There is no obvious reason why monetary policy -- the central bank's decisions with regard to interest rates and money supply -- is so different from other major policy decisions that it should be specially insulated from the electorate. There is no valid analogy, for example, to the independence of the judiciary -- which is based on a theory of separation of powers, or checks and balances, ostensibly to limit abuses of power or infringements on civil rights and liberties.
The argument for an independent central bank is more purely an elitist argument. It really boils down to the idea that monetary policy is too important for the "uneducated" masses to have an influence over it.
Ironically, the reality is quite the opposite: monetary policy is an area where pressure from the majority is sorely needed. There is a grand conflict of interest between the financial sector and the rest of society.
Friday, February 19, 2010
Mark Weisbrot: Central Bank Independence: From Whom?: