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Central bank independence: A social economic and democratic critique

Published online by Cambridge University Press:  01 January 2023

Jocelyn Pixley ,
Sam Whimster  and
Shaun Wilson
Jocelyn Pixley*
Affiliation:
University of New South Wales, Australia
Sam Whimster
Affiliation:
University of Bonn, Germany
Shaun Wilson
Affiliation:
University of New South Wales, Australia
*
Jocelyn Pixley, Industrial Relations Research Centre, University of New South Wales, Faculty of the Australian School of Business, Sydney, NSW 2052, Australia. Email: jocelynpixley@gmail.com
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Abstract

The advent of quantitative easing by the world’s major central banks invites renewed questions about the meaning and role of central bank independence in an age of economic crisis. This article draws together insights from economic sociology, history and democratic theory to engage in further discussion about the proper role of central banks in democratic society. We stress some related themes. Our brief history of central banks aims to show how these banks have always been embedded in economic and political coalitions and conflicts, therefore qualifying the term independence; our study also aims to show that in satisficing between conflicting tasks, central banks need to maintain a balance between cognitive competences and normative expectations. Independence is better understood as a form of dependence on the coalition of interests that supported the financial climate prevailing before the global crisis of 2008, one of low wage-price inflation, high borrowing and debt, and loss of prudential control. We argue that independence amounts to a form of re-privatisation of central banks, and that they are increasingly suborned to the pressures of financial markets. At the same time, asset price inflation has sacrificed growth and employment and therefore prolongs the crisis. The economic measures now demanded by the financial crisis prompt new doubts about the independent central bank experiment, potentially in favour of the ex ante model of governmental oversight of central banks.

Keywords

E52E58G28H50Central bank independencecentral bank principlesdemocratic mandate and institutional designmonetary and fiscal policysocial economics
Type
Articles
Information
The Economic and Labour Relations Review , Volume 24 , Issue 1 , March 2013 , pp. 32 - 50
Copyright
Copyright © The Author(s) 2013

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