President Donald Trump is quickly tightening control over institutions that have long believed to be independent of the White House.
Last week, he Turn on fire Bureau of Labor Statistics Commissioner Erika Mcentarfer, the agency released a bleak July report just hours later. He plans to appoint him think “More capable.” A few days ago, Trump announced his plan Name Next Fed Chairman “soon“months before the start of the term of current Fed Chairman Jerome Powell. The move provides Trump with an unusual opportunity to shape the direction of the central bank.
Some critic The back-to-back reshuffle has been warned that the back-to-back reshuffle represents a broader trend in the second Trump presidency, a weakening of political independence among key financial institutions, a fundamental feature of American liberal democracy.
Explore what this transformation means for business leaders, wealth Talked to Francis Fukuyama, one of the world’s leading scholars in democracy.
Familiarity warnings from the 1970s
“Trump’s philosophy is that everything is political,” Fukuyama said. “Either you are with him or you are against him, and if you are against him, you shouldn’t be in the administration.”
This approach, he said, directly conflicts with the liberal model of governance: a type based on a “impersonal, nonpartisan bureaucracy” managed by technical experts. Fukuyama believes that in the hypercomplex, affluent economies like the United States are crucial to long-term stability.
Fukuyama said Trump did not seem interested in this vision. He proposed Appoint yourself As a feeding chair, threaten Powell challenged his authority. Instead of postponing experts to experts, Trump demonstrated his desire to guide economic decisions from the executive branch.
However, institutions like the Fed are designed to resist such interference. Their role is to isolate the drama of the political cycle, especially in terms of interest rates, where short-term cuts can help the president win reelection, but push for long-term inflation.
Fukuyama said past presidents respected these guardrails, but Trump’s direct and hostile pressure on the central bank was “unprecedented.”
He compared the early 1970s when Richard Nixon repeated push The Fed cuts interest rates before re-election campaign. The Fed chair surrendered at the time, a move that helped trigger a decade of excessive inflation.
“That era is comparable to what is happening now,” Fukuyama said. “We have many examples of what happened in countries without independent central banks.”
He cited cases in Latin America and sub-Saharan Africa in the 1980s, and the politically captured central banks helped soar.
Fukuyama warned that the problem for CEOs and investors is that if the next Fed chairman is more willing to follow Trump’s preferences, the impact may not be felt immediately.
“If Trump was to fire Powell tomorrow, people wouldn’t feel the impact of two or even three years,” he said. “People probably wouldn’t associate this political behavior with the economic pain they feel.”
He added that this delay creates vulnerability. “You seem to be able to escape a lot when you actually cause a lot of losses.”
Risks of political data
Fukuyama said Trump’s risk of firing McEntarfer is different, but equally serious: the politicization of official statistics. He pointed out in 2007 that Argentina, then-President Néstor Kirchner, dismissed a government statistician whose inflation report clashed with the government’s narrative.
“What’s amazing is that inflation has dropped,” Fukuyama said. “Everyone knows it’s entirely politically based, not credible.”
He warned that it would be difficult to restore it once credibility is lost. “That’s the risk we face when we start to disappear from the independence of these neutral experts.”
Why CEOs should keep their distance
For business leaders, the motivation to stay neutral may not be clear. Fukyuama points out how some executives can attend an exclusive Trump fundraising dinner, including event Investors can offer personal opportunities with the president in Trump’s cryptocurrency.
But Fukuyama warned that being too close to politicians often backfires.
“It’s hard to run a predictable modern business when politics is too involved,” he said. “In the past, if you had to bribe politicians to go your own way, it was a very efficient system.”
He also used Elon Musk as an example to illustrate how public politicization complicates the public image of a company. By politicizing his brand, Musk distant He hopes to sell the car to the exact market.
The lesson, Fukuyama added, is that in a stable, depoliticized system, it is best for the CEO to operate. “The easier the rules are to predict, the easier it is to do business.”
