When financial markets were put on edge this past week by Turkey’s shaky economy, German Chancellor Angela Merkel decided to offer some advice. Turkey, after all, is the largest economy between Italy and India, a pivotal state between East and West.
“Nobody has an interest in economic destabilization in Turkey,” she said. “But everything must be done to ensure an independent central bank.”
Ms. Merkel was not alone. Inside Turkey, leading business groups asked that the central bank be free to raise interest rates in order to rein in 15 percent inflation and overcome a currency crisis. Turkey’s lira has lost nearly a third of its value since May.
That’s when Turkish President Recep Tayyip Erdoğan said he would personally run monetary policy. In addition, he appointed his son-in-law as finance minister. And he baffled experts by claiming high interest rates are the cause of inflation, not a solution. These missteps sent ripples across world bond markets.
Countries with independent central banks tend to have successful economies. The reason is that politicians often think short-term to the next election, preferring high growth regardless of a risk in inflation. In contrast, independent central banks use a range of experts and data to guide the economy for the long term. In a representative democracy, both must be held accountable to the public. But citizens can realize, after learning from hard experience, that complex policy with far-reaching effects is best left to appointed bodies, such as central banks, commissions, and supreme courts.
Economists in central banks can certainly be wrong in their analysis, as the 2008 financial crisis in the United States revealed. Many theories in economics are not yet established as fact. That is one reason why the Federal Reserve has become more transparent about its decisionmaking process in the past decade.
Yet central banks do something better than do many elected leaders – especially leaders who personalize power and suppress dissidents as Mr. Erdoğan has done since first elected in 2002. They seek out opposing views and respectfully listen to them. In a spirit of equality, they encourage free-flowing discussion. They test new data. Out of humble uncertainty, they ask questions before giving answers. They understand the need for selfless, patient reflection. They pay attention more than persuade.
In other words, they deliberate.
Informed deliberation brings out the best in people. It rests on the knowledge that good ideas will float to the top. Representative democracy is not just a process of accumulating the interests of the people through the competition of elections. It also relies on the understanding that wisdom and virtue are available to each individual and can be brought to light through reason, sharing, and listening.
In his design for the US government, James Madison set up both elected and appointed bodies to achieve what he called “successive filtrations” of public wisdom. Chosen bodies of citizens would refine the views of the public and achieve “the cool and deliberate sense of the community.”
Those countries with high polarization and a low trust in governing institutions are often the least deliberative. Too many of their citizens prefer to listen mainly to the like-minded. In the US, such polarization is now reflected in institutions meant to be the most deliberative, such as the Supreme Court and Senate.
In her gentle nudge of Turkey, the German leader reminded that country to run its institutions with thoughtful, respectful, and open deliberations. The wisdom to run an economy, indeed an entire country, must be sifted and refined by seeking out the best ideas and the highest virtues of its people.