Independent means
THE Bank of England consoles itself with its scope for influencing the whole range of economic and fiscal policy, but its Deputy Governor, Sir George Blunden, owns that he envies the authority and power of the German Bundesbank and the US Federal Reserve and believes that countries with independent central banks have the advan- tage. Samuel Brittan, carrying the banner, adds that a properly independent Bank would need a properly qualified Governor — so he briskly brushes aside such City figures as Sir David Scholey or Lord Alexander, narrowing the field to a philsopher-king who looks quite like Mr Lawson and quite like Mr Lawson's old friend Mr Brittan. Nick Parsons and David Coleman of the Union Discount Company make it their thesis that inflation came in when, two world wars ago, the Govern- ment started telling the Bank what to do. Certainly the Bank has more power when the frame of policy is fixed — when (for instance) the gold standard or the Bretton Woods agreement or the European Monet- ary System sets the currency's value and the Bank must make it stick. Governors can then tell governments that, having willed the end, they must will the means. Full membership of the EMS will mean more power to the Old Lady's elbow and she has consistently favoured it. It was, though, a former Governor, Lord O'Brien, who pointed out the practical limits of independence: `A government which had the political will to cede part of its power in that way would be one likely to exercise that power itself in a responsible fashion.' Conversely, a government determined to print money would not let the central bank stand in its way. It is for that reason depressing to hear John Smith say that he would not take charge of economic policy to hand over much of it to the Governor. Perhaps the Gillray cartoon shows Mr Smith. He has certainly lost weight.
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