted by democratic control.
Why should the monetary policy be different? To me, it seems that all these arguments themselves reflect the fear of democracy. With democracy, there is a risk of being under the power of those who do not agree. It is quite rational to wish that immigration policy, educational policy, and environmental policy were all conducted by the Trump administration and its mega -majority Congress. But we must be honest in acknowledging that although it can be rational, it is also anti -democratic.
Since 1997, the UK’s approach to monetary policy has been designed so that it knows more and more boring and technical. But through the financial crisis and pandemic diseases, in the years to come, this approach has been pushed forward. Monetary policy politics is clearly contested. It would be a huge mistake for liberals and progressives to deny it, or to run back into the arms of the 1990s. It just opens the door for people like Trump. Therefore, instead of denying the politics of monetary policy, Labor and Democrats should insist that it has been subject to democratic control.
