As U.S. President Donald Trump starts asking about whether he can fire the Chairman of the Federal Reserve, it is time to start asking how strong the protections are for politically independent central banks. The answers are alarming: Trump is not the only one challenging central bank independence; he is also not the most successful. Indeed, the challeges are widespread and they have been growing for some time. That is reason enough to pick up Paul Tucker’s book Unelected Power — which was recently named by Foreign Affairs as one of the top books published in 2018. If you want a taster, my review of Tucker’s book from Survival is below. The punchline is that while people are right to be concerned that Trump would violate the independence of the Fed, that does not mean either the Fed or any central bank should be left entirely to its own devices.
On 28 September 2018, Lorenzo Forni of Prometeia invited me to give a short comment on the relationship between ‘populism’ and economic policy-making. Although, I hadn’t thought about that relationship before, I came up with four things I think we might want to consider (in addition to what we might useful think of as ‘populism’ in the context of the question Lorenzo asked). My argument was that populists bring new people into the policy-making process. They also bring a healthy dose of unpredictability. Their messaging on policy issues is not great, which causes problems in a world defined by rational expectations, and they tend to be skeptical toward independent agencies like central banks. Finally, populists are disinclined to international policy coordination. The combination is not wholly bad — sometimes change is for the good! — but the results are often below the promises that populists make to the electorate. The text of the presentation follows.