I've been thinking a lot lately about the political theory of an independent central bank. A lot of the libertarians I know have deep issues with the activities of the Fed, which have been largely unaccountable to elected officials.
That's a valid critique. But here's the problem: the Fed has performed vastly better on any metric except "being elected" than the Congress. There's little doubt in my mind that if we had not had an independent central bank, unemployment would be many percentage points higher, GDP would have contracted much more strongly, and we wouldn't now be making optimistic noises about the thing bottoming out.
Where does that leave me?
Pascal-Emmanuel Gobry tackles this question as part of a larger post on the compatibility of democracy and capitalism, and his thoughts mirror mine.
Megan McArdle is very happy that Ben Bernanke, unelected and unaccountable, has a bigger role in the response to the financial crisis than Maxine Waters, and is only able to take the dramatic steps he is precisely because he is unaccountable, and so am I. But -- and I realize this is a cliché, but an unescapable one -- even if you have the smartest technocrats running the country today, what about their successors, and their successors' successors? The historical record of unelected governments in this regard is not very good.
Democracy is not so much about electing people as having a process and a system of checks and balances that ensures that basic rights are protected.
course, libertarians and liberals and conservatives all mostly abandon
this committment to Democracy when there's a principle they care about
at stake; democracy is, of course, good and wonderful, but that
shouldn't let the majority dictate their opinion on the position of
homosexuality in the public sphere . . .